Redefining Realtors in tough times
Diary of a Real Estate Rookie: Roadmap to Recovery
By Alison Rogers, Tuesday, November 25, 2008.
Flickr photo by KellyB.Editor's note: Inman News is embarking on a major editorial project to examine how the real estate industry should and will look in coming years. Click here to find out how you can participate in this "Roadmap to Recovery."
There's a biblical story about seven abundant years and seven years of famine, and, collectively, we forgot to read it.
We're all at fault, really. As a nation, we did not invest the profits from the good times in new roads and bridges, or in spending that would have bettered America and created new jobs; instead, we spent them on a disastrous war. As individuals, those of us who profited from the boom (which is pretty much most of us, because even if you're middle-class and your real wages didn't grow, chances are that you've got a nicer TV than you had eight years ago, and a better phone) did not save for a rainy day the way we should have.
However, that's all whiskey under the bridge -- or as Buckaroo Banzai would say, "Wherever you go, there you are." This is where we are, and the question is: What are we going to do about it?
I think, as citizens, the answer is going to be to save a little bit more of our money. Now we have to be careful, because of course the best thing for the economy this minute is actually consumer demand, and we don't want to take that away entirely. I don't think I have to support the service economy single-handedly, but I do figure that waiters and waitresses in my town are feeling the reduction in investment bankers, so I am trying to be punctilious about tipping. But overall, that old-fashioned idea that every year you put away 10 percent or 15 percent of your income for a rainy day -- that's got to come back.
As Realtors, we've got to raise the standards of our profession. Higher barriers to entry than "anyone who can fog a mirror" would help, even if it means the numbers of working Realtors drop from the peak of about 1.4 million (c'mon, guys, it's not a driver's license). Beyond that, we're going to have to educate consumers constantly that the difference between the image of the average Realtor that they have in their heads and a good Realtor is a huge gulf that's worth paying for.
The ever-increasing flow of data does not help us, because uneducated consumers are constantly mistaking information for expertise. I see that over and over again. In my latest crusade, I am constantly reminding consumers, "Don't just pay attention to list price."
Consumers have figured out how to get a property's price history now, and they figure it means everything. If a home was priced at $1 million and now it's $600,000, Internet shoppers figure that it's 40 percent off -- but don't stop to consider that it might still be overpriced. Maybe it's truly a $500,000 house, and no one in their right mind should pay $600,000 for it. We can do that kind of valuation work for consumers.
And that work is valuable, and we can get compensated for it, but not if we cede the ground that we are fair judges by urging buyers to grab every house they see. I wrote in my book last year that I thought that selling first-time buyers homes with no money down was "pass the crack," and now we are unfortunately seeing some of the burnout that results. That tactic may have made for a good 2005, or a good 2006, but it's not making for a good 2008.
A friend of mine was looking to buy a condo in Massachusetts, and his agent pleaded with him to not buy the first thing he saw. He was surprised at her forthrightness, and asked her about it. "Well," she explained, "I think it's about building relationships. You can have a good year, or you can have a good career."
The good year may look like it's off the table for a lot of us right now, but there's no reason to give up on the good career.
Alison Rogers is a licensed salesperson and author of "Diary of a Real Estate Rookie."
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Submitted by Ron Brownell on November 25, 2008 - 2:16pm.
Very well said Alison;
I am in 100% agreement of the "Higher barrier to entry". The only thing more coveted than a driver's license is the California Real Estate license. And about as easy to get. I really believe that the more transparent we become about our industry the more it will benefit the consumer. They are already becoming more knowledgeable about the market, even before they talk to a Realtor. The internet will continue to help with the transforamtion of our industry and authors like yourself, will broaden the consumer's awareness of the difference between the "Overnight want to get rich quick" Realtors and those of us who truly have made it a career.
Thanks,
"RON" Brownell
Branch Manager
Windermere Exclusive Properties
(760) 594-1402
http://www.ronbrownell.com
Submitted by Robert A. Hulme on November 25, 2008 - 3:01pm.
I think today's market has set a higher barrier to entry. The newcomer is going to think twice before they try to get the driver's license. Realtors are going to have to work smarter, be more educated and work hard to build the all important relationship that will be needed to help our clients understand how everything works.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
www.UtahCountyRealEstate.us
www.UtahCountyHomes.ws
801-885-2586
Submitted by Gregory Schreiber on November 25, 2008 - 4:25pm.
"As a nation, we did not invest the profits from the good times in new roads and bridges, or in spending that would have bettered America and created new jobs; instead, we spent them on a disastrous war."
Please spare us the election talking points. Obama won already. Nobody sat down in the Congress and said we can either build bridges in the US or finish a war that was started a dozen years earlier. We can certainly do both if we choose to. That is a contemptible red herring.
Also, let us not forget that we wouldn't have to be doing so much rebuilding in Manhattan right now if we had paid more attention to the threat emanating from the Middle East before it was too late.
But I don't disagree with all of your article. You are spot on when you say that we need to raise the standards of our profession. NY State requires a measly 22.5 hours of continuing education every two years in order for real estate agents to maintain their license. The worst ones typically wait until the very last minute to fufill the requirement online. Would you agree with me that we should start by pruning the tree right there?
Submitted by John Citrigno, CCIM on November 25, 2008 - 5:42pm.
Raising the Real Estate Industry to Professional Standards while bringing it into the 21st Century
By John Citrigno, CCIM
It is universally agreed that the real estate industry must task itself to establish higher professional standards. I have been reflecting on this subject the past year as a result of the subprime fiasco and related housing price meltdown. Today’s financial crisis was aided in no small part by vast numbers of unqualified, under-qualified, or simply morally bankrupt "sales persons" passing themselves off as real estate professionals and this must be addressed.
Beyond establishing and enforcing higher “ethical” standards, the real estate profession must evolve specialized licensing similar to the medical profession at a national level.
A "General Residential" (basic entry-level) license would enable agents and brokers to sell residential real estate only. Additional studies, testing, and licensing would be required for before residential agents could list, market, or sell residential specialty properties such as "condominiums", or "rural land" (as just two examples).
General Residential licensees would be strictly prohibited from operating in commercial and investment real estate. Such "commercial and investment" licensing would require a comprehensive mandatory education in commercial and investment real estate and vigorous testing requirements (such as is involved in obtaining the CCIM Designation www.ccim.com). Conversely, commercial licensees would be prohibited from operating in residential real estate, unless appropriately licensed (dually licensed).
Commercial licensing would involve a “General Commercial” (basic entry level) license similar to the General Residential license, with three separate “category” designations: "leasing only", "leasing and owner-user sales", and "income property/investment sales", each complete with its own rigorous coursework and testing. And each category designee would be tasked to complete additional coursework and testing, as well as an “internship” (as in the medical profession) before being allowed to operate individually in any of the various commercial property specialties: office, retail, industrial, multifamily, hospitality.
Each commercial property specialty license would become the equivalent of an advanced degree, with a requisite "internship" of one to three years in said specialty. Much like the CCIM Designation, each commercial property specialty would require submittal and peer review of a "Case Study" in said specialty. Until such commercial property specialty degree or designation is obtained, the General Commercial licensee would be required to co-list or co-op all such commercial specialty transactions with a “Sponsoring Broker” (mentor) with the degree or designation of said commercial specialty.
Licensed Commercial Specialists would be allowed to participate in the fees paid on the sale of commercial real estate TIC interests (real estate securities) along with a licensed securities firm offering such TIC interests for sale, the licensed Commercial Specialist representing the real estate specialty in the interest of its client, all of which would be required for the payment of a “Referral Fee”, however, greater fee cooperation and client involvement could be afforded the licensed Commercial Specialist that would study coursework and go through testing to obtain a “Real Estate TIC license” for advising in the sale of TIC interests (I understand NAR and the SEC are working on this).
Licensees holding a General Residential license would NOT be allowed to transact, represent (list or sell) any commercial or income/investment property. They would be required to "refer" such work to the appropriately licensed professional, and they could earn a "referral fee" on transactions involving specialties or property types outside of basic single-family residential. These types of extra-specialty Referral fees would be limited by LAW to 20% of the corresponding "side" referred. All the major "primarily residential" companies (Coldwell Banker, Century 21, Sotheby's, Intero, etc.), would be tasked to enforce such policy internally, or "refer-out" such specialty work IF their firm doesn't have appropriately licensed commercial specialty divisions and persons to the major "commercial and investment specialty" brokerage houses (i.e. CBRE, Cushman, Colliers, M&M, G&E, Hendricks, SVN, etc.) or those individuals holding such licensing.
This of course would all be done in the spirit and in the best interests of the CLIENT, and this licensing structure would be widely marketed through NAR highlighting the "consumer protection" aspects and importance of the public being educated and informed as to the distinctions between General licensees, Commercial (Leasing vs. Sales) and Investment licensees, and the stringent requirements for the advanced ("graduate level") specialty licensing.
Last but not least, in today's "information age" of easy access via the Internet to massive amounts of data, with buyers able to "shop" online in the areas of their choice (city to city, county to county, and state by state) I believe it imperative that NAR endeavors to create a program for a "national level" license. This will require state cooperation in coordination and simplification of their real estate laws to one common raised standard, which will enable the creation of "national" level common/standard forms (listing agreements, letters of intent, purchase agreements, disclosure and due diligence documents).
Correspondingly there needs to be further consolidation and standardization of the MLS systems, with most states having only one MLS system, and very large states (such as California) having possibly two (NorCal and SoCal). Membership fees should be structured by license type with general licensees having relatively low dues, and specialty licensees having slightly higher dues. Yes, the specialty licenses should bear somewhat higher dues. This along will go along way to helping sort out persons “committed” to their profession and specialty from the fakes and flakes that are sadly abundant today.
In this concept of bringing the real estate business into the 21st Century through license by specialization (rather than by state) and thereby national-level licensing, once the basic (annual) national membership is paid, licensees can ADD MLS areas (by state or large region) for small incremental fees, based upon QUARTERLY area-by-area subscriptions. Standardizing systems, inputs, forms, billing can streamline, reduce costs (fees) and create better ease-of-use.
Last but not least, NAR must create and promote the use of a “universal” and superb, seamless, easy-to-use Commercial MLS with common, national standards (as above), with emphasis placed on MUCH HIGHER QUALITY DATA than is currently available through the various private attempts at a commercial MLS (i.e. LoopNet, CoStar, etc.). This universal Commercial MLS must hold HIGH its standards with input requirements enforced internally by the major firms (and externally by CCIM and/or NAR) as well as its “client base” of Commercial Specialists. Particular importance needs to be placed on the gathering and dissemination of "real numbers”, facilitated by making clear input distinctions between "actual" (2-3 years stabilized) and "pro forma" (12 mos. trailing OpEx, current rents, mandatory reserves, and with "management" included).
Sales comps would be mandatorily and immediately inputted (as with today's residential MLS systems). Member access to said commercial and investment sales comp data would be included in the envisioned Commercial MLS dues (by state/region, and/or property specialty). AND to encourage "participation" (as it takes time and effort to input "good data") each properly completed Commercial MLS listing could earn two (2) credits (toward discounted Commercial MLS dues): 1) proper and comprehensive "complete" initial "for lease" or "for sale" listing entry, 2) proper "complete" reporting of sales comps(within 3-5 days).
Another great way to encourage participation is to provide Commercial MLS members with web based solutions to many of the daily, mundane, and time-consuming aspects of the business such as the generation of one and two-page marketing flyers, four page brochures, and full Offering Memorandums (all of which can be easily created with the technology available today “on-the-fly” from within the Commercial MLS system based upon the accurate data input (both “actual’ and “pro forma”). CRM modules and other such “productivity” software can be readily created to auto-interface with such a system.
And participation can be encourage such that the active commercial specialty practitioner could earn "FREE" MLS dues (and possibly bonuses or awards) for active, detailed, accurate, and timely reporting.
And finally, this "good information" could be re-sold by said Commercial MLS on a subscription basis to related real estate and finance industry professionals (via The Appraisal Institute, third-party consultants, banks, Wall Street, the News Media, etc.).
Submitted by Gregory Bain on November 25, 2008 - 6:13pm.
Gregory Bain, ABR, SRES
Realtor Associate
NJHomes@Ask4Greg.com
Raising the bar, I am able to see under it. We seem to think too highly of ourselves. It ain't rocket science.
Submitted by Bill Fooks on November 26, 2008 - 3:53am.
Bill Fooks
TFT realty Marketing Service
Warwick, RI
Raising the bar for entry. Is this not always the answer? NO and I say No. My opioion is that we should raise the cost of entry. You see a college degree or some other degree will not make you a better person or sales person.
Now the cost of entry. Laptop required. Ability to use the programs. If not, you must learn them at you time and cost.No sales or representation until then. Must work with experienced agent( 5 years in the business and 60 of there own transactions) for one year or 12 of your own transactions.You will pay experienced agent 15% of the commissions you develop on your own.They will be mindfull of your responsibility to the public.
The experienced agent will reccomend classes to further the new entrys development.
This apprentice program would do more to improve our immage than any class required. You see you can buy education but you can't buy wisdom