The rise of 'a la carte' real estate
Roadmap to Recovery: Essay
By Inman News, Friday, January 30, 2009.
Editor's Note: Inman News readers are sharing their views on a path forward for the real estate industry as a part of the Roadmap to Recovery editorial project. Click here for more details. The following is a guest essay by Bruce Hahn, president of the American Homeowners Grassroots Alliance.
By BRUCE HAHN
A number of factors will change business models and practices in real estate services, but how those models and practices will be changed is much more difficult to predict. Obviously the march of technology development and growing consumer technology proficiency will continue to increase the level of disintermediation between more and more consumers and various types of real estate services professionals.
Consumers will increasingly procure required real estate services on an a la carte basis, and there will be growing numbers of niche markets tied to real estate service specializations. It is very difficult to predict which business models and technologies will be created and which will succeed.
Another significant change factor lies in how the real estate brokerage sector itself deals with the inherent internal tensions between large vs. small companies and traditional vs. new business models. Successful industry trade associations are able to strike a balance between the competing needs of various types of members, which is a reality in almost every type of business.
However, in some cases a specific member segment can become disproportionately dominant and a national, state, or local association can favor that segment at the expense of the others. Service offerings, pricing and policy objectives can become more skewed to increasingly benefit the favored types of companies.
From an outsider's point of view, that appears to be happening in the real estate brokerage sector. The larger, traditional franchises and companies appear to be increasing their domination of the industry's national, state and local associations. Evidence of that includes those associations' promotion of laws and regulations that undermine the nontraditional business models of their own members.
The U.S. Justice Department, the Federal Trade Commission, consumer organizations, and major media organizations have all correctly concluded that the real estate brokerage sector's current self-regulation processes and procedures have in many cases led to violations of U.S. antitrust or anti-competitive laws, and/or worked against the best interests of American homeowners.
What happens next is up to the real estate brokerage industry. I used to work for the National Association of Manufacturers, and at one point the Fortune 50 companies became so dominant that NAM's small members threatened to quit en masse and form their own, new manufacturers association.
Will the small, independent real estate brokers that make up the heart and soul of the industry and the new-business-model brokers ever get to that point and join together and rebel against the corporate suits in any of the national, state and/or local associations? If they do it would probably reduce or eliminate industry violations of antitrust laws.
That would be a good thing from a consumer perspective and would also help restore the real estate brokerage industry's reputation. Based on past practices, the status quo will lead to increased dominance of the large real estate brokerage firms and more violations of the nation's antitrust laws. If such antitrust violations continue, it can only lead to an increased role for the federal government in the regulation of the real estate services sector, and more bad press.
Bruce Hahn is president of the American Homeowners Foundation and the American Homeowners Grassroots Alliance.
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Submitted by Lawrence Bunnell on January 30, 2009 - 4:51am.
You've hit the nail on the head with this observation. The problem with starting a new association for non-traditional brokers and alternative models is that you can't take the Multiple Listing Service with you.
Creating a 2nd Association with it's own MLS creates more problems than it solves. For example, in Atlanta, GA, where some years back several brokers apparently got fed up with their Realtor association's MLS and formed another, has simply created a nightmare for agents who must now join and pay dues for 2 MLSs in order to compete in the marketplace where consumers have come to expect exposure in both MLSs.
The inevitability of the continued growth of 'a la carte' real estate service companies ensures that at least at some point in the future the local Associations' boards will begin to contain membership representative of newer models, but that remains to be seen. At this point, Federal intervention is the ONLY way that the shenanigans of slanted rules and regulations in foavor of traditional brokerages is going to stop.
Submitted by Steve deGuzman on January 30, 2009 - 4:53am.
Amen!
Submitted by Judith Lindenau, CAE, RCE on January 30, 2009 - 4:58am.
Bruce, your first two paragraphs are right on...disintermediation is a fact of life, in real estate and in other business sectors as well.
But as for how the industry will deal with it, you assume that trade associations can somehow shape the future. They can't. Their target market is the paying customer, and services will be based on the largest segment of paying customers--a fact of economic life in the US.
However, the answer isn't all that easy, either. The largest segment may be larger offices/franchises, but that also may not be the first allegiance of the target market either: it could be the younger practitioners, the technology skilled members, or a variety of other demographics.
And it's pretty clear from a variety of studies that the younger generation does not have the employer loyalty that the older age groups have. They will make choices based on quality of life, family, time, and other primary needs. Brokers large and small will have to accommodate this characteristic in order to keep this age group happy and loyal.
So brokerage size isn't, I think, the issue. Nor is the ability of the association to make directive choices in the industry future. And none of the outcomes will be much influenced by our wishful thinking.
Submitted by Mollie Wasserman on January 30, 2009 - 5:01am.
Bruce, you might be interested in a Course and Coaching Program that we started a couple of years ago to train real estate professionals to practice real estate from a consulting rather than sales model. The ACRE® (Accredited Consultant in Real Estate) program hopes to do for real estate what the CFP® designation in the 1980's did for financial planning.
In the 1980's financial planners were stockbrokers and other salespeople that called themselves financial planners but were in fact salespeople who got paid by selling products. The consumer demanded a choice whereby they could receive (and pay for) truly objective counsel on their finances and from that demand the Certified Financial Planner was born.
Now, the tremendous growth of the CFP designation does not mean that there are not financial salespeople today. There are, but there's a clear line of demarcation between salespeople who are paid contingent on selling products and CFP's who are paid to give counsel independent of the decision the consumer makes.
We believe the real estate consumer should have a choice both in the services they can receive and how they can be paid for. The choices can include an hourly rate, a flat fee for a service or package of services, as well as traditional commissions as long as the choices are given with full transparency.
We practitioners also need to get real when discussing commissions with the consumer. As I said in my book "Ripping the Roof off Real Estate", commissions are not about payment for services. Commissions are about risk mitigation and until we start being straight with the consumer as well as ourselves, the real estate industry will continue to be in a precarious position.
You can get more information about what we are doing with consulting at: http://www.TheConsultingTimes.com.
Sincerely,
Mollie Wasserman
Submitted by Susan Krancer on January 30, 2009 - 5:53am.
The internet opens communication for everybody. It provides all of us with such a powerful communication tool. A new idea or approach can catch on like wildfire. It can make a small company look big, so the little guys can compete extremely well with the big guys. Sooner of later, the consumers will get what they want, and the "big guys" can't fight that and continue to provide the same old services and survive.
Susan Krancer
REALTOR®
Liz Moore & Associates
Williamsburg, VA 23188
www.WilliamsburgGolfProperties.com
Submitted by Michael Thomas on January 30, 2009 - 6:44am.
I believe in the a la carte real estate program. For those of you that do not remember Julie Garton-Goode wrote the first book, to my knowledge, about the subject and actually created a designation. The book was Real Estate `a la Carte. I cannot remember the designation. Unfortunately Julie's child became very sick and she took a leave of absence. I am not sure what role she is playing at the moment. The biggest problem is creating a model that is financially sound. Mollie Wasserman, in an above comment, has been doing this for quite awhile and probably is one of the Best people to contact regarding the subject. Hi, Molly; we talked back in 2005-2006 when you were developing the course. I started a Flat Price company in northeast Florida in 2005; in 2006 I had more listings, I believe it was around 173, in northeast Florida than any single agent. Then came the discounters and I took a leave of absence. I provided a level of service that was excellent according to my sellers; however I could not afford that level at the price of my competitors, most of who are out of business.
It is better for the consumer to purchase a la carte, however when a very good agent says "why pay them anything up front, when I will do all of it for free unless your house is sold."
I am very interested to continue this discussion via email and/or phone.
PS Mollie, I will revisit your site and when time permits, give me a call or I will call you.
Michael Thomas
Broker/Realtor/Mortgage Broker
Passport Realty & Mortgage
904-866-6777
Jacksonville, FL
Michael@PassportRealty.com
Submitted by Robert A. Hulme on January 30, 2009 - 7:28am.
Using the right technology can make anyone look successful. Recently, I decided to optimize 12 of my own personal websites. Tuesday I met with my broker to work a plan on how to distribute the massive number of buyer leads that I have coming in. The Internet gives everyone the opportunity to succeed if they only apply themselves and work smart and quit worrying about how bad our economy and housing market is.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
Loan Officer
Envision Lending Group, Inc.
www.UtahCountyRealEstate.us
www.UtahHomesForSale.ws
801-885-2586
Submitted by Robert A. Hulme on January 30, 2009 - 7:28am.
Using the right technology can make anyone look successful. Recently, I decided to optimize 12 of my own personal websites. Tuesday I met with my broker to work a plan on how to distribute the massive number of buyer leads that I have coming in. The Internet gives everyone the opportunity to succeed if they only apply themselves and work smart and quit worrying about how bad our economy and housing market is.
Robert A. Hulme
Realtor, GRI, e-PRO
Prudential Utah Real Estate
Loan Officer
Envision Lending Group, Inc.
www.UtahCountyRealEstate.us
www.UtahHomesForSale.ws
801-885-2586
Submitted by Louis Herrera on January 30, 2009 - 7:51am.
We launched RT Brokerage Services with two principles in mind. First, full-service real estate is here to stay. Second, in rethinking the traditional full-service real estate model, any complementary models would need to embrace new consumer-centric practices to attract and accommodate the growing segment of savvy, online real estate consumers.
In shifting from a purely agent-centric model of full-service in which the agent was the exclusive facilitator for real estate shopping to a broader consumer-centric model in which the consumer shares in the search for properties, we took a time-accountable approach, very similar to the a la carte model. This led us to our consumer-choice strategy for full-service real estate.
We are the first full-service, consumer-choice real estate brokerage in the US. We provide consumers with a choice of two full-service models to close their real estate transactions. The option is an innovative consumer-choice strategy called reConsidered™.
In reConsidered™ the consumer decides how their brokerage and agent will be compensated. They can go traditional with a commission-based model, or they can go hourly with a fee-for-service model—whichever works best for them. It’s fair, simple, and straightforward.
When you look to the future of real estate, don’t limit yourself to one model. There is no reason for it. Your limiter should be consumer demand, not how the national brokerages operate.
Louis Herrera
CEO/Designated Broker
RT Brokerage Services, Inc.
www.rtbrokerage.com
Submitted by Jerzy (George) Szkup on January 30, 2009 - 8:05am.
George Szkup
www.DestinationTucson.biz
Comments are interesting - as far as the original article is concern - I am also psychic - I predict that tomorrow will rain or sun will shine.
George Szkup
Submitted by MLS4owners.com on January 30, 2009 - 12:20pm.
In Washington we have found that education of consumers and real estate professionals has made a difference.
Our Department of Licensing and our largest multiple listing service have done well at ensuring that consumers have freedom of choice in real estate services. The same is true for the Federal Trade Commission and the Department of Justice.
Our broker now serves on the Boards of our local and state REALTOR associations, and they have taken positive steps by including our viewpoint in discussions of real estate issues. We hope to continue to work within the industry to achieve a level playing field.
Ken Whitney
MLS4owners.com
www.MLS4owners.com
Submitted by Paula Bean on January 30, 2009 - 12:23pm.
Interesting observations by all. Bruce participated in Inman's 'Roadmap to Recovery' survey by Inman.
He has some good points to make that I also agree with especially with regards to the MLS system and the big Franchise companies that support the membership and MLS of everyone's local area.
If NAR is correct, and over 80% of the population start their search for property on the internet, then what is to be gained by paying all the fees that the MLS system wants?
What about member board dues? Lock box fees? State Fees?
There is a valid point about the seperate boards and dues for each one, but what is the alternative? Do agents really need to pay all these fees to all these seperate entities to stay in business? Is our money well spent on these fees, which have to be incorporated into our fees or commission to get a good ROI, or is this something we can work around?
I agree with Mollie Wasserman, who posted above, when the consumer has choices, and everything is transparent, everyone wins. That is why after over 10 years of striving to meet consumer demand as well as paying all the fees to stay in business that I decided to join the ACRE program.
Real Estate Consulting will be the wave of the future, whether or not we like it, learn it or know it - it's what the consumer wants and demands.
Transparency and choices are here to stay regardless of the big franchises who dominate the MLS, membership and State and Local boards.
I'm not so sure that our Local MLS's, nor our membership of our local, State and National REALTOR Associations are giving US - the agents, (their clients) the same choices and transparency that we are striving to give to our clients.
I'd like to hear more opinions about THIS from around the Inman Globe.
Submitted by John March on January 30, 2009 - 1:44pm.
Today, I gave up my desk space. Who on God's green earth needs it! You stick a Verizon wireless device in the right place--in your lap top-- and you're good to go--or you use a blackberry.
I will share this. I spoke with one of the powers that be about offering consulting. I didn't get any loud applause. My request was cast immediately as a discounting arrangement--which it is not--and after explaining that, I got permission to offer consulting only if I am not competing for a listing with an agent in my company. There is still darkness. We need some light.
Does anyone believe that the ranks of Realtors is going to increase in the next 5 years?
As technology, data collection, and regional MLS begin to jell, consumers will have a wealth of real estate information at hand. So, one of our "jobs" will fall by the wayside.
Why do consumers need us now? Most are not marketers, they don't have a network of people who have the capability to attract buyers, they do not have the time to learn about all the technology, they do not know the ins and outs of the paperwork, etc. So, there is room for us to provide services.
Consumers have the right to participate in the sale of their property, doing those tasks which they are capable of doing and comfortable doing. We can help them by performing those tasks and critical fiduciary responsibilities --and give them want they want--not the traditional commission arrangement.
Submitted by Michael Thomas on January 30, 2009 - 7:31pm.
I believe in the a la carte real estate program. For those of you that do not remember Julie Garton-Goode wrote the first book, to my knowledge, about the subject and actually created a designation. The book was Real Estate `a la Carte. I cannot remember the designation. Unfortunately Julie's child became very sick and she took a leave of absence. I am not sure what role she is playing at the moment. The biggest problem is creating a model that is financially sound. Mollie Wasserman, in an above comment, has been doing this for quite awhile and probably is one of the Best people to contact regarding the subject. Hi, Molly; we talked back in 2005-2006 when you were developing the course. I started a Flat Price company in northeast Florida in 2005; in 2006 I had more listings, I believe it was around 173, in northeast Florida than any single agent. Then came the discounters and I took a leave of absence. I provided a level of service that was excellent according to my sellers; however I could not afford that level at the price of my competitors, most of who are out of business.
It is better for the consumer to purchase a la carte, however when a very good agent says "why pay them anything up front, when I will do all of it for free unless your house is sold."
I am very interested to continue this discussion via email and/or phone.
PS Mollie, I will revisit your site and when time permits, give me a call or I will call you.
Michael Thomas
Broker/Realtor/Mortgage Broker
Passport Realty & Mortgage
904-866-6777
Jacksonville, FL
Michael@PassportRealty.com
Submitted by Jodi Summers on February 2, 2009 - 9:09pm.
Brand identity will be a key. A brand like Sotheby’s International Realty establishes trust quickly. It's amazing,the brand has WOW! power.
I hand them my business card, and people say,
"WOW! You work with Sotheby's."
The instant recognitgion quickly establishes trust, especially when you tell the client that the company is older than our country.
As my team says, "Our reputation, assures your satisfaction."
Best….
Jodi Summers
Sotheby’s International Realty
The SoCal Investment Real Estate Group
Santa Monica, CA
jodi@jodisummers.com
www.SantaMonicaPropertyBlog.com
www.SoCalMultiUnitRealEstateBlog.com
www.SoCalGreenRealEstateBlog.com
**
If you can imagine it, you can achieve it; if you can dream it, you can become it.
- William Arthur Ward
Submitted by Tina Merritt on February 3, 2009 - 6:07am.
The consumer wants choice and the real estate industry has been withholding choice from them. Give them 3 options: discount, standard and elite - just like they have with retail.
Submitted by Denyce Thomas on February 4, 2009 - 11:37am.
I'm in the Greater Las Vegas area--entertainment and foreclosure capital of the world. It is ironic how our national, state and local governments are using the "T" word (TRANSPARENCY) so frequently lately, and that is exactly what the ACRE® (Accredited Consultant in Real Estate)Program is designed around for the consumer, who so badly wants and needs Transparency, not only from their government, but from their real estate professionals these days. As an ACRE® Ambassador, I'm trying to spread the word to my local Association, my Broker and other agents I come in contact with. We agents need what the ACRE® Program provides as much as our clients do. We need to value our time and services and be paid for our efforts as other professionals are, even if a sales transaction doesn't occur. How many hundred of hours do we need to waste on these short sales, REOs, and even the normal buyers and sellers, without being compensated? Why do we continue to work for FREE? When we aren't paid, neither are our Brokers--they need to think outside the box and look and listen to what the ACRE® Program has in place. I'm ready to help the Las Vegas area WAKE UP --it's such a perfect time for change for the better.