The news of discount brokerage company Foxtons’ demise comes at a time when many in the real estate industry are dealing with the market transition. My phone rang off the hook within two minutes of the “group e-mail” saying the company had terminated 90 percent of its work force.
The news of discount brokerage company Foxtons’ demise comes at a time when many in the real estate industry are dealing with the market transition. My phone rang off the hook within two minutes of the “group e-mail” saying the company had terminated 90 percent of its work force. I received calls from competing brokers who for years wished for this day and also from agents who chanted that age-old phrase, “See, you get what you paid for.” I hung up each call feeling bad for these brokers and agents and worse for their customers.
The real story of Foxtons is much greater than a discount broker going out of business. It’s larger than the joy traditional competitors feel when one of the discounters has gone under. The real story is that Foxtons represents the real estate community’s psychology. The situation says much more about the competition than it does of the company itself. I was a former senior founding executive with YHD and Foxtons before leaving in 2001, and I think brokers and agents around the country should listen, learn and ask themselves, who will be next?
The animosity started when YHD launched in March of 2000 armed with millions of dollars in investment capital. A real estate company with investment capital? A real estate company raising capital and launching a business like this caught traditional brokers by surprise. The blood really started to flow upon hearing the sacred commission would be reduced. But reduced commission was not the real story; traditional brokers for years had quietly offered reductions to friends and family and on special occasions. What really shocked the industry was that suddenly YHD put the reduced commission right out there for all to see, making “2 percent” its logo. Suddenly the commission was there for all to see and my traditional broker friends at the time said, “How dare you advertise the commission?”
While the commission was being unleashed to the public, the next shock wave hit: competitors publicly challenging each other, which had also been sacred ground in the real estate industry. Sure, brokers would bad mouth each other over the phone, at listing appointments and open houses, but never in public. Pepsi knocks Coke, Sony knocks Panasonic — why was real estate immune from this competitive approach? YHD’s innovation was not commission discounting; it was putting commission and the competition on display for the public to see and debate over.
This rocked the industry, but what came next is even more interesting. The traditional industry, built on independent contractors and self-employment, took the lead of its management, who decided that if you can’t beat them join them. If you can’t beat them, discredit them. Also, the industry felt it had to look better in the eyes of the public, so the investment in information and Web sites began. Over the next five years the transformation continued and more and more data flowed out the door of real estate companies, all of them packaging the same information and wrapping it just a little bit differently. Today, there is great content out there that all looks, feels and tastes the same.
Many in the industry continue to miss the point. The industry continues to look at itself rather than the group that matters the most: the group that pays the bills, the group that we need to serve, protect and lead. That group is the customer.
As a speaker and trainer, I travel the United States and live inside real estate brokerage offices large and small. I listen to agents on the phone and watch them as they sit in the conference room. The reality is that customers are still frustrated, confused, insecure and experiencing the same problems they did the day this notorious discounter launched in March of 2000.
Who is investing in the customer? Which companies are building their businesses for the customer? Who is training agents to truly serve the customer first and themselves second. I hear them in the halls saying, “Make more calls, knock on more doors.” What we also need to hear is, “Are you making customers happy and providing real value?”
Brokers need to stop fearing that their agents will leave, which is what holds many of them back. I hear far too many brokers and managers say, “I can’t make them come to class, they just won’t do it.” They commonly say, “I just can’t force them to do it.”
Too many brokers and managers invest little time and money in raising the bar for sales associates. They cheer an agent who spends $1,500 on a laptop computer to prospect for new customers, but they spend zero time and money on ensuring agents know how to read a mortgage commitment, read a title policy, understand buyer quality, calculate return on investment or instill a risk management protocol into their businesses. I do see brokers who spend thousands of dollars putting their faces and logos on park benches and just listed cards.
I see the word “service” on just about everything, but I cannot find two agents in the same office who can even define what that really means.
The Foxtons story is a lesson to the industry that innovation is more than a nice Web site and some great content. Brokers may have a new Web 2.0 site but a beta version of their agents’ value. The lesson is that if brokers and managers do not make the customer experience something of value, whether they charge 2 percent or 7 percent, their time is coming to an end.
Foxtons blamed its demise on a bad real estate market. Is that really true? The question we need to ask is why are some companies doing more business in this market? It is because they are learning, investing and raising the bar of their most valuable commodity — their people. “Customer first” is not just a tagline, it’s a business model. Brokers and managers need to remove their egos from the storefronts and put the customers on display.
Real estate sales agents need to have knowledge about the transaction, financial decisions, and sales and legal strategies to ensure a positive experience. There are 20-year veterans who would not know what an LP or DU Finding was if it hit them on the head.
The story of Foxtons is to believe and let the customer win. Build your business and agents to be better, smarter and faster. Demand it! With all the awards we bestow on innovators, the award that matters the most is the one that you can see, the smile on the customer’s face at closing. If you get that right, we all win.