Yes, real estate does have an identity crisis.
The public isn’t sure exactly what residential real estate agents are all about. The more everyone in the industry understands what contributes to this identity crisis, the better the industry will be at managing and eliminating the problem.
From what I’ve seen and heard, many consumers just don’t think that Realtors run a business. This story describes the problem:
A Realtor I know received a call from one of his clients. He’d been working with this couple for over a month, introducing them to the area and showing homes. The client wanted to talk to him to let him know that they’d bought a home in one of the new developments the Realtor had mentioned to them.
Does it sound like that client was being obnoxious? Did she call to make him feel bad about the fact that she’d purchased from someone else?
I don’t think so. I think the client had established such a good relationship with the Realtor that she wanted to share her excitement.
What can you take away from this situation? The client just didn’t understand how real estate works. If the client had gotten three estimates to ensure her home, do you think she would have called the two agents she didn’t choose to share the good news that she’d made a decision? That just wouldn’t happen.
You may also be aware of the DANGER Report (DANGER stands for Definitive Analysis of Negative Game Changers Emerging in Real Estate) that the National Association of Realtors has published. It reinforces several issues I’ve addressed below; you can read a summary of some of the findings from the The Washington Post.
How did this identity crisis start?
I’m sure there are many explanations. Here are some that come to mind.
1. As an industry, real estate is often left out.
Real estate is sometimes identified as a service industry, but residential real estate is often left out of any number of descriptions of service industries. Here are a couple of examples. From Investopedia.com:
Service sector: “The portion of the economy that produces intangible goods. According to the U.S. Census Bureau, the service sector primarily consists of truck transportation, messenger services and warehousing; information sector services; securities, commodities and other financial investment services; rental and leasing services; professional, scientific and technical services; administrative and support services; waste management and remediation; health care and social assistance; and arts, entertainment and recreation services.”
That’s a pretty long list, and it includes rental and leasing services, but where’s residential real estate? Nowhere to be found. So, the assumption is that it is rolled into “professional services.”
But if you ask 100 people to list the types of services included in the term professional services, how often do you think residential real estate would come up?
The Department of Commerce, on its SelectUSA website, lists the following subsectors within the professional services industry: accounting, architectural services, engineering services, legal services and management consulting.
2. Real estate has DIY competition.
Do you know anyone who writes their own insurance policies, designs their own buildings or tries their own lawsuits? Of course not.
But, there are lots of FSBOs (for sale by owners) — people who are performing real estate transactions on their own. FSBOs make it easy for consumers to think that Realtors aren’t all that professional — after all, if a home seller or buyer can complete a transaction by themselves, how difficult can it be?
3. There are low barriers of entry.
How difficult is it to get a real estate license? Not too difficult. You just take a few courses (many are offered online), pass some tests and you’re licensed.
In fact, some of the people holding real estate licenses aren’t even using them. Just about everyone knows someone who has been out of work and has gotten a real estate license to say they have a job.
4. Consumers don’t understand the real estate industry.
How many people do you think know the difference between a real estate agent and a Realtor — or an agent and a broker — or someone with an ABR or GRI? Do consumers know that the needs of consumers over 50 years old are different than younger consumers? Do people over 50 look for a professional with an SRES designation?
5. Real estate professionals don’t differentiate themselves from their competition.
Without differentiation, the only alternative is to compete on price, which reduces the industry’s professional status.
6. Not all real estate agents work full time.
Many brokerages will take on part-time agents just in case they sell something. Along with a lack of understanding, this has contributed to the idea many consumers have that Realtors spend most of their time relaxing.
How to manage the crisis and make more money
Mark Graban is an expert in “lean health care,” which means he’s focused on improving quality in the health care industry. But, he said something from which everyone can learn:
“You get what you expect, and you deserve what you tolerate.”
If you’re tolerating the identity crisis, now is the time to be proactive to eliminate it. You’ll make more money when the true professionals in the industry become visible, outspoken advocates. Here are three actions you can take:
1. Act like a business owner.
Even though the brokerage you work with has an impact on your credibility, you don’t work for them. You are running your own real estate services business. Create your own identity to stand out in your marketplace, and make it easier to get and keep clients.
2. Treat both buying and selling as services for which you are compensated.
No one could list a house without a listing agreement, but many people work with buyers without any formal agreement. That reinforces the idea that if a Realtor sells your home, you’ve hired them, but when they help you look for a new home, they’re just doing it for fun. If the buyer agreement you must use is too scary for leads to sign, work to get it changed.
3. Set an example.
Follow NAR’s Code of Ethics and Professional Standards. Promote those standards to others in the industry. Encourage serious individuals who want to make a career in real estate, and try to stay away from those whose lack of professionalism gives the industry a bad name.
We as an industry, need to let the world know where we stand. We need to treat our business seriously and exude our success.