- The No. 1 threat to the industry is lack of competency seen in people who work in the industry.
- No. 2: Not all consumers understand the value of using a real estate agent, and the industry isn't great at educating consumers about why agents are valuable.
- No. 3: Control over listing data. Inefficiencies that stem from using multiple MLSs affect everyone -- consumers, too.
Joseph Rand is the general counsel and managing partner for Better Homes and Gardens Real Estate — Rand Realty, one of the largest companies in the New York region, with 30 offices, 800 agents, and closing more than $1.5 billion in real estate transactions in 2013. His primary responsibility is managing the company’s career development and education programs, principally based on a concept he has pioneered called “Client-Oriented Real Estate,” or “CORE,” which is designed to raise the level of client service provided by the real estate industry. He previously spoke at Inman Connect in January 2010, and has also given talks at numerous industry conferences and conventions.
You can find more about Rand’s approach to real estate education at his educational blog, and more about him personally at his sporadically published personal blog about his experiences moving from New York City to the suburbs. His contact information and links are available at josephrand.com.
Brad Inman: Greetings, Inman News readers and listeners. I’m really excited today to have with me a broker from the East Coast, Joe Rand, one of the leaders of the industry. A wise soul, a smart guy, a guy who’s direct and clear, and you’re never confused about what he thinks. But also very progressive, progressive on technology.
He’s great on the Connect stage, whether he’s interviewing young tech heads or old-fashioned real estate brokers. A big fan of Joe Rand. Welcome, Joe.
Joe Rand: It’s a pleasure to be here, Brad, thanks for having me.
Let’s dive right in. I think you’re the kind of guy who sees it all. Has a very open mind, and with that, you have some clarity around things that I think a lot of people in the industry missed.
But let’s start out with this, what do you think the three most important issues facing the real estate industry are today?
I would say No. 1, and this has been my pet project for the last 10 years, is we need to increase the competency in the industry. We need to be better at the jobs that we do, and we need to do a better job of selling ourselves to the public as to what real estate agents actually do.
No. 2 would be, how ripe is the industry for disruption? How ripe is the industry for somebody coming in and saying, “For $500 we’ll list your home and put it in the MLS and that’s all that you need, you don’t need an actual real estate agent”?
The extent to which we are open and vulnerable to that is based on the fact that we don’t do a very good job of explaining our value proposition, and we also don’t do a very good job in many cases of executing the value proposition.
Joe, why is it we blame the outsiders for screwing up an industry? I think the industry makes its own bed here, too many times, where those threats would be much less threatening. Is that what you’re kinda driving at?
Yeah. I mean, here’s the thing. I think what it comes down to is there’s an original sin at the heart of the real estate industry, which is the fact that we conceive of ourselves as salespeople. When, in fact, sales is a very small part of what real estate agents do. They spend 90 percent of their time counseling people through a transactional process that is very difficult, that is challenging, that is complicated.
And yet someone who says, “I’ll put your home on the market for $500” is living off the perception that the public has that all a real estate agent does to sell your house is they put a sign in your yard, take a couple of pictures and put them up on the internet.
If that’s all a real estate agent does, well then, you can get that done for $500 — but anyone that’s in the industry knows that it’s a lot more complicated. And that requires a lot more skill, a lot more knowledge, a lot more hard work than that, which is why people can command the pricing and the charges that they do.
But if people perceive us as being just salespeople — they don’t value that, and they’re not gonna be willing to pay for that, and it leaves you vulnerable to outsiders coming in.
Great point. No. 2, second issue facing the industry.
The second issue facing the industry, I would say, would be the possibility, particularly as the market heats up, that you’ll get people coming and doing the $500, the $50, the 1 percent, whatever the case may be. People challenging the industry essentially on its pricing model.
And that happens more likely in a hot market, you’re saying, because people want to save on commissions — or why would they?
In 2008, when it was taking 12 months to sell a house, people could see the value of having a real estate agent working as long and as hard as the agent has to work. But if you have these markets where the house hits the market on Monday and has multiple offers on Tuesday — if the public perceives that all you’re doing is putting the house on the market — they think, “Why do I have to pay all this money to an agent if I’m going to get multiple offers within 24 hours?”
Exactly, I got you. Joe, we just had a post on Facebook in one of the admin groups, an agent — I can’t remember her name. But she asked on Facebook if other people had been seeing this, and I think this is in line with what you’re trying to say here: Buyers, they’re doing all the work themselves, and then somehow the agent comes into communication with this prospective buyer.
And the buyer says, “Hey I found the house I need and want. I don’t need you, I’m going directly to the selling agent.” And that’s kind of a new concept. Every time I always bought a house, I got an agent to sit alongside me. And we would go out and journey into the homebuying process.
And then on that Facebook post, we had a ton of people who said, yeah that’s happening. Is that an example of people not seeing the role of the buy side anymore, or what’s going on there, do you see that?
I think it stems from the same problem, which is that we have not, as an industry, done a good enough job explaining what we do to people so that they think that, again, from the buy side, do I really need an agent just to present an offer for me and then negotiate? I know how to negotiate. I can call up a listing agent and present an offer.
You do leave yourself open to that if you don’t do a good enough job explaining what it is you do, the value you bring to the transaction. What you described happens a lot, it always happens. It’s not new; there are always going be buyers, particularly in a hot market, who look at this and they say, you know what, maybe I can make an offer, and they do perceive then that they can get a better deal because the listing agent might be getting both sides.
Or the seller might be negotiable because the listing agent isn’t paying a buy side on this, or whatever the case may be. But that’s always a problem.
Here’s the thing: these are the kind of problems I like to have, Brad. The problems I had in 2008 are much worse than the problems I have today. These are good problems. Multiple offers, all these kind of things, these are the good kind of problems.
It’s like when I used to complain to my dad about paying taxes, he’d say, “That’s a good thing, Brad. You get to pay taxes. Some people don’t get to pay taxes.”
No. 3: Challenge facing the industry.
I would say the third challenge is something that’s coming up again and again, and I know that you’re always very interested in it, which is the control over the data, over listing data, and the question of how the industry is going to deal with the companies like Zillow that have come in and are positioning themselves with a consumer brand that rivals what real estate brokers have with consumers in terms of consumer awareness, in terms of, certainly, traffic. If you add up all the different brokerage sites in the country, I’m not sure that they would average out with what Zillow’s doing.
So yeah, I think that’s another challenge is that somebody has come in, and they’re very well-funded and they’re very smart. They’ve inserted themselves into the transaction in a big way. And that’s always gonna bring in a lot of problematic issues for brokers.
And we just learned yesterday in the earnings report, they’re approaching a billion dollars in revenue and that is 95 percent coming from the real estate industry. And so, it’s not only the traffic and the data. Wherever you all used to advertise, they’re now advertising on Zillow and realtor.com.
Hey, let’s go to the next one. What I like about you, you are a family-owned, second-generation real estate company. Your old-school, rock-solid principles, fundamentals of running a real estate company, tried and tested practices.
But you’re very progressive. You’re open to the new stuff. So you’re old school, new school. What is good and bad about both?
For example, we talked about competency of agents. Brokers have this model — if you can fog a mirror, if you can stand on one leg, you can be a real estate agent.
So what’s good and bad about the old way? And what’s good and bad about some of the new things we’re seeing?
I think what’s strong about the old model is the extent to which it posited the broker as a partner of the agent.
You go back to the pre-1970s and the way it really worked was that the broker was the lead generator, was the rainmaker for the brokerage. And usually the hail-fellow-well-met, who knew everybody in town, had more business than he could handle, so he brought in associates, paid them 50/50 and then worked with them.
And then that evolved in the ’70s — Re/Max and all these types of changes — where the agents start to build their own independent businesses within a brokerage.
But it’s always been kind of a partnership. The broker is going to help the agent through the services that the broker provide to them. And that’s the strength of that model, that’s something that we certainly take very seriously, is that we try to be a great service provider to the agents that work with them, try to help them provide a great consumer service experience that a lot of brokers say, well, my client is the agent, and my client’s not even the buyer or the seller.
I kind of see both of them as my client. And what I try to do is empower the agents to do a great job for the client, because I think that’s good for everybody involved. That’s the strength of that model.
And I see that in some of the new-school models — I don’t see that partnership. I see too many brokers trying to go into this industry where essentially they’re just landlords. They’re warehousing agents, where they have no vested interest in the agent’s success of his career, they’re just going to charge him some fees to have a desk and try to make money on volume.
And isn’t that why the industry gets a bad name? Because they run rogue and there are not a lot of competent people? That’s what I think gives the industry a bad name, running those warehouses is part of the problem — not the entire problem, but part of it.
To be fair, I think there are bad agents who work at every brokerage, whether it’s new-school or old-school. But I don’t understand the brokerage model where the broker does not take a hand in trying to help the agent be successful. That to me is a very different model from the one that I’m in.
In terms of the strength of new school, what we’ve seen over the last 15 years coinciding with the internet and all these different technologies, is a much greater awareness of the consumer. Trying to push information out to the consumer, trying to be aware of the client satisfaction experience. Ten years ago we never rated agents or got evaluations of performance. Now virtually every company is doing that and you can find that information in a million different places on the internet. That’s a dramatic change.
You remember, and I know you covered this extensively, when agent ratings came out and agents were so scared of them that they were rebelling against the very idea.
There’s always this knee-jerk, people react. “Don’t even put listings on the internet. Oh you can put them on, but don’t use photos.” And on and on and on. It takes agents not too long, and I think the industry not too long, to say, “Hey, that’s not that bad, that might actually help my business.”
Let’s run through a short list here, up and down yes or no, what do you think. We’ll call them quickies here, Joe. Portals, up or down? You like them, you hate them?
Portals, I like them. I’m partnered with all the portals I do think serve a purpose. So up.
Yep. Will Move win the lawsuit, do you even care? Move and Zillow, nasty blood sport going on.
You know what, we’ll let them fight it out, I have absolutely no skin in that game whatsoever. Honestly, I’m the lawyer for the company, I have enough legal issues to deal with of my own to worry about anybody else’s.
Hey, by the way, are contingent liability concerns by brokers up with general litigation? Anything unique in real estate, or is it just the way it is these days? Everyone’s getting sued for something.
Everyone’s getting sued for something and the more transactions you do, the more likely you are to end up in a transaction that leads to somebody being unhappy enough to sue you.
Yeah. That’s another one of my dad’s slogans: “If you’re getting sued it means you’re big enough to get sued. That’s a good thing.”
It’s a good thing insofar as it means we’re doing more deals, and so there’s going to be some percentage of them that are going to go sideways for one reason or another.
Exactly. Broker Public Portal. Fan or foe?
On the Broker Public Portal itself? I’m a tentative fan. I think it’s an interesting idea. Certainly, you can’t be pro portal, and not be pro broker portal. The more the merrier.
Yeah. Upstream. Fan or foe?
I’m on the board of Upstream so I’m very pro.
Tell me this though, is the genie out of the bottle? I mean, is there any hope the industry can catch up on this data thing, or on the broker portal thing? It seems a little late to the party.
Well, I’m not empowered to speak on behalf of the board of Upstream, but I will say this: I think people fundamentally misunderstand what people are trying to do with Upstream. Everyone thinks that it’s trying to supplant this or that. I think the main value of what’s gong to come out of Upstream is going to be the single point of entry of listing information.
What happens after that, to the extent to which brokers get more control over the orientation of their data, is also an interesting thing. I think it’s a good thing. I certainly don’t think it’s a bad thing for brokers to be able to wield control over the information they provide to third parties.
But quite honestly, when I’m a member of nine MLSs and I have to do data entry in all these different systems, the idea that I can do it in one system and have it then push out to all the various MLSs — that’s a huge thing for me, that’s a huge money-saver for me.
And for the consumer, you know? I think that is a communication problem. I would challenge you, for us, have them be more transparent, so we can get and understand. You just described the heart of the issue, which is this inefficient MLS system. It’s not good for anybody, and forget Zillow, forget all the other threats and all this other stuff that everyone likes to always talk about.
It seems like the inefficiencies of the multiple MLSs is a problem for brokers, for agents, for the consumer and for everybody.
If you would ask me “up or down” on MLSs, I’m also up on MLSs. I don’t have a problem with MLSs. I do think it’s unwieldy when you’re dealing with multiple operating systems and programs. That, to me, is a bigger issue than having multiple MLSs.
Having different rules and things like that — that’s a problem. Back in the day when we were just in one MLS, our lives were a lot less complicated than they are today.
Great. Hey, let’s end on something positive. Sunday is Mother’s Day, right? And your company was founded by a mother? Do I have that right?
It was founded by my mother, Marsha Rand, about 32 years ago.
And I met her only once, but she’s an amazing person. What’s it like? You got a tribe of brothers and your mother. Family-owned businesses, I was brought up in one of those. And they’re pretty cool, aren’t they?
It has been one of the highlights of my career to work with my brothers and my mother in this company.
It has brought us closer together, it’s really been a wonderful experience. I will say that — people always ask me, you know, “what’s the secret of a family company being successful and not falling apart at the seams?” And what I always say is this: We fight about everything.
I mean, when we fight we lock the door and nobody gets out until we make a decision. Because we do have disagreements, we’re not all sharing a hive mind. We come into the situation with different perspectives.
But we never fight about money; we’ve never fought about money. Marsha laid the law down about everything being equal, everything being divided equally — I get a stipend for speaking, it goes right into the pot for everybody to share.
There’s no outside income. And I’ve seen that, I’ve seen other family companies where there are problems, and the problems stem from unequal ownership interests, or who’s got an interest in this company, but not that company, or someone feels that they’re, “why has he got a better car than I do and it’s on the company,” all that kind of stuff.
You fight over money, it’s posion. You can’t fight about money.
Now, that’s a great lesson for the audience. Hey Joe, congratulations on your success and congratulations to your entire family on their success. I love watching you. You kind of come from the world that I’m really familiar with. I was brought up by family retailers, and that family business discussion every night at the dinner table. And I just think of it so fondly, but I also am very grateful.
You’re a leader, you’re a direct, you’re clear, just like this interview. People are going to love hearing you here. And wish your mom Happy Mother’s Day, and thanks for doing the show with me.
I will do that, thank you Brad. Best wishes to everybody and have a great weekend.