realonomics

Part One: a Situation

Real estate is morphing. That is the opinion of many, if not most. The extent to which it is morphing is a topic for endless discussion and rancor. One individual who believes the pace of the morphing is quickening is the Founder of e-Partner and CityBlogUSA a market management and economic model that espouses full-on horizontal business models, consumer-centric transparency and paperless transactions.

That’s not all…there’s more. In addition to his passionate, Robin-Hood-like defense of owners, he believes that much of the industry as we know it today is being challenged by new entities he affectionately calls “non-brokers” who are already challenging outmoded concepts of franchising and real estate industry business models that either don’t work, are cumbersome to implement and maintain or, more importantly, aren’t profitable.

He believes these non-brokers and what he calls “neo-brokers” are already emerging and forming technology solutions and alliances that threaten the viability of a large percentage of traditional real estate companies.

Topic: The Quickening Pace of Business Evolution

“We simply don’t have a mature understanding of the pace of evolution within the industry, where it’s been, where it’s going and how to manipulate its business models on the fly,” states Donald Teel, Founder of e-Partner. Teel, a twenty year industry veteran and former owner, approaches our business modeling bluntly but professionally when he states, “We aren’t agile enough to quickly shift course because we are weighted down with an old, tired retail model that consumers find repulsive, arduous, expensive and non-transparent,” he says.

What does Teel want? “It’s a message about owners taking control of the economic forces that are shaping their ROI, rather than being dependent and dangerously reliant upon fickle markets to deliver passive revenue in feast-or-famine cycles…I stopped believing in fairy tales when I was about 5 years old and our industry is largely living on myth…just read the articles about how long the downturn is going to last…where are the articles that talk about the many new, exciting ways we can reinvent our industry during the downturn?”

“What do I want? A true analysis about the reinvention of the industry, its economic models, profitability for owners, market definitions and how we meet the needs of today’s consumers, without all of the inhibiting rhetoric about brands, MLS Associations, NAR, local associations and the whole litany of things that used to make this industry work but now need renovation and clarity with respect to how we do the job of listing and selling real estate,” says Teel.

Topic: “Freedom Summit” for Owners

Teel insists, “Owners need their own economic summit, where they come to the round table with a legal pad and pen or, if your truly geeky, Notepad, and hammer-out what we are up against and how we can take control of the reinvention of the industry before others reinvent it at the expense of owners and franchisors, including independent firms.”

“If 500 owners came together for one week, without speakers, break-out sessions, ancillary service sponsors, cocktail parties disguised as networking sessions, outside interference and influence, I believe we could come up with cutting-edge solutions. This would be a “Freedom Summit” where we forget we are competitors and distinct brands and ask ourselves as owners, are we happy with the industry, its direction, where it is taking us and the profit we produce.”

Although Teel supports brand franchising, NAR and local associations, he believes emphatically that it is time for owners to start taking control of these organizations, the process by which they operate and the outcomes their produce before it is too late. “The historical institutions which once served owners and real estate agents have, to a large degree, become self-serving real estate icons that actually place their own interests above the interests of broker/owners at the expense of owner profitability.” In short, Teel believes that too often, “…the politics of survival and personal gain within the institutions out-weigh owner needs.”

Topic: Replicating Inadequacy, Over-and-Over-and-Over

“We cannot simply keep doing what we do and hope solutions come to us by osmosis because there are too many competing entities within our industry that block innovation and the new definitions of market models, including how owners make and sustain profitability.”

“My partner said it best when he remarked that we are an industry made up of control models…everyone is trying to control someone else in the real estate industry’s national organizational flow chart.”

“Outsiders look at the industry as ill equipped to handle the fundamental changes being thrust upon it and they implement effective models that run counter to us. We should be asking the hard questions about what can be done to dramatically improve how we meet consumer needs, lower operating costs, diminish our numbers, reduce transaction costs and yet, improve our profitability.”

“When you have a major Franchisor, like Prudential, showing the likes of Zillow and Trulia the door, it’s a signal that the industry’s arteries are clogged and we are deeply in need of a bypass,” Teel says (see Rock Solid Meltdown post here).

“Prudential owners understood what was happening,” Teel states. The bottom line on this, according to Teel is simple that “…industry organizations cannot be allowed to provide Prudential owners with free services if Prudential Real Estate Affiliates provides similar services for a fee.” Teel views the Prudential debacle in San Diego as a symptom of the larger economic problem facing owners, i.e., finding new ways to create efficiency models that can produce higher profitability on fewer transactions.

REALonomics , Teel’s blog, estimates that up to 65% of all traditional brokerage firms on the precipice of financial disaster…”more owners are profitless than ever before,” Teel believes. “Our risky ROI models are catching with us as the tsunami of change batters us relentlessly.” “Your franchisor can’t help you,” Teel says, “they have the same issues.”

Topic: The Third Economic Wave - Consumer Centricity

Teel, a student of the industry’s evolution, has divided the history of brokerage into three eras or, what he calls, economic waves, each of which is characterized by technology. “Technology has always been the alchemy that produced ROI, even our old MLS books were the technology model of their day,” says Teel. “We would do ourselves a favor if we understood the First, Second and especially the Third Economic Eras of our own industry.”

Teel’s outline of the industry recognizes three overlapping eras with each new economic era supplanting the former with new technology while diminishing owner profitability. “As the industry has inched forward, owner profitability has steadily declined to its current negligible amount and operating complexity has increased,” Teel believes.

“We have entered a Third Economic Wave, the Consumer-Centric Era, with entirely new operating rules or worse, no operating rules at all, where owner agility will be the greatest asset they possess,” Teel believes and he is emphatic when he says, “Owners are running out of options for profitability because they continue to cling to a tattered security blanket of a bygone model that is clearly dead on arrival…bricks and mortar, retail operations that rely too heavily on space allocation and manual labor to service consumers and provide transaction management.”

“Consumers,” according to Teel, “have their hand on the economic joystick as they increasingly reject our service models that contain too many control-barbs in favor of open, free-wheeling, transparent real estate that allows them cost-effective choices without notions such as buyer-brokerage, please sign here so I can control you.” Teel says, “its just time to buck-up and admit it, consumers don’t like our model…they tolerate our model…there aren’t many options…and that’s my point, why aren’t owners creating the options internally; shouldn’t we be partnering with the consumer?”

Next Week: Part Two - The Interview

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