Consumerism

Gekko was Wrong…Greed is Bad

EDITORIAL

A re-post from iVoteAmerica, dated Monday, September 15, 2008.

In the movie Wall Street, Gordon Gekko proclaimed to shareholders, “Greed is good!” Gordon was wrong. Wall Street was wrong. The real estate and mortgage industries were wrong.

Oh, by the way…Alan Greenspan was wrong too when he proclaimed that subprime lending was “innovative” and “beneficial to consumers.”

Sound economics and the art of lending are predicated upon the borrower’s capacity to service the debt, pay it down over time and deliver return to the lender.

The concept of borrowing without capacity is foreign to all western economies and you won’t find it on any campus in America in Economics 101. Neither you nor many of your friends was ever taught the principle “you can have something for nothing.”

No One Whined about the Flow of Money

From about 2000 through 2005 greed was good to Wall Street and to the real estate and to the mortgage industries. No one whined about the money back then.

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REALonomics Launches National Political Blog Network

The iVoteAmerica (iVA) voter, polling and blogging network has been on my chalkboard for several years, delayed only by the call and priority of other projects.

Because we wanted our faithful readers, authors and commentators to know first, REALonomics is pleased to announce that it has cooperated in spearheading the launch of the iVoteAmerica Network (iVA). iVA is a national polling and blogging network that includes political polling and blogging (Plogging) for all fifty States. The iVA network creates an online political blogging forum for each State allowing people to post to the left, the middle or the right of any issue.

As we have discovered in the last 12-24 months our industry is confronted with many challenge that have us wound up with politics and politicians. With the recent takeover of FANNIE MAE and FREDDY MAC by the Fed, we need to reconsider our ability to influence outcomes by creating voices. The iVA Network is one way we can do that.

The iVA Network incorporates polling as a means of measuring participant opinions on a variety of political and social issues. At its heart iVA is a political blog or, what we call a “PLOG.”

We simply are not vocal enough…we are informed, we vote, we care, but we are not vocal enough in the competitive political arenas. My vision for the iVoteAmerica Network is to simply deliver a political platform for people who vote. Who votes? People who own real estate vote, people who care about the influence politics has over us, our families, our industry and our lives. – Donald Teel, Founder

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REALonomical: an Economic Mentality

Brokerage economics is undergoing a massive reordering. The way Brokerage firms make money is changing faster than our ability to absorb and adapt to the demands of the New Real Estate Economy.

To be “REALonomical” actually means something. REALonomical enterprises recognize the facts surrounding their business models and how those facts play out in real world situations, producing predictable and sustainable ROI. REALonomical is a brokerage mind set and it has something to do with how we model the financial aspects of a company in light of the Third Economic Wave; The Consumer-Centric Era.

It was Once a Simple World

During the First and Second Economic Waves of the real estate industry the model math was fairly simple and easy to interpret. From this interpretation we developed strange economic terms we called “desk cost” and “per person productivity” (ppp). Such economic models delivered notions of profitability because we could run formulas for operating our “offices” and hypothetically project our margins. Our simple formulas appeared as:

Gross Commission Income (GCI) – Cost of Sale (COS) = Gross Company Dollar (GCD). From the GCD, expenses were paid and profit, if any, was realized.

It was a simple world then. Broker/Owners understood how to create profit. Physical space was a huge part of the formula and for many years “cyber” was something we read about in Batman comic books.

Too much of the real estate industry is still living in the former model while being confronted with the transformative power of the cyber model.

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Unlocking Franchise Economics: Pt 1

Although relatively new, franchising has a powerful presence in the historical flow of the real estate industry and has shaped many outcomes and market realities since its inception.

Some broker/owners would claim that a franchise has made them incredibly successful, while others would say they have failed miserably with respect to leveraging a franchisor’s brand and its prima fascia value propositions.

However, despite the predominance of real estate franchising a large number of real estate brokerages still prefer their independent status and some of these have become their own franchised brands, capitalizing on the economic dividends available to them through leveraging themselves.

Although franchising is a powerful force within the industry, REALonomics believes there is still too little careful analysis and quantification of franchising’s market and economic value on the part of owners.

Quantifying a Franchise Value Remains Elusive

In addition, the ability to create economic performance models for a franchise, judge its market impact on a forward moving basis (trending), fully understand the costs and benefits to owners, agents and most importantly, to understand with as much certainty as possible the way in which consumers view franchises, remains quite elusive.

Franchising is a powerful economic consideration for broker/owners and an initial term can represent as much as fifty percent of the life cycle of a contemporary brokerage firm. For some time, franchisors have been negotiating initial franchise commitment terms that will run more than a decade. Another perspective is to consider the lifespan of an executed franchise agreement in terms of the changes that will occur within the industry during this “initial term” of a franchise agreement.

REALonomics will be posing questions, analysis, insights and extending some limited advice regarding how broker/owners can unlock the door to franchise economics. It’s this door that we believe is the key to identifying the benefits to adoption of a real estate franchise.

In true fashion, we will steer our spotlight of analysis and critique on the not-so-oft understood downsides of franchising. We will highlight and accentuate the benefits as we see them. We will ask the powerful questions that should be asked of franchisors who in turn ask broker/owners to pledge their companies to a particular brand at a cost that can sometimes be astronomical.

Framing the Franchise Analysis Correctly

We will help frame questions broker/owners can use to ask franchisors to quantify their economic delivery, their stated marketing value propositions and to clarify the broker/owner’s recourse for sub-standard performance on the part of a franchisor. We will suggest ways for franchisors to remodel some of their old propositions and presuppositions that cannot and do not create value for owners and how they can and should be delivering transparent, consumer-centric solutions that can differentiate them with owners, the market and consumers.

This will be fun, challenging and perhaps a little ugly at times. At the end of the day we hope REALonomics delivers some value to broker/owners, to its general readership and to franchisors.

We want our readers to be a part of the content, so your posted comments, insights, experiences (good or bad), together with private emails and other communication with us will be welcomed by everyone.

Our objective is to see if we can unlock the door to franchise economics, since the state claim of real estate franchisors is their delivery of an economic enhancement and a stronger overall market asset. Broker/owners need to know how a franchise can and should perform on their behalf and how to make the critical judgments associated with the cost versus benefit relationship.

Some initial questions about franchise value might include the following:

1. What is a franchise worth to an owner, i.e., what should today’s initial and ongoing cost be? How do franchises differ from one another, if at all?
2. What is the preeminent economic value of a real estate franchise to Broker/Owners and to agents? Why have new franchises such as Keller Williams and EXIT Realty been successful in the midst of a very crowded playing field?
3. Do consumers have predisposition toward franchise names or, are consumers neutral when it comes to loyalty?

Broker/owners, franchisors and agents are invited to post comments about their franchise experiences, good, bad or indifferent. If you wish to communicate but do not want to post a comment you can use our traditional Contact Form.

Yikes! What have we started now?

RateSpeed: Inching Us Toward Mortgage Transparency

As a real estate industry change agent, Jeff Corbett certainly ranks high on the mortgage list. His blog, The XBroker, is a quality diatribe that weaves a clear picture of the confusion and chaos that exists within the mortgage industry and its relationship with the consumer.

Good change agents have an edge to them, typically a sharp edge. Exceptional change agents have a sharp, well informed and analytical edge to them that will cut ones mind open so that it soaks in the message of transformational change. Jeff is a sharp, well informed, analytical agent of change. He is on the march against predatory lending and other kinds of mortgage lending practices that have contributed to a large degree to the current financial state of the union.

ENTER “RATESPEED“

Jeff wants transparency in all things related to mortgage. When we spoke recently, we briefly discussed our respective efforts within the industry but digressed almost immediately to his “RateSpeed” widget for the mortgage industry.

As is usually the case within our industry, disclosure is at the core of RateSpeed. The RateSpeed widget spews out mortgage pricing analysis and its resultant solutions are the kind of transparency that sets the consumer at ease with a sense of “complete” knowledge about the financial ramifications of a mortgage commitment.

Although the RE industry and its biological twin, the mortgage wing, need a dose of RateSpeed widgetry, what we need more than widgets, good as they are, is a dose of the mentality and leadership behind the widgets. Jeff’s widget stems from a mental image of what the mortgage industry’s business model should look like, what it can deliver to the customers in this, our Third Economic Wave, the Consumer-Centric Era.

To REALonomics, RateSpeed is not a widget…the widget is the expression of a kind of business model…of course, that’s what REALonomics thinks about day and night…MODELS.

Behind Jeff Corbett’s RateSpeed widget is a business blueprint and behind the blueprint is a design that delivers a solution to the industry and the consumer. BRAVO!

ENTER “RATESPEED RESISTANCE“

REALonomics admittedly knows less about the fundamental practices of the mortgage industry than it does those of the real estate brokerage industry. But there is an initial and fundamental response to our mutual calls for transformation and transparency…resistance.

Moving from corporate hierarchy models to cooperative and collaborative platforms that embrace complete disclosure will always be met with initial skeptical cynicism and resistance. Nevertheless, the Jeff Corbett’s of this industry are to be recognized for thrusting their widgets into our faces, forcing us to think about transforming a now very sick industry into a new, vibrant and fully fluid, consumer-centric delivery model that our clients love…yes, “LOVE” is what I said.

REALonomics applauds Jeff and all of the rest of the Jeff-like transformers who are inching us forward in our “Qwest for Model Perfect.”

Try RateSpeed. Visit The XBroker.

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