realonomics

A few weeks ago, both NAR and the DOJ announced a settlement of the suit broought by DOJ against NAR reagrding its VOW policies and competitive restricition created by the policy.

Here is the official scripted response by NAR from Vicki Cox Golder, 2008 NAR First Vice President & Laurie Janik, NAR General Counsel. NAR President Dick Gaylord is also featured here.

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There’s a bear in the woods of the economy and in the real estate sector in particular…he’s tired, angry, confused and very hungry. His insatiable appetite can no longer be assuaged by an industry lacking the fortitude to initiate collective, pragmatic and meaningful change to its business model and its relationship with the consumer.

Who is the bear?

As REALonomics forges this post, we estimate that nearly 40% of all real estate brokerage firm owners are the edge of financial collapse. Agents are leaving the industry for jobs at the malls. One said to me, “hey, I gotta eat.” The bear grunts its disapproval and hot steam shoots from its nostrils.

Who is the bear?

While the mortgage industry scrambles around attempting to locate financial relief, 1.8-2 million homeowners will experience up-ticks in their adjustable rate loans in 2008. The money changers are reaching out to foreign investors for capital due to a weakening dollar, indications of recession, bailouts of some of our most cherished lending institutions. Countrywide was just absorbed by Bank of America in what has to be one of the sweetest deals in decades. The bear rumbles through the woods, pacing and snorting.

Who is the bear?

Title and escrow companies have already started trimming, not the Yule tide tree but rather, their staffs…more layoffs are just around the corner…office consolidations are underway…middle managers are updating their resumes…sub-leases opportunities are growing. The ability to sustain the overhead and retain experienced personnel is waning. The roar of the bear is deafening and its hunger is obvious.

Who is the bear?

The landscape of contemporary and financial relevance is starting to shift under the feet of real estate franchisors whose transaction revenue streams have plummeted to amazingly low levels. It’s likely that franchising may become a negative growth industry in 2008…this will be a first since 1976. Wanna buy a real estate company? Eight of ten may be on the market by mid 2008. Market value, zero. The bear stalks the woods, its movements tracked by the sound of snapping branches.

Who is the bear?

The National Association of Home Builders (NAHB) reports are full of sub-prime finger-pointing and predictions that new home recovery will rebound in 2009. Some Midwest markets report that contractors are simply shutting down, packing up and walking away from unfinished projects and unfinished home construction jobs, leaving owners in a lurch with no trades available to complete their project. The forest belongs to the bear and no segment of the terrain is beyond its reach.

Who is the bear?

Finally, the National Association of Realtors (NAR), with declining membership and revenue, while locked in an ongoing and costly herky-jerky legal dance with the Department of Justice (DOJ), recently announced its plans for change, relevance and transparency as only it can define it…drill-down pseudo Web 2.0 mapping for major markets via www.Realtor.com coupled at the neighborhood level with FSBO MLS listing opportunities through www.HousePad.com. Indeed, strange bedfellows. The bear’s ears are penned to its head, flattened in an instinctive response to a threat…he rises on his hind legs, assuming a posture of potentially fatal engagement.

Does a bear sit in the woods? If so, who is the bear?

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Breaking NEWS! You can now list your property with the Department of Justice, a.k.a. DOJ Realty (spoof). Why? They are suddenly the country’s real estate brokerage experts (more spoofing). Their new website gives consumers tips and angles about what is wrong with their current broker, the industry and how, if you listen to them, you’ll have a wonderful new home buying and selling experience. Question, is the DOJ practicing real estate without a license? We’re serious! Is the DOJ tampering with contracts currently in force…again, we’re serious! Well, we’re sort of serious…in order to get your attention and drive home the point. What’s the point?

REALonomics has long held the position that the DOJ’s core target is not MLS rules…yes, we need to reform them…fast, making them consumer-centric. The core gripe is not NAR’s operating principles…more smoke and mirrors. We’ve held that the DOJ’s positions are not, at their core, about the consumer…that’s the ‘no one can argue with this position’ used by the DOJ to pander. It’s not about competition, either, nor service levels.

It’s not MLS, its not NAR’s rules, it’s not the consumer…nope! And it’s not about competition and service levels. It’s about MONEY, a.k.a., the long held notion that real estate practitioners charge too much and do to little. This is all fueled by the myth of the millionaire real estate agent, loan officer and escrow agent. It’s about fanning the consumer’s already raging emotions about paying all of us too much. Mortgage and title are next in line.

This Stuff is all Still True

As we stated, and as we have noted herein, the MLS property blockade does need to change in favor of consumer-centric transparency. NAR could and should make some serious adjustments in the rules we need to follow. Yes, the consumer is king and we ought to start operating as if we believe it.

Competition, you bet! We need more new models that compete in the marketplace by providing new solutions to real property issues faced by consumers.

And what about our service levels…another truth…we have a look-alike industry that is totally annoying. After we get past the door-hangers, the MLS, lock-boxes, the Internet ad, open houses and refrigerator magnets, what is it that distinguishes one brokerage, mortgage or title firm from another? Why is it that 95 percent of all residential listings in the USA carry a six percent fee? Why don’t we negotiate, truly negotiate, up and down the economic ladder? Frankly, I look around today and think, “I wouldn’t take that listing for less than 12 percent…too much work, too much risk, too little financing and too few buyers.”

The DOJ is Right - We have Some Things to Fix

“DOJ Realty Watch”, the new consumer advocacy agency, is right; we have a truck load of issues to face. But, that’s not what this is really all about. My friends, just follow the money trail! Or, I should say, the misconception about commission fees.

We, via NAR, are doing what we always do, bucking, kicking, scratching, clawing and arguing when we ought to be transforming our industry making it more effective for the consumer and thus dispelling all doubt that we are worth all we charge and even more in light of current market conditions!

Go ahead take a look at the DOJ website…read a bit…but mostly, read between the proverbial lines, it’s easy, the line spacing is very wide. Then, ask yourself question #1; “is there something we need to change?” After answering that question, ask yourself question #2; “is this, however, really about money hidden beneath legal briefs?”

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