realonomics

We are facing a new syndrome. BBS. Busted Broker Syndrome. Exactly what is BBS, what are its symptoms, what creates it and how is it treated?

“Busted” is not used here as an economic term rather, it is an emotional and mental term that refers to the ability of Broker/Owners to cope with the industry and its myriad pressures, changes, challenges, costs and operating demands.

“I’m burned out, I’m broke and I am busted…I can’t keep up any more,” said one broker to me in a recent conversation. “I want to execute…I can’t execute…I don’t know what to do anymore and I no longer recognize the industry I have been a part of for more than two decades.” “The money is gone, my strength is tapped, my will is gone and my attitude is in the tank…I’m on the edge.”

What is BBS?

BBS is an insipid malaise. Although not officially recognized by the Centers for Disease Control (CCD), make not mistake about it, BBS is real. Ask any Broker/Owner who is willing to engage in a transparent discussion.

BBS begins with the onset of market change, disruption and rapid business evolution that renders the Broker/Owner’s ability to adjust his/her business model to the prevailing transformations taking place within the industry.

Result? BBS increases, confusion, tension and economic and personal stress on Broker/Owners, often causing them to lose perspective regarding their appropriate roll as visionaries and leaders within their company. This diminishes their ability to consistently deliver sound, well-thought-out business solutions to their organizations.

BBS is primarily rooted in the potting soil of industry and market transformation where demands far outweigh the capacity to deliver solutions. BBS is stress that Broker/Owners face in a rapidly changing industry. BBS erodes the self-motivation, self-confidence and even self-esteem of Broker/Owners.

BBS thrives wherever a Broker/Owner is operating a traditional brokerage business environment that is confronted with changes it does not understand, cannot readily adapt to and seemingly cannot control. This is the optimal eco system for the onset and growth of BBS.

Symptoms of BBS

BBS begins with a set of often ignored emotional symptoms that find their ultimate expression in the actions and reactions of the Broker/Owner. Again, rapid, unchanneled and uncontrolled change is where BBS thrives…change is not where Broker/Owners thrive…thus, the two are in conflict from the outset.

Symptoms of BBS start with a sense of fatigue and diminished motivation when faced with the daunting challenges of a rapidly evolving industry. Stress begins to cloud business judgment and creativity is replaced with survival instincts…hanging on, hoping and waiting for a new market cycle and a general inability to create outcomes.

Other symptoms include poor financial judgments, borrowing excessive amounts of money in order to keep the brokerage operating, neglect of fundamentals such as recruiting and market expansion, technology and Internet solutions designed to curb overhead.

Under these conditions loss of hope, despair and depression can take hold of a Broker/Owner so that he/she can actually become immobilized and sometimes unwilling or unable to cope with the obvious needs of his/her company. Things grind down and sometimes the organization ceases to exist as it once did or, unfortunately, doors are closed.

Broker/Owners are becoming increasingly disillusioned with their position within a rapidly changing and chaotic industry. Like anyone, when a person of leadership is overwhelmed with too much change too fast, that person can feel as if he/she is clinging to life on the edge of a precipice.

Symptoms of BBS often include an attempt to move faster than is necessary, less than optimal decision-making, diminished objectivity, poor financial decision-making, short-sightedness, erosion of personal relationships and a sense of doom and gloom. Folks, this is real stuff!

BBS is real. It’s not a joke. This post is not hyperbole or satire. This is not humor. We are dealing with real people who run thousands of real estate companies. We at REALonomics talk to Broker/Owners almost every day. We hear their stories, listen to their frustrations and attempt to console them by delivering some business solutions to their market and financial dilemma.

Something new is emerging as we listen, dialogue and coach. There is a very real set of emotional, financial and operating issues facing Broker/Owners specifically and real estate practitioners in general. As an industry we have little or no emotional or financial mechanisms for assisting career Broker/Owners who are overwhelmed. Why?

Causes of BBS

What are the specific causes of BBS? There is an emotional, psychological and spiritual dimension to all businesses. We call it “culture” or “model” or something less dramatic in order to distance ourselves from discussing sensitive, deep dimensions of an owner’s dilemmas in operating and sustaining a real estate business.

The causes of BBS are diverse and complicated. BBS isn’t like the common cold that comes and goes in a few days. The influences of BBS take place over the long haul. BBS gains momentum within a Broker/Owner who really cares, who keeps plowing his/her field…the one that takes care of his/her agents, participates in the local, state and national organizations and is always trying to do what is right.

BBS has a common set of causes, however. The biggest cause of BBS is rapid, overwhelming change followed by a lack of preventive inoculations such as access to powerful business models that work, personal coaching and capital.

BBS is caused by a sense of inadequacy that grips an owner. This inadequacy, left unchecked, extends itself into the capacity of the Broker/Owner to implement new operating models called for in the consumer-centric era.

BBS can cripple an Owner’s ability to re-inventing his/her business, creating a perception of isolation (yes, one can be public and still be isolated). BBS works over time creating confusion, anger, guilt, frustration and a sense of hopelessness that can overwhelm Broker/Owners.

The real estate industry is clearly in the throws of an upheaval that can potentially annihilate our most precious resource, the career leaders, Broker/Owners. These are the men and women who have been on the front line for a long time carrying the financial and leadership load. These have become the vulnerable ones.

Solutions and Cures for BBS

Unfortunately, there is no quick-fix solution. However, if our industry values Broker/Owners, and we know it does; and if the franchisors value their Broker/Owners, and we know they do; and if our myriad local associations, core service providers and others value the important place Broker/Owners occupy within the industry, we should have professional, business and financial support mechanisms in place that can bring assistance to Broker/Owners in time of need.

REALonomics believes that the plight of Broker/Owners is reaching dangerous levels. Much of the situation is swept under the rug as Broker/Owners quietly close their doors and walk away from careers that sometimes span decades.

REALonomics believes that the situation could become pandemic resulting in the loss of much of the industry’s true talent and leadership. REALonomics believes Broker/Owners are core assets to the industry and assets should be treasured, protected and supported during difficult times with business and financial assistance as well as development coaching and peer support.

We face a couple of huge glitches standing in the way of assistance. These have always been part of the culture of being a Broker/Owner…pride and ego. Our healthy sense of self-determination among Broker/Owners is good and admirable…mostly. But under these circumstances and at this time, some Broker/Owners will have to stop pretending, drop the pretense, lose the ego and reach out for help to those they can truly trust and those who actually care about them as people, not as pawns in the real estate industry’s game of market chess.

How many psychiatrists does it take to change a light bulb? Just one, but the bulb has to really want to be changed.

Popularity: unranked [?]

In a previous post (Nori’s Leaky World) we spoke about the real estate industry being built, in part, on a control model.

Throughout our history we have deployed control-based business models. Like the real game of Monopoly® our industry has created its own market game board governed by a set of rules we wrote and occasionally edited to extend our control. An owner’s business model was based largely on mechanisms designed to control information, markets, brands and for a long time we even tried to control the real estate agents who were part of companies.

Most importantly, we have historically attempted to control the consumer.

Control and Dominance

Large segments of the real estate industry and its core service providers still engage in Realonopoly, a game about market control and dominance. In the game of Realonopoly we carve out spots within defined markets…we then seek to control our position, until, as we have all experienced in the game of Monopoly®, we can no longer pay the rent; a position in which too many owners find themselves today.

Within real estate, mortgage and title companies, creating one’s board is the first initial step; everything flows from there. Position on the board can mean power and power typically equates to a kind of control measured by muscle flexing. Control has historically been everything in the real estate industry.

The ultimate control was consumer control.

Losing control creates a depression and a void…a crack where others can slip in. Yet, it is the contention of REALonomics that each era in the historical timeline of the real estate industry unravels when control is challenged and the challenge typically stems from a change in informational technology…the means by which people gain access to real property data.

Collaboration and Community Forcing Change

Business models typically change when the old models are confronted by new technologies and people empowered by concepts of innovation. Most of the change in business modeling is induced by innovation driving primarily by advances in technology. These advances in real estate technology create a “democratizing” of information, which then empowers others to innovate, challenge the control status of the prevailing models.

This is precisely what has taken place in the real estate industry. REALonomics has presented this as the Democratization of Real Estate, a time where the industry loses its grip on the game of Realonopoly and finally is forced to abandon its position in favor of a new board game. Think of this concept as three distinct eras as follows and notice how transitions occur when new technology is introduced…then, notice how control is relinquished as information is decentralized and ultimately democratized.

Examine the following illustration, extracted from our archives. It demonstrates the evolution of the real estate industry’s business models.

Control works well in business model climates where informational access and free exchange are blunted, where collaboration is limited to the controllers and where the rules only change when the controllers are finally confronted by free thinking people who are initially labeled as rebellious fringe lunatics.

We have now entered an economic era with a new personality being formed by collaboration and communities, rather than control and corporate bureaucracies. Each consumer who is empowered with Internet access is empowered to shape our business models and help us write the rules that will govern The New Real Estate Economy.

There is a new board game emerging that will redefine how we will play the real estate game tomorrow, next month, next year and for quite some time in the future. It’s now a game without many rules, one of collaboration and community, of open, free-flowing dialogue where one person is just as powerful as a group. How do our current models stack up to his new reality.

The question we ask is “Does anyone still want to play the old game, Realonopoly, a game in which we predict there will be no winners?”

Popularity: 15% [?]

The real estate industry has always tried to be a closed environment. The real estate industry has traditionally been a control environment. With few exceptions, our models have typically created an “us” and a “them” or, those who are insiders looking out and those who are outsiders looking in.

We are now facing the prospect that we are them and they are us! The once safe environment of our cozy aquarium is being invaded by “them” in droves. They are asking for all the rights to the environment heretofore granted to the “fish”…us. Or, they are proposing that we leave the tank and join them in a new form of existence.

In traditional business models, secrets are often deemed necessary and access to “insider” (the fish) knowledge is viewed as a threat. Free, open and unrestrained information is usually viewed as a corporate debacle and dangerous to the survival of insiders.

Our Real Estate Environments

The unraveling of any business environment starts at the fringes of the model and moves inward toward the epicenter. That is what is occurring in the real estate industry. The hairline cracks in our closed tank system are becoming open gorges where all that we have held sacred (secret) is spilling into the streets where the distinctions between “us” and “them” are being blurred by the Democratization of Real Estate.

Stefan Swanepoel recently posted the thought provoking question “Is the Future of Real Estate in Google’s Algorithm?” The mere addressing of this interrogative forces the industry to reexamine its operating models in the midst of a consumer-centric era.

REALonomics remains uncertain with respect to the ability of the real estate industry to retool itself for life in a new environment.

Learning to Live Life outside the Tank

My daughter once had a goldfish she affectionately named Nori. Nori lived in a small aquarium on the nightstand next to her bed. Twice each day Nori was fed from an entity outside the aquarium. Nori peered at us, we at Nori. Nori, without fully appreciating her situation, was living a life of total dependency on my daughter.

The analogy hardly needs explanation. We are Nori. Nori is us. My daughter is the consumer. She is one of “them” to Nori.

When it came time to clean Nori’s aquarium, we would all gather around and gently scoop her out with a small net, place her in a temporary environment, clean the aquarium and then return her to the environment to which she had become accustomed. Nori could not live outside the tank…her existence depended upon a certain environment.

Can the real estate industry learn to live outside the tank of traditionalism in a world where the operating rules are decidedly different? Can we live without the aquarium? Can we evolve from dependency on controlled isolation to the open world of life without gills?

Can we learn to live and operate the real estate industry and our local business models outside the tank where we have created and experienced a deceptive pseudo security?

Can we shed self-imposed gills and fins and dependency and control in favor of the freedom of an open sourced environment where tanks are the stuff of folklore and where our lungs can breathe the air of innovation and partnership with “them?”

Popularity: 16% [?]

Kevin Seney knows his way around the real estate and mortgage industries. He’s comfortable talking about both and equally comfortable addressing their dark sides. Our paths crossed recently and I began to explore his new franchise concept Bug! Realty.

Although REALonomics cannot address the validity of Bug’s economic model, its brand, marketing, emphasis on cyber agents and offices, lower overhead and a commitment to meeting the needs of the consumer in a transparent way caught our attention.

We tracked down Kevin and found him as open as his model. He was eager to share with us his vision for Bug! Realty and the the real estate industy itself. Kevin discusses his own franchise offering, comparing it to what he calls the “tired…instituional…not current” traditional brands. The following excerpts come from our exchange with Kevin Seney. For the full interview, click here.

REALonomics: Can you tell us who Kevin Seney is and about your real estate background?
Seney: I have been involved in real estate since I was a teenager. Growing up in Wyoming, I had a remodeling business in high school which led me to building spec homes when I graduated. We eventually lost our butts, when our construction loans went to 18%, but I learned some valuable lessons at 20.

I started my own Mortgage Company, The Home Loan Store, Inc. I opened the company in a small, highly visible downtown retail space, right next to Starbucks. I finally sold the company in 2000 and took some “much needed” time off.

Looking back at my experience working with Realtors® I walked away with a very unique perspective on the business of real estate. I was always amazed how much money Realtors® spent on “Image Advertising” and “putting on the show,” but as an insider, I knew how INEFFECTIVE it was for them. Meanwhile, I felt like consumers were all laughing at the industry. The economics of real estate were changing quickly. Real estate needed an “Image Makeover.” I HAD MY IDEA!

REALonomics: As you know, REALonomics is in a perpetual quest for what we call “Model Perfect” because we think the real estate industry and its relationship with the consumer is in dire need of a transfusion. What makes Bug Realty a unique model in the sea of options for brokers/owners and agents? What are your core value propositions and distinctives?
Seney: First, let’s talk about our brand. Existing real estate brands are tired and institutional. They are not current. They are from the 1970’s.

Our brand is NEW. It is COOL. It stands alone in the industry as being COMPLETELY DIFFERENT. People love to talk about Bug! Our brand has personality. Our brand is clearly distinctive!

REALonomics: What prompted you to create Bug Realty and what’s the message behind the bugs?
Seney: I saw a clear opportunity for this model. The market is wide open for change. The message behind the Bug goes clear back to my original objectives with brand development. I set out to create a brand that was simple, yet cool and consumer friendly. Something New! Something Fun! Something Remarkable! Something that signaled CHANGE.

Here is what all the experts said: Powerful brands are simple. Powerful brands are memorable. Powerful brands carry significant emotional meaning to the consumer. As a result, people talk about powerful brands. Consumers love us. They love Bug! simply because they already did.

REALonomics: What do you see as the major trends that are present in the real estate economy that can harm and/or help owners get a grip on their business and its profitability equation?
Seney: We could not have launched our franchise at a better time. I would like to say that I timed it that way, but our experience so far, has been that the entire industry is looking for something new.

Consumers are also licking their wounds, recalling the guy in the $100,000 car who sold them the house that is suddenly without equity. The consumer wants change too. People are becoming economy and ecology minded. Our message is being well received.

The more difficult the market, the more our model makes sense. Every day I hear of established brokers going out of business. Can’t pay the rent.

REALonomics: Does Bug Realty have any relationships with core service providers such as mortgage, title, escrow, home inspection, etc. and how do these work within the organization’s framework.
Seney: So far nothing. The industry is still floundering and not paying much attention to new opportunities. Coming from the mortgage industry, I also believe that the consumer wants freedom of choice for both mortgage and escrow.

Keep it Simple, is our motto. When the time is right we will tie up with a national lender for marketing reasons and a shared web experience but I still believe in local people making their own choices, in their own markets, with local service providers. This is still a “People Business” and we want to keep it that way.

REALonomics: Apart from the Internet, what are the components of your technology platform, that is, your internal technology tools that you bring to the table for owners and agents? Do you espouse transaction management; tablet PCs or any of the trendy technology solutions?
Seney: We require all agents and franchisee’s to have the basic “Bug! Virtual Office Package” which consists of a wireless laptop, cell phone, eFax and online forms, and business software.

We are exploring many options such as agent blog sites, internet marketing options, and an array of transaction management software.

Recently, I made the decision to standardize our Franchise on the Apple iPhone. All agents will have one. Why? They make us even more portable. Our agents always have internet access, even in line at Starbucks. And, most of all, they are just cool. We are a cool company. It works.

REALonomics: Are you seeing broker/owner profitability problems in the current market situation and do you think the industry is going to see the closing of doors with respect to real estate brokerage firms.
Seney: We already covered this, but again, it is clear that there is a lot of “fixin” to be done in the real estate industry. Doors are closing daily, across the nation. We believe we have the solution.

REALonomics: We have a readership of thousands of people from all aspects of the industry including franchises, title, mortgage, owners and agents. What’s the most important message you have for the industry as a whole?
Seney: Join us! We have an incredible future ahead. We are pioneers having the time of our lives. We are creating something really cool. We need leaders. We need visionaries. We need regular people.

In December of 2007, we closed out our first round stock offer of our Series A Preferred. We are already planning a second round offer later this year. We exceeded our plan for 2007 by 118%. Our costs were HALF what we expected!

2008 and 2009 will be explosive for this company. Our franchise is currently approved in all 50 states. We have a regionalization plan already in place. We have already sold our first Region: Welcome Region ONE in San Francisco, CA.

Every day I wake up and pinch myself…is this really happening?

REALonomics: What question would you most like asked of yourself that we have not asked and what’s your answer?

To see the Kevin’s answer to this question and other you may retrieve a complete copy of the interview by clicking here.

Popularity: 11% [?]

Bug! It’s a new real estate franchise brand. No fooling! Although REALonomics cannot address the financial model behind Bug Realty, the brand image has been carefully orchestrated to convey simplicity, frugality and of course, fun for consumers. In this sense, we believe the wearied and worn consumer will easily recognize and identify with this brand. After all, who doesn’t know the Bug?

That isn’t all bad in today’s tired and shop worn real estate industry. The branding concept utilizes the Volkswagen Beetle Bug as an icon. Geek Squad gone realty! The power behind the brand is the natural, built-in consumer predisposition toward the Bug…I’m talking Beetle Bug.

REALonomics would like to recognize Bug! as Model Perfect from the standpoint of their keen attention to new brand creation. Watch for our REALonomics Interview with Bug Realty Founder and CEO, Kevin Seney.

What Bug Realty wants to convey to the consumer is their deliberate lack of pretense…simplicity is the idea behind the message as contracted with the big and brassy brand message of some other franchises.

Bug! touts a no-frills, no-hype real estate model. Bug! agents drive the Volkswagen Beetle in order to drive home (no pun intended) the idea of simplicity and no frills.

Bug! resists the idea of being labeled a “discount” brokerage company, opting instead to convey to consumer that they reduce costs by eliminating things like inefficient advertisement in favor of streamlined operating systems. Bug! agents conduct their business with wireless technology solutions with full access to MLS property information via the Company’s intranet, laptops and of course, cell phones.

Founder and CEO, Kevin Seney, said this about current brands, “Their brands are stale, they’re institutional. The communication they’re sending out to the marketplace is we’re big, we’re fancy, and we sell estate homes. But that image doesn’t work anymore.”

REALonomics congratulates Bug Realty for its marketing design that is truly innovative, fresh and recognizable in an industry that desperately needs fresh paint and new screen doors.

Watch for our REALonomics interview with Bug Realty Founder and CEO, Kevin Seney.

Popularity: 10% [?]