Here we go again!

NAR should be seen here in its true light, a purveyor of control, monopolization and the promotion of the punishment of creative models that do not meet the local real estate dominance model put in force and sustained by its vast network of local Associations.

Although we are not supporters of discount brokerage as a viable business model, we feel the need to speak out on this issue and the freedom of Broker-Owners to create business models without the fear of retaliation and punishment by NAR and local Associations.

We are forced to ask the question, “Is anyone paying attention to how our dues, financial assets and human capital are being used by NAR?” Furthermore, are we paying attention to how NAR and local Associations are dealing with Broker-Owners who are not lining up in lock-step with centralized policy?

NAR’s support of Realcomp’s position, backed by a commitment of $500,000 in member funds, comes on the heals of its unprecedented announcement of its support for the extension of the federal home buying credit.

FACT ANALYSIS: This is a credit that is funded by tax-paying consumers and given to under qualified home buyers who lack their own financial capacity to purchase a home without a subsidy. Is this NAR’s new version of the now regretable community lending laws forced upon banks by Congress?

It appears that while NAR attempts to convey to its members that it is on the cutting edge of creative solutions for the industry (yes, some of these solutions are excellent), behind the scenes it continues to accellerate the wielding its financial and market control to further sustain its self-serving monopoly and potentially lethal grip on the industry.

While we are not opposed to supporting sound MLS policies or lobbying in favor of industry issues, we do wonder why NAR continues to fight independent Broker-Owner creativity at the local level and why it supports home purchases funded by the extraction and transfer of wealth from tax paying consumers to under-qualified home buyers.

HISTORICAL REVIEW. NAR has locked horns with the DOJ over many of its policies and historically come out on the losing end of these battles, squandering millions of our dollars on old-line, control models that contribute further to the decline of our industry and the capability of Broker-Owners to sustain their businesses.

Isn’t it time for the industry to start asking NAR leaders some hard questions about what they support and why? More importantly, why isn’t NAR using its lobbying and financial clout (again, our money) to assist Broker-Owners with financial support, in the form of business loans and grants for the reinvention of our failing models?

We have three dangerous forms of consumer, financial and business model control happening within the industry, each harming Broker-Owners and their ability to create and sustain profitability. The first of these is NAR itself, the second is franchising and the third is local MLS property information policies.

Each of these three factors can and sometimes do work against the ability of Broker-Owners to create models that produce sustain ROI and profitability.

After all, NAR, franchisors and local Associations have their own self-serving agendas for financial survival, even it it means the further erosion of Broker-Owner viability.

NAR, like all large organization and bureaucratic structures, is beginning to miss the mark with respect to whos money fuels the financial coffers. Bureacracies often forget for whom they toil.

Tails should not wag dogs.

No related posts.

This Post Syndicated from e-Partner

Ours is an industry with legacy. The brokerage business has seen many booms and endured many busts.

Many have come and most have gone.

Road kill has always been a part of the mix; the strong eat the weak and the weak find refuge in other endeavors.

The real estate industry has always been a town occupied by heralded gun slingers whose reputations have become the stuff of legends. Sometimes these are brands, other times they are movements, fads or personalities that come and go with the wind.

We have always been a tad reckless; that’s why we are a business model willing to predicate its economic viability on the unpredictable and unenforceable productivity of independent contractors. Let’s admit it, the business cultures we have created have typically been less than IBMish.

Nonetheless, we have moved from era-to-era, cycle-to-cycle and shifted from mode-to-mode, surviving the financial droughts of summer and living through the long, frigid economic nights of our many winters. We are an industry that could legitimately lay claim to squeezing blood from turnips.

We have historically endured and outlasted our most caustic critics who have mocked us at every turn and likened us to dishonest snake-oil salesmen.

Yes, we’ve been brought back from the dead a number of times. We are a cat with nine lives and most of them have been used up.
Are we now reaching the termination point? Are we, Tenus Terminatio Cuspis?

An Industry on Life Support

e-Partner believes we are an industry on life support. Our traditional business models are being depleted of their potency because they only work effectively within controlled economic environments backed by cycles where predictability is a guarantee.

Broker/Owners are reaching a desperation point as they face the decision to remain on life support or, turn off the apparatus that sustains them. In essence, they are losing the will to sustain the battle.

We have built our business models on the sands of predictable turnarounds that always came if we just waited long enough. Our economic foundation was never “rock solid” (a phrase once used by my former franchisor) but rather, a roll-of-the-dice at a table where we knew the odds would eventually turn against us.

The money is running out and the sand in the hour glass is reaching its last few grains. The water line that once flowed with abundance has slowed from its gush of 2002-2006 to droplets we must now try to ration.

Our rank and file is wearied and worried about sustainability. We are nervous and fearful about what might be waiting for us around the next corner. With few exceptions, there doesn’t seem to be a coherent national call-to-arms to address our crisis.

This is no way to run a business or an industry.

While We have Faint Pulse

During a recent two-hour protracted conversation with a Broker/Owner, I realized the deep hunger that exists within our industry for one-on-one support. In fact, I was told in no uncertain terms that the personal conversation itself had more meaning than the business concepts being exchanged. I’m feeling more like a therapist than a business consultant.

This and many other conversations like it indicate that we have a faint pulse but that we may be losing some patients very soon if we do not shore up the ranks by means of a national support network for Broker/Owners.

Our productivity numbers indicate that we are on the cusp, facing what could become a pandemic situation. Many Broker/Owners are reaching the termination point.

The 64,000 dollar question begging to be asked is, “Is our industry as a whole reaching a collective termination point?” How much more trauma can we endure?

e-Partner has not seen nor have we heard of any national industry initiative dedicated to addressing the survivability of ourselves.

While we may have a pulse today, tomorrow is coming. While many are hunkered down waiting hoping for some sort of market rebound, the demands and characteristics of a new real estate economy are passing us by.

I am ready to predict that there will be no return to what we once knew and that new operating and economic rules are being devised and implemented that will forever change our relationship with the consumer and thus, our viability.

There will always be time as long as we have a pulse. Like any weakened or wounded entity, the longer we wait to implement decisive corrective action the more difficult becomes the chance of survival. And if we squander our resources on internal battles that do not equip us for the next generation of our industry we will surely succumb.

We can survive but not without a herculean effort to save ourselves. Then, after survival comes the art of rehabilitation and full sustainability. The industry as we know it today is in need not of a stint but of a radical transplant in order to produce the type of organization that is in possession and control of the requisite tools and willful capacity to perform in a new global real estate economy with new rules and new regimens.

There is a set of irreducible minimums that e-Partner sees as industry priorities and this set of principled changes must be considered before we can arrive at protracted sustainability.

• Redirect key NAR Resources to industry redevelopment and Broker/Owner support.
• Redefine the meaning of real estate “market” in contemporary terms.
• Redistribute property information via transparent MLS economic packages.
• Retool local Realtor Association models and services for tomorrow’s reality.

These four principled changes serve as the nucleus for rehabilitation and sustainability of our industry. Let’s address each of these briefly.

Redirection of Key NAR Resources. NAR holds sway over much of the industry. Our money flows from the grassroots members upward to NAR and is used to promote the priorities of our industry.

Promotion is an integral component of the function of NAR. But more must be done to create the conversations that will lead to transformation of the industry. This requires a consideration of the redistribution of our capital assets. The motivations behind how NAR prioritizes the allocation of our resources is just as important as where these economic resources are directed.

NAR does a great job defending and promoting the industry. But it does a less than stellar job tending to the needs of Broker/Owners and the demands placed upon them by the massive economic and technology changes taking place within the rank and file. We are not collectively managing the economic and operating changes at a pace commensurate with the consumer nor the profit margins required for survival.

In order to insure survival and sustainability, the industry needs to take a serious and candid look at the economic priorities implemented by NAR and ask the question, “Is this what we should be doing with our money?”

Redirecting key economic resources toward targeted initiatives designed to re-define the economic model, our relationship with the consumer and how we transact business for profitability should be emergency priorities.

Redefining our Market. Second on the list of priority principles is the notion of market definition. All businesses must be predicated upon an accurate definition of their market in order to produce sustained economic success.

I believe that our previous definition of market as a zip code, city name or a set of buildings positioned therein, is now defunct because the customer has changed the definition for us.

Until we understand what the real estate market is we cannot expect to move to a new platform where profitability exists and where the industry can flourish.

Although transactions take place in a fixed geographic location, I do not believe location is the market and furthermore, I believe the market is much more distant, unpredictable and illusive than in previous economic eras.

The market is Jell-O, not dirt. It is water, without concrete. Yet our institutional structures and operating models are still captive to bricks, mortar and steel.

The chemical and behavioral composition of the “new real estate market” is a highly refined set of consumer characteristics finding their origin in the freedom and power granted by technology and the Internet to self-access information and it is therefore in a constant state of uncontrollable flux. Indeed, the new real estate market never gels. Our industry must then be as liquid as possible in order to play effectively.

Learning the components of market definition will lead us to new models. Until we reach an understanding of what constitutes our market and how we fit into this new paradigm, profit will continue to erode and sustainability will continue to place us in peril.

What is a real estate market? Is it my city? Is it my customers in my database? Is it my hot list of prospects? Is it consumers pledging loyalty to my brand?

No, it is none of these anymore. It is a complex set of consumer bents, biases and behaviors that are shifting the center of control away from lead generation, massive corporate models and universal branding to stealth and fluid exchanges that result in trust and conclude with transaction. The Trust = Transaction formula, although not new, is, however, comprised of new dynamics that create it and it is precisely these dynamics that we need to capture and shape into models that create what I have been referring to as “new real estate model math.”

Brand loyalty, process control, property information containment, website contact forms, registration requirements and the host of Web 1.0 schemes are dead or dying, being replaced by freedom platforms that move the consumer to the center position and us into orbit around a unique set of moving and ever changing requirements.

This is the new market.

Redistribution of Packaged Property Information. Once the new real estate market has been defined we can then create new property information models that can become economic products and marketable services to the consumer.

It’s not the house, it’s the information. It’s not the brand anymore, it’s the information. It’s not the broker, agent or NAR, it’s the information. Any semblance of control techniques, tactics and models will be loathed.

Grouped informational products designed by the consumer, then defined and deployed by us can provide the new profit stream for the industry.

As a whole, we as an industry have spent inordinate time, money and effort sweating over the loss of our precious MLS data while, at the same time, failing to understand the economic power that exists in packaging this information as a product for consumer distribution.

It is not just property information the consumer wants packaged up, made accessible and delivered via the portals of cyberspace. In the real estate and relocation process, there exist a myriad of ancillary information data sets that are marketable, including health care, community lifestyles and much more.

Old MLS control models are largely defunct, too expensive and more importantly, they are inoperable as economic tools. They are increasingly failing to perform for Broker/Owners.

Retooling Realtor Association Models. This leads me to my final dribble.

Heretofore, our local Associations (formerly “Boards”) served a valuable function in supporting local real estate businesses in a non-technical, disconnected world where real estate transactions were virtually all initiated on site and in a building owned and/or operated by a Broker/Owner. (See the post “The Four Bs” at Realonomics.net).

The localized value proposition for Associations has changed. The importance of the traditional functions of Associations is diminished from its pre-Internet apex in the early 1990s where Associations were controlled by local Brokers, printed MLS books and hosted MLS meetings where agents shared wants and needs. A total control model.

Yet, despite the transition away from the centralized control wielded by the Brokers, Boards, Books and Buildings (the “The Four Bs”) geographic model, we have been largely unwilling to break our addiction the now false and unsustainable notion of property information control through Associations.

Can and do Associations have value? Yes, no and maybe. Yes they can and many do, if they are functioning and providing the types of services necessary to the new real estate economy.

No, Associations are not valuable if they are simply self-serving paternalistic job banks at the expense of Broker/Owners and local agents.

Maybe Associations can bring new value to the industry if they equip themselves to provide the types of cutting-edge business services related to the creation and sustainability of Broker/Owner profit.

Translation: If an Association can justify its existence (and they should be required to do so at regular intervals) and its functional costs to Members when measured against productivity standards and market conditions, then maybe they can deliver value.

Retooling Realtor Association models is a tall order because of historic entrenchment and a perception of need that is probably misplaced.

Almost all functions currently executed by Associations could be centralized and even made more effective through consolidation of services, marketing and training. Small is good, agility it the first of the Ten Commandments of the New Real Estate Economy. Generally, the refinement and redirection of general and administrative costs is good for business and profit.

In my own geographic area in northern Arizona there are Associations in Flagstaff, Sedona and Prescott, just to name one small geographic area. Remarkably, the distance between these locations is less than an hour.

Each of these Associations has its own Executive Officer, staff, facilities, operating costs and Board of Directors. What are we protecting?

The reality of the situation is that agents in central and northern Arizona are now servicing all three markets because that is what the consumer wants them to do AND that is what they must do in the prevailing market to produce income.

However, despite the needs and wants of the consumer and the dictates of market realities these Associations are an impediment to change and Broker/Owner profit because their membership structures are prohibitive rather than inclusive. Some legal minds even view these structural impediments as economic and therefore potentially subject to anti-trust law.

Associations were largely constructed upon the old definition of the real estate market being purely a localized function driven by sign calls, newspaper ads and up-desk lead generation.

Why have we not adapted our administrative model so that it matches consumer reality and Broker/Owner needs in a market defined by bits and bytes? The layers of bureaucracy inherent in the Association structures and their relationship to NAR would make a career bureaucrat blush.

Simply said, our administrative models are labor intensive, bloated and we are spending too much money on infrastructure and organizational maintenance at the expense of profitability.

We are spending approximately the same amount of money per transaction per Association as we were in 2002-07, money that could be used to redevelop the industry. Why?

In conclusion I can only ask, “Tenus terminatio cuspis?”

No related posts.

——

Dear Fellow REALTOR®,

Here’s our take on the Stimulus Bill and Treasury announcements made this week. We look at the Stimulus package AND the Treasury’s package holistically, in compliment with each other – mostly because that’s how the Obama team is looking at it. Your representatives, the NAR Board of Directors, asked us in November to do 4 things (with an unspoken but clearly understood mandate to PRESERVE what we already have). Here they are: 1) get loan limits raised for high cost areas, 2) make the $7,500 tax credit NOT a loan, 3) try to find ways to push interest rates down (which are higher than they should be due to systemic risk right now) by 200 basis points, and 4) help provide solutions to the foreclosure/short sale problem.

So here’s what we have achieved: (1) the loan limits will be raised to $727,000 in high cost areas, (2) the tax credit will be raised to $8,000 with NO payback [a true credit], (3) interest rates have come down 125-150 basis points, and (4) the bill has over $50 billion in it for foreclosure mitigation, with Geitners Treasury plan signaling that the second half of TARP and TALF will be used to mitigate foreclosures through a government guarantee, drive down interest rates by buying another $200-300 billion of mortgage paper from the GSES’s thereby freeing them up to do the same with new mortgages, and Fannie has just agreed to lift the cap of 4 investment properties eligible for loans and raise it to 10.

In addition, we preserved what we have – which some tend to forget is always on the table when these negotiations start up again – mortgage interest deductibility, real estate tax deductibility, and the $250,000/$500,000 cap gains exclusion (an overall package worth more than $100 billion and for some a very attractive funding source for their pet projects).

We did make a run at the $15,000 credit — and we would have loved to have gotten that or the Homebuilders $22,000 credit idea as well as their 5 year loss carry back deal, but they were considered too rich for this program. What it did do though is totally take the debate off of whether a tax credit should be reinstated at all (it expired last year) and whether it was a true credit or a repayable loan, and kept the conversation on how much it should be. It also kept the debate off of ‘what we are willing to give up to get a $15,000 tax credit’ and kept the debate again, on how much it should be. It’s pretty hard to complain when they give you what you ask for and you lose something you never had.

While we study the Treasury specifics on their major role in providing the rest of the housing solution — there is much more to come and we are working diligently with the Administration to help ‘unclog the pipeline’ and get capital flowing into housing again.

Sincerely,





Charles McMillan, CIPS, GRI
2009 NAR President

Related posts:

1. Supporting the NAR Stimulus Agenda

This time around, however, NAR is getting it right and deserves the support of the industry…yes, I have already sent my letter to my elected officials supporting “The Four Point Plan” put forth by by NAR. REALonomics is endorsing this plan with comments inserted into NAR’s message that was emailed to members.

NAR has urged Congress to include the following provisions in any future legislation:

NAR POINT ONE: Make the $7500 tax credit available to all purchasers and eliminate the repayment requirement. The credit’s limited availability and required repayment terms have severely limited the credit’s appeal to potential homebuyers. As a result, the credit has not been widely used or proven effective at stimulating sales.

REALonomics: We concur. The tax credit should be a true credit against taxes, however, and at the descretioin of the buyer, be taken in one year or extended to up to three years of equal credit deduction. This would allow each consumer some flexibility in the application of the credit based upon income and other factors. In addition, we would like to see the deduction made available to investors who purchase in calendar year 2009.

NAR POINT TWO: Make the 2008 FHA, Fannie Mae and Freddie Mac loan limits permanent. New rules for 2009 would significantly reduce the FHA, Fannie Mae and Freddie Mac loan limit from their 2008 levels. Now is not the time to limit the availability of affordable mortgages.

REALonomics: This part of NAR’s plan needs further clarification for members. In general, we concur, but the devil could be lingering in the details on this one.

NAR POINT THREE: Get the Emergency Treasury bank relief program back on track by targeting more funds to mortgage relief efforts and increasing efforts to mitigate foreclosures. Don’t just give the banks unrestricted cash. Make the program work to improve mortgage and housing markets as it was originally intended.

REALonomics: Yes, NAR, this position is the correct one! We were all burned by the ambiguity of the emergency relief program and we, in fact, got hood-winked into believing that toxic mortgages were going to be purchased and sold to investors at discounts. In fact, the banks just banked (pun obvious) the bucks or, in some cases used the funds to purchase other banks. But the problem is also an empowered Treasury Secretary who could simply redirect the funds in just about any way he so desired. To date not a single mortgage has been purchased and resold. The mitigation of foreclosure loses is a tricky one and REALonomics takes a very conservative approach to how this should work. Consumers who are in default should not be rewarded without some additional tax incentives to those who are not in default. We cannot reward bad behavior. Leveling the playing field is going to require caution and discipline.

NAR POINT FOUR: Permanently bar banks and banking conglomerates from engaging in real estate brokerage and management. The banks have proven they have enough to do to simply properly manage their current lines of business. Do we really want them to manage the home buying process? Imagine what could have been the situation now if they already had the added ability to engage in real estate sales.

REALonomics: On this point REALonomics disagrees with NAR. Point four should not be on the table at this time. Although we are not yet convinced that we should advocate bank brokerage models, there remains a lot of room for discussion on how banks can collaborate in economic partnerships with real estate brokerage firms in order to shore-up the profitability of each to the benefit of the consumer. It’s understandable why NAR, as a preservation move, would call for this issue to be addressed and finalized. REALonomics still advocates streamlined and consumer-centric home buying/home financing models. Such models might be created out of financial partnerships that are carefully blueprinted so that banks and brokerage can maintain levels of expertise.

CLICK HERE to take action on the NAR Four Point Plan (NAR members only).

Related posts:

1. NAR Reports it’s Stimulus Progress

The Obama news conference was followed this morning, Saturday, November 8, 2008 by a radio address with similar content. These two initial events give us hints about the Obama economic model that will shape America and of course, the real estate industry for perhaps decades.

Attacking the Economy Means Controlling the Outcome

The Obama team is going to attack the economy in laser-like fashion. New rules are going to be written that will impact the private sector and retool the way in which those transactions dependent upon credit and lending work.

REALonomics has believed for some time (years, actually) that the real estate industry needed to redefine itself through sweeping consumer-centric changes driven mostly by standards based brokerage and maximum transparency.

What we never knew and could never predict are the bleak economic factors that now give rise to the transformation of our business models and have fueled a meltdown of home values in such universal proportions. Principle: Economic problems left unsolved by the private sector typically invite government mandated intrusions in order to harness the favor of the electorate.

Can the RE Industry Still Write its Own Rules

It is beginning to look a lot like the real estate industry will be shaped not by factors we control but by the policies and rules created by others. We, under the mantle of the National Association of Realtors (NAR), have, for the most part, missed most of our opportunity to define and shape the debate and participate in the rules that will create a “New Real Estate Industry.” NAR’s mistaken endorsement of the $700 billion bailout program has hurt us and created a dependency relationship with the federal government. In essence, we have been placed in the unenviable position of a reactive industry rather than a proactive force.

Do we still have the clout and the courage to write our own rules? Do we have the will power, discipline, leadership and the creative inspiration to recognize that we are on the cusp of a “New Real Estate Economy” wherein we can control the rules that dictate how the industry operates within a consumer-centric era? Have we become an industry, like so many before us, that will eventually become reliant upon the solutions created by a bloated federal bureaucracy that is more interested in centralizing power than in actually empowering people?

The Key Principle behind Rule-Writing

It’s not so much the rules per se, that govern business matter as it is the economic and social viewpoints of those who pen the rules. It’s always belief that precedes policy. What we believe about our industry is different that what Washington believes. There are principles behind rule-writing, always!

The key principle behind rule-writing is simply “BE THE RULE WRITER.”

Here are but some of what REALonomics believes will be the “new rules” evolving from the financial policies that will be put in place during what will be increasingly defined by the new Administration as a “crisis.” A history lesson…bureaucracies flourish best when set in motion during “crisis.”

NEW RULE 1: There will be a heavy emphasis on creating a bevy of legislation designed to control each aspect of the mortgage lending process. This sounds good until we understand the difference between our and Washington’s definition of transparency and disclosure. The new set of rules will further slow the markets while everyone waits to see and then create a whole new layer of regulations and regulators operating in the basement of every mortgage lender.

NEW RULE 2: Crack down will be the new operative language for not only Wall Street and so-called “overpaid CEO’s” but also those within the real estate industry who are not fully compliant with Rule #1. REALonomics thinks that real estate brokers will become targets for industry crack down and the eventual police force for compliance with new lending and transaction rules. In his website Barack Obama has already pledge to crack down on brokers and lenders.

NEW RULE 3: NAR will become more and more dependent upon government approval for the implementation of our industry policies and procedures that have sustained us for decades. NAR, already reeling from the DOJ debacle, will have a mandated hotline to Washington and will need to use it to check-in, seek approval and help implement the new rules that will be written. In essence, NAR could become an extension and purveyor of brokerage and home ownership policies written by the Obama administration, Pelosi’s House and Reid’s Senate.

Although the housing industry is suffering and the real estate industry is under siege, REALonomics would like to encourage the industry to step up to the plate and position itself under a new set of operating principles that can be sent to Washington as a demonstration of our commitment to operating and policing our own industry. We are still strong enough to influence the outcomes if we are proactive rather than reactive.

Let’s continue to remind ourselves that the key principle behind rule-writing is simply “BE THE RULE WRITER.”

Get the full transcript of the Barack Obama news conference and read between the lines.

Related posts:

1. Obama, McCain and Real Estate
2. Home Price Declines Hit New Records: What Can the Industry Do?
3. Is the Future of Real Estate in Google’s Algorithm?

Editorial by Stefan Swanepoel

I would like to share with you the fantastic afternoon I had this last Saturday. My wife and I had the privilege of being invited to the two hour Saddleback Civil Forum with Senator Barack Obama and Senator John McCain. This was the first time these two presidential hopefuls, and expected nominees for the Democratic and Republican Parties, shared a public stage.

Rick Warren, author of “A Purpose Driven Life,” and pastor of our Church, Saddleback in Lake Forest, had organized for Obama and McCain to come and present their views on important issues.

The Atypical Conversation. This was not your usual political debate with read-the-teleprompter canned speeches on pre-approved political questions. No sir. This was about the real stuff – the big subjects – topics we usually do not hear about in a presidential face-off.

On Sundays, Rick is usually dressed up in a Hawaiian shirt, but this Saturday was different – he was in a dress shirt, no tie and suit. Rick himself is an excellent and inspiring speaker but the afternoon wasn’t about him.

During the forum Rick first posted questions to Obama before asking McCain the same set of questions. Topics covered aspects such as personal values, religion, abortion, marriage, education, evil, stem cell research, energy and their respective vision for the United States.

Obama was enthusiastic, but gave answers that left one often confused with his commentary falling on “both-sides-of-the-fence.” His weakest answer was probably when he replied that’s “above my pay grade.”

McCain’s appeared more comfortable and his replies were short and concise. His weakest answer was when he jokingly replied that $5 million annual income would qualify as “rich.” 

As Rick noted, it was clear that both care deeply about America.

The Forum Got Me Thinking.  It was the best and most honest political debate I have heard in decades.  Overall it was a very interesting and eye-opening experience – this got me thinking. What if we could have a Real Estate Forum like this one but where someone like Dale Stinton of NAR would ask the candidates’ questions directly related to real estate, housing and the mortgage crisis? Items that are of direct importance to our industry.

Wouldn’t that be great! How about it Dale, think NAR could pull an event like this off?

Watch the Saddleback Civil Forum.

Related posts:

1. Obama & a New Real Estate Industry
2. Government Interference has Harmed American Real Estate Wealth
3. Real Estate Recovery Quo Vadis?

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.

Related posts:

1. Bill Gates – ’92 Predictions
2. DOJ & NAR SETTLE SUIT – It looks like everyone’s coming up roses!

“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.

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1. Permission Based RE -vs- Non-Brokers
2. The Four “Bs”
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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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NAR’s historical imperative has been, admittedly, “stick-like.” In fact, that’s been our industry’s posture with respect to its delivery of property information services to consumers. But now, as everyone scurries for solutions, NAR has perhaps its greatest opportunity…EVER! It’s our opportunity to move from consumer control (stick) to consumer advocacy (carrot). After all, wouldn’t we all admit that the carrot motivates us in ways antithetical to the stick?

Death to the Stick

For decades our real estate business models have attempted to poke, prod, stick, gouge and direct the consumer in ways that create the perception (remember, perception is everything) that control is at the core of our relationship. We designed and operated our business models with ourselves at the center and the consumer revolving around our local associations.

Consumers were granted access to information because we existed, because we allowed them the privilege to know…but, they always had to come to us, to our agents, to our buildings, to our open houses, indeed to our market…this was our STICK.

This is what REALonomics has referred to as the Broker-Centric ERA or, the First Economic Wave of our industry’s development.

The Broker-Centric Era gave way to the Agent-Centric ERA, the Second Economic Wave of the real estate industry. But this era was nothing more than the transfer of the stick into new hands with a corresponding transfer of economic control via high commissions.

NAR represents the interest of the real estate industry, its broker/owners, agents and advocates. A “No Stick – All Carrot” approach to property information is not only possible, it’s imperative and the logical next step in the fulfillment of the business requirements of a Consumer-Centric ERA, the Third Economic Wave of the real estate industry.

The “Stick” has been rejected by the boomers, by generation “X” and there is no way this side of rational thinking that generation “X” is going to opt-in to a system that controls information. We will not prevail against iPods, iPhones and blackberries. We are witnessing the Democratization of Real Estate. what will happen to us when we suddenly wake up and 2+2 no longer equates to four and instead 2+2=5.439 or some other economic resultant.

Carrots, Carrots and More Carrots

Carrots are good for you…so said my mother…that alone makes “carroting” right! The Democratization of Real Estate demands the “carrotization” (is that a word?) of the models we use in a universal market where the consumer dictates profitability based upon freedom of access.

The real estate industry is being redefined and the profitability equation is being rewritten by the consumer whose hand is on the joystick of profitability. “Do it our way, or die,” is the subtle but real high stakes game we now play.

Stick and carrot examples:

STICK: Property information controlled by local associations.
CARROT: Universal property data accessible by all consumers.

STICK: Direct Seller-Buyer dialogue prohibited by agency advocates.
CARROT: Local blogs delivering local Seller/Buyer conversations.

STICK: Local MLS systems as the sole means of property information.
CARROT: Multiple portals allowing national consumer listing services

STICK: Broker controlled access to real estate transaction forms and technology.
CARROT: Online paperless transaction models with universal data management.

STICK: Inhibiting consumer access by creation of artificial market borders.
CARROT: Implementation of a new set of common rules for market access.

STICK: Broker/Owner territorialism defined by franchisors to owner detriment.
CARROT: Open market models that foster horizontal development.

STICK: Time consuming, awkword and expensive transaction closing models.
CARROT: Fast, 24/7/365, universal access to paperless transaction details.

STICK: Mortgage and title services that require extensive paperwork.
CARROT: Fully transparent lending models that foster ultimate disclosures.

STICK: “Listing services that are property and place specific.”
CARROT: “Universal listing plans that guarantee the sale of all property for life.”

STICK: (go ahead…fill in the blank…what stick do you see in the industry?)
CARROT: (got a carrot…stick it in this slot…go ahead!)

NAR is much like a large governmental body…an entity empowered by the real estate industry to act on its behalf and in its best interest. NAR has the opportunity to help us shift our model from a stick mentality to a carrot technology…can it? Can we? Will we? Will it? They are us, we are them.

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