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.

Contests are held to determine who can execute the exact pattern in the least amount of time. The world record holders are those that can manipulate the cube with the greatest amount of speed. Solving the cube is no longer the game…time is the game.

I call this game “Speed Cubing” and that’s what Rubik’s Cube® is all about today. Solving the puzzle in a slow, thoughtful and deliberate manner has become boring…doing it fast is the new requirement. The Rubik’s Cube® culture now seeks speed solutions…solving the puzzle the old methodical and mechanical way is insufficient.

WATCH THIS VIDEO, THEN, DO YOURSELF A FAVOR AND READ ON:

Speed is Everything. Understanding the pattern is everything. Execution is everything. Agility is everything. Having a well oiled cube is everything…hang-ups are the death knell to solution. It’s not the end game we now seek with the cube…it’s the ability to execute the solution faster and faster and faster and faster.

Moving quickly and managing the manipulation of the real estate cube is the new challenge facing broker/owners, agents and mortgage and title services. Keeping pace is no longer going to be enough. Merely being in the game is no longer sufficient. The tortoise and hare analogy has become all hare and no tortoise.

Flow, adaptation, rotation, pattern manipulation, agility, flexibility, bending, stretching and beating the clock…that’s what we face as the new challenge to our business models. Running at the speed of sound and setting land speed records is how companies will need to manage their models in order to simply stay in the game.

Ours is a 24/7/365 hundred yard dash followed by a 24/7/365 hundred yard dash a 24/7/365 hundred yard dash a 24/7/365 hundred yard dash a 24/7/365 hundred yard dash…next year we will convert this into a 50 yard dash! When we move from a 100-yard dash to a 50-yard dash the speed of our agility and business adjustment will need to be one-third what it was, not one-half.

The distances Broker/Owners will be required to traverse each day will be shortened and the speed required to move from point “A” to point “B” will not be governed by new formulas. In the new race we will be faced with “new real estate model math” a formulas where ten divided by two (10/2) will not necessarily equate to five…but rather, some other solution. What is our plan for working with the new real estate model math where the formula solutions become more bizarre than we ever imagined, such as:

Our point is this; the math we once used is being changed by the realities of the market and the demands consumers are placing upon us.

Our Problem? We can only speed so long. Burnout becomes inevitable at some point. The laws of physics enter into the framework at some point, limiting our ability to shave off another .0000001 second. Collapse occurs when we are pushed too far…too fast…and from too many angles. Exhaustion sets in when any business owner in any industry is faced with models he/she cannot channel, control and direct toward profitability.

Change is the model of our future. Managing and controlling multiple changes in the molten hot crucible of speed is the new required brokerage management skill set. Building businesses with appropriate pace and rythm, building operating models that allow for regulation of the tachometer and possessing the skill to regulate the business throttle has become paramount to adequate and sustained ROI. No speed management, no profit. No change management, no ROI.

We’re only Human. We cannot perpetually run our organizations pedal-to-the-metal if we want to stay in the game. Yet, that is what many Broker/Owners are currently doing. Our operating reference points are being changed and the operating cultures are evolving to a higher plane…morphing into a new life form. As REALonomics has been predicting for years that, “new rules are being written that will govern how the real industry industry operates…and, although we could be, we are not necessarily the scribes.”

Broker/Owners (agents too) are going to be challenged like never before, creating new demand, new rules and new stress in an already vice-like, pressure cooker. Watch for our next post.

Related posts:

1. Scratch and Sniff: Stacking the Economic Deck in Favor of Us
2. REALONOPOLY – Does Anyone Still Wanna Play this Old Game?
3. The Four “Bs”

During the First Economic Wave, the broker-centric era, and for most of the Second Economic Wave, the agent-centric era, business models were predicated on old, predictable model math, where 2+2 produced four. In the current climate, where the consumer has control over the “economic joystick,” we are forced to pose the question; what if 2+2 no longer equates to four?

Let’s first discuss the “profitability joystick” I have mentioned, then the terms and conditions that now exist for a New Model Math.

Only if we first acknowledge that we are indeed operating in a consumer-centric era, can we then appreciate the imagery conjured by the phrase “economic joystick.” Throughout the evolutionary development of the real estate industry, the “economic joystick” has been been passed from brokers, to agents and now is being handed-off to the all-powerful consumer, each player introducing new operating principles that impact the profitability equation for real estate companies. The joystick produces the New Model Math for each subsequent developmental cycle.

The consumer-centric era began with the first posting of real estate property advertisements on the Internet (circa 1993-94) for viewing by consumers. With this seemingly innocuous act, the “economic joystick” was handed to the consumer and the triad of players (broker, agent and consumer) were repositioned on the real estate playing field.

What is the economic joystick? Simply put, it is the control over the conditions under which property information is made available to the consumer, thus altering the economic model which has traditionally assured owners of some control over the industry. The woderful challenge amidst this sea of chaotic change is the opportunity to pursue Model Perfect.

It is this current climate of consumerism where the economic joystick, in the hands of the consumer, begins to redefine the past business math used by the real estate industry and the profitability equation begins to shift to the New Model Math.

Consumer behavior and its accompanying demand for immediate, real time access to property information, simplified transaction management coupled with technology and the Internet will most assuredly insert new factors into our profit equation, producing a New Model Math.

In a climate where the only predictability is the lack of predictability, broker/owners will face an increasingly powerful consumer who wields the economic joystick in a manner that forces the industry to redefine its most basic business presuppositions. This is what I have termed “The Democratization of Real Estate.”

My cloudy crystal ball tells me we are headed into a “Brave New Wierd” where new models will emerge faster than we can say “bricks-and-mortar.” We are entering a climate where the New Model Math will challenge the industry like never before. Where will it lead? No one can be absolutely certain but it would not surprie me if we wake up tomorrow to headlines that read:

2 + 2 = 5.439