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The Great American Real Estate Alchemy

Syndicated from e-Partner

For centuries the notion of turning lead into gold has captured the imagination of countless Alchemists, all of whom were doomed to failure.

The real estate industry’s economic model has been for decades akin to conjuring concoctions that claim to convert the weight of our tarnished enterprise models into shining bars of profitability.

We have not always understood the true alchemy of our industry and the relationship between the decline of profitability with the introduction and application of new technologies to our industry.

Each of the two great historical shifts (economic eras) in our industry have occurred with the rise of new technology, the independence of agents and the empowerment of the consumer. Consider the following diagram and then listen to the accompanying presentation.

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NAR’s Tail Wagging the Dog National Control Model

On Tuesday, December 02, 2009, Inman News carried a new piece by Matt Carter, entitled “NAR Backing Realcomp Appeal.” REALonomics believes the article is another demonstration of NAR’s attempt as the tail of the industry, to wag us, the dog. Here is our response to NAR’s reported actions.

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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?

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NAR Explains DOJ Settlement

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

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

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Our Genie is on the Loose & Fresh out of Wishes

REALonomics understands the real estate industry, both its abstract side and its empirical dimensions.

We have been inside, outside and throughout the industry for quite some time. Our vantage point has changed, enabling us to see what we heretofore could not. In the world of business development and economic analysis one’s vantage point can bring the kind of insight that frankly, changes one’s faulty fundamental assumptions while confirming sound precept.

REALonomics now realizes, without further equivocation, analysis or debate, that our industry’s real estate genie has been released from its bottle and is fresh out of wishes!

Pushing the Vapor Back into the Leaky Bottle

From here on out, all attempts to capture the vapor, return it to its confines and cork the RE bottle will fail.

The Genie that once belonged to us, obeyed us, served us and made us what we once were is loose and fresh out of wishes.

The bottle is tarnished. Rubbing the bottle produces nothing. Our Genie is loose and now serving multiple masters simultaneously, none of whom, save one, the consumer, has sway over the Genie’s capacity to grant new wishes.

It’s impossible to bottle this kind of vapor; its seepage passes through the tiniest of spaces, spilling into the open atmosphere, moving where it wills to go. Where does the Genie go? It ALWAYS takes the path of least resistance, shunning confines, rejecting control and moving to open expanse where it finds its ultimate economic freedom.

Bottling the vapor no longer creates reliable “RE Economic Tonic” for the industry. The vapor is meant to be breathed, not bottled.

RGB, NGB and NGCs

Retail Generation Brokerage (RGB) used the bottle to control the Genie in vertical markets where the consumer was required to submit to the model in order to invest in real estate. Net Generation Brokerage (NGB) is the post 2000 freedom model where horizontal peer collaboration is replacing hierarchal control models.

The real estate industry is now the most vulnerable mainline industry to peer-to-peer models where the consumer and the Genie meet up for property inventory data exchanges and local community collaboration. The context is different and the conversation is different. Both the Genie (property and community information) and the consumer have reached agreement…FREEDOM Rules, open space ROCKS!

Vertical (retail, local style bricks and mortar) real estate brokerage models are being quickly replaced with a viral model, spread by a Genie on the loose and fresh out of wishes.

Two dangers to the industry and its economic models occur in this environment. First, there is the danger of complacency, of not re-tooling our economic ship so that it can operate fluidly in a viral, horizontal world where profitability is defined by open, collaborative peer models facilitated by the real estate industry.

Secondly, and perhaps more importantly, there are now signs of the emergence of what REALonomics calls “self brokering” whereby and wherein the consumer creates their own economic reality, ignores real estate professionals, only calling on them if they must and when they so desire for services they define for themselves.

The next generation of “consumer-buyers-sellers-clients” that will fuel the recovery and beyond will be Next Generation Consumer (NGCs) whose informational points of reference are alltogether dissimilar to old line retail brokerages.

Great News and More Great News!

Great news! The Genie, once our beckoned servant, existing only to accomplishing our economic wishes, rather than rejecting us, invites us to follow into new the new economic space of opportunity…to collaborate, to join the viral horizontal world of the consumer with new approaches to property information management and peer-to-peer community information services.

More great news! Never before has the industry and its adherents been afforded the opportunity to engage in a kind of real estate information alchemy, where our old lead bottle can be turned to a golden horizontal field of freedom for both us and our partner, the consumer.

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DOJ & NAR SETTLE SUIT – It looks like everyone’s coming up roses!

REALonomics Editorial

There is an old saying, “After all is said and done, more will be said than is done.” The long battle between the Department of Justice (DOJ) and the National Association of Realtors (NAR) was declared “settled” today.

Not so fast! After a reading of the Final Judgment document, REALonomics offers the following cursory observations:

• THE GOOD: NAR cannot prohibit the distribution of full MLS listing information;
• THE BAD: Local Associations cannot engage in unique policies about local listing distribution;
• THE UGLY: NAR must report to the DOJ quarterly…this ain’t over, folks;

After all has been said and done, more has been said…and spent…than done with respect to how the real estate industry under the leadership of NAR has moved from its control model to a transparent model that will unleash the kind of innovation and consumer-centric services we need.

Furthermore, the DOJ has now completed one of its central objectives, to position itselfself as the sole arbiter of real estate property information access, all local associations and members of NAR and more importantly, as we have said before, to eventually control services and commissions.

Mark this down and highlight it: When the DOJ does anything under the banner of “public interest” there is a north and south point of reference, depending on one’s facing. Decide for yourself what this important section of the settlement might mean to the industry, long term and short term (highlights ours):

The big loser here is actually the industry itself, the thousands of broker/owners and yes, temporarily, even the consumer. NAR will remain under the DOJ microscope for some time to come. This entire debacle, we predict, is the precursor to mandated services and commission control. In this case, we hope to be wrong. The solution, we have long contended, is a reinvention of our models, how we use and distribute property information and finally, how we best serve the consumer, our ultimate client.

The settlement serves no real purpose yet! It’s just more of the same old square dancing between NAR and the DOJ. But watch out when people say it means nothing fail to see the overall DOJ strategy fuel by anti real estate indutry sentiment from consumer watch dog groups.

PRINCIPLE: It’s about the MONEY, stupid…commissions. This is just the beginning of a long death march toward more national scrutiny. We are going to tango with the DOJ again. This is not really about VOWs and property information. It truly is about US, the industry and our practices that smell of control and dominance and to quote the DOJ, anti-trust inclinations.

BIG WINNERS: The non-brokers, non-industry innovators and the neo-brokers are the big winners here. The “judgement” is a precursor, nothing more, nothing less. It’s the swinging open of a previously locked door so that we can see what’s on the other side. It’s what lawyers call “precident” and “legal trending.”

BIG WINNERS: Transparent advocates. It will be impossible to thwart the Democratization of Real Estate in an ultimate sense. This decision is like a strand of DNA but not the entire structure.

True, NAR may now face restrictions on its traditional control tactics but there’s more to the story when we recognize that competitors are waiting in the wings to bring open-sourced property information models to the forefront by empowering property owners to do whatever they please.

Our issue as an industry remains completely unchanged. Why haven’t we been able or willing or both to reinvent this industry into a vibrant, consumer-centric model that both empowers users and delivers adequate and sustained profit to broker/owners. The short answer is we don’t know how to do it!

For now we will simply continue the NAR/DOJ dance until one of them collapses. Does anyone think the DOJ will collapse?

READ THE Final Judgment.