Monthly Archives: January 2008

IN or OUT? How about Way Out?

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Marc Grayson has a post up on Real Estate Tomato asking whether bloggers should focus on the IN audience (industry peers) or the OUT audience (consumers).

You know what I realized after reading that?

If you have to think about IN or OUT, then this might be a good time get way out.  As in, out of the blogosphere completely.

Seriously, there’s a pretty good chance that you’re just contaminating the blogosphere with that blogs-as-marketing crap.

More I think about it, more I believe blogging is a horrible, horrible marketing device.  I know there are plenty of people who think that blogging is driving all kinds of traffic to their paying jobs and such.  Maybe from a professional day-job standpoint, I should be a huge cheerleader for blogging-as-marketing, since each of those blogs is a potential customer of my company’s products & services.  But this is my blog, not my company’s blog.

I’m a blogger — not as rabid or as clever as some, but I do it because I enjoy writing.  I would do this even if I had no readers.  (And believe me, looking at my traffic, I may as well have no readers. :) )  I suspect that all great bloggers are the same way.  Manolo probably would be writing about shoes and going “Ayyyy” even if five people in the world read his stuff.

In fact, that’s what makes blogs good: the personal passion, the personal voice, the uninhibited opinionating.

Marketing, in contrast, requires discipline, focus, and of course, ROI.  And Marketing — even if you’re a disciple of Cluetrain like I am — does require thinking carefully about framing, positioning, and persuasive power, all towards a given business goal.

I have to say, even as a huge proponent of blogging (yes, I do believe all companies in real estate should blog, and allow their employees to blog more or less without restriction), I would rather see far fewer “blogs” that are just thinly disguised pitches for business.  I keep seeing some site called tugboat.realestatesomethingoranother pop up in my Akismet spam filter.  Turns out, it’s some bot-crawl operation that takes snippets of posts and puts it on their site with a link to mine.  How lame.  How silly.

Anyhow, if you’re blogging because you want to make more money selling real estate… I have to advise you to stop.  Spend that time doing something else.  Database marketing maybe.  Join a civic organization or something.  Work at a charity.  Because there’s no way that you can be a genuine, authentic, personal voice when your goal is simply to drive more business your way.

If you’re blogging because you’re just… born that way, or something is a bit off-kilter in your head that you’d rather spend time in front of a computer than watching TV or whatever else it is that normal Americans do… then yeah, keep going.  Keep blogging.  Your opinions are probably interesting to read.

So if you’ve got to think about IN or OUT or target audience or whatever… please, just get out of blogging altogether.

-rsh

Occupational Licensing and Capitalism Perfected

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Once again, Bloodhound has a fantastic post up on a topic that is tangential to much of a theme I’ve been hammering since I started this blog. Greg Swann tells the story of an unfortunate eBay merchant who is being threatened with legal penalties for “auctioneering without a license”. Read the whole thing — it’s worth the time.

Greg’s point is that licensing laws are bad — they don’t protect the consumer, but the licensees:

But there are consumers who need protecting, right? Oh, you bet:

D&J Virtual Consignment had 11,000 feedback comments on eBay and 14 were negative, Pletz said, giving her a 99.9 percent satisfaction rating.

Ebay is not just perfect Capitalism, it is Capitalism Perfected — everything that has always been implicit in free-market commercial transactions made utterly transparent by means of database management. If you are looking for the complete and irrefutable refutation of Das Kapital, you’ll find it not on but in the form of Ebay.com.

So where’s the beef?

Amoros, the state spokeswoman, said investigations were a “complaint-driven” process but those complaints are confidential.

Uh huh.

It is only possible to for you to defend occupational licensing laws by ignoring the palpable harm they do to actual consumers — higher prices for lower quality goods and services. But even then, don’t get downwind of yourself. This stuff stinks.

As a non-practicing attorney, I know what Greg speaks of firsthand. The work of a first year attorney is something that most chimpanzees that are not brain-dead can do. We’re talking about stuff like deciding where a comma should or shouldn’t go and making photocopies. In most firms, the senior paralegal has forgotten more about the law than the new lawyer has ever known.

Yet, that snot-nosed lawyer commands $175K a year (in NYC) while the paralegal gets by on $50K because the former has that shiny thing the paralegal doesn’t: the license to practice law.

So I agree with Greg overall. However, and c’mon you knew there was a ‘BUT!’ in here somewhere, there is something he’s not taking seriously enough.

Greg is mostly correct (I think) in describing eBay as “Capitalism Perfected”, but he glosses over what makes that really possible: utter transparency made possible by means of database management.

I’m as big a fan of the free market as just about anyone, but even I think there is a role for government in the market. Its critical role is to cover the one enormous weakness of capitalism: access to information.

People (and companies) rarely have the incentive to provide complete and full transparency. I haven’t yet seen a case where complete transparency has redounded to the benefit of the person or company being transparent. Even between husbands and wives, complete transparency might not really be the best policy. I mean, do you really want your wife to know your actual, true, transparent opinion on whether those pants make her look fat?At the same time, for a free market to function, there has to be enough information available for buyers and sellers to make a rational choice. This is not the same thing as saying that buyers and sellers have to be actually informed — merely that the information must be reasonably available. Otherwise, the notion of caveat emptor just doesn’t apply.

If you’re looking for a heart surgeon, wouldn’t the information that Dr. Smith has had 3 of 3,000 patients sue him for malpractice while Dr. Jones has had 400 of 3,000 patients sue him be a relevant piece of data in helping you make your choice? Of course it is. If you had that information, learned it, you can still choose to go with Dr. Jones — but you’re probably going to bargain the price of services down, or negotiate for insurance arrangements, or do something where you benefit as the consumer.

eBay is Capitalism Perfected in a sense because of its reputation management system. While it can be gamed a bit, it’s very, very, very difficult to game it consistently over time with thousands and tens of thousands of interactions. So someone who has a 99.9% satisfaction rating with 11,000 feedback is plainly trustworthy. Applying licensing laws to someone like that does indeed stink, as Greg puts it.

But in the real world, we don’t have the benevolent eBay dictatorship able to track all of the transactions and gather feedback on a person-by-person basis, then presents all of that information in a single, easy-to-use place for the consumer. Trying to get the equivalent of a eBay rating in the real world would take weeks and months of painstaking research — even if the information were actually out there somewhere.
Furthermore, eBay’s transaction regime is pretty one-dimensional: did the seller deliver the item to the winner in a satisfactory way? How do you evaluate the performance of professional services? Is someone a good lawyer because he’s prompt with his responses, considerate of your needs, and a good father, even if he loses every case for you? Is the opposite a good lawyer — he wins every case, but treats you like a piece of crap?

In the real world, I do think there is some justification for a licensing scheme for some professions. Not a lot, but some — and certainly the schemes we have need some real improvement.

In a way, licensing is merely branding with teeth. The purpose of a brand is to engender trust in the consumer by having lived up to the promise of the brand time and again. Licensing extends that concept and gives it some teeth.

If I’m looking for a lawyer, I might not have the time to do what I really should do: sit down with the man, and quiz him on torts, contracts, constitutional law, corporations law, income tax, property tax, federal courts, and the numerous other fields of law to make sure he knows what he’s doing. I should look up all of his past cases to make sure that he hasn’t absconded with client funds, or defrauded clients, or done any one of the really horrid things a lawyer could do. But I just don’t have that kind of time.

So I rely a great deal on his license. If he had absconded with client funds, he would have been disbarred. If he didn’t know a thing about basic black-letter law, he wouldn’t have passed the Bar exam. His license to practice law is a brand that proclaims, “this man knows enough and is ethical enough for you to trust him with your life savings”. Or in some cases, your life itself.

If the licensing scheme is coherent, rational, and rigorous, and it is designed to further consumer benefit, it can be a very important stand-in for the eBay User Reputation system. A great example is the designation of Master Sommelier. Try getting one of those — there are only 1

Now, just because I can defend these licensing schemes does not mean that I can defend all licensing schemes, or for that matter, that I want to defend licensing laws. I could see some jobs where the possibility of harm is so great to the consumer or to society that we need the power of government to prevent anyone who does not have the proper training and ethics from working those jobs without a license. Commercial aircraft pilots come to mind. Even if licensing laws in that case result in protecting the licensee’s turf, the downside of not making sure that someone flying a 747 is properly trained is way, way too big.

For most professional services, however, the licensing laws are a big problem.  There is no coherent benefit to the consumer, and the license itself no longer carries the ‘brand’ that it used to.  In those cases, I think a professional registration program — with much higher, more stringent standards — is far superior.  Rather than prohibiting people from practicing law without a license, why not simply have those who have passed the Bar register with the State Bar Association, and make that data public.

The application to our real estate industry is, I trust, obvious.

-rsh

Dear NAR: Whatever You’re Doing Ain’t Working

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Over at TechCrunch, a hugely influential web technology site, there’s a profile of Redfin up. The profile itself is pretty bland and content-free. But the comments to that post has some… ah… action in there.

For example, here’s a “Kerry R“:

I’m not paying an F-ing real estate agent any fees, they don’t do anything! I don’t care how much they rebate. If I’m going to sell my house I’m going to use Craigslist or Backpage or ChoiceA but definately not paying realtor commissions. And before I sell I’ll use Cyberhomes or Zillow to validate my pricing strategy. This whole “you need a realtor” BS that is all over my TV is tired. C’mon, $30,000 in commissions to sit down and post a house on the MLS and just wait for a buyer to call you. National Association of Realtors will be in the deadpool by 2012.

And then, a couple of comments later, here’s a “Marzipan“:

Second, to #3 Kerry R….Realtors charging the typical 6% do get paid too much. But paying 1-2% is quite fair. The reason is that sombody else handles the BS, but more importantly…you are buying an entity and/or individual to sue in the event the $hit hits the fan somewhre in the transaction.

May I suggest to whomever the powers be at National Association of Realtors that whatever they’re doing ain’t working?

Particularly interesting is Marzipan’s perspective: that using a broker is essentially taking out an insurance policy on the home sale transaction. Is that what real estate brokerage has been reduced to in the Internet age?

Marzipan’s comment reminds me of a conversation I had a couple of years ago at Realcomm. A top residential broker from the Houston area had just presented to a room full of commercial real estate people how she uses the Internet and virtual teams to get her tasks done. As she was going through it, I realized that her team (spread throughout the world, including India) was doing everything from marketing to website maintenance (her own site) to contracts and paperwork to setting up closings to followups. Now, she was a Re/Max agent, but used absolutely nothing that Re/Max presumably offered her except perhaps for the business card.

So I asked her, “What exactly does Re/Max do for you, since you’re a totally self-contained operation?”

She said, “They provide liability insurance.” That was it. That was the entire value of being part of Re/Max for this top real estate agent whose team did north of $15M in GCI.

So apparently is the entire value of working with a real estate agent for at least that Marzipan guy.

This goes to the heart of a debate I’m having in the comments of the Halstead Brand Suicide post. If the core value proposition of a real estate agent is brokering, then the industry is doomed. The Web does brokering — the matching of buyer and seller — better than just about any human being. We’ve seen this in finance, we’ve seen it in travel, we’ve seen it in dating, we’ve seen it in job search, we’ve seen the phenomenon in every industry where the essential value is matching a buyer with a product/service.

Why do so many real estate people think it won’t happen here?

NAR’s advertising campaigns have been incredibly bad.

Apparently, NAR doesn’t realize that the image of the real estate agent is so bad that anything they say is simply treated as a lie.  It’s probably true that right now is a great time to buy (assuming you’ve got the cash, the credit, and can get a mortgage) for all the reasons the ad mentions.

Too bad the consumer just thinks Realtors are full of crap.  Just check out the comments on YouTube on that video.

“I keep finding realtors/former realtors that were topless dancers (pole dancers) or that are going back to that business (or prostitution).

Is it the lure of easy money combines with the lack of morals? ”

“Realtors are parasites.”

“It is always a good time to buy. You know why? Because if you don’t buy homes, realtors starve. They can’t pay their mortgages or put gas in the Escalade.

So go ahead and buy, even though your house will be worth less in a few years and you will have no equity.

NAR would be better off spending their ad dollars to give to people as down payments. It’s the only way half the people will even be able to afford a house.”

I don’t know if I agree that NAR is better off spending ad dollars to give people down payments.  But I do think NAR should fire whoever its ad agency is, maybe fire whoever is heading up the PR/Marketing efforts for NAR, and spend some real time and money understanding consumers and why they think Realtors are such scumbags.

If marketing is a conversation, then NAR has simply been plugging its ears going “Nyah nyah nyah, I can’t hear you!” for years.

And given the Texas agent’s comments, that problem is up and down the entire real estate value chain.

How to fix this problem?  I don’t know.  If I knew for certain, I think I’d be a rich man on a tropical island somewhere.  But I do have some thoughts.

First, get rid of the bad apples.  It may be that most Realtors are hardworking, conscientious professionals who take their responsibility very seriously.  If so, the industry needs to purge those whose behavior reminds consumers of prostitutes and pole dancers.  If the 1.3 million Realtors goes to 500,000 Realtors, but every single person who carries that tag represents the best practices, best intelligence, best knowledge, and highest ethics, I think that’s an improvement.

Second, go back to the grassroots.  Have conversations.  Instead of spending $40M on TV ads that make consumers think you’re a slimy douchebag, why not spend it training every single Realtor and every local Realtor Association to get out to the community, in person, to hold seminars, teach consumers the ins and outs of the market, evaluation, housing laws, zoning regulations, and share whatever knowledge and expertise Realtors have?  People generally find it harder to call you a scumbag to your face, especially if you’re telling them something they didn’t know that could help them, without sales pressure and sleazy tactics.

Third, really understand and proselytize among the brokerage community what the value proposition is.  If it’s brokering, then prepare for a bloodbath.  If it’s something else, then work to make that happen.  My personal belief is that the value proposition of brokers in the Internet age is wisdom and judgment.  Websites can give me valuations; they can help me find homes; I can get neighborhood info from them.  What I can’t get is an expert’s wisdom and judgment.

This is more or less how it works in finance.  In law.  In accounting.

Why would real estate brokerage be any different?

-rsh

But… That’s SO Web 1.0!

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Dan Green over at Bloodhound Blog understands marketing.  Well, I’m sure I’ll find some place and time to be a pain in the ass to him to, but he’s absolutely on the money with this post:

Click-throughs from a search engines are not “leads” and that’s why the NAR statistic is misleading.  Until a reader engages the author personally, the click-through is only that.

A Web site visitor that registers for free search, free reports, or free seminars is not your client.  He is a window-shopper taking home free samples.  He’s a client when he signs, and never before.

He goes on to vouch for the power of database marketing, good old fashioned email, that the Web 2.0 gurus have been telling us is dead as the proverbial doornail.  I think he’s exactly right.  Read the whole thing — it’ll be worth it.

Okay, maybe not exactly right.

I suppose if I had to pick a bone with him, it is that while he’s absolutely correct that a click is not a lead, and that a random visitor is not a client, he doesn’t soften the blow by pointing out that one should still care a great deal about generating that random traffic.  There is value in clicks, value in the random visitor.  Just not as much as some people think when they go on and on about “user experience” and “customer interaction” when they’re really talking about the random visitor.

After all, the random visitor could turn into a customer; the non-visitor never will.

Of course, you have to make the site enticing and provide value to the random visitor in the hopes that he will turn into a frequent visitor, then a regular visitor, then finally take that step and become a customer.  But first, you do have to get them to your site somehow.

I don’t think he’d disagree with me.

The real lesson from Dan’s post, I think, is to avoid getting caught up in the hype of the latest tech gimmickry.  Just because something is “old-school” doesn’t mean it’s ineffective.  Pursuing innovation for the sake of innovation is a pretty good way to lose a lot of time and money.  Connecting the marketing effort as directly as possible to the business model is a far better way.

If I were responsible for marketing for a local brokerage, I would take my entire paid search budget and spend it on doing live, in-person weekly seminars on the local real estate market instead.  The people most likely to list with me are those who already live in town.  Why not make a concerted effort to educate them on the topic they care about deeply: the value of their homes?

But Rob… that’s not even Web 1.0.  That’s like… Cro-Magnon marketing.

So?  Establishing your company, and your agents, as experts in the market conditions of your local market is a bad thing how?  Getting people to come to your office one evening to hear an objective lecture (free from all sales-pitches and smarmy sales tactics) on what’s going on nationally, regionally, and locally and meeting potential customers face to face is bad how?

It might be different for a large regional brokerage, or a national network, but the local broker will probably get more ROI on those evening lectures (cookies and soda aren’t that expensive, yo) than on any amount of money spent buying keywords on Google.

-rsh

Tribe Management in Real Estate: Just Don’t.

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Seth Godin, he of the bald head and brilliant marketing insights, has a new post up talking about how branding is dead, replaced by what he calls ‘tribe management’:

It adds to that the fact that what people really want is the ability to connect to each other, not to companies. So the permission is used to build a tribe, to build people who want to hear from the company because it helps them connect, it helps them find each other, it gives them a story to tell and something to talk about.

And of course, since this is so important, product development and manufacturing and the CFO work for the tribal manager. Everything the organization does is to feed and grow and satisfy the tribe.

Instead of looking for customers for your products, you seek out products (and services) for the tribe. Jerry Garcia understood this. Do you?

Who does this work for? Try record companies and bloggers, real estate agents and recruiters, book publishers and insurance companies. It works for Andrew Weil and for Rickie Lee Jones and for Rupert at the WSJ… But it also works for a small web development firm or a venture capitalist.

People form tribes with or without us. The challenge is to work for the tribe and make it something even better.

With all due respect, I think Seth made a mistake by including real estate agents in that list.

There are a couple of reasons why.

First, the term “tribe” by its very nature implies permanence.  The Webster.com definition of tribe is:

1: a social group comprising numerous families, clans, or generations together with slaves, dependents, or adopted strangers

2: a group of persons having a common character, occupation, or interest

Add to that dictionary definition, the anthropological notion of a tribe being organized around kinship connections, and you get the idea of permanence.  After all, what is more permanent than family?

You can extend the metaphor plenty — after all, the second definition above is about as wide open as you can get.  So you can speak of a ‘tribe’ of a particular writer’s fans — I belong to the ‘tribe’ of George R.R. Martin’s fans.  I also belong to the ‘tribe’ of people crazy about Alison Krauss and Union Station.  The membership in these various tribes is based on relatively durable interests.

So when Godin speaks of working for a tribe, I have to think he means some sort of a more-or-less durable group of people with common interests.  Blue-state conservatives, or people who love chocolate, or whatever.  Work for such a group, and find products and services for that tribe, and you can be successful.

Fine.

But what happens when the “tribe” is held together by absolutely nothing except a passing, momentary need?  If the sky opens up in a sudden rain shower, is it logical to call all those running for cover a “tribe of shelter-seeking people”?

What Seth neglected to take into account is that real estate consumers surface every seven years on average.  Alex Periello of Realogy likened them to whales who breach the surface every seven years in a frenzy of activity for a few months, buy/sell the house, then disappear for another seven years.  There is no permanence there.  No enduring interest, no enduring common character.

Are there special niches within real estate where tribes are found?  Sure.  Commercial investors might make up such a tribe — because they have an enduring interest, a permanence to the membership.  But for general application, the “tribal management” approach to real estate marketing is likely to get you very broke, very fast.

Second, and this is perhaps a bit more fundamental a critique, it appears to me that even within a tribe, branding occurs.  Unless we’re talking about paleolithic hunter-gatherer societies, you always have specialization in any group of human beings by the very fact that we’re not the same.  Some people are just better at making pottery than others; some are just more talented at writing poetry than others.

Seth’s focus on ‘what people really want is to connect with each other’ is just a touch too much of the soft muddled buzzword-driven thinking that infects so much of modern marketing.  (Personally, I blame Facebook.)

In some cases, what people really want is to connect with each other.  In other cases, what people really want is someone to solve their problem for them with the minimum hassle.  If my pipes burst, I really have no desire whatsoever to connect with the plumbing community and partake in their tribal rituals.  Sorry, I don’t.  I just want a competent plumber to come to my house and take care of my broken pipes.  That’s it.

And frankly, I really don’t have the desire to go and engage in a lengthy conversation with my tribe (whoever the members may be) and learn the ins and outs of a plumber’s skill level, education, perspective on piping, and his philosophy of ecological sustainability.  I just want to know who to call, and if he’s reasonably competent.

Branding is absolutely critical in those cases.  I’m not likely to call the guy who brands himself as “The Best Baker in Town” with my piping problem, despite not having connected with him or his tribe, or held lengthy conversations with my neighbors about his qualifications to fix my pipes.  I’m far more likely to go to Google or Yellowpages.com and search for “plumber” and go with the guy with the best branding.

Because I really don’t want to think about it anymore than I absolutely have to.

Now, combine the two factors and you have a perfect storm of non-tribal work.

Real estate consumers are not a tribe, because its “members” surface every seven years.  When they DO actually surface, they’re not looking for kinship connections or establishing common interests.  They’re looking for someone to help solve their problem with a minimum of hassle: buying, selling, or renting a place to live.  The buyers are not looking to connect with the sellers anymore than they absolutely have to.  The sellers are not interested in having the potential buyers come over for tea and biscuits while they discuss all of the various interests they have in common.  They’re just looking to transact business for their own purposes.

In that context, I submit that branding is absolutely crucial.  Being branded as a professional real estate agent, who knows what he’s doing, who knows the market, who is an expert in the process, and can get things done with a minimum of hassle and maximum of helpful advice, will be of far greater utility than any sort of “tribe management” strategy.

Ignore branding at your own peril, if you’re in the real estate business.

-rsh

Positive Vibes

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I realized that my first few posts on this brand new blog have been… a tad negative.  While I certainly have no interest in joining some echo-chamber gabfest about how wonderful technology X is for real estate, and how if we just learned how to connect, really, really connect, then everything would be hunky dory, re-reading what I’ve written makes me wonder, “Geez, why is this guy even working in real estate industry?”

So some positive vibes.

I really dig this industry.  I’m not a broker, nor a realtor.  I’m a lawyer, entrepreneur, and marketer.  So I look at the real estate industry from with a bit of distance.  What I see is (a) incredible importance and vitality, and (b) unbelievable anachronism and inefficiency.

A lot of it is the result of bad business practices.  And no amount of technology can help with that.

But what the technology can do, and is doing, is disrupting everything.  The whole neat arrangement built up over decades of work by millions of people is having its foundation chopped out from beneath it by the power of the Networked Society.  That, in turn, is forcing conversations about the industry, its practices, those of us who provide products and services to the industry, to the brokers, the agents, the buyers and the sellers.  All of that is extremely healthy, and frankly invigorating.

I could go work at some CPG company, I suppose.  But the marketing there is more or less set; a lot of the practices are pretty well understood, as that industry has adjusted to the disruptive effects of the Networked Society.  Maybe the next enormous disruption will make those industries fun to work in again, but in the meantime, real estate is the place to be if you want to deal with really new, really interesting, really tough issues in marketing and technology.

Here’s the thing: I believe that ultimately, the real estate industry will redefine itself, and re-emerge stronger than ever, more efficient than ever, and more focused on delivering value than ever.  Technology will be only a small part of the story.  The larger part is in redefining the modus operandi of real estate as it exists.  That change is coming; in fact, it’s already here — we just haven’t adjusted to it yet.

And in that work, marketing is a critical part of the conversation, because what real estate professionals do day in and day out is marketing.  That so many do it so badly today doesn’t mean they’re not doing marketing; they’re doing it, just not well.  That too will change.  It’s how business works, and how an industry moves along.

I’m pretty excited to be a part of that tectonic shift.

So yes, I tend to criticize an awful lot at least in blogging.  But it’s because I see a way forward, a way upward, to break through this time of uncertainty and emerge out the other end as a much improved industry overall.  I suspect that many of the people actively reading blogs (like this one) are also engaged in that same work.

I’m quite optimistic actually, that mistakes will be made, but we’ll learn from them and move forward and upward.  But we have to recognize mistakes when they are mistakes, and argue with each other as to whether this or that was the right or wrong step.  Through that creative destruction, I really do believe that we’ll find our way.

As I’ve said, my day job is at OnBoard, a real estate data and technology company.  I’m surrounded by smart passionate people who argue all the time about what is the best solution, or the most realistic, or the most efficient way to solve problems for our clients.  That’s a lot of fun.  But having worked at Realogy, I feel that our work — my work — is important as well.  Alex Periello, the CEO of Realogy Franchise Group, once said at a company meeting that what we (Realogy) do is to help people fulfill their American dream of homeownership.  When you really think about what that means, the work of real estate professionals is really quite profound.

So laziness, hidebound customs, and lack of professional dedication in that important work is just not acceptable to me.  And if I get nasty and negative, I suppose that is the reason why.

All of us involved with the real estate industry need to recognize the vital societal importance of what we do — whether its helping people buy and sell homes, or supplying data to companies, or writing mortgages, or building websites to serve consumers.  And then we all need to step up.

Now, let me return you all to our regularly scheduled programming. :)

-rsh

In Which I Answer Inman’s Question

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The Inman blog asks a question:

What’s interesting is that it points to a need to rebuild some trust between consumers and the real estate industry. Real estate agents even before the downturn suffered a bad image in the minds of consumers, and with emotions flaring in the midst of this housing recession we’re likely to hear more backlash from people looking for someone to blame.

Some agents appear to be finding success in building consumer trust through blogging. What are some other ways to combat this in a down market?

Actually, what’s really interesting is how Inman talks about a need to “rebuild some trust”, then mentions in the very next breath that real estate agents even before all this gotterdammerung had a bad image.

That isn’t called “rebuilding”.  That’s called “building”.  As in from scratch.  And I have the answer.

Start firing agents until you only have good ones left.

1.3 million Realtors in America today.  Those would be the so-called ‘good’ real estate agents, right?  You know, the ones who are members of NAR and have subscribed to a Code of Ethics?  So there are plenty of non-NAR member agents running around out there too.

Find an industry professional.  Find a bar.  Get said professional drunk.  Ask him how many of the 1.3 million Realtors are really professionals who abide by every whit and jottle of the Code of Ethics.

You want to build trust?  Start by being trustworthy.  Want to know who is and isn’t trustworthy?

Try this.

And as you shrink away in horror, ask yourself, “Well, why not?”

-rsh

Halstead, Brand Suicide, and Media Companies

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Over at the Future of Real Estate Marketing blog, Joel Burslem celebrates Halstead’s incorporation of New York magazine’s neighborhood profiles on their website. But then he goes on to make what I think is an outrageous claim:

It also signals to me that more brokers are waking to the reality that they themselves are media publishers and therefore need to start acting like them. Inking content deals for their sites is part of that, but so is exploring trends like syndication and distribution for their own content (i.e. listings).

Say what now?

I don’t know Joel, but I’m sure he’s a brilliant guy. And like many brilliant guys, he appears to have forgotten some simple truths.

The business model matters.

What I mean, quite simply, is that how a company actually makes money means something. Calling real estate brokers a “media publisher” doesn’t make them one anymore than calling a pile of poop “caviar” does.

The media business is pretty straightforward in how it makes money. It either (a) sells the content via subscriptions or some other pay-by-consumer model, or (b) cons convinces some company to pay to advertise to the consumers of content. As long as money coming in is greater than the money spent on creating and distributing the content, you’re in the media business, baby! Trulia and Zillow are in the media business (until they’re not, of course, but we’re assured, assured, that will never happen by Trulians and Zillowites).

In stark contrast, the real estate brokerage business makes money upon the closing of a transaction in which a piece of real property goes through a change in legal status. Typically, that’s a transfer of title. But it could also be the execution of a lease, creating a leasehold estate. The brokerage makes money by commissions tied to the final sale/lease price. What the heck does that have to do with the media business?

The content is given away for absolutely nothing, because that ‘content’ is nothing more than advertising, promotion, and marketing for the underlying asset. This is tantamount to claiming that J. Crew is actually a media company because it puts out a catalog.

If real estate companies were to actually act like media companies, they would be inking deals wherein publishers would pay them for their content (aka, listings), or they would get some other company to pay them money to put advertising on their content (aka, listings).

Alas and alack, the legal status of listings is very much up in the air, I’m afraid. After all, who owns the listing? Is it the agent? The seller? The MLS? The brokerage company? The mega national franchise networks such as Century 21?

If the national Century 21 organization (a division of Realogy) inked a deal with Google to send it listings for $1/listing, would the lawyers for the various MLS’es and agents and brokers break the sound barrier in getting to the courthouse to file a suit? Or just fall short of Mach 1?

Look, I dig what Halstead has done from a technical standpoint. As a web guy, I like the user interface, the clean but functional design, and the map integration. But let’s not get carried away here.

From a strategic standpoint, what Halstead has done is properly described as “brand suicide”. Halstead has essentially told every single visitor to the Halstead website, “Our agents know jackshit about the neighborhoods in which they are supposedly experts.” If you want to know where to move to in New York City, don’t ask the boys and girls at Halstead — no, go read New York magazine. That, my friends, is brand suicide.

If real estate is local, then presumably the value of real estate agents is local knowledge. Farm that out to some publication, and you’ve essentially made your real estate agent a glorified paperwork clerk. But, oh yeah, pay me 6% please! That makes for a very compelling value proposition.

Why are we celebrating this again?

What Halstead should have done instead is to make sure that every single agent on its roster is in fact a local neighborhood expert. If you sell million dollar condos in SoHo, sister, you’d better know where to go for the best sushi dinner, which dry cleaner will wreck my $4,500 Brioni suit and which one won’t, and where I can take my dogs for grooming. You’d best know which elementary school my kids will be attending if I buy this condo vs. that condo. Then, Halstead should have done everything in its power to brand those agents as local experts, and kicked New York magazine to the curb.

But I guess it’s easier to take the lazy way out and ink a deal with New York. That way, you could be described as a “media publisher” too, while you flush your brand down the toilet.

-rsh

New Model for Real Estate? Let’s Try an Older Idea.

4 Replies

Pat Kitano at Transparent Real Estate has an interesting post speculating on what the future of the real estate industry might look like, by taking a look-see at the finance world.

If one subscribes to the idea that a real estate transaction is basically matching capital with opportunity, and that the transactional process has become more transparent due to internet data, then it’s logical to see that any intermediary based transaction is also fair game.

Investment banking and venture capital is a relationship based business that matches investor bases, often institutional investors, with opportunities – stocks, bonds, M&A, start ups, etc. Like any other lucrative business model, maintaining the mystique of “high finance” and managing deals behind the scenes keeps power contained within the select few who live on Park Avenue or in Woodside.

Read the whole thing.

I think Kitano is on to something, but at the same time, his analysis doesn’t work for me. He essentially ignores what may be the most important element, either in real estate or in high finance: people.

For example, he believes that finance — whether venture capital or investment banking — is just a matter of matching capital with opportunity. Stripped to its bare essentials, that would make sense. Except that you could also say that automobiles are about getting from point A to point B. Or that sex is about combining genetic materials for the propagation of the species.

While true, in a reductive sense, once you inject people into the equation, the story changes dramatically.

Entrepreneurs don’t select VC’s simply because they offer the best term sheet. TheFunded.com, the site that Kitano mentions, is not a NASDAQ for startups matching bid-ask prices for investment — the message boards are filled with human-on-human interaction stories. Investment banking may be matching capital to need at its core, but as Jonathan Knee of The Accidental Investment Banker posits in his book, there is an enormous human element to that business as well.

Knee, a former managing director at Goldman Sachs and Morgan Stanley, talks on and on at length about how the investment banking community has lost its way, how it has abandoned the traditions of client service in search of the next kill. He seems to believe that at the heart of investment banking is being a trusted advisor to the CEO’s and CFO’s — men and women who are powerful, but lonely because of their power. Surrounded by asskissers and yes-men, these executives need someone who understands their business and isn’t afraid to tell them what they need to hear, a business confidante or sorts.

Knee left the big Wall Street banks and joined a boutique firm that specializes in the kind of handholding services that he believes clients need.

That stands in stark contrast to the future that Kitano is describing:

Now that the jig is up, investment banks need to prove another business model for 2008+, but like many of the transactional industries disintermediated by the internet – travel, real estate – the new reality will be lower fee structures distributed among more players who can provide services that were once the sole province of investment banks. For example, Kessler posits that new players will be consolidated financial powerhouses with the capital strength to provide a continuum of financial services – think Goldman Sachs merged with Citigroup.

Kitano and Kessler both seem to think that the future of investment banking will be some sort of a financial Super Wal-Mart. Presumably, for real estate, that means the future will be some sort of a real estate One-Stop-Shopping combining brokerage, buyer agency, mortgage, appraisal, title, legal, moving, home maintenance, and Home Depot to boot.

I don’t think so.

If anything, I foresee a future that splits sharply, just as retail has done. On the one hand, you’ll have the low-cost Wal-Mart types that competes on the basis of one-stop convenience combined with pricing power. Frankly, the various FSBO type companies coming up are shaping up to be these. Low-service, low-prices, low-interaction. That’s one model, and lies at the heart of Kitano’s new model for real estate.

Thing is, I just don’t believe these will be the dominant model for real estate, anymore than I believe the Super Goldman Citibank Dean Witter will be the dominant model for investment banking.

Investment banking — the buying and selling of companies, and the locating of massive amounts of capital — isn’t exactly picking up the groceries. It’s one of the most difficult, traumatic, and life-changing events in a company’s lifecycle. If you’re the CEO, do you really want to go with the lowest bidder on something like that? That’s like selecting your brain surgeon on the basis of price only. I believe investment bankers get chosen on the basis of trust. I believe the successful investment bankers of the future will go smaller and more focused, instead of bigger and more diversified.
Similarly, buying and selling a home isn’t picking out the latest CD or pair of shoes. It’s one of the most important, financially significant, and traumatic experiences a family goes through. The disconnect today isn’t that capital-finding-opportunity has been disintermediated by the Internet. The disconnect today is that the person the family turns to for advice and counsel doesn’t care. The real estate agent looks at the family as just another deal. Too many of them pretend to give a crap, but really, all they’re thinking about is the commission check. Buyers and sellers are just wallets with legs to far too many Realtors.
And that insincerity shines through in everything these brokers do.

That is what is wrong with VC’s, with investment bankers, and with Realtors: they are supposed to be selected on the basis of trust, but they do things to make sure that they are not trustworthy. Conflict of interest is so rampant in all three industries that lawyers are getting verrrrry interested in them. Mercenary behavior is the norm, not the exception.

No wonder the customers are looking to disintermediate, and boil things down to capital-matching-need. If you’ve got to deal with mercenary scumbags who only see you as a pile of cash, wouldn’t you want to minimize what you have to pay these hyenas? I would.

But here’s the bright side: If you actually found someone who is trustworthy, who is professional, who is an expert, and who actually gives a crap about you, would you really mind paying them whatever the cost for the most important financial transaction of your life? I don’t think so.

If an investment banker can really earn the client’s trust, disavow the mercenary behavior, would the client — who is buying a $10 billion competitor — really haggle over a few million here or there? I just don’t believe they will. I think those clients will gladly sign the check over knowing that they didn’t get conned, didn’t get snowjobbed, and got someone’s honest, objective, professional, best-effort assistance.

The same goes for real estate. 6% of the sale is a rather large sum of money. I would pay it without hesitation if I really felt that the agent representing me did so with no conflict, with forthright honesty, and with genuine caring about me and my family. If she really worked for me, to advance my interests, did the homework and the research, and knew the market, and knew her stuff, and got me what I think is the best price possible for my house… I’d sign that check without hesitation. I hesitate only because I don’t believe she did any of those things.

Why doesn’t the real estate industry try a much older idea: actual, fiduciary client service. Realtors talk the talk, but then try their damnedest to get ‘both sides of the deal’. Come on now!

Maybe the business model of real estate is just broken. Maybe the buyer agents need to be completely separated from sell-side brokers. Maybe both need to be paid a salary to encourage professionalism instead of mercenary hunt-and-kill mindset. Maybe the regulations surrounding Realtors need to be toughened up a bunch, and the equivalent of the Bar Exam in law needs to be instituted.

But whatever the solution, I’m convinced that at the heart of any major transaction — whether investment banking or buying a home — is the human being.

Get more human. That seems like the ‘new’ model for real estate to me.

-rsh

One Reason Realtors Will NEVER Get Web 2.0

2 Replies

I was on a call earlier today with a client of my employer (who does not authorize this blog, nor have anything whatsoever to do with it — all opinions are my own, blah, blah and blah) talking about a particular product we carry that could assist them with some of their online marketing efforts. They ask questions, we answer them. We hope they’ll buy from us, but at the same time, I really don’t want to sell something that the customer can’t use.

In any event, during the call, the client asks, “So, can we choose to exclude certain data from the report your tool generates?”

Normally, people buying data tend to want to have more, not less data. Thus with my interest piqued, I ask why.

“There’s some stuff we just don’t want in there, like y’know… crime stats, and bad school ratings.”

I realized these guys will never, ever get Web 2.0. For that matter, I’m not entirely sure that they get Web 1.0. And they’ve got the blogs, the podcasts, the video, the user-generated-content and the whole nine yards. All the trappings of Web 2.0, none of the soul.

Web 2.0 means a whole lot of things. Oftentimes, it means a string of buzzwords strung together. But one of the roots of the whole concept of Web 2.0 lies in something called the Cluetrain Manifesto. If you care at all about marketing as a topic, you owe it to yourself to read that in full, but this passage captures the central insight:

Most corporations, on the other hand, only know how to talk in the soothing, humorless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal. Same old tone, same old lies. No wonder networked markets have no respect for companies unable or unwilling to speak as they do.

But learning to speak in a human voice is not some trick, nor will corporations convince us they are human with lip service about “listening to customers.” They will only sound human when they empower real human beings to speak on their behalf.

While many such people already work for companies today, most companies ignore their ability to deliver genuine knowledge, opting instead to crank out sterile happytalk that insults the intelligence of markets literally too smart to buy it.

Replace the words “corporations” and “companies” with “Realtors” and I think you have a pretty good summary of the state of real estate marketing today on the part of the vast majority of the industry.

What is it about Realtors that makes them think that they alone can defeat the power of the Internet? That they alone can somehow control information and prevent its leaking to the public? They couldn’t seriously believe that crime statistics are somehow only available through their website, which isn’t ranked even in the Top 100,000 websites in reach, traffic, or usage on any traffic measurement service… could they?

Hiding unfavorable information is not only pointless — since any consumer worth a damn is going to research the house or neighborhood — but counterproductive. Because it erodes trust. Once trust is gone, really… what do you have left? Shiny brochures?

The real estate industry has to wake up and realize that yes, even for them, the Internet changes everything.

Let’s face it. Consumers are going to find out that the neighborhood you’re trying to peddle is a crime-ridden shithole. They’re going to learn that the school system is overcrowded, filled with underperforming kids and unmotivated teachers. They’re going to find out that the “up-and-coming” area that you spoke of so glowingly is neither up nor coming, but only going and faster that ever. Thing is, they’re going to learn all this from someone else.

That someone else could be a real estate megasite, like a Trulia or Zillow, or it could be a dedicated blogger who doesn’t particularly care about commissions since he isn’t a Realtor. It could be a community message board, or Facebook user group.

Whoever it is, the consumer will be trusting… well, not you. And since you’ve chosen to obfuscate on things like crime data and schools, why should they believe you when you tell them the property is a fantastic buy?

I’m not entirely pessimistic. I’m sure there are realtors out there who truly believe that the best way to serve their clients (whether seller or buyer) is to cut out the bullshit from day one. That could mean telling the seller, “Hey, this neighborhood sucks — you might need to drop the price a lot more than that.” My view is… those guys are going to end up owning everyone else who are addicted to the spin of selling.

Oh I know — realtors love to point to Fair Housing laws as the excuse why they can’t tell consumers what they want to know, and will find out despite the best efforts of the real estate industry. But that’s just an excuse. You really don’t want to take the risk? Just tell the clients, “I can’t tell you jack, but the FBI crime statistics can be found at www.fbi.gov” and handle it that way.

Point is, the Realtor community has got to understand at some point that they need to start getting real with the consumers. At this stage of the industry, I think it’s very fair to say that most consumers are better educated and better informed than most Realtors are. They’re engaged in the most expensive purchase of their entire lives. They’ll do the research. They’ll find out.

In my book, seems like it’d be better that they find out from the person who claims to be the expert.

-rsh