Notorious R.O.B.

Well, at least, it attracts interest.  Joe Ferrara alerts us to some… ahem… sexy ads related to real estate (safe for work).  Go check it out.  To be fair, most of those are ads for hotels which… I guess is real estate… sorta….

But one of them is for a condo project in Manhattan called the District.  Lots of sexy photos.

Joe asks whether these sexy ads help sell the property.

I’m going to guess, No.  But they do help draw attention to the ad.   And sometimes, that’s all that an ad has to do.

I personally think some of those images go over the line in sex appeal and make it evident that they are appealing to our Lust, which is counterproductive.  I did, however, enjoy looking at the ads.

-rsh

A while back, I’m afraid I bashed the hell out of MoveSmart.org — a seemingly well-meaning website that wants to practice something called “integrative moves”.

I have learned more about what that might mean through this post on Stuff White People Like:

White people like to live in these neighborhoods because they get credibility and respect from other white people for living in a more “authentic” neighborhood where they are exposed to “true culture” every day. So whenever their friends mention their home in the suburbs or richer urban area, these people can say “oh, it’s so boring out there, so fake. In our neighborhood, things are just more real.” This superiority is important as white people jockey for position in their circle of friends.

Maybe MoveSmart is on to something after all….

-rsh

A reader of Dustin’s sent him an email that both were kind enough to allow to be published at 4realz. The reader, a member of a MLS committee, raises some very interesting and very important questions provoked by the discussion on Cluetrain marketing in real estate between Dustin and myself. Read the whole thing.

This is, of course, right up my alley so uh… let me clear my virtual throat here. The reader (and the MLS members) face a real conundrum here.

This conversation issue is not driven by the word “control” but rather by the “agency relationship” created to the client to “market” their property for highest and best sales price. The conversation is also with consideration that at the MLS it is a cooperative membership to assist the process of buying and selling property. It could be devastating to the industry to get caught up in a war of words about the value of any one property. Why would I list my home with an agency if when the listing is posted online It gets poor (or worse –slanderous) reviews by MLS members or public on the very same site that is suppose to market the property for sale?

So back to the idea that broker members of the MLS recognize the value of an open, interactive dialogue with the consumers to grow their web presence at their individual web sites. However they are reluctant to allow this dialogue with opinion of the competing brokers/agents (which may be an opinion rooted in competition and not fact) or the potential “sensationalism” that can be created through “negative news” allowed to be expressed by the public or within the MLS membership.

So in context of the ClueTrain and with the legal regard for agency relationship in mind my questions to you are; 1) what would your opinion of the MLS discussion be and how would you advise the MLS to proceed with this line of thought. And 2) If you were an individual owner of a real estate company, how far would you go (or allow to go) on your company/agent’s websites to allow what may be disparaging comment on a competitor’s listing or your own company listings?”

Although this MLS committee member didn’t ask for my opinion, I’m going to give it anyway. That’s just how we roll here. Heh.

My take on it is as follows: take one step at a time, very gingerly.

Fact is that there are laws and regulations that bind up real estate and real estate brokerage. Even as I rail against such laws, I can’t advise anyone to incur legal liability while the laws are on the books. Having said that, we need to do much more in terms of earning the consumer’s trust through authenticity.

So first, with respect to the MLS discussion and how I would advise the MLS to proceed, I would suggest that they debate the meaning of “agency relationship” in the current context. Is it really in the client’s interest to be seen as selling a house that is badly mispriced and pretending that it is not? Does the agency relationship impose a duty of telling the client that he has to update his kitchen to the 20th century or face significantly lower bids? I think they do.

In fact, if I were selling my house, I would want my agent to have the intestinal fortitude and professional pride to tell me when I’m being an idiot. I might insist that the deep purple shag carpet in the master bedroom is teh sexay; it’s your job to tell me that I’m smokin’ the devil weed too much. If I elect to ignore your advice, then it’s on me. If you never tell me in the first place, because you’re afraid that I’ll just go find some kiss-ass agent who’ll tell me that I’m an interior design genius just to avoid annoying me, then that’s on you.

Why would I list my house with an agency if upon being posted online, it gets hammered by criticism? Because the agent in question would have prepped me for it. She would have sat me down and explained the facts of life in real estate, so that such negativity doesn’t faze me. In fact, I might incorporate that into the overall marketing plan:

“Total 70′s era house available for sale. I know the place needs major renovations to tear out the tigerprint carpeting, and the mirrored disco ball in the master bedroom, and yes, you may have to replace the leopard print wallpaper, but that’s why I’ve priced it below market. I don’t want to repaint the place while I’m still here, as my agent tells me to do, but you can after you buy the place from me. The structure is solid, all of the fixtures work, and the boiler was replaced last year. So it’s a bargain for you if you don’t mind a bit of interior redesign work.”

In addition, what I would expect is for my agent to defend the house using facts and expert analysis, thereby silencing the uneducated rabble, through the conversation. For example, suppose some consumer gets on the site and trashes my house.

“Man, that is the UGLIEST house I’ve ever seen. I wouldn’t buy that for a dollar, nevermind $350K.”

I want my agent to get on and respond, something like this:

“The owner has already agreed the aesthetics might not be for everyone, which is why he’s priced the house at $350K when comparable homes in this neighborhood have been selling at an average price of $370K. Fact is that the house is located in South Mountain school district, one of the top elementary schools in the county (link to PDF), and pricing has been bucking the downward trend (link to graph). Indeed, the owner would not sell it for a dollar, but will entertain reasonable negotiation.”

That is the key to resolving the consumer vs. competing agent issue as well. As an MLS, I would prohibit members from posting personal opinions — they can and should post professional opinions. I would absolutely discipline a MLS member for a personal opinion driven more by competition, but encourage professional opinion driven by facts and expertise. The distinction might be fine, but honestly, I think people know the difference when they see it.

For example, compare these two opinions:

“Wow, is this house terrible. I’ve got three other houses for sale right now that are far better value.”

“I think this house is overpriced. The sales comps for similar properties in this neighborhood going back six months is $15K lower. Further, the zoning for that area has change to mixed residential/industrial. I don’t know that I could sustain this pricing given those factors. Perhaps there is some special amenity or unknown factor here that would warrant the higher price, but in my opinion, this property is overpriced.”

It’s fairly obvious which one is just competitive bullshit and which one is a professional opinion. The latter can be debated, while the former cannot.

As a matter of fact, I would advise the MLS not to open up for public comments if their members are not allowed to comment. Because without expertise, without leadership, the public tends to become a mob. If consumers who know jackshit start badmouthing a property, the calm, expert, and knowledgeable professional opinion of an agent can help calm the waters and reveal the naysayers for the idiots that they are. If they are silenced, however, then the mob mentality just takes over and it gets ugly, fast.

So my recommendation to the second question follows naturally. As the owner of a brokerage, I would positively encourage commenting on my website and listings, and encourage my people to comment on competitors’ listings as well, provided that my people restrict themselves to professional opinions that can be backed up with evidence and data and expertise, and that my people stomp out the idiot consumers who just flame for the hell of it. In fact, part of the value that we would provide to those who list with us is our vigorous defense, based on facts, research, and expertise, against morons who got nothing but emotional flaming. This overall effort has to be tightly coupled with a generall “Whole Truth, And Nothing But the Truth” policy as it comes to dealing with our seller clients.

We will spare them nothing in our honest, authentic, and well-considered professional opinion. If such an opinion leads them to go elsewhere to list their house, then so be it. I will consider it a point of professional pride that I and my people have never refrained from telling a potential seller client our absolutely honest opinion about their property, about the pricing, and about their neighborhood.

If one applies this standard, then I think even commenting on competitor’s listings is a valid part of the Cluetrain method. If your competitor has a listing up that is really just wrong in your professional opinion, then you owe it to the market-that-is-conversation to let your opinion show. If he’s a professional, then he will defend it with professional expertise, facts, and data. If he’s not a professional, but one of these sham-agents, then he needs to get out of the business, and his client needs to find better, more ethical representation.

I think MLS and broker organizations can make Cluetrain marketing work. But the conversation must involve the client. And the standards of expertise, leadership, and fact-based professional opinions must be kept in order to provide value (not just entertainment) to the community (not the mob).

-rsh

Ben Martin at Agent Genius(an excellent site that I have now added to my RSS reader) has posted a trenchant response to my earlier post on proof in Web 2.0 type of activities.

He takes issue, it seems, with a few things, confessing himself further and further befuddled by the dialogue.

First, measuring ROI from blogging or social networking activities — Ben seems to believe — is inherently bunk:

How do measure “investment” in social media? A wordpress.com, blogger.com or ActiveRain blog costs exactly $0. Let’s say you get one deal per year by blogging. A facebook profile costs you exactly $0. Let’s say you convert one lead from your facebook network into a deal per year. Let’s see, anything divided by zero is… Infinity, I guess. That’s one hell of an ROI!

He then claims that time really isn’t a factor when it comes to blogging:

Okay, so there’s the time factor. Sure it takes time to write a blog or do the social networking thing. You can do this during unproductive times of the day. Nobody at the open house? Type. Waiting for a client to show up for a meeting. Type. Kids gone to bed and the spousal unit is watching a boring TV show? Type.

He then concludes that there is no cost to blogging:

Now, consider the opportunity costs of not sharing your expertise. If you don’t write about what you know, the only people who benefit from your knowledge are you and your current clients. Knowledge is a Realtor’s greatest asset and to not share it is to squander it. Basically, to not share your expertise widely is like holding your expertise in inventory, and everyone knows that holding inventory costs money.

I’m going to go out on a limb and say that the net cost of blogging is effectively zero dollars. Some will quibble with this, but remember to consider the opportunity costs of holding your knowledge closely.

There’s a lot of confusion here. Ben seems like a very smart guy, and very observant, but in this particular instance, I’m afraid he’s out of his depth — just as, I suspect, I would be if I started talking about how best to show a house.

First of all, measuring ROI in marketing is not a difficult concept. You measure “lift over control”. If you have a baseline established already, then measuring lift isn’t particularly difficult. For example, if my website gets an average of 300 visits a day, then I add a blog and see 3,000 visits a day, that’s a pretty clear lift over control (historical data).

If you have no historical data, then you try to find someone who is doing the exact same thing you are, then do your activity, and measure lift. So find an agent, or a brokerage, who is doing exactly the same things you are, except for blogging, and compare your two businesses. If you’re getting 20% more transaction sides, or your transactions are worth 15% more than his, then that’s pretty solid lift over control.

Yes, it gets tricky when you’ve got two heterogeneous companies, and the control group is hard to establish, and you have to start assigning weighted averages and such, but that’s the principle.

The “This cost $XX, and I made $YY from it, so ROI is $YY/$XX” is far too simplistic and often misleading — as is the case here. That a WordPress.com blog costs nothing, therefore getting one sale would make the ROI infinite is a ridiculous result. I suspect that Ben knows that, and was merely using it as a rhetorical device. No, the real question is, would you have gotten $YY without that zero-cost WordPress blog?

To further confuse the issue, Ben believes that the cost of operating a blog is the time it takes to type up some words. You can do this, as he puts it, during your unproductive dead time.

This is confusion because it implies that were you not blogging, you’d be sitting around twiddling your thumbs. That isn’t the case. Time spent notblogging could be spent doing more of the same old activities — writing Thank You cards to clients, or making a phone call, or reading up on the latest market studies. There are a nearly infinite number of things one can do during dead time that isn’t blogging or social networking.

How do we know that those activities are in fact not more valuablein terms of growing your business than typing, typing away on a blog?

The logic behind his claim that there is no cost to blogging is… well, bizarre.

First, it assumes that Knowledge is a Realtor’s greatest asset, not his personality, Rolodex, experience, attitude, or physical beauty. That may or may not be true. But even if it were true, the claim that not sharing that Knowledge is squandering it, because “holding inventory costs money” simply makes no sense.

Holding inventory costs money because storage costs money. This is a purely physical concept, based on the physical space that inventory takes up in physical space that you as a company must lease or own in order to store those items. In fact, for most e-commerce operations, “inventory cost” asymptotically approaches zero — particularly if they sell digital goods such as music or photos. That insight, after all, is the whole premise behind Long Tail. How much does it cost to store knowledge in your brain? If it isn’t zero, you need to contact your lawyer and sue yourself.

Further, Knowledge is not subject to spoilage. Knowledge isn’t fish that has to get sold within a couple of days, or it goes bad. You do not automatically forget things you didn’t blog about, or share with the widest possible public audience. Sure, it could get outdated as new facts emerge, as new knowledge is gained — but in that event, even the shared Knowledge gets outdated and “goes bad”.

So contrary to Ben’s thoughts, actually, there is zero cost to not sharing Knowledge, no inventory cost, and not sharing does not mean you squander it.

There is a significant cost to sharing such knowledge. I’m incurring that cost right now, by typing out this blogpost. I don’t see it as a cost, because I happen to enjoy blogging; this is partially entertainment expense for me, if you will. But that isn’t the case for an agent trying to drive more business via blogging or social networking. That is a real cost. And as such, it requires some proof of a return on that cost.

Applying the above, we can ask some questions about Ben’s personal experience:

Based on my personal experience, I’m also fond of saying that I can’t draw a straight line between my blogging efforts and any success I’ve had in business. But I can draw a squiggly line. 2007 was the most remarkable year of my career, and I attribute it in large part to social media. Did I get a new job just by blogging? Nope! I networked in real life. Did I get the freelancing and public speaking gigs just by blogging? Nope! I got papers published and spoke for free. Did I just blog my way into a photo shoot and get my picture taken for the cover of my professional society’s national magazine? Nope! I volunteered for committees, showed up for events, and followed through on commitments.

Could I have done all of the above without blogging? Maybe one, but definitely not all three.

Could someone else who isn’t Ben, who also networked in real life, also got papers published and spoke for free, also volunteered for committees, also showed up for events, and followed through on commitments but did not blog have gotten a new job, gotten freelancing and public speaking gigs, and gotten his picture taken for the cover of the national magazine?

If the answer is Yes, then I can go out on a limb and say that all of Ben’s blogging activities were worth precisely zip. He might have done better by spending a lot more time on the golf course.

What’s funny to me is that Ben and I are kindred spirits in terms of what we want to see out of real estate, and out of the agent population:

So I offer a different equation: Return on Engagement. Instead of thinking about return on investment, consider how you can engage your social media farm. The extent to which they’re engaged with you is the extent to which they’re likely to think of you when they need to move. And because referrals will come when there’s trust and engagement, even though you may NEVER convert someone in your social media farm into a client, they will be more likely to think of you to the extent you’ve engaged them through social media.

This concept won’t resonate with everyone, but I know many genius agents understand this intuitively.

Ever since I started this blog, I’ve been talking about the need for agents to become more professional, more honest, more authentic, more engaging, more human, more Cluetrained. So I’m 100% on board with what Ben is advocating here. And I’m glad to hear that many genius agents understand this intuitively. So do I. I’m really glad that there are agents trying the new methodology, even in the absence of objective metrics, based on what seems to work for them. God Bless ‘em.

But as a marketer, I want data and backup and proof. I’m not asking for scientifically valid proof here. I just want to see enough evidence, enough data, enough proof for a reasonable person to conclude that yeah, in fact there does appear to be a causal relationship between blogging and increased sales. Or increased productivity. Or something. I want to see lift over control.

Because without that data, we’re not engaging in marketing, but in hype. We’re not thinking about Web 2.0, but fantasizing about Dreamland 1.0, fueled by so much over-the-top rhetoric: OMGASM! DA BLOGS RULE!!!

Furthermore, may I point out that even Ben’s new, less objective metric, can and should be measured? It’s easy to do. I hope some marketing firm or ActiveRain or whoever does it soon.

It’s a classic brand recall study.

Get one group of 15 consumers who have used an agent for their last home purchase. Ask them who they would use for their next home purchase when they need to move. See if they recall the name of the agent they used.

Get another group of 15 consumers who used an agent who blogs and social networks for their last home purchase. Ask them the same question. See if they recall the name of the agent they used.

Get a group of 15 consumers who read real estate blogs. Ask them the same question. See if they name the agent blogger.

Measure the difference in the response. Voila! Return on Engagement metrics.

And may I say once again, if there is absolutely NO statistically significant difference between the three groups… then I will go out on a limb and say, blogging is absolutely worthless as a Return on Engagement tool.

-rsh

Really, I have no axe to grind against the National Association of Realtors. I suspect that I would like most of the individuals who work there, and I admire them for many things. The Center for Realtor Technology is a good example of things I admire about NAR.

But they make it so easy to beat up on them sometimes (HT: InstaPundit):

The National Association of Realtors falls into this latter category [of trade groups that massage their data and spin it]. They have been calling the bottom in Housing, well, ever since the top 2 1/2 years ago; Their consistent claims of stabilization and price improvements later in the the year — as prices have continued to slide — have earned them the title of Worst. Forecasters. Ever. What is more damning, IMHO, is that they are not just wrong, but purposefully misleading for commercial purposes. I believe that is defined as Fraud.

Those are some harsh words. I don’t know that NAR was intentionally defrauding or misleading journalists and people, but… they do deserve a beating. Evidence?

In a front page, 3rd paragraph snafu, the Journal writes: “On Monday, new data suggested that pressures like these are starting to drive prices low enough to attract some buyers back into the market. Sales of previously occupied homes jumped 2.9% in February from the month before, the National Association of Realtors said, the first increase since July.”

As we noted yesterday, that was not what the data stated at all: “Changes from January to February are measuring seasonal differences, not actual improvements in house sales.” Can you imagine what it would be like if we reported retail sales from December to January this way? Headlines would misleadingly state: “Retail sales plummet 65%!” That is why with highly seasonal data series, the preferred methodology is to report year-over-year data — not month-to-month variations.

And what were those numbers? The year-over-year data for existing home sales were DOWN 23.8% below February 2007 levels. That datapoint never found its way into the WSJ article at all. I cannot recall a more blatant misreporting of fact, or a larger or more embarrassing error in a front page WSJ article, ever.

While the NAR might be high-fiving each other over their successful deception at the Journal, they may wish to reconsider. As we noted over a year ago, many realtors in the field are finding the NAR tactics frustratingly counter-productive.

The author has a point.

Now, to be fair, perhaps WSJ simply took the NAR quote out of context. Maybe the NAR spokesperson did say, “BUT!!!11!one!111! you have to remember that Feb 2008 is 24% below Feb 2007 levels, so we’re nowhere near out of the woods yet.” Who knows?

Fact is, avoiding getting misquoted in newspapers is why you have public relations professionals. At a minimum, the PR folks over at NAR bungled this article. But if they intentionally sought to create rah-rah optimism, they have failed and just embarrassed themselves in the process.

Like Big Picture wrote, this has also been counterproductive, because it encourages sellers to continue to engage in fantasy pricing.

I think it’s high time that NAR join the ranks of the industry organizations that just put the raw data out there, and refrain from comment.  No spin, no explanation — just data.  Let the commentariat do the yapping and just put the data out there in raw form.

It can’t possibly be worse than engaging in spin, then being caught.

-rsh

I think Pat Kitano at TransparentRE is one of those guys who has brilliant and useful insights to anyone interested in exploring what Real Estate 2.0 might look like.  And despite disagreeing with him on a specific thing here or there in the past, I continue to think his blog is valuable and his insights invaluable.  His latest is no exception:

Blogging is currently touted as real estate marketing’s magic bullet, but many new real estate bloggers don’t realize that the impact of blogging lies in its ability to build a social and informative relationship with its readers. Simply put, the consumer wants a social relationship with no tit-for-tat, not a business relationship in which the agent shares their expertise in exchange for the implicit obligation that the consumer owes them. This is one major difference between soft sell and hard sell… the hard sell obligation seeds the “call for action”, and  consumers cringe from this arm-twisting implication.

The brand new real estate blogger, knowing nothing about blogging culture, often uses the blog construct as a kind of daily loudspeaker trumpeting their business prowess. Every article is another opportunity to present various aspects of their business (see these two example blogs ) – foreclosure help, requesting referrals from other agents, their property listings, success stories – and are peppered with links to call and email them at the end of every single article. Almost all of the blogs I see that do this only last a few months if that long, and then these bloggers complain that blogging doesn’t work. Of course not, their blogs reinforce everything the consumer doesn’t want to see – a self aggrandizing sales person intent on bugging them as a component of their “contact database”.

That sound you hear is me standing up yelling, “Hear hear!”  And “preach it brotha!”  And so forth.

Here’s the thing, though, for both Pat and myself and other cheerleaders of the new Real Estate 2.0 paradigm.  Pat writes:

And best of all, the enlightened blogging agent doesn’t need to rely upon all those resource intensive, intrusive consumer reach out tactics to win business, he/she becomes the recipient of the “out of the blue” phone call when one of their blog readers decides to explore becoming a client.

Any proof to this claim?

In other words, what evidence is there that this “new marketing” works better for agents than the “old marketing”?  And I include myself in this challenge.  I advocate a Cluetrain method of marketing, but can’t show you any ROI comparing the non-Cluetrain companies to Cluetrained companies.  In fact, there is some evidence that suggests that the Old Way is very much alive and well, even in an industry as “clued-in” as computer hardware and software.  Apple is the furthest thing from Cluetrain or New Marketing, but their success speaks for itself.

Anecdote is not the plural of evidence.  That one agent here or there claims that blogging has completedly changed her business around is not evidence that the new non-intrusive marketing approach yields a better return on investment than the old-school hard-sell method.

What data, what metrics are available to show that in fact those agents who practice the non-intrustive New Marketing are more successful in dollars and cents terms than those who do not?  Is there any data from ActiveRain or one of the blog-focused realty companies or blogging coaches to show that the social-network marketing, soft-sell method is more effective?  I’m looking for classic lift-over-control metrics here.

If such data does not exist, then we need a marketing firm or a smart market researcher to do a comprehensive, statistically valid study on this topic.  If we’re going to advocate a New Marketing for real estate, and advocate a Real Estate 2.0, then we have to be able to prove that our method in fact works to make more money for its practitioners than the Old School hard-sell method.

Of course… as a blogger just opining away, I reserve the right not to undertake such an expensive, time-consuming study before opening my virtual yap.  But we have to have proof that what we advocate works.

-rsh

In part one of this series, exploring the implications of the Cluetrain Manifesto on the real estate industry, I focused on the basic concept behind the Cluetrain: that markets are conversations, and in the Internet age, authenticity and honesty is absolutely indispensable.

In this part, I’d like to muse on what the value of expertise is in a fully networked conversation/market. In particular, the question of ‘wisdom of crowds‘ must be addressed, as “Web 2.0″ tends towards a tendency of valuing the many over the one.

My hope is to spur some thought on what the real estate industry might look like after the transformative power of the empowered community is fully unleashed.

I know that anecdote is not the plural of evidence, but stories are fun! So I begin with a story.

Read the rest of this entry »

Mike Farmer at Bloodhound has an inspirational and thought-provoking post up on what he calls a “Biz 2.0: Super Real Estate Company” would look like. Read the whole thing; it’s long, but worth the time.

By now, readers of this blog know that I am entirely simpatico to Mike’s call for a new enlightened leadership and work processes in real estate.

There is, however, one fly in the ointment for Mike’s vision that I have pointed out before, and it’s worth doing so again.

For his (and my) vision of the Real Estate Company 2.0 to become real, the industry has to abandon one of its hallowed traditions: the independent agent.

The level of unity, organizational pride, and collaboration that Mike is envisioning simply can’t happen when your entire producing workforce thinks of themselves as independent contractors in business for himself/herself.

The truth is that a company needs leadership, but a committment to the on-the-ground salesforce is critical to retention and productivity. With intranet 2.0, voices across the system should be heard and information used for steady improvement and innvoation. With all the communication tools, any part of the company should be able to access rich information about listings, trends, local changes, clients, closings, vendors, etc. with a click or two. The information being fed from the field should be a steady stream. Training should include the skills necessary for agents to learn the importance of information, how to quickly gather it and input it so that it’s meaningful and useful. The infrastructure for this should user-friendly so that agents aren’t burdened with a clumsy, complex system they won’t use. But, companies should also be contracting with more skilled agents.

The Biz 2.0 tools will allow communication and comarederie [sic] throughout the company and create the highest level of co-operaton possible if leadership believes and everyone is on board. Then perhaps companies who hire anyone breathing will be more selective and realize that quality is way more powerful than quantity in this line of work. I venture to guess that a local company who implements these changes could dominate the market their in in no time at all. The environment would be attractive for connected, productive agents and too difficult for those who aren’t serious about RE. It would be very difficult to form a company like this, but it is possible. Can you imagine what 50-100 agents and high-skilled managers with enlightened leadership could accomplish if they were wired and working together toward a common goal?

This is possible, and desirable, but only if those 50-100 agents are not independent contractors whose ultimate (and sometimes the prima facie) loyalty is to his or her own commission splits.

First of all, the level of investment required in such a system and such a process at the organizational level is quite high. An intranet is no joke to setup, nor is it self-maintaining. It takes enormous investment in time and treasure to get a really useful intranet going. Providing truly useful information technology to every member of the organization is expensive, resource-intensive, and time-consuming. A broker might decide to do all of these things to gain a competitive advantage — because he will gain that — but the money to fund all these have to come from somewhere.

Can such a Brokerage 2.0 become uncompetitive in agent splits and still retain the talent it needs? Because the money has to come from somewhere. Apart from commissions, what else can a brokerage tap to fund these initiatives?

Second, and this is connected, the individual employee’s investment of time and energy into maintaining such a “live” organization is enormous. As Mike himself points out, the flow of information from the field has to be steady and constant. Information technology is utterly useless without information. And someone, somewhere has to gather that information and put it into the system.

You see this in practice, in the real world, in commercial real estate where information flow is absolutely the lifeblood of brokerage. You have to know your local market to a degree that many residential brokerages do not. Knowing the inventory, the actual square footage vs. leasable square footage, the comps, the new projects, etc. etc. is critical to competing in CRE. Guess what the #1 pain point for these companies are? Getting that data in the first place.

Many of them rely on their newer agents to do the gruntwork of going door to door, calling on landlords, etc. to find out which tenants are in which buildings taking up how much space and for how long. Many require their agents to go do these market surveys periodically. Some condition the release of the commission check upon meeting the quota of market data gathered. But almost every single one has enormous difficulty getting its agents — who all think of themselves as independent contractors — to do this work that doesn’t benefit any one of them directly. It’s a variation of the tragedy of the commons.

Third, it’s extremely difficult even in an integrated organization (with only employees) to ensure service quality. Take a look at investment banks and law firms, none of whom employ independent contractors to be frontline representatives. They expend enormous resources in recruiting and training, and these companies are aided by professional schools that train individuals for two to three years learning professional competence, as well as government organizations that require compliance to standards.

I simply can’t imagine how this would work where your producers are all entirely independent contractors over whom you the broker have limited control, by law. As I read the IRS ruling, you actually cannot demand that your agents undergo specific training, or do things in a specific company-mandated way. That would constitute control over “means and methods” and make them into your employees. That in turn has significant implications for taxes, for liability, and other legal issues. If you’re going to undertake those things, then you want to do it with your eyes wide open, and with a very different compensation structure.

I’m sure someone somewhere either has tried the agent-less real estate brokerage, or will try it again soon. I think that may help us figure out whether this is a viable business model for real estate or not, and whether Biz 2.0 will be a driver of that model or the beneficiary of it.

-rsh

Work has been absolutely crushing the past couple of weeks, and blogging has been light out of necessity.  Hopefully, I can get back on schedule next week.

But I did want to briefly note that the Seventh Circuit Court of Appeals issued its ruling (PDF) affirming the lower court’s decision in Craigslist v. Chicago Lawyers Committee (H/T: Inman News).  It seems like a sweeping victory for Craigslist to me, and good news generally for the RE.net community.

Trulia, Zillow, and others can relax a bit.  Seems to me that under this ruling, even a brokerage network may be safe from liability for discriminatory ads/descriptions entered by an independent contractor (aka, the agent).

I wonder, however, what to make of this dictum:

To appreciate the limited role of §230(c)(1), remember that “information content providers” may be liable for contributory infringement if their system is designed to help people steal music or other material in copyright. See Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913(2005); In re Aimster Copyright Litigation, 334 F.3d 643 (7th Cir. 2003). Grokster is incompatible with treating §230(c)(1) as a grant of comprehensive immunity from civil liability for content provided by a third party. (Emphasis mine)

Arguably, the court ruled in favor of Craigslist partly because Craigslist provides next to nothing to the advertiser. It’s basically just a big message board.

If you provide additional tools to the agent — such as a way to edit listings, or manipulate photos, or automated feed uploads — does that take you over the line into contributory infringement? One could make the argument that such a rich system is “designed to help people” infringe the Fair Housing Act, couldn’t one? Providing detailed maps, data on crime, etc. could theoretically be construed as providing a “system designed to help” those who want to redline and steer consumers.

That creates a perverse incentive for the online listings aggregators: provide more tools, face more liability.

I know, it seems like weak tea, but it did make me wonder. Maybe the real solution isn’t in the courts, but in the legislature. Time to update the Fair Housing Act to conform to the 21st century reality.

-rsh

This is big news that portends intensely amusing times ahead:

A National Association of Realtors tech incubator company has acquired a commercial real estate data exchange company and plans to use its technology to launch a national commercial real estate listing and transaction platform in May.

Second Century Ventures LLC, a private equity fund established by the Realtors trade group supported by a membership dues increase this year, acquired Gig Harbor, Wash.-based ePropertyData.

EPropertyData operates CommercialMLS.com for the 4,500-member Commercial Brokers Association in Seattle and CommercialGateway.com for the 2,000-member commercial division of the Houston Association of Realtors.

…

Gaylord said the platform will offer NAR’s commercial members “national exposure for all their sale and lease listings” and serve as a resource for national property searches.

Meanwhile, an advisory group formed by NAR leaders is studying the feasibility of creating a massive property information database, dubbed the “Gateway” — featuring detailed information for all types of properties — that could be governed by brokers, owned by NAR and accessible to varying degrees by consumers, real estate professionals and others.

Oh. Wow.

I don’t know how to feel.

On the one hand, anything that could get the Galactic Empire and the Keystone Kops to focus on serving their customers instead of suing each other is a real positive. On the other hand, is NAR the organization to challenge either behemoth — nevermind both of them — in the extraordinarily tricky commercial real estate space?

Even if NAR is the right group to bring reform to CRE, is ePropertyData the vehicle to use?

I mean… look at this:

The value of the ePropertyData acquisition was not disclosed. According to B121.com, a business information Web site, ePropertyData has fewer than five employees and annual sales of $500,000 to $1 million.

Um, okay…. I know a deli in my town that has more employees and has more sales.

In comparison (well, more contrast), CoStar’s market cap is $774M, and in 2007, it did $192.8M in revenues. Loopnet’s market cap is $435.7M and its 2007 revenues were $70.7M.

NAR really ought to have thought this one through more, methinks. All that CoStar needs to do here to crush this nascent problem is to go to the five guys who work at ePropertyData and offer them $150K a year jobs working at CoStar. They’d be fools to turn that down. And that’s if CoStar were even remotely worried about ePropertyData instead of more pressing problems, like whether to have the corporate retreat in Las Vegas or in Orlando.

Here’s a tip for NAR: if you were going to buy any small company that has a reasonable shot at competing with the Two Big Boys, you should have bought Catylist. At least Catylist has experience working with some major institutions that are respected in the CRE space, like CCIM. And Dustin Gellman at Catylist is one of the really smart guys in CRE who really gets the web.

But really… you’re the frikkin National Association of Realtors, with a technological marvel of a building that looks like this in Washington DC:

You couldn’t get Google or Microsoft to talk to you about doing something in commercial real estate?

And yet… I can’t help but cheer the efforts of NAR. The online commercial real estate space is desperately in need of an alternative to the really-smart-but-evil guys on the one hand and the bumbling-simpletons on the other hand.

I look forward to seeing the reaction of the commercial real estate industry, as well as CoStar and Loopnet and Xceligent and everyone else in that business.

-rsh