Ah, the horse ain’t quite dead yet, Matt Dollinger. Nor is the discussion a moot point.
I testify, cuz at the September dinner of the Wired Straits Social Club (kinda like a Houston-based Lucky Strikes, which I started in NYC), we discussed this issue at some length. And got something out of it.
I figured I’d share at least one insight from that with you.
I need to clarify something from my original post. I don’t think I did a good job of stating the point.
If “real estate used to be about relationships” because it was, at its heart, a service-business rather than a skill-business… what is it today? And if the answer is, “real estate is (or needs to be) a skill-business, the way law and medicine are”… then consider the wide-ranging changes that would need to occur throughout every level of the real estate industry.
What I should have made perfectly clear was that I do not necessarily agree with Chris that real estate is not a relationship business. I was asking what real estate would look like if it were not a relationship business.
The various responses to the post took a straw man, I think, and beat him dead. The straw man is the idea that relationships are unimportant in business, or that real estate agents and consumers do not have a relationship. Many people would ask, “Well, what do you mean by ‘relationship’?” or say that it isn’t so much about a personal relationship as much as it is about being “top of mind”.
To avoid killing straw men and red herrings, let’s be clear that relationships are important in real estate, as they are in any business involving human beings. Hell, even in a pure-skills business like professional football, guys like Randy Moss sit on the sidelines despite having mad football skillz because his relationship skillz suck.
My point was, however, and remains this: I do not believe that consumers hire real estate agents because of the agent’s skill. The reason is largely that the consumer has no real way of evaluating agent skill.
One result is that referrals become incredibly important, because consumers figure that if their friend had a good experience with a particular agent, then they’re likely to have a good experience. Another result is that agents have to stress service, service, and more service, because they have so few ways to distinguish themselves from others on the basis of superior skill.
You can understand this if you consider a profession on the opposite side of the skill vs. service spectrum. Say something like commodity traders. For whatever reason, there are men and women who are just somehow gifted with the ability to trade large sums of money, make correct bets on market movements, and earn literally billions of dollars for their employer/client. If you want to make your $1m into $5m, and this guy has the track record of somehow being a step ahead of the market all the time, but he’s a total prick, you’re gonna hire him. It’s that simple. You could be like, “Man, he’s a jerk, and he smells bad, but… damn, if he doesn’t know how to make money.”
Other professions that are similar are in the creative fields. A top notch fashion designer might be a total nightmare to deal with, but if she creates amazing products year after year that sell for hundreds of millions, you’ll put up with it. A brilliant computer programmer, who is socially stunted, is still someone you’d hire. Steve Jobs is absolutely famous as a tyrant and a world-class prick; a “lovecat” the man is not. But that doesn’t stop you from buying his stuff, or from wanting to work with and for him.
Those people, you hire because of their skills. And there are plenty of ‘proof statements’ of their skills, whether that is a track record of investment returns, the actual designs themselves, or computer code.
Real estate, however, is a business that is today, as of this writing, one in which it is difficult to find ‘proof statements’ of skill. What exactly would you look at? Time on market? Sale-to-list ratio? That doesn’t help if you’re looking for a buyer agent. Any statement like, “I save my clients 15% on average in buying a home” is impossible to prove, since you’re looking to prove a counterfactual (that is, “what would the home have sold if you weren’t working for me?”). At best, you could try to compare to comparables, but since each property is unique, who can really say that the reason for the 15% discount is the skill of the agent vs. something about the house?
Even someone like Chris or Inna Hardison would find it nearly impossible to evaluate just how brilliantly an agent handled his/her transaction. Here’s Inna, from her wonderful post on the topic:
I think that as a consumer, I’d want the same thing from my real estate agent as Chris – save me the headaches of dealing with paperwork, listen to my needs, make the process as painless (for me) as possible and be there when I need you. In short – handle my transaction seamlessly, brilliantly. I don’t flip houses, so statistically, you probably won’t sell me another home, but if you handle my transaction brilliantly and I don’t hear from you again unless I have a problem with the home – I will recommend you to my friends and family. I will even dig for your name if I’d forgotten it, even if I have to resurrect my HUD statement to do that. What I know for a fact is that I will never refer business to someone just because they keep sending me cards or gifts or because they are my FB friends or twitter followers. I will NEVER risk my reputation with people I actually do have a relationship with because of convenience.
This strikes me as absolutely correct. But… how would Inna know that the agent handled her transaction seamlessly, brilliantly? If she is evaluating an agent on the basis of lack of headaches… someone who truly moves heaven and earth, rescues a seemingly impossible deal from the brink, through her experience, expertise, knowledge of the market, negotiating ability and the like would end up looking crappy, because… oh boy, there were a lot of headaches.
Meanwhile, perhaps the smooth as silk, no problems whatsoever transaction was so smooth because Inna ended up overpaying by $20,000 and just surrendered all sorts of rights because her agent did not know what she was doing. How would you know?
With the above, it would perhaps appear that even discussing this is a waste of time. And yet, it is not.
Because the issue of relationship vs. brilliant execution, which strikes me as a good stand-in for “service vs. skill”, is implicated in what brokers, agents, trainers, vendors, and the industry as a whole does today. And that’s what we discussed at Wired Straits.
Ken Brand, an industry expert if there is one, who wrote a book trying to help agents reach their full potential, is a member of Wired Straits. And he would disagree with Chris Smith 100% about the importance of relationships.
But in our talk, here’s one thing that became obvious:
Whether real estate is or is not a relationship business, fact of the matter is that it is taught to agents as if it were.
Consider all of the training available to the real estate agent. Consider what the typical manager stresses in a company meeting. Consider what the industry values when award time rolls around. Consider all of the conferences you might have attended in the past few years, and the major topics that were drawing huge crowds. Consider all of the vendors selling solutions to the industry.
Almost all of them have to do with marketing, with sales, with lead generation, and with generating business. Precious few have to do with actually servicing the actual client.
The agents behave the same way. How many spend their extra time reading up on the latest local laws and regulations that might have a tremendous impact on their local market, versus spending hours writing blogposts to “establish local expertise”? How many would attend the local zoning board meeting, versus attending a webinar on using Facebook for real estate? How many choose to spend money on an IDX website, versus spending money on transaction management?
In terms of time spent, I recall seeing one statistic that the average agent spends 90% of her working hours trying to get new business, and 10% of her time actually working on the client’s transaction.
I remember talking to a longtime professional about this phenomenon a while back: Why do real estate agents spend so much time on marketing and so little time on, y’know, real estate? The answer I got was, the real estate part is easy; the hard part is getting business in the door.
I’ll leave the detailed takeaway for managers like Matt Dollinger and Ken Brand and professionals like… well… you. But at a high level, here’s one takeaway I might want to spend time thinking about.
If the consumer is more like Inna, wanting someone who handles her transaction brilliantly (however that’s defined, however that’s evaluated), then shouldn’t the broker, the manager, the trainer, the vendor, and the agent spend far far far more time thinking about, improving, and providing that “brilliant transaction experience” and less time worrying about lead generation?
Shouldn’t every sales meeting start and end with ways that the agent can provide even more value, understand the local market even better, learn more about local regulations, or building codes, or whatever else the civilian doesn’t know and has no reason to know? Shouldn’t Associations be giving out awards not only to the top producer but to the agent who has delivered the most brilliant transaction experience?
Is it unrealistic to think that if you spent less time trying to build relationships and more time being the best damn real estate professional in the world, that you’d end up being top of mind far more often? That if you took all the effort you put into talking about yourself into just blowing the client away, that you might get more referrals than fewer?
Or to put it into Twitter-friendly terms, how about… “Less talk; more doing“.
With all that said, here’s the one takeaway from our meeting, which we got to after much discussion:
In every single transaction, there is at least one opportunity in which the agent can do something memorable. It doesn’t matter how vanilla, how routine, how run-of-the-mill the transaction is for you the agent. For the consumer, this is a major, major transaction. There is at least one opportunity to leave a lasting impression of brilliant execution. If it doesn’t exist, you’re not looking hard enough. Find that opportunity. Do that thing. Leave one lasting memory in the client’s mind.
It will come back to you hundredfold.
[Republishing in an effort to eradicate FB spam…]