Home Brokers & Agents The Difference Between Business and a Profession

The Difference Between Business and a Profession

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I’ve been traveling almost nonstop for a few weeks, so things have been light in the blogging department. My latest stop was Stefan Swanepoel’s T3 Summit in Los Angeles last week, a fabulous event made even more fabulous this year because of agent Eric Boyenga of the Silicon Valley Real Estate Team.

T3 attracts  the most powerful people in the industry, such as Spencer Rascoff, Dale Stinton, CEOs of major brokerages, and MLS CEOs. There were amazing speakers, including the Co-CEO of Whole Foods. Yet, Eric was one of my favorites. Not only is he extremely successful, he’s also an agent pounding the pavement every day, driving buyers around, and going to listing appointments. That made his opinions and descriptions of problems invaluable.  The ultimate job of every CEO in that room is to solve problems for people like Eric — the agent on the ground.

That’s why when Eric talked about the industry’s epidemic of incompetence, it really resonated with me. Brokerages that recruit anybody who can fog a mirror, supply little training,  provide no guidance, and offer almost no oversight make Eric’s job more difficult — and make his clients more miserable. While Eric said NAR is not responsible for these “fly-by-night brokerages,” he would like to see NAR focus on the quality of agents over the quantity of agents.

If that sounds familiar to you,  it should. We’ve been talking about professionalism and raising the bar for years. But it’s really difficult to pin down what people want to change and why. I believe that we, as an industry, no longer understand the difference between a business and a profession; in doing so, we confuse the two.

Allow me to explain.

The Business of Real Estate

Just about every real estate broker and real estate agent in North America is in business. A tiny few may be salaried employees (e.g., Redfin), but their companies are in business. What is that business?

The business of real estate is to help people buy and sell houses. That’s it. That’s how everybody gets paid – commission on the sale of a property. In order to help people buy and sell houses, we need to do four things:

  1. Identify people who want to buy and sell houses
  2. Get those people to agree to pay you
  3. Find houses that are for sale and buyers who are willing and able to buy them
  4. Close the transaction

That, in a nutshell, is the business of real estate. Lead generation, lead conversion, transaction management, listing coordination, marketing, negotiation, etc. are all related to one of those four things. The entire infrastructure of the MLS is related to one of those four things. All the agita and agony around data ownership and data protection are related to one of those four things. All the technology in our industry is related to one of those four things. The end result of excellent business practices is money, profitability, and growth.

The Learned Professions

There is a different context for the term “professional” which comes from the original learned professions: medicine, law, and the clergy. Those professions were distinguished from other vocations by three things:

  1. Extensive training and education
  2. Organization
  3. A spirit of public service

A blacksmith might have required training and education, and belonged to a guild of blacksmiths, but he did not work for the public good in the way a doctor would. If the blacksmith  came up with a new way of working steel, he kept that secret to himself as a competitive advantage in the marketplace. The learned professions behaved differently:

The third attribute of a learned profession is that its numbers are dedicated to a spirit of public service. Gaining a livelihood is incidental. A professional man offers a certain service and he confers the same diligence and quality of service whether he is paid or not. The lawyer or doctor does not patent his discoveries or exploit them for his own personal use, but makes them known to the profession and to the public in general. He practices preventive medicine and law. He does not advertise or compete for customers. He does not seek to create a demand for his services in the fashion that the businessman does.

John Wade, the dean and professor of Vanderbilt Law School, wrote the words above in 1960, in an article entitled “Public Responsibilities Of The Learned Professions.” But these concepts were not novel — rather, they were centuries old by the time he wrote them down.

The Issue of Dignity

When people in the industry say that professionalism is a problem, they’re usually talking about is an agent who isn’t very good at the business of real estate.

Consider how often people mention production as a criteria for a “professional” real estate agent, as opposed to someone who is a part-time dabbler. After discussion, they concede that yes, there are some top producers who are extremely “unprofessional” while there are Realtors who may be part-time because they are raising a family, but who are extremely competent in a transaction. Nonetheless, most of the raise-the-bar conversation is around getting better at lead generation, lead conversion, negotiation, closing transactions, and so on.

And yet… there is an unarticulated sense that professionalism means something more. For example, the way a Realtor dresses is often brought up. Wearing shorts and flip-flops to a closing is seen as being unprofessional. Why? That disheveled agent in shorts and flip-flops might be amazing at lead generation, negotiates wisely and skillfully, and closes transaction after transaction. He might be the #1 producer in his market, but there is something unprofessional about how he dresses.

Or take this lovely piece of advertising:

Even if that billboard – and accompanying abs – were effective in generating phone calls and inquiries to Peter Klaven, there is something about this that would make most  Realtors cry “Unprofessional!”

The reason is that ads like this, or the way one dresses, speaks to the dignity of the profession. And what many Realtors want is more dignity, more respect. Which naturally raises the question of why. Why should a Realtor be dignified? Why should she receive respect? What is it about what a Realtor is or does that should be respected at all?

The Difference: A Spirit of Public Service

There is nothing in the business of real estate that commands respect. Advertising, marketing, negotiating deals, opening doors, going on listing appointments — none of these things confers dignity. A used car salesman has to advertise, market, negotiate, take people on test drives, arrange financing, etc.  and nobody thinks a used car salesman deserves respect for being in business.

So why should a Realtor deserve respect? Why should there be any issue of dignity? The answer: the spirit of public service.

Read the Preamble to the Realtor Code of Ethics:

Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. REALTORS® should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment.

Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves. REALTORS®, therefore, are zealous to maintain and improve the standards of their calling and share with their fellow REALTORS® a common responsibility for its integrity and honor.

Those two paragraphs are fairly dripping with the spirit of public service. A Realtor works for her clients, yes, but she recognizes that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. She accepts grave social responsibility and seeks to fulfill her patriotic duty in her work.

The only reason why a Realtor deserves respect at all, and why the dignity of a Realtor is important at all, is that a Realtor is committed to practicing with that spirit of public service. Nothing else that a Realtor does in the actual business of real estate is worthy of respect; those are things a Realtor has to do to get paid and stay in business. It is that higher ideal, that recognition of civic responsibility and patriotic duty, which elevates a business to a profession.

Eliminating the Confusion

Seen in this way, we might make some progress on raising the bar by allocating responsibilities to the appropriate parties.

Eric Boyenga is correct when he says that we cannot blame NAR for the fly-by-night brokerages who provide no training, no guidance, and no oversight. But we can, and should, place the responsibility of elevating the business to a profession to NAR whose Code is the heart and soul of the profession itself.

The business of real estate belongs to the brokers. If an agent is incompetent, that is the broker’s responsibility. If that incompetence leads to a more difficult transaction, less production, more annoyance for consumers and the agent on the other side, those are the fault of the broker who is in charge of the agents.

The profession of real estate belongs to the Realtors. If a Realtor does not recognize her civic responsibility and patriotic duty, and does not endeavor to go beyond ordinary commerce, then that is the Association’s responsibility. If that lack of pride, lack of dignity, and lack of awareness of her responsibility leads a Realtor to engage in conduct (like the ad above) that undermines the public’s trust in the profession, then that is the fault of the Associations local, state and national who have failed to properly inculcate a spirit of public service in their Realtor members.

The business and the profession are interlinked, but they are separate. Because competence in one does not mean competence in the other. By conflating the two, we have created a situation in which no one can actually make real changes. The brokerages outsource competence in the business to trainers, coaches, and oftentimes, the Association which provides all manner of training. The Associations have far too often lost sight of their role as the conscience of the profession and think that their job is to make their members more money.

Separate the two. Be clear on your sphere.

The consumers, whom we all serve in one way or another, deserve competent businesspeople who know how to market a home, how to negotiate, how to close a transaction, and how to provide excellent customer service along the way. That is the responsibility of the brokers who are in the business of real estate.

But those consumers are also members of the public. They have to live, work, play and raise families in their communities. They deserve professionals who know the importance of functioning cities, of productive industries and farms, and of a healthful environment. They deserve professionals who understand that in serving their clients, they are serving their country. That is the responsibility of the Associations who are in the profession of real estate.

Let the businessmen take care of the business, and the professionals take care of the profession. We might make some progress this way.

-rsh

23 COMMENTS

  1. fantastic stuff. very glad i signed up to receive your posts. i am reminded of a recent experience with a model home sales agent who met my potential client (the sister of a past client) at their model home. though i cannot prove it, i believe they explained that involving an agent would cost them money and, with this “almost” client’s knowledge, proceeded to weave a web of deceit over the phone with me. what rationale could cause the buyer to participate in this deceit? when i was the only reason they knew about the community (there was nothing on the mls for sale there). when i told them i would like to take them out there myself. when the model sales agent registered them with me over the phone. could it have been: “hey it’s nothing personal, it’s just business”?

  2. BUT (you knew if I was commenting) – we can’t fully absolve the brokers from leading the professionalism. I fully agree the association spends too much time teaching how to prospect, but if the Broker only cares about the business – so will the agents. In my company, we have no High Production awards. We award customer service based on Client Testimonials. We award the lowest priced home sold to occupant (because the agent treats each family with time and dignity no matter what the price point), and we award the most helpful in the office. The closest to a production award we have is the Double Up club. If you’ve doubled your previous years production (units or $$) you win an award. Obviously most who double are the newer agents, and we tell them the BEST way to prosper – exceptional service. SO – I think Brokers need to reward Professionalism – and not just production.

    • Hey Greg 🙂 Good to hear from you, mate.

      I agree that the broker should reward professionalism, not just production. See Sunny’s comment below. BUT (and you knew there was a but), by “business” here I mean the skills to conduct the business. That includes things like providing excellent customer service, listening to the client, responsiveness, etc. etc. It’s not just “go make me money!” but more of a “Here’s how we treat our clients.”

      But that spirit of public service, of real concern for the community itself, of wanting to be informed of all kinds of government policies so she can inform her clients and neighbors… that’s a different type of “professionalism” which harkens back to the original Learned Professions. To me, that’s the Association’s responsibility, because the Code of Ethics.

      You of all people know 🙂 Article 1 and 2 of the 1956 Code, baby. 🙂

  3. I do marketing for Realtors. IMO the best are the ones who’s goal is helping people change their lives. Every client ends up a friend. The paycheck is secondary. Being good at the business is just table stakes.

  4. Great article Rob. Eric was spot on with his depiction of the ramifications of doing business in an industry that lacks performance standards. This is only magnified by the entitlement provided by the MLS that enables any member of the MLS to enter into a cooperative transaction with another member. The “license to cooperate” provided by the NAR / MLS rules and policies is dramatically flawed. It is like what a flight crew would look like with a highly skilled Captain and an under qualified or worse yet, incompetent Co-pilot. Both get paid, both are supposed to share the responsibility but only one is experienced enough to know what to do and that person ends up doing most of the work. In the end, the Captain ends up telling the Co-pilot to “just sit there and whatever you do, don’t touch anything!” So as it relates to the business of real estate and trying to close transactions what really matters is – who’s on your flight deck? You need to care because organized real estate has proven in all ways possible that it simply does not.

  5. Admirable conversation and great thoughts, but the issue of how to get to a point of differentiation is about the lack of the ability for the consumer to tell who is good and who is not, and of course, money.
    Every system, from the MLS to the way brokerages operate is about leveling the playing field, keeping barriers to entry in to the business low, and most of all, portraying all Realtors as being relatively equal in their ability to provide services.
    In almost every other service profession, fees are a reflection of the skill set, depth of knowledge of the subject, and ability to achieve extraordinary results. Yet, in real estate the fees in a marketplace are almost identical, the brokerage promotes all their brokers as being equally competent and the most successful agents often discount fees despite their sales records and satisfaction of their clients.
    NAR tries to drive designations that are largely an afternoon of study as being badges of superior performance and the public is having none of it. What NAR could do is provide and promote levels of superior competency based on criteria that takes into account both experience and performance, with testing.
    The narrowing of the entry into the business and limiting of opportunities to serve clients in a brokerage will not happen in the face of current business practice. A new designation that can be tied to real knowledge of transactions, service and relationship building would allow for a move up and the ability to charge MORE for services provided by someone who has demonstrated they are top tier brokers. That is not a survey, not sales volume and not the ability to smother a market[place with advertising as a way of showing you are the top dog in an area.
    Stop focusing on how to raise the bar for all and look to change the business so there is a reward in the brokerages doing the heavy lifting. Otherwise this conversation will be the same in ten years as it was ten years ago.

  6. Ahh …. professionalism. Hard to define, but you know it when you experience it.

    As a Broker, I have been on both sides of the desk over the past 13 years. I have demanded it from the agents in my office, while explaining to them that not all brokers feel the same way. I can’t count the number of times I said “It doesn’t matter what anyone else is doing. What YOU do matters. Do the right thing – it’s simple.”

    I sent in licenses for lack of professionalism. I probably should have sent in more. I was picky when I recruited new agents – not just for knowledge, but for character. I can train the skills if an agent is willing to learn (and I don’t hire the ones who aren’t). But I can’t teach an agent how to sit with and listen to someone who has just suffered a loss – then help that person make a life-changing decision.

    That level of true caring and empathy – that intangible quality – is what sets apart a business person from a professional. Wanting to help guide clients, being educated well-beyond the required CE courses, possessing a deep understanding of the community and the people in it … that is what it means to be a real estate PROFESSIONAL.

    Notice I didn’t say Realtor? You write a check to become a Realtor as it stands today. The Realtor brand doesn’t set a business person apart from a professional. Character does.

    What I would love to see is a return to the original Preamble. I would love to see a return to professionalism and character as the qualities that set Realtors apart from licensees. We all know it’s too easy to get and maintain a real estate license. Let’s make it harder to be a Realtor again.

    • The challenge is that every dolt with a RE license you don’t hire will get a desk down the street from a broker who will. So in a broader “professional” sense, they are still our problem.

      • True. I terminated a licensee once because of what could be generally said is “lack of professionalism” and the comment was made “I will just go down the street to my old broker. She said she’d take me back in a heartbeat.” She did. Another one was at my office a few months and I realized this was not someone who we wanted representing our brand. I terminated and this person has had multiple brokers in a short period of time. There will always be another broker there to pick this person up. Always.

  7. Great post Rob! In my opinion we need to change the way we talk about our business and profession. We need to change the lexicon and reporting we do in order to help the public understand us better and elevate our our commitment to public service.

  8. Aah Notorious, you got pranked! However that Peter Klaven thing only reinforces the whole sleazy image that the public holds toward real eatate people and REALTORS.

  9. Nice thoughts R.O.B. Isn’t it amazing that these articles never address the underlying issue that NAR and the Licensing agencies will lose income if they place more requirements on entrance? That 1 thing will not allow the system to change. NAR is too big and Licensing agencies are too greedy/needy to require higher standards, financially and ethically. Heck, NAR won’t even allow us to have rules that match our contracts so we can enforce consequences of bad/illegal behavior within an Association or MLS, because it cannot allow us to tell someone what they can and cannot do, since it would be a restriction of trade.

  10. As an industry we should celebrate the fact that so many can enter this business. Yes the entry bar for obtaining a license could be set higher. No question. But there should be an accompanying minimum transaction threshold that all licensees must attain within a specific time frame in order to retain that license. Clear the hurdle? Welcome back! Otherwise go back to class for remedial training. Moving toward a metric-driven performance standard would surely improve our industry.

  11. I’m late to this party and it’s definitely one I would have liked to attend before last call….

    My take away: I wonder what the scale looks like if agents and brokers were asked for an honest response to the importance to them regarding the “profession” / “business” discussion? We know the consumer doesn’t care about the profession they just want a good purchase or sale.

    If the pot is not already stirred, my guess is that 99% of agents/brokers are all about the business….the “profession”, not so much.

    Get customer, turn them into clients, repeat 🙂

    IMO, the 1% that care about the profession, like me, care only as it could effect their business…….or just like to participate in discussions.

    Thanks,
    Brian

  12. Hi Rob, Wow, first off, I apologize for not responding sooner. As usual my boots have been on the ground, leaving me little time to catch up. I just finished reading your blog, what a huge compliment. There definitely is a sharp distinction between running a business and a profession. Thank you for clarifying the point, and helping us wrap our heads around all the challenges in the industry. It was a pleasure meeting you at T3. Hope to connect with you at Inman or sooner.

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