Home Blog Page 3

Star Trek, Star Wars, and Real Estate: Failure of the Imagination

7

I was stuck at the airport last week with the fifth flight delay in two days (courtesy of United Airlines). The upside to all that downtime? I got a chance to think through something swirling in my subconscious for a while – the parallels that exist between technology in science fiction and technology in the real estate industry. So I figured, what the hell! Let me entertain myself and hopefully some of you.

The problem with science fiction is that it assumes human behavior will remain static, even as the technology around them changes. Star Trek and Star Wars are two great examples of this bad sci-fi thinking.

It’s also why I dislike most of technology futurism in the real estate industry.

So much of what technology enthusiasts put forth imagines the real estate process as static. There’s this belief that society will remain the same – despite the advent of massive technological change. Like, “AI will change real estate, because it makes finding a home easier to do!”

Something as fundamentally disruptive as AI would change the whole world around us, which means the last thing on any of our minds would be how easy or difficult it is to find a home. Technology doesn’t exist in a vacuum; human behavior and human reactions must be taken into account.

Let me explain.

What If the MLS Were A Service Company?

18
The Agony and the Ecstasy…

Just about every single MLS in the country has mandatory training for all new members that’s in the 3-5 hour range. Add in other courses ranging from how to use the tax data system to creating CMAs to whatever else the MLS offers and you’re looking at tens of hours of training in order to use the MLS effectively.

Let’s leave to side the issue of why it takes 3-1/2 hours just to learn the basic essentials of how to use the MLS. Instead, let’s explore a different take altogether on this.

Here’s my question: What if the MLS were to become a service company instead of a software and data company? What if, instead of offering training to subscribers, the MLS offered to do it for you?

Would you sign up for that? How much more would you be willing to pay for that kind of a MLS?

Local Expert: What Is Required?

24

It’s been a while since posting, because I’m in the process of some big design changes here and elsewhere. Plus, life on the road — you know the deal….

But I wanted to drop this quick post, which is really more of a set of questions to you, the best informed readers in the industry. It’s interesting and all kinds of (potentially) controversial. I love both interesting and the controversial, so… here we go.

In my last Industry Relations podcast, with Greg(s) Robertson and Fischer, I brought up a point that got me wondering. The episode is embedded below.

The point is around the 29 minute mark and it is this:

What pisses off brokers and agents about portals like Zillow is that they resent a buyer agent who doesn’t know the area/neighborhood/building being able to buy leads from the portals for properties in that area.

The most prominent example with this Streeteasy deal was Ryan Serhant, the star of Millionaire Real Estate Agent, who posted this on Instagram:

This is about the seller whose single largest investment – their home – is being mishandled, mistreated, and misrepresented. This is about the consumer who is nervous about the home-buying process already, and who will now be lead to contact an agent that knows nothing about the property they are interested in, for no other purpose than for StreetEasy to make money. There is no vetting process for agents who pay to get into the Premiere Agent program other than a credit card number. [Emphasis mine]

As Greg Robertson points out, this “unqualified agents buying leads” thing has been an issue with portals forever. At the same time, there is no clear consensus on what does qualify an agent to hold herself out as an expert. If there were a vetting process, as Ryan Serhant seems to want, what would that look like? What would the person or company doing the vetting look at?

I don’t know Ryan at all. I assume he’s an amazing guy, being incredibly successful and a TV star besides. I’m just using him as an example because (a) he has a high profile and is well-known, (b) he has taken a stance in the Streeteasy issue, and (c) he has clearly articulated the issue of “unqualified agents” getting leads.

So when he protests Streeteasy’s Premier Agent program because it means that the “seller whose single largest investment – their home – is being mishandled, mistreated, and misrepresented” then I’m curious what being properly handled, properly treated, and properly represented looks like. Because on his Streeteasy Profile, I see that Ryan is the listing agent on 128 properties in New York City from the Upper East Side to Tribeca to Brooklyn. If you know NYC, you know that neighborhoods in NYC are more akin to city-states than to just neighborhoods. There is no way in hell that any person could be a local expert in Soho and the Upper East Side; those areas inhabit not just different zip codes, but different social galaxies.

Outside of NYC’s weirdly compacted universes-within-20-city-blocks environment, we have very similar issues around the country. Here in my home city of Houston, you cannot convince me that an agent who is a local expert in Katy (my west-side, outside-the-beltway suburban neighborhood) is also an expert in Montrose and in Pearland and also in the Woodlands. It’s not possible. Might as well claim that you’re a local expert in Dallas and San Antonio while you’re at it — which you can do, legally speaking, since your real estate license is from the state of Texas.

So this issue is endemic and fundamental to the industry, and therefore, here are my questions to you all:

  • What should be required before an agent could legitimately be considered an expert in an area, neighborhood, or town?
  • What should that vetting process look like?
  • If you run a brokerage or a team, do you have a vetting process? What does it look like?
  • If I were a consumer, what would you advise me to look for/ask a prospective (a) listing agent, and (b) buyer agent to determine whether she is a legitimate local expert or a faker who doesn’t know squat?

Would love to know your thoughts!

-rsh

Understanding Opendoor’s Mortgage Brokerage Move

7

Regular readers know that I have said that Opendoor could be the most important company in real estate. My reasoning was that Opendoor looked to be trying to revolutionize the single biggest painful aspect of buying a home: the mortgage. Here’s what I wrote:

So yeah, I think Opendoor is about revolutionizing the entire culture around how homes get bought and sold in the United States by replacing the broken mortgage financing system with an institutional market maker system. Do that, and you can’t help but impact the pain-in-the-ass homebuying and selling system since the latter rides on the shoulders of the former.

If it pulls this off, Opendoor will become the single most important company in real estate. Hell, it could become the single most important company in banking, in much the same way that Uber has become the single most important company in transportation and logistics, not just in taxi and black car industries.

Well, yesterday, Inman reported that Opendoor is launching a mortgage brokerage division:

Opendoor, the property-exchange platform that’s raised $320 million, is launching a mortgage brokerage that could connect buyers with loans to purchase its homes.

The operation could help the company offload its property acquisitions at a faster clip while opening up a new revenue source. It also highlights a strategy real estate brokerages are increasingly using to streamline the transaction process.

I was interviewed for the article by the reporter, Teke Wiggins. But afterwards, and even after the article was posted, I got to thinking about Opendoor even more. I think I’ve figured out what they’re doing, but not in time for it to be helpful to Teke.

So let me at least do it here for the best informed audience in real estate.

Understanding Opendoor’s Mortgage Brokerage Move

7

go-board

Regular readers know that I have said that Opendoor could be the most important company in real estate. My reasoning was that Opendoor looked to be trying to revolutionize the single biggest painful aspect of buying a home: the mortgage. Here’s what I wrote:

So yeah, I think Opendoor is about revolutionizing the entire culture around how homes get bought and sold in the United States by replacing the broken mortgage financing system with an institutional market maker system. Do that, and you can’t help but impact the pain-in-the-ass homebuying and selling system since the latter rides on the shoulders of the former.

If it pulls this off, Opendoor will become the single most important company in real estate. Hell, it could become the single most important company in banking, in much the same way that Uber has become the single most important company in transportation and logistics, not just in taxi and black car industries.

Well, yesterday, Inman reported that Opendoor is launching a mortgage brokerage division:

Opendoor, the property-exchange platform that’s raised $320 million, is launching a mortgage brokerage that could connect buyers with loans to purchase its homes.

The operation could help the company offload its property acquisitions at a faster clip while opening up a new revenue source. It also highlights a strategy real estate brokerages are increasingly using to streamline the transaction process.

I was interviewed for the article by the reporter, Teke Wiggins. But afterwards, and even after the article was posted, I got to thinking about Opendoor even more. I think I’ve figured out what they’re doing, but not in time for it to be helpful to Teke.

So let me at least do it here for the best informed audience in real estate.

#GetReal Episode 2: Technology Doesn't Make You Better

7

In Episode 2, I discuss one of my core principles: technology doesn’t make you better — it only makes you more efficient.

Your thoughts/comments are always welcome.

-rsh

#GetReal Episode 2: Technology Doesn't Make You Better

7

In Episode 2, I discuss one of my core principles: technology doesn’t make you better — it only makes you more efficient.

Your thoughts/comments are always welcome.

-rsh

#GetReal Episode 2: Technology Doesn’t Make You Better

7

In Episode 2, I discuss one of my core principles: technology doesn’t make you better — it only makes you more efficient.

Your thoughts/comments are always welcome.

-rsh

The New NAR CEO Job Description and Good to Great

1

NAR CEO Position Description by Robert Hahn on Scribd

As many of you know, I’ve already taken some public positions on the whole new NAR CEO thing. Even going back to 2015, I predicted that NAR would select a female CEO in 2016… not realizing that the search committee won’t even be formed until November. Oops. I also wrote about the need for something like a Rooney Rule in real estate. And my girlfriend Sunny is sort of the mastermind behind #NARGirlBoss, the inspiration for which I may have had something to do with. Or not. You’ll have to ask her.

So I’ve made multiple public statements about the new NAR CEO. But until the above document was published by Heidrick & Struggles, the headhunter retained by NAR for the CEO search, I didn’t really know what NAR and its leadership were looking for from its future CEO. Now I do. And there are some interesting takeaways from just the job description alone.

I thought I might do a think-out-loud with everyone here post about the job description and what that says about the state of the real estate industry today. Shall we dive in together?

The Necessity of Divorce

18

Setting the Future 2016 3.0 IMAGES.036

So Greg Robertson and I did a thing – a podcast, to be a little more specific – and I’m pretty excited about it. Industry Relations with Rob Hahn and Greg Robertson just went live this month. Each episode is about 30 minutes, and stuffed full of our particular brand of wit and insight and stirring shit up. Give a listen, and if you like it, subscribe on iTunes.

In the inaugural episode, “The Troubled Marriage of Associations and MLS,” we tackle a topic I’ve been vocal about for years – the need for the Association and the MLS to get a divorce.

Although it isn’t easy for most MLS executives and Board members to wrap their head around what I’m talking about, but very few people actually disagree that the relationship is in trouble.

Since I discuss the issue in the Industry Relations podcast, I’m not going to get too deep into it here. But there are a couple points that I wanted to highlight and explain.

Divorce Means Letting Go of Pricing Power

The first point is that “divorce” here has a specific meaning: fixing the governance and allowing the MLS to operate as a strictly for-profit business for its shareholders.

MLS governance today is premised on the idea that the MLS is a “member benefit” of the local Association. Therefore, the primary goal of the MLS is to provide tools, technology, and rules to enable cooperation and compensation at the lowest possible cost. This core belief about the MLS has all sorts of negative consequences for the industry.

The Association and its heavy involvement in the governance and operation of the MLS keep prices artificially low. That in turn leads to razor-thin margins for the MLS, which in turn means the MLS is unable to invest in products and services that its customers — the brokers and agents who pay the actual bill — want and need in the 21st century. When the MLS is kept artificially poor, it has no choice but to squeeze its vendors, who, as a result, don’t have the margins to invest into technology, user interface, product, and services.

In addition, because the MLS can’t raise prices without it becoming a major political fight with the Board that is appointed by/elected by the Association, the MLS is often obsessed with “non-dues” revenue. That leads to the MLS doing all sorts of things that encroach on what its brokers want to offer as a competitive differentiator. That whole “level the playing field” business stems from the MLS’s lack of pricing power.

The solution then is for the Association, the brokers, and the agents to let go of the governance of the MLS as a business operation. They need to remain involved in the policies, rules, and even some product decisions as the actual people on the ground trying to use the MLS to do business every day, but they need to remove themselves from the financial, operational, technological, and marketing decisions of the MLS.

I bring this up because in past talks, people say things like, “Well, our MLS is a separate corporation, so it’s already divorced.” That’s a necessary first step, but it really isn’t enough. True divorce means changing the governance — and the ownership structure — of the MLS. We can determine the true liberation of the MLS by a single question: Can the MLS charge the price that the market will bear, without interference from its owners?

Today, it cannot. To survive, the MLS of the future must have that power, which means divorce from the political world of the Association of REALTORS.

Divorce Is Good for the Association

One of the things that Greg and I debated is “What is the big get for the Association without the MLS?” My answer was that advocacy is the “big get” for the Association, and that the Association can never be relevant as long as it is reliant on the MLS for its membership. Greg thought this was circular logic and got lost, and I don’t know that I did a great job of explaining myself.

To me, it’s pretty simple and straightforward.

The single biggest problem in the industry today is that there are too many crappy agents. This isn’t me saying this, but NAR through the DANGER Report which recognizes the problem.

At the same time, the single biggest pain-in-the-ass for the working REALTOR is… the agent on the other side of the transaction. Widespread incompetence, unethical behavior, and even outright corruption mean that the honest professional REALTOR has to deal with crazy shit on the other side all the time.

The crazy thing for the true REALTOR is this: every single one of those incompetent, unethical, marginal agents on the other side is a card-carrying, dues-paying, Code of Ethics-having, REALTOR.

And why are these incompetents actual REALTORS? Because they need the MLS, and becoming a REALTOR is the way to get access to the MLS.

The Association cannot be relevant to its real members — those who give a crap about the Code of Ethics and political advocacy — while giving away the REALTOR brand to every Tom, Dick, and Mary who can fog a mirror. As I said on the podcast, “At some point, the true REALTORS are going to get sick and tired of being lumped in with a bunch of unethical, corrupt and incompetent morons.”

The only way that the Association can do anything about that problem is to reduce the number of members. If you think about it, this is the only way the Association remains relevant to its real members — as opposed to the members-in-name-only who are actually just buying the MLS through the Association.

The point of divorcing the MLS proactively, before you are forced to do so by outside powers, is to arrange for a financial arrangement in which the Association can continue to get funding while reducing the number of members down to those who actually want to join, who care about the REALTOR brand and who take the Code of Ethics seriously.

Look, divorce is never pleasant. Unlike Louis CK, I don’t recommend it. Then again, as Louis CK once said, no great marriage ever ends in a divorce. But here’s the thing: the marriage between the Association and the MLS is NOT a great marriage… at all. It’s a dysfunctional, co-dependent relationship that hurts both parties.

Divorce does have its upsides, namely freedom. In this case, a divorce grants the Association the freedom to be selective, which paves the way to tackle the crappy agent problem, which ultimately improves the industry at large.

It’s time to move on.

-rsh