Notorious R.O.B.

I love this new post by Brian Boero over at 1000watt blog.  Go read it in its entirety, right now.  I’ll still be here.

Back?  Okay, I don’t have a lot of time today to do one of my traditional 9,000 word essay, but this post raises such a set of good points that I had to address them briefly.

Brian writes:

First, technology is – in the real estate broker’s world – thoroughly paradoxical. That which offers brokers a promise of liberation (from legacy systems, from antique business practices, from burdensome costs) often ensnares them in a Web of confusion, dependency and waste.

That’s too often true.  But then Brian continues:

These words are relevant for any broker trying to reclaim brand equity with consumers and deliver long-term value to agents.

…

If you can pull it off, though, and once you determine who your target customer is and what it is you know that is most likely to engage them, then – and only then – think about the technology you’ll need to make that happen. (Emphasis mine)

This is where Brian — and the brokers who are trying to get un-confused — need to take it one step further.  The primary source of strategic confusion in real estate comes from not knowing who your customer is.

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There is an interesting little dichotomy in the results of the survey that Inman ran recently, and published as a Special Report: “To Be A Broker: Charting a Course for Recovery“.  It’ll cost ya some money, unless you’re an Inman Premium subscriber, but I think Inman did a great job here in putting the information together.  If you care about the industry, brokerage models, and the like, you’re going to want to check out this report.  So go buy one, or subscribe.  (Disclosure: I am a columnist for Inman.com… so uh, if you subscribe and such, I think I benefit through that.  Plus, you can see my archives on Inman.com, which might be entertaining later.)

My first thought upon reading the Report was that the sample might be skewed — after all, presumably Inman contacted brokers in its database of subscriber or some such.  They have to be among the tech elites, these brokers, to be subscribers of Inman.  Then my second thought was, that real estate brokers, more than perhaps any other group of business owners in America, need a remedial class on business strategy.  My third thought was, hey, this might be a good blogpost!

Said blogpost follows.

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See that green pattern on the bark! That's 3.2(b)(iii) of the License!

Once again, I find myself in the curious position of praising the good folks at RPR while at the same time ending up on a negative note.  On the one hand, RPR’s posting their Content License Agreement (complete with redlined corrections) is by far the most transparent thing that I’ve seen a company do in real estate industry thus far.  Kudos not just to Reggie Nicolay, the Social Media director of RPR, but also to Marty Frame and to Dale Ross, the executives in charge of RPR.  These guys talk the talk, and walk the walk of being open and transparent.  Thank you guys, and I really mean that.

If you’d like to look at the entire Agreement, including the Terms of Use for the RPR Website, go to the Google Doc here.

Some of the critiques already on the web may be entirely valid, but I think they largely miss the point.  For example, Mike Wurzer’s post suggesting that the new License Agreement allows RPR to sell listing-level data to various customers may be accurate (or may not be, as Marty Frame points out in the comments), but… this falls into the category of missing the forest because you’re too busy looking at whether the tree is a douglas fir or a pine tree.

There are three major, fundamental issues that the License Agreement does not address — primarily because those issues stem from RPR’s business model and its basic value proposition.  If the goal is to nitpick the language of the Agreement in the hopes of finding a provision on which one can base a future lawsuit, I suppose the detailed analysis being done now is interesting.  If the goal, however, is to understand the fundamental challenge of RPR, then we need to raise our eyes up a bit.

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image: Polly Jordan, realestatecafe.com

Once in a while, realestistas get around to discussing tame, non-controversial topics.  And as any regular reader of this blog knows, I am simply allergic to controversy and disagreement.  I am glad, therefore, that people are talking over at Agent Genius about the entirely boring and controversy-free topic of dual agency.

As it happens, I happen to have a view or two about dual agency, and figured I’d meditate on a few unrelated (or maybe related) topics as follows.  Most of them are inspired by the comments to the AG post:

1. Dual Agency and #RTB
2. Dual Agency and Brokerage
3. What Dual Agency Says About Agent Value

Twitter version: Dual Agency is a symptom of so much that is wrong with real estate today.  Long version follows after the jump.

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So how does this RPR thing affect us and our brokerage?

In part 1, I tried my level best to keep my opinions restricted to what RPR actually is, based on the demo.  And what RPR is is a fantastic piece of web engineering.  In this part, I get more into the opinionating and what Reggie Nicolay might term, “fearmongering”.

Let us examine the possible impact of RPR on brokers and agents, based on what we know thus far.

Caveat Lector: What We Know That We Don’t Know

One thing I learned at REBarCamp NYC that just happened last week, from Reggie himself, was that the Terms of Use for RPR have not yet been set.  And while the RPR has announced API’s, the terms of use on those have not been set or published.  We also don’t know what those API’s will actually do in terms of data provisioning over the API’s to third party tools or websites.

Therefore, one of the biggest pieces to the puzzle — the legal rights and responsibilities of RPR’s users — is as yet unknown, except in glimpses.  We also don’t know how flexible the RPR system will ultimately be.  It may be incredibly flexible, or it may be a closed system.

We don’t know yet whether brokerages (or even agents) can participate directly in RPR, or if they have to wait for their MLS to first sign up with RPR in order to utilize the full range of functionality.

For that matter, since all we’ve really seen is a video demo and some screenshots, we don’t really know at the end of the day what the finished product will actually look like and how it will work.

Enough caveats?  Okay, let’s get into this…

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Your SEM Dollars At Work!

From the Search Engine Land site comes news (h/t: Duke Long, @dukelong) that Google has built out what amounts to the start of a national real estate search website:

The real estate listing place pages include property information, photos, map placement, Street View imagery and functionality, nearby public transit details, and even AdWords ads. Google has added links for “Directions” and “Search nearby,” as well as a “Send” link that opens an outgoing email with the place page link embedded inside. The property details in the example above are sourced from two separate Prudential Real Estate web sites, and from NWSource.com, which is the Seattle Times’ web site. It’s all presented just as you’d see on any standard MLS web site, though it lacks some of the deep information (such as square footage of individual rooms) available in a typical MLS listing.

Whee!  By the way, in case you think the Flickr image above is a Photoshop job, here’s the link to the property in question on maps.google.com: 8801 Fauntleroy Way SW, Seattle, WA. And here’s an announcements of sorts from Google Australia:

So here’s what we’ve been cooking up – in the past, if you wanted to view real estate listings on Google Maps, your best bet was to select “Real Estate…” from the “More” menu at the top of the map.

Now, simply searching for “real estate” will return, well, real estate (try it)! You could also try “homes for sale sydney” or “homes for rent adelaide“. Or while you’re at it, check out “apartments for sale brisbane“, or “homes for rent near perth“. The idea is to make it really easy for you guys – you tell us what you want, and we get it back to you! Of course, we’ll continue to work to return the best results for all your Google Maps queries, whether you’re looking for local businesses, geographic features, or your perfect home.

We also wanted to tell you about the integration of real estate listings with Place Pages. Now clicking the “more info” link next to a listing takes you to a faster, easier-to-read page that gives you all of the information we have about a listing: photos, inspection times, videos, details, a Street View preview and nearby public transit information if available, allowing you to quickly find the listing you want and click through to the sources of the listing.

The initial responses range from delighted to worried.

This is from Kathleen Buckley (@kvbuckley), a broker in Massachusetts:

From Todd Carpenter (@tcar), Social Media Manager for National Association of REALTORS:

From Bob Wilson (@bob_wilson), a real estate marketer and technologist:

There’s lots to speculate on, lots to think about, and lots to debate and argue about here.  But in a way, it’s as if the other shoe has finally dropped.  Many of us in the real estate industry have been wondering what Google plans to do with real estate, as the boys and girls from Mountain View have been moving towards something like this for a while with Google Base, Google Maps, etc.

So let’s get into the speculation.

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Holy Bloggers, Batman!

Greetings from Las Vegas — I’m not sure what time it is, even though I’ve been fully awake for, oh, a few hours.  But some of the discussions at REBlogWorld 2009 have been so great that I wanted to get something posted now.

One of the more interesting sessions for me personally was the Branding in the Social Age session with luminaries like Jeff Turner (@respres), David Armano (@armano), Todd Carpenter (@tcar), and Ian Lurie (@portentint), moderated by a luminary herself, Nicole Nicolay (@nik_nik).  I thought the insights were interesting, and the brainpower on that panel was impressive.

There was one point, however, which I suppose yours truly raised, that could use some elaboration and explication: multiple brand layers and how they function in social media.  I was genuinely curious what branding experts, especially those from outside our industry, like David and Ian, had to say about the issue — and I don’t know that they understood the issue.  Plus, the inimitable Bill Lublin (@billlublin) had his views on the matter, but I’m uncertain that he understood the context.  So the fault is mine for failing to set the stage adequately and explain precisely what I meant, and why I think this is an issue.

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Sell Your House for Top Dollar!

It’s a very personal, a very important thing. Hell, it’s a family motto. Are you ready, Jerry?  I wanna make sure you’re ready, brother. Here it is: Show me the money.

- Rod Tidwell, Jerry Maguire

I was recently researching a somewhat different topic (deflation, inflation, and price sensitivity in real estate) when I came across a paper written in 2007 by a trio of economists at respected institutions.  This paper has me in a tizzy.  I need to know what you think of it, and how we as an industry might answer it.

The paper is called The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com (PDF) and the authors are Igal Hendel and Aviv Nevo at Northwestern University, and Francois Ortalo-Magne at the University of Wisconsin.

The findings are… disturbing to say the least if you work in or near the real estate industry:

After controlling for houses and seller heterogeneity, we …find no support for the hypothesis that the MLS delivers a higher sale price than FSBO. Considering that realtors charge a 6% commission versus $150 for FSBO, FSBO sellers come ahead fi…nancially. The lack of a MLS premium does not mean realtors do not provide value to the seller. It means instead that the cost of the convenience provided by realtors seems to be the full commission.

And more:

The raw price comparison shows that the average sale price of homes that sell on FSBO is higher than the average price of homes that sell with a realtor. The characteristics, reported in the city assessor’s database, of houses sold on the different platforms are somewhat different. However, after controlling for these observed characteristics a significant price gap persists. Naturally, platform selection is the main suspect behind the persistent premium. We take several approaches to deal with selection. All the approaches support the same conclusion: MLS does not deliver a price premium.

Emphasis are mine.  If you are so inclined, read the whole paper.  I read through it, but didn’t have time to dive in.  For that matter, I don’t have the Ph.D. in economics to really criticize their work.

Turns out, the New York Times had covered this paper, both in an article and on its Freakonomics Blog.  This is from the blog:

But the paper supports the argument that, unless you’re the kind of person who needs a little help through a “stressful and maybe difficult period,” and unless you’re unwilling to wait a little longer to sell your house, then the commission that you pay your Realtor is in essence a big fat tip.

Oh wow.  This is a problem, y’all.

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Thinking about the dawn of a new day

I had promised in Part 2 of this series that I would tackle the so-called “K-Dub” model in this part.  Well, I’ve decided against it.  Looking at the numbers, it seems to me that from a model perspective, there’s nothing particularly novel about the K-Dub (based on Keller Williams) model.  Its appeal and power lie elsewhere — power of recruiting, passive income streams, etc. — but on paper, K-Dub is clearly inferior to an optimized Traditional model and to the employee-based TerraFirma model.  In the real world, of course, Keller Williams is the fastest growing real estate company in America for a reason.

Instead, I think it might be time to get into a meatier, opinion-based discussion about what the future might look like, based on the models thus far.  So first, for those of you inclined to mess around with spreadsheets and such, I’m attaching the actual Excel spreadsheet I’ve been using for my analysis: Brokerage Models 2.0 (.xlsx workbook file).

Also, before we dive in, please take a moment to go read this post by Nicolai Kolding, the guy who sort of started this all with his prescient post on the status quo.  Some of the comments to that post are just excellent, and this post of mine can be thought of as an extended comment to his post.

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In Part 1, we explored the traditional brokerage model by the numbers and found that there are significant issues with the current model as constructed.  It may be, of course, that my hypothetical numbers are just way off, and therefore, the entire analysis ought to be trashed.  I get the feeling, however, that in the main, the assumptions — and therefore the analysis — were mostly correct based on comments in the thread, as well as the simple fact that traditional brokers aren’t out buying luxury yachts and private planes by the hundreds.

But simply because “traditional” models — and please note that I exclude Keller Williams from the “traditional” model, as would Keller Williams itself — are broken does not mean that other models are sustainable.  We have had a number of discussions within the industry about how to address the flawed model for real estate brokerage, from low-overhead virtual models to heavyweight full-service/low-split models, to employee-based models.  Going forward, all of these models have to be put to the same test of (at least) hypothetical numbers.  If the hypothetical numbers don’t make sense, there’s little reason to think that the real world numbers (which are usually worse) would lead to the Promised Land.

One of the first I’d like to explore is the “brokerage as a law firm” model — simply because it was one of the first I had suggested back in the misty days of bygone memory.  The theory here is that producing agents — the rainmakers — would band together and form a partnership, much the same way that experienced lawyers get together to make a law firm, and employ associates who are on salary.  To test this, let us create another hypothetical brokerage for the purposes of discussion, debate, and comparison: TerraFirma.

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