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Dual real estate revolutions gaining velocity

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Revolution #1

In case you haven’t noticed, the local MLS is available to the public through literally a hundred if not a thousand websites in your market. In fact, I’d go as far as to say ya can’t swing a dead cat without hittin’ some Realtor’s IDX. (In essence, the MLS on an agent’s website.) This means that if you’re a buyer, or even if you’re merely curious, you can see pretty much anything listed in your community. I have one, though so far, it’s pretty much been for my family and friends. I don’t sell San Diego real estate to anyone with the lone exception of  those who wish to live in a 2-4 unit setup. Even if you live in East WhatsIt Ohio though, you can see whatever you want in San Diego’s MLS on my site, and hundreds like it.

Back in the day, the only way a buyer could see all that was for sale was to get an agent. Only brokers/agents had access to the MLS. See, it was their property, the listings that is, and that’s the way they treated it. They harbored the silly belief that since it was the fruit of their labor, and their entity, they’d do whatever they chose to do with it. Imagine the cheek. It worked very well, as far as buyers and sellers were concerned. ‘Course some folks always think they have a better idea. This is almost always dangerous, especially to their members when NAR begins thinking they have a better way.

See, they gave away the store. The only thing of value they had on their shelves was their listings. Now they don’t have that. What geniuses brokers/agents have at the helm of their ship, the SS NAR.

Here’s a scoop for ya — consumers don’t have a ‘right’ to my info just cuz they declare it so.

They have a right to professional service and solid expertise, ethically rendered with integrity. Wonder how it’d go over if decades ago those same consumers had declared their right to Coke’s formula? It’s the only thing Coke has of value. Once that formula can be used by anybody, they’re toast. Yet many seem to think the real estate industry was created to be their bitches. I beg to differ.

All the fuss lately about using or not using aggregators is moot from where I sit. Who cares, anyway? Any agent worth two quarters to rub together will sell their listings without using any of ’em. They’ve been doin’ it for generations. If ever an industry has been sold a bill of goods — by their own leadership — real estate is it.

It’s possibly too late now, but order needs to be restored.

I suggest a revolution. Let the biggest brokerages in each market completely withdraw from their local Board and MLS. Then they can start over from scratch. NAR would have a stroke to be sure, but they’d stop pretending everything they’ve done for the last several years has been in the brokers’/agents’ best interest. If you believe that, you should go buy some Vegas property for zero down and wait for the appreciation tsunami.

Like Bill Cosby used to say to his kids, “I brought you into this world, and I can take you out.”

The various Boards of Realtors need the brokers, not vice versa. Ditto the MLS. It’s time broker-owners stop allowing the tail to wag the dog. The only thing they need to do to accomplish that is to reach down and grab a pair.

Revolution #2

The agent-centric business model has failed miserably everywhere it’s been tried for the last 40+ years. Get over it. It wasn’t a good idea from day 1. How bright must we be to know that you don’t put worker bees in charge of the hive. They’re worker bees, not risk taking, capital spending, gladiator-in-the-arena bees. The broker/owner to agent ratio has to be somewhere around 100 to 1,000/1. Yet we’ve been (That’s the editorial ‘we’, as I’d never allow it in my firm.) allowing the 1 to rule the roost since the early-mid 1970s.

Geez, guys, how’s that been workin’ out for ya lately?

Since most don’t know the history, here’s how the broker-centric model works. The broker’s in charge. The agents are to be seen and not heard. If the agents had what it took to own their own successful business, they would. But they don’t, so they don’t. They don’t get to dictate to the business owner how to run it. The broker generally pays for the bulk of the marketing. They directly or indirectly generate and/or distribute leads. They don’t view dead wood as a good thing. They do a lot more, or the same business with a lot less agents. The agents make more money even though their splits are much less than agent-centric models.

This is why teams are literally outperforming their own brokerage owners sometimes.

With rare exceptions most successful teams today are using the pre-1970’s broker-centric models. What’s hilarious to watch is how their buyer-agents are earning more bottom line money than their counterparts in the same office. Their counterparts are often making 50-125% bigger commission splits, yet bring home less bacon. Meanwhile, the poor broker/owner is not only payin’ the overhead for the schmuck to whom he’s payin’ 50-90% splits, he’s hearing ’em complain. All this while month in and month out he gets to watch a team’s team leader make as much or more money than he is as broker/owner of the company.

Imagine an entire company based on today’s team concept. You don’t have to, cuz I lived it. It closed more sides than anyone in my local market, San Diego, for five consecutive years, than anyone. They did it with never more than 30 full time agents, and about a dozen part-timers. Over 1,000 sides a year. Their competitors? Some had as many as 16 offices. They had triple, sometimes quadruple the number of agents and still couldn’t keep up. In my experience there were two basic reasons for this.

1. Broker/owners acted like broker owners. They were in charge of their own businesses. What a concept. They were brave enough not to kowtow to a buncha wannabes who, frankly, couldn’t find their asses with a map, two guides, and a GPS.

2. If an agent wasn’t cuttin’ it, they were shown the door. Non-producers were not treated as mascots, as they are today in agent-centric models. In other words, you were a professional producing agent, or you were gone. What a concept.

Oh, and by the way? That brokerage wasn’t part of either the local Board or the local MLS, both of whom came hat in hand, begging him to please join and share with them his bounty. Go figure.

The tiresome “raising the bar” discussion

The cry for ‘Raising the Bar’ is well meaning, but mostly misguided.

There are those with very good intent who want the industry to make it more difficult to become an agent or a broker, and/or want continuing education to be more rigorous. I understand their thinking. I’m 60. Been hearing the ‘raise the bar’ mantra since I was a teenager. How’s that been workin’ out for us? Don’t answer, it was rhetorical. But if we all take a few steps back so as to view the big picture, maybe we can begin to come together on a different approach. The big picture? It comes down to two realities merged into one prototypical person — and they represent, easily, around 70-85% of currently active licensees to one degree or another.

They work for a brokerage without producing much if any business. Also, regardless of the many classes they may’ve been coerced into attending, they don’t know much about the law, procedures, and general practice of real estate agency. Combine those two — lack of production and general industry ignorance — and you get the periodic outcry for ‘raising the bar’. Hey, I have a idear, why don’t we insist as broker/owners that our agents be producers or be gone? Producers generally know what they’re doing on all fronts.

What a concept! The vast majority of all listings/sales of 1-4 units is done by far less than 20% of the licensees out there. Said another way, if tomorrow all brokerages were suddenly operating the broker-centric model, the merit based culture would be the natural result. The huge majority of agents out there who take up space more than anything else would, like steam, heat the air then disappear. They’d never return either, cuz bottom-line production requirements would be the barrier they’d never be able to navigate.

Would love to hear your thoughts.  Back to the future may just be what’s beginning to happen now.

Jeff Brown specializes in real estate investment for retirement, has practiced real estate for over 40 years and is a veteran of over 200 tax deferred exchanges, many multi-state. Brown is a second generation broker and works daily with the third generation. With CCIM training and decades of hands on experience, Brown's expertise is highly sought after, some of which he shares on his real estate investing blog.

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30 Comments

30 Comments

  1. Lesley Lambert

    January 30, 2012 at 9:59 pm

    My mom was my first broker (she started real estate in the 80's) and this was how she trained me. I credit my training in the above methods as being what has allowed me to survive and even thrive in a bad market. Some good points that I am certain a lot of people don't want to acknowledge.

    • Jeff Brown

      February 1, 2012 at 8:32 pm

      As the industry is slowly forced into the broker-centric model, Lesley, something tells me they'll acknowledge it. 🙂

  2. herman chan

    January 30, 2012 at 10:05 pm

    hi jeff! i think in theory a merit based brokerage would work, but the fact of the matter is many brokerages don't' chop off non-producers b/c brokerages make money off the non-producing agents by selling classes, certs, desk/franchise fees, tech fees, blah blah blah.

    • Jeff Brown

      February 1, 2012 at 8:18 pm

      Hey Herman — They do that cuz their model simply is a big FAIL.

  3. Nick Molnar

    January 30, 2012 at 11:07 pm

    Sorry Jeff, that day is dead (or dying). If all an agent has to offer is listing data and a well-trained team, they should make plans to exit the business. Launching a brokerage is now well within the capability of a smart high-schooler with a four or five figure budget (depending on the market). And the listing data ultimately belongs to the sellers. It sounds like you offer a real value to your investor clients and help them in ways they are unable to help themselves. Why do you think residential brokerage should offer anything less?

    • Jeff Brown

      February 1, 2012 at 8:24 pm

      Somehow I think we're not communicating, Nick. That's exactly what I'm suggesting. You're right about anyone being able to START a brokerage, but they'd fail just like the brainiacs who've been bringing in extra income streams just to stay afloat. The listing data belongs to me, period.

      I own the listing, period.

      The old model fired incompetents. They slowly but surely ended up with quasi all-star teams after a relatively short time. Nothing's changed since then, Nick. Sellers want their homes sold, at the highest possible price and in the shortest period of time. It was true when I first started in '69, and it's true today.

      That day may be dead, but the teams are showing their broker/owners the way. Agent-centric models simply do not work. They're doomed from the start.

  4. Drew Meyers - ESM Exec Designs

    January 31, 2012 at 10:38 am

    Exactly why I think (know) brokers like m realty in portland and m squared in wash dc are on their way to killing their respective markets…

  5. Bruce Lemieux

    January 31, 2012 at 4:08 pm

    The 70s offered many delights like awesome clothes and spectacular shag carpet. People who ran 26 miles were labeled as freaks. Now, you're a freak if you don't. It was a golden age.

    Still, I wouldn't like to see the return of cars that rust and don't run, double digit mortgage rates, or restricted access to home listing data. Consumers should have easy access accurate and non-spammy home listing data. Good for consumers, good for our industry. I'm less concerned about how they get it (syndicated, IDX, etc).

    Revolution #2 really resonates. The methodology for the big brokers in my market is simple: grab as many agents and market share as possible. Remove all risk to operate a profitable business, give cubes, free business cards and office managers (often to babysit) — and take a high split. As agents get better and want a bigger share, they are lured by the do-it-yourself, agent-centric models. Now, agents need to invest heavily in processes, technology and coaching to acquire and convert leads – which is time not selling. Now imagine a world where the broker manages the business, generates the leads, and coaches – and holds accountable – the agents who spend 100% of their time selling. Sounds like a pretty good trip back to the 70s to me.

  6. Jeff Brown

    February 1, 2012 at 8:30 pm

    Love the comparisons, Bruce. As far as #1 goes, the public has unfettered access through hundreds, sometimes thousands of IDXs in each local market. My gripe is MLS/Board treating its members like street walkers. There's simply no need, and the professionally listed home sells quickly and for more without the aggregator circus clown acts. 🙂

    Does my model interest you for your brokerage?

    • Bruce Lemieux

      February 1, 2012 at 9:07 pm

      As it turns out, I'm in the last stages of launching my own brokerage. The organizational model will look a lot like a team where the broker (my wife and me) will concentrate on lead generation and listing conversion, with a couple buyer agents focused 100% on sales. At this point, I don't see how new 'listing agents' would come on board since I'll have a very structured listing process, but I don't need to figure that out right now. I'm excited about our listing model – we'll see if my market likes it once it launches. When it's completely out of my brain and fully realized in a marketing plan, I would like to send it over to you so you can shoot holes in it. An unvarnished critique would be appreciated — I know that you’re very good at being ‘unvarnished’ 🙂

  7. Stephanie Crawford

    February 4, 2012 at 6:52 pm

    Bruce, send that model over to me while you are at it. Would love to check it out 🙂

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Opinion Editorials

Ways to socialize safely during quarantine

(EDITORIAL) Months of isolation due to quarantine is causing loneliness for many, but joining virtual social groups from home may help fill the need for interaction.

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quarantine

Quarantining, sheltering in place, staying home. We’re tired of hearing it; we’re tired of doing it. Yet, it’s what we still need to be doing to stay safe for a while longer. All of this can be lonesome. As the days turn into weeks and weeks into months, the alone time is getting to even the most introverted among us.

Solitary confinement is considered one of the most psychologically damaging punishments a human can endure. The New Yorker reported on this in a 1992 study of prisoners in detention camps in the former Yugoslavia, as well as Vietnam veterans who experienced isolation. These studies showed that prisoners who had experienced solitary confinement demonstrated similar brain activity to those who’d suffered a severe head injury, noting that “Without sustained social interaction, the human brain may become as impaired as one that has incurred a traumatic injury.”

We aren’t meant to be solitary creatures. Your “pandemic brain” is real. That fogginess, the lack of productivity, can be attributed to many things, including anxiety, but being kept apart from other humans is a big part of it too. Be kind to yourself, give yourself grace, and join others virtually. Be it an app, a class, a Facebook group, a chat room, or a livestream, someone somewhere is out there waiting to connect with you too.

The good news? We are lucky enough to live in an era of near limitless ways to interact socially online. Sure, it is different, but it is something. It’s important. The best thing about this type of social interaction is being able to hone in on your specific interests, though I’d caution you against getting caught in an online echo chamber. Diversity of interests, personality, and opinion make for a richer experience, with opportunities for connecting and expanding your worldview.

Here are a few suggestions on ways to socialize while staying home and staying safe. Communicating with other humans is good for you, physically and mentally.

Interactive Livestreams on Twitch:

Twitch is best known as a streaming service for video game fans, but it offers multiple streams appealing to different interests. This is more than passive watching (although that is an option, too) as Twitch livestream channels also have chat rooms. Twitch is fun for people who like multi-tasking because the chat rooms for popular livestream channels can get busy with chatter.

While people watch the Twitch hosts play a video game, film a live podcast, make music or art, mix cocktails, or dance, they can comment on what they’re watching, make suggestions, ask questions, crack jokes, and get to know each other (by Twitch handle, so it is still as anonymous as you want it to be) in the chat room. The best hosts take time every so often to interact directly with the chat room questions and comments.

Many Twitch channels develop loyal followers who get to know each other, thus forming communities. I have participated in the Alamo Drafthouse Master Pancake movie mocks a few times because they are fun and local to Austin, where I live. Plus, in my non-quarantine life, I would go to Master Pancake shows live sometimes. The chat room feels familiar in a nice way. While watching online is free, you can (and totally should) tip them.

Online trivia in real time:

There are some good options for real-time online trivia, but I’m impressed with the NYC Trivia League’s model. They have trivia games online on Mondays, Wednesdays, Fridays, and Sundays. The NYC Trivia League seems to have figured out a good way to run the game live while keeping answers private from the other teams. They run games on Instagram Live with a live video of the host, and participants answer via the question feature. Clever!

Online book club:

First I have to shout out my Austin local independent bookstore, BookPeople, because they are fantastic. They run book clubs throughout the year, along with readings, book signings, and all things book-related. BookPeople hosts several online book clubs during these lockdown days, and most people will find something that appeals to them.

I’m also impressed with this list from Hugo House, a writer’s resource based out of Seattle. This list includes Instagram and Goodread book clubs, book clubs for Black women, rebels, and poetry lovers. The Financial Diet recommends the Reddit book club, if you are comfortable with the Reddit format. Please note that it’s a busy place, but if you like Reddit, you already know this.

Cooking class or virtual tasting:

This is doubly satisfying because you can follow these chefs in real time, and you end up with a meal. There are a couple on Instagram Live, such as The Culinistas or Chef Massimo Bottura.

You can also participate in virtual tastings for wine, whiskey, or chocolate, though you will have to buy the product to participate in the classes (usually held over Zoom or Facebook Live). If you are in Austin, Dallas, or Houston, I recommend BeenThere Locals. The cost of the course includes the wine, spirits, or cooking kit in most cases, and all of the money goes to the business and expert hosting the class.

Look for your favorite wine, spirits, cheese, chocolate makers, and chefs that are local to you to find a similar experience. Most either prepare the class kit for pickup or delivery within a local area.

Quarantine chat:

To interact with another quarantined person seeking social interaction, there’s Quarantine Chat. Quarantine chat is one of the ways to connect through the Dialup app, available on iOS and Android devices. Sign up to make and receive calls when you want to speak with someone. The Dialup app pairs you randomly with another person for a phone conversation, at a scheduled time, either with anyone or with someone with shared interests.

Quarantine chat takes it a step further with calls at random times. When your quarantine chat caller calls, you will not see their number (or they yours), only the “Quarantine Chat” caller ID. If you are unable to pick up when they call, they will be connected with someone else, so there is no pressure to answer. It’s nice to hear someone else’s voice, merely to talk about what you’ve been cooking or what hilarious thing your pet is doing.

Play Uno:

Uno Freak lets people set up games and play Uno online with friends or strangers. Players do not need to register or download anything to play. Uno Freak is web-based.

Talk to mental health professionals:

If your state of loneliness starts sliding toward depression, call someone you can speak to right away to talk over your concerns. When in doubt, call a trained professional! Here are a few resources:

  • National Alliance on Mental Illness (NAMI): The NAMI HelpLine can be reached Monday through Friday, 10 am–6 pm, ET, 800-950-NAMI (6264) or info@nami.org.
  • Crisis Text Line: Text HOME to this text line 24/7 for someone to text with who will also be able to refer you to other resources: U.S. and Canada: 74174, U.K. 85258, Ireland: 50808.
  • Psych Central has put together this comprehensive list of crisis intervention specialists and ways to contact them immediately.

There are many ways to connect even though we are physically apart. These are just a few real time ways to interact with others online. If you want something a little more flesh and blood, take a walk around the block or even sit in a chair in front of where you live.

Wave at people from afar, and remember that we have lots of brilliant doctors and scientists working on a way out of this. Hang in there, buddy. I’m rooting for you. I’m rooting for all of us.

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Opinion Editorials

Working remotely: Will we ever go back? (Probably not)

(OPINION / EDITORIAL) Now that the pandemic has opened the door on working remotely, there’s no way we’ll put the genie back in the bottle. But, here’s some ways you can adapt.

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Woman working remotely on her couch with a laptop on her lap.

When it comes to working remotely, will the toothpaste ever go back in the tube?

Mark Zuckerberg recently said, “We are going to be the most forward-leaning company on remote work at our scale…” By 2030, Zuckerberg anticipates that over half of Facebook’s workforce will be remote. Many other companies are jumping on the work from home bandwagon. Working remotely has helped many businesses manage the pandemic crisis, but it’s unsure what form remote working will take over the next 10 years.

We know that employees are responding positively to WFH, as reported in this article – Employers: Lacking remote work options may cause you to lose employees. As offices transition to a post-COVID normal, here are some things to consider about your office and remote work.

What does your business gain from allowing workers to WFH?
The future of remote work depends on a conscious application of WFH. It’s not just as easy as moving employees out of the office to home. You have to set up a system to manage workers, wherever they are working. The companies with good WFH cultures have set up rules and metrics to know whether it’s working for their business. You’ll need to have technology and resources that let your teams work remotely.

Can your business achieve its goals through remote work?
The pandemic may have proved the WFH model, but is this model sustainable? There are dozens of benefits to remote work. You can hire a more diverse workforce. You may save money on office space. Employees respond well to remote work. You reduce your carbon emissions.

But that can’t be your only measure of whether remote work fits into your vision for your organization. You should be looking at how employees will work remotely, but you need to consider why employees work remotely.

The work paradigm is shifting – how will you adapt?
The work environment has shifted over the past century. Remote work is here to stay, but how it fits into your company should be based on more than what employees want. You will have to work closely with managers and HR to build the WFH infrastructure that grows with your organization to support your teams.

We don’t know exactly how remote work will change over the next decade, but we do know that the workplace is being reinvented. Don’t just jump in because everyone is doing it. Make an investment in developing your WFH plan.

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Opinion Editorials

The truth about unemployment from someone who’s been through it

(EDITORIAL) Unemployment benefits aren’t what you thought they were. Here’s a first-hand experience and what you need to know.

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unemployment

Have I ever told you how I owed the government over two grand because of unemployment in 2019, and only just finished paying it back this year?

This isn’t exactly the forum for memoirs, but this is relevant to everyone. So I’ll tell y’all anyway.

It all started back in 2018 when I came into work early, microwaved my breakfast, poured coffee, and got pulled into a collaboration room to hear, “We love you and your work, April, but we’ve been bought out and you’re being laid off.”

It was kind of awkward carrying my stuff out to the car with that Jimmy Dean sandwich in my mouth.

More awkward still was the nine months of unemployment I went through afterwards. Between the fully clothed shower crying, the stream of job denial, catering to people who carried rocks in their nostrils at my part-time job (yes, ew, yes, really), and almost dying of no-health-insurance-itis, I learned a lot!

The bigger lesson though, came in the spring of the following year when I filed my taxes. I should back up for a moment and take the time to let those of you unfamiliar with unemployment in Texas in on a few things that aren’t common knowledge.

1: You’re only eligible if you were laid off. Not if you had quit. Not fired. Your former company can also choose to challenge your eligibility for benefits if they didn’t like your face on the way out. So the only way you’re 100% guaranteed to get paid in (what the state calls) “a timely manner”, is a completely amicable split.

2: Overpayments have to go back. Immediately. If there’s an error, like several thousand of Texans found out this week, the government needs that cash back before you can access any more. If you’re not watching your bank account to make sure you’re getting the exact same check each time and you have an overpayment, rest assured that mistake isn’t going to take long to correct. Unfortunately, if you spent that money unknowingly–thought you got an ‘in these uncertain times’ kinder and gentler adjustment and have 0 income, you have a problem. Tying into Coronavirus nonsense is point three!

3: There are no sick days. If ever you’re unable to work for any reason, be it a car accident, childbirth, horrible internal infection (see also no-health-insurance-itis), you are legally required to report it, and you will not be paid for any days you were incapacitated. Personally, my no-health-insurance-itis came with a bad fever and bedrest order that axed me out of my part time job AND killed my unemployment benefits for the week I spent getting my internal organs to like me again. But as it turned out, the payment denial came at the right time because–

4: Unemployment benefits are finite. Even if you choose to lie on your request forms about how hard you’re searching for work, coasting is ill-advised because once the number the state allots you runs out…it’s out. Don’t lie on your request forms, by the way. In my case, since I got cut from my part-time gig, I got a call from the Texas Workforce Commission about why my hours were short. I was able to point out where I’d reported my sickness to them and to my employer, so my unpaid week rolled over to a later request date. I continued to get paid right up until my hiring date which was also EXACTLY when my benefits ran out.

Unemployment isn’t a career, which is odd considering the fact that unemployment payments are qualified by the government as income.

Ergo, fact number five…

5: Your benefits? They’re taxed.

That’s right, you will be TAXED for not having a job.

The stereotype of the ‘lazy unemployment collector burdening society’ should be fading pretty quickly for the hitherto uninformed about now.

To bring it back to my story, I’d completely forgotten that when I filed for unemployment in the first place, I’d asked for my taxes NOT to be withheld from it–assuming that I wasn’t going to be searching for full time work for very long. I figured “Well, I’ll have a tax refund coming since I’ll get work again no problem, it’ll cancel out.”

Except, it was a problem. Because of the nine month situation.

I’d completely forgotten about it by the time I threw myself into my new job, but after doing my taxes, triple checking the laws and what I’d signed, it was clear. Somehow…despite being at my lowest point in life, I owed the highest amount in taxes, somewhere around the 2k mark.

Despite being based on a system that’s tied to how much income you were getting before, and all the frustrating “safeguards” put in place to keep payments as low and infrequent as possible, Uncle Sam still wants a bite out of the gas-station Hostess pie that is your unemployment check. And as I’m writing this, more and more people are finding that out. And even as we enter 2021, there is still more to be aware of – we’re not out of the woods yet.

I’d like to end this on a more positive note… So let’s say we’ve all been positively educated! That’s a net gain, surely.

Keep your heads up, and masked.

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