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Technology still not the answer to a successful real estate practice

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Closing in on half a century in real estate

Earlier this month I quietly acknowledged my 42nd year as a licensee. All but just over six of those years have been spent as a designated broker. Read: where the buck stops. The first nearly six years were spent as an agent listing/selling homes to owner users, not investors. High tech in those days meant your car didn’t sport a carburetor. The MLS was housed in a small phone book, with thrice weekly ‘Hot Sheets’ delivered in the form of stapled pages directly to each office. On my first day as a licensee there were no ‘For Sale’ signs made of anything but a steel stake with a sign screwed to it. No giant wood post type signs.

Today? Many are embarrassed if the computer they use is more than a couple years old. Put in context though, their smart phone has more computing power by far than what NASA used just 100 short days before I became licensed.

Ah, context. A wonderful thing, isn’t it?

The agents in Dad’s firm back in the mid to late 60’s, if they were good, and the vast majority were very good, might close 30 sides in a year. Based on today’s commission splits (A side = 3% of purchase price. Agent gets 80% of that.), those 1960’s agents, in a market with a median sales price of say, $200,000 would make $144,000. Contrast that with what they made back then. The math is simple — just divide by 10. Actually, they made less than 10% of today’s agent with the same number of closed sides due to the far lower commission rates paid back then. Think 20-40% of the 3% and you have the true picture.

The average full time agent in Dad’s firm generated over a couple dozen closed sides a year. Please, anyone, anywhere, show me a real estate brokerage whose full time agents number more than a couple dozen, and average two closed sides monthly. It might exist, but if so it’s definitely the exception proving the rule. For the record, if we use San Diego values now, those agents don’t make $144,00, they make $252,000.

More context

San Diego county’s population is roughly three times what it was back then. The percentage of agents producing excellent results are about the same too — we’ve not seen that change in over 40 years.

Wanna know the only real change in real estate brokerage in all those years? I mean change that matters a hill of beans? Teams. Aside from the advent of teams, nothing I’ve seen in the last 42 years has had any empirically discernible impact on a typical agent’s ability to earn. Measured in terms of transactions per period, and allowing for population/housing growth, things are pretty much the same.

But what about…?

But what about all the high tech help agents have at their fingertips now? What about it? If you’re reading this as an agent or broker, please, tell us about all the agents you know and/or work with who’re closing 24 sides a year or more — and not part of a team. You can’t cuz those you know are but an embarrassingly small slice of the pie out there.

Technology? There’s little or no real evidence demonstrating, again, empirically, that it’s impacted real production a whit. Sure, there are agents here and there who’ve figured out how to leverage technology to generate leads. That part doesn’t make ’em special. It’s those even rarer agents who figure out how to convert those leads at an impressive rate. No, even with the massive onset of high tech that has made itself part of the everyday brokerage existence, real production hasn’t been affected when it comes to the foot soldiers of the industry.

Agents are doing the same business they were a couple generations ago, but with shinier objects. They’re not producing any more than their predecessors when productivity is measured the only way it matters — the bank account.

Ultimately it’s like Grandma said — The more things change, the more they stay the same. What really makes an agent/broker successful today is exactly the same things that made Dad’s crew flourish.

The equation hasn’t changed in the last 1,000 years. Be more knowledgeable and skilled than the next guy, while talkin’ to and gettin’ belly to belly with as many as possible. High tech when I started was a telephone. Then came the first computers. Then cell phones. Then all the magic software guaranteed to triple the business of the agent who bought it. Among all that was the IDX which was and still is, heralded as second only to turning water into wine.

Wrong, high tech breath.

The same level of business is being done by the same kinds of agents/brokers as was the case nearly half a century ago. They might be taking a different route to get belly to belly, but the bottom line results are virtually identical.

Nothing’s changed. We’re mowing the same lawns as our dads did and not a blade of grass more.

The moral of the story?

You have three choices: Either retain your status quo — Create a team — or, stay solo, but with the ‘assistant’ business model.

High tech ain’t the answer — at least not so far.

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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43 Comments

43 Comments

  1. Cindy Allen

    October 27, 2011 at 10:11 am

    I got into the business in 1989, and the fax machine (with thermal paper) arrived at my chosen brokers office about a week after I did. While I agree that technology hasn't increased the number of homes an agent sells, I do think it has untethered agents from the office. I'm no longer stuck waiting by the phone for a counter, my phone goes with me. I don't have to run to the office to pick up a hard copy of an offer, it's delivered to my phone by email. And no more running to another broker to pick up keys… The "key" hangs on the front door.
    Those things alone would seem to free up agents to have more "face time" with prospects.
    So why do you suppose agents aren't using that "free" time to generate more leads? Perhaps it's more about human nature – a comfort level at an average income, that keeps agents from using the "free" time technology has allowed.
    Or maybe we're all so busy playing with the next "shiney" new technology we're too tied distracted to bother to get "face to face" with the prospects we now have time to generate.

  2. Matt Nowak

    October 27, 2011 at 10:39 am

    While nothing will ever replace traditional face-to-face time, technology has made the customer more educated about the real estate process. In turn, they expect more responsive and personal contact from agents.

    Instead of making customers wait, I have been able to access MLS on my smartphone and do a multitude of tasks that would have been impossible if I didn't have my smartphone with me. Mind you, I am doing such taskes WHILE I am face-to-face with customers. I am giving them the information they seek instead of me saying, "I'll get back to you."

    I believe some agents are not using technology properly. They are using it in an attempt to replace other modes of communication. Technology should be used to enhance communication and engage customers more effectively.

  3. Bruce Lemieux

    October 27, 2011 at 12:24 pm

    Great article. To be successful in this business, you need prospects, know your market and be good at sales. Technology may help some on the first two, but does nothing to help you close.

    I do think that technology allows us to be much more productive. Without it, I would have to have at least one more fulltime assistant (copy, fax, schedule, etc). And, technology has changed the nature of how we spend our time.

    On the other side of the coin, technology has introduced a whole slew of distractions that may easily be eating-up any productivity gains (as I comment on a blog post which does absolutely nothing to help acquire new clients or close deals).

  4. Jeff Brown

    October 27, 2011 at 1:36 pm

    Hey guys — I think your comments hit the nail on the head. Even with all the technology available, and all the time it saves, the production needle for the industry simply hasn't moved. I like the observation wondering what use agents are making of all this 'saved' time.

    My view is the takeaway is this: Most agents should be W2 employees in another industry. They're pretty much not worth the space they take in a serious brokerage office. Harsh — or plain truth?

    • Matt Nowak

      October 28, 2011 at 11:12 am

      That's quite harsh, especially since I don't understand the correlation between this article and the opinion that some agents shouldn't be agents. With that mindset, it could be just as easy to say that any agent that doesn't understand the importance of technology & social media and how they relate to engaging customers is going to get left behind if they believe that "traditional" forms of communication are the ONLY way of doing business.

      We shouldn't eschew technology because we fear shiny new objects. We should utilize what works best for us and remove the rest. For example, I have a colleague that has received many leads that have ended in closings by using Facebook. Yet that medium doesn't work for me, so I don't use it.

      The important thing to take away from the use of technology by agents is that it is a necessary tool to connect with customers. Isn't that why agents have blogs, Twitter accounts, and use Facebook in their marketing plan? How much money is wasted by agents by creating glossy direct mailers that they hope customers will read? Are open houses not working as well as they once did because consumers can now go online to view homes?

      By the way, my computer is 6 years old.

  5. Bruce Lemieux

    October 27, 2011 at 4:36 pm

    As long as brokerages are 100% commission based, and the barriers to entry are so low, we'll always have a large number of low performers in the industry — regardless of what happens in technology. I do think that proper adoption of the right technology can enable (not make) great agents do very well in this business — something that would be much harder to do without it.

  6. Matthew Rathbun

    October 27, 2011 at 10:03 pm

    I want my jet pack!

  7. Jeff Brown

    October 28, 2011 at 11:19 am

    Me too, Matthew. 🙂

  8. Jeff Brown

    October 28, 2011 at 11:56 am

    Hey Matt — I do see where you're coming from on this, but have a different view. Maybe cuz I'm second generation and have seen firsthand since the 1960s, plus had mentors from even earlier days, I have a different perspective. Also, I may have a somewhat richer context from which to see changes — or things having never changed.

    ". . . I don’t understand the correlation between this article and the opinion that some agents shouldn’t be agents."

    The correlation, the crucial point of the post, is that though technology has indeed done wonders for our business, the per agent production is still a joke. It's not changed in any meaningful way since my first day in the office back in the fall of 1969. I think this empirically 'harsh' fact is a fact nevertheless. Most agents, as in the vast majority, should be working 9-5 W2 jobs in another industry. They're simply not cut out to be truly effective, productive real estate agents. This was true two generations ago, and is the factual reality today.

    Yes, agents use social media, blah blah blah. They use it to connect. So what? So in 1964 they only had the telephone. So what? The common denominator is CONNECTING. Yet with all the magic powers of high tech, social media, and IDX, the production remains the same. That fact isn't debatable on any level, period. Since that's both the historical and current empirical truth, how today's mediocre to failing agent is 'connecting' with folks is completely irrelevant.

    Again, it's about results, and nothing's changed in the last half century.

    I agree with you: It's moronic to say that if agents don't adopt this or that technology or strategy that they should be doing something else. I'm saying that even if the Lord Himself came down and whispered how they could make $100,000 a year, most agents would STILL be workin' a 9-5 W2 job 1-2 years later.

    I'm not making predictions here, Matt. I'm reporting both history and our current status quo. The 'harsh' realities of past/current real estate brokerage is that a dominating majority of agents are a waste of space.

    Now THAT's harsh. 🙂

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Opinion Editorials

How Gen X is nailing the COVID-19 social distancing order

(EDITORIAL) Of course, someone found a way to bring up generational stereotyping during COVID-19 and claim who is best, but are they onto something?

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Demographics and categorizing people helps us to process groups. A huge part of demographics and how we market ourselves in a job search, for example, is sharing our level of experiences and skill sets related to our profession – thus alluding to our age. Millennials (b. 1981-1996) received a lot of generational shame for being elitist and growing up in a time where they all received participation trophies – therefore being judged for not always winning a fair competition.

Gen X (roughly b. 1961-1981) has often commented that they feel like the forgotten generation which so much attention being play to the Baby Boomers (b. 1946-1964) who seemed to be born in to a great time of prosperity for “The American Dream” and then the Millennials who overtook Gen X and some of their jobs while they weren’t enough Gen Xers to fill them.

In this article “It Took a Global Pandemic, But Generation X is Finally Getting Love”, it is discussed how great Gen X is at this social distancing thing and maybe this will be helpful to anyone who feels like they are losing their mind. This is by no means an intent to shame any generation nor claim no one else knows how to handle it but this article does a great job about why Gen X might be primed to be handling the global pandemic well with the times they were raised in.

Right now, it’s a waiting game for many people who’s professions and lives have changed in what seemed like overnight. The patience required. The uncertainty of it all. The global pandemic forced (without any forgiveness), a swift move to new ways of life. The busy-ness of our days came to a crashing halt when we were no longer allowed to be out and about in places with large groups and possibly sent home to work remotely.

Many non-essential businesses were forced to close which meant people could not only not work at the office, but also had to cease their extra-curricular activities like working out at the gym, shopping, eating brunch with friends or taking their kids to their sporting events, a playground and/or coordinating a play date or sleepover. The directive from our local and federal government was for “social distancing” before the shelter in place orders came.

Gen X may agree that there were some pretty great things about their childhood – the types of things you do with your time because you don’t have a smartphone or tablet addiction and the fact that there was no way for your work to get a hold of you 24/7. Gen X did have TV and video games and sure, Mom and Dad didn’t really want you spending all of your time behind a screen but it also seemed that there wasn’t as much of a guilt trip if you did spend some of your “summer vacation” from school playing Nintendo or Sega with your neighborhood friends.

It seems like the article alludes to the idea that COVID might be helping people to get back to some of those basics before smartphones became as important to us as one of our limbs.

Gen X has had no problem adapting to technology and in their careers, they have had to adapt to many new ways of doing things (remember when caller ID came out and it was no longer a surprise who was calling?! Whaaaat?! And you can’t prank call anyone any more with your teenage friends at a sleepover! Gasp! You also wouldn’t dare TP an ex-boyfriend’s house right now).

Regardless of the need to learn new hard skills and technologies, everyone has been forced to adjust their soft skills like how technology and still being a human can play well together (since it is really nice to be able to FaceTime with loved ones far away). It seems those slightly unquantifiable adaptable and flexible skills are even more required now. It also seems that as you grow in your career, Emotional Intelligence might be your best skill in these uncertain times.

And not that we are recommending eating like crap or too many unhealthy items, Gen X has been known to be content surviving on Pop Tarts, Spaghetti O’s, Ding-dongs and macaroni and cheese which are all pretty shelf stable items right now. Whatever way is possible for you, it might be a good time to find the balance again in work, technology, home, rest, relaxation and education if at all possible.

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Opinion Editorials

How strong leaders use times of crises to improve their company’s future

(EDITORIAL) We’re weeks into the COVID-19 crisis, and some leaders are fumbling through it, while others are quietly safeguarding their company’s future.

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strong leaders

Anthony J. Algmin is the Founder and CEO of Algmin Data Leadership, a company helping business and technology leaders transform their future with data, and author of a new book on data leadership. We asked for his insights on how a strong leader can see their teams, their companies, their people through this global pandemic (and other crises in the future). The following are his own words:

Managers sometimes forget that the people we lead have lives outside of the office. This is true always, but is amplified when a crisis like COVID-19 occurs. We need to remember that our job is to serve our teams, to help them be as aligned and productive as possible in the short and long terms. 
 
Crises are exactly when we need to think about what they might be going through, and realize that the partnership we have with our employees is more than a transaction. If we’ve ever asked our people to make sacrifices, like working over a weekend without extra pay, we should be thinking first about how we can support them through the tough times. When we do right by people when they really need it, they will run through walls again for our organizations when things return to normal.

Let them know it’s okay to breathe and talk about it. In a situation like COVID-19 where everything is disrupted and people are now adjusting to things like working from home, it is naturally going to be difficult and frustrating.
 
The best advice is to encourage people to turn off the TV and stop frequently checking the news websites. As fast as news is happening, it will not make a difference in what we can control ourselves. Right now most of us know what our day will look like, and nothing that comes out in the news is going to materially change it. If we avoid the noisy inputs, we’ll be much better able to focus and get our brains to stop spinning on things we can’t control.
 
And this may be the only time I would advocate for more meetings. If you don’t have at least a daily standup with your team, you should. And encourage everyone to have a video-enabled setup if at all possible. We may not be able to be in the same room, but the sense of engagement with video is much greater than audio-only calls.
 
We also risk spiraling if we think too much about how our companies are struggling, or if our teams cannot achieve what our organizations need to be successful. It’s like the difference in sports between practice and the big game. Normal times are when we game plan, we strategize, and work on our fundamentals. Crises are the time to focus and leave it all on the field.
 
That said, do not fail to observe and note what works well and where you struggle. If you had problems with data quality or inefficient processes before the crisis, you are not fixing them now. Pull out the duct tape and find a way through it. But later, when the crisis subsides, learn from the experience and get better for next time.

Find a hobby. Anything you can do to clear your head and separate work from the other considerations in your life. We may feel like the weight of the world is on our shoulders, and without a pressure release we will not be able to sustain this level of stress and remain as productive as our teams, businesses, and families need us.

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Opinion Editorials

I just got furloughed. Now what?

(EDITORIAL) Some companies are furloughing employees, betting on their company’s long-term recovery. Here’s what you can expect and should plan for in your furlough.

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furloughed woman

Are you furloughed? You are not alone! What now? What does “furlough” even mean? How will I get money? Will I still keep my insurance?

A furlough differs from a layoff in a few ways. Whereas a layoff means you are definitely unemployed, a furlough is at its core unpaid time off. Not all furloughs are created equal, though the basic concept is the same: to keep valued employees on ice without being on the hook for their pay until a financial turnaround occurs.

The good-ish news is that a furlough means the company wants to keep you available. When a company is unable to pay their employees for an extended (often indefinite, as is the case with COVID-19 closures) period, they may opt to furlough them instead of laying them off. This virus has decimated whole industries, at least temporarily.

Furloughed employees are forbidden by law to do so much as answer a work email or text while furloughed–or else the company must pay them. The first large waves of COVID-19 furloughs are in obvious sectors such as hospitality (Marriott International), airlines industries (Virgin Atlantic), though other industries are following suit with furloughs or layoffs.

Some furloughs may mean cutting employees’ hours/days to a minimum. Maybe you’re being asked to take off a couple days/week unpaid if you’re hourly, or one week/month off if you’re on salary. With the COVID-19 situation, though, many companies are furloughing bunches of employees by asking them not to work at all. This particular furlough will last ostensibly for a few months, or until business begins to bounce back, along with normal life.

So, what are your rights? Why would you wait for the company? Can you claim unemployment benefits? What about your other work benefits? I’d be lying if I said I knew all the answers, as the furlough packages differ from company to company, and the laws differ from state to state.

However, here are some broad truths about furloughs that should apply. I hope this information helps you sort through your options. I feel your pain, truly. It’s a tough time all around. I’m on your side.

The first answer people want to know is yes, if you’re furloughed and have lost all or most of your income, you may apply for unemployment benefits. You can’t be expected to live off of thin air. Apply IMMEDIATELY, as there is normally a one or two week wait period until the first check comes in. Don’t delay. Some states provide more livable unemployment benefits (I’m looking at you, Massachusetts) than others, but some income is better than none.

Also, most furloughed employees will likely continue to receive benefits. Typically, life and health insurance remain intact throughout the length of the furlough. This is one of the ways companies let their employees know they are serious about wanting them back as soon as it’s financially realistic. Yet some other benefits, like a matching 401k contribution, will go away, as without a paycheck, there are no contributions to match.

Should you look for a job in the interim? Can you really afford not to? What if the company goes belly up while you’re waiting? Nobody wants that to happen, but the reality is that it might.

If you absolutely love your job and the company you work for and feel fairly confident the furlough is truly short-lived, then look for a short-term job. Thousands upon thousands of positions have opened up to meet the needs of the COVID-19 economy, at grocery stores or Amazon, for example. You could also look for contract work. That way, when your company reopens the doors, you can return to your position while finishing off the contract work on the side.

If the company was on shaky ground to begin with, keep that in mind when applying to new jobs. A full-time, long-term position may serve you better. At the end of this global health and economic crisis, some industries will be slower to return to their former glory–if they ever do. If you’re furloughed from such an industry, you may want to shift to something else completely. Pivot, as they say. Now would be a good time.

The only exceptions are “Excepted” government workers in essential positions, including public health and safety. They would have to work while furloughed in case of a government shutdown (and did previously).

Furloughs are scary, but they offer a greater measure of security than a layoff. They mean the company plans on returning to a good financial situation, which is encouraging. Furloughs also generally offer the comfort–and necessity–of insurance, which means you can breathe a bit easier while deciding your next move.

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