The Consulting Times

Recently on the ACRE® Coaching Exchange, our coaching platform for ACRE® graduates, we had a very interesting discussion about where our value today lies as agents. It seems that in the tough market that we are working in, many agents are competing for listings by charging less than the competition and requiring less commitment in the way of an exclusive agency contracts with buyers.

This is so sad because you can never compete on price and stay in business. No matter how low you go, there will always be some desperate soul who will charge less. And when you don't require a commitment from those you work with, you only underscore that your time, experience, and expertise has no value.

In my book Ripping the Roof off Real Estate, I talk about the difference between a commodity, which can and should be shopped by price and a service where the quality, level of expertise, talent or experience makes a big difference in the outcome. When an agent or brokerage competes on price, they reinforce the perception by the public that agents are all the same, a commodity, and therefore they should be shopped by price. However, when a real estate professional understands and articulates their value, the consumer will beat a path to their door and the competition will be left in the dust.

If you are out in the market trying to make a living in real estate, I don't need to tell you that our industry continues to go through tremendous changes that are challenging our most basic of real estate practices and assumptions:

• Revolutionary growth in technology which continues to transform our industry.

• A huge consumer backlash that, contrary to conventional wisdom, is not just challenging our commissions but challenging our very value as professionals.

• A growing bewilderment by both the consumer and ourselves over what exactly our role as real estate professionals today is supposed to be.

Yet, in the midst of all of this, when we clearly need some new direction, it seems like all we're getting is the same old advice from the same pundits that have been around forever saying the same things like:

The Republican primary in the state of Michigan was held this past January and the way that the two leading candidates approached this primary provides a fascinating primer on how real estate will fare in the next few years, depending on our reaction to the systemic changes that confront us.

I've noticed that during the last few months of every year, agent list-serves and forums begin popping with posts regarding the newest and greatest software, tools, and must-have cool gadgets to buy for their businesses. This crazy rush to purchase the newest and greatest is in full swing by the NAR® (National Association of Realtors®) Convention in November and only seems to slow down when the realities of holiday shopping hit home - usually when the bills begin arriving in January.

Last week, in "Broker proposes new real estate marketing platform: Universal MLS", Inman News Writer Glenn Roberts discussed a "Universal MLS" that is the brainchild of Colorado real estate broker Creed Smith, a specialist in bank-owned foreclosure properties. A real estate broker since 1987 who has a master's degree in marketing, Smith said his vision for a new breed of MLS is based on his belief that real estate agents and brokers will inevitably play a lesser role in real estate transactions as Web-based services become increasingly popular with consumers.

A few years back when I was teaching "Introduction to Real Estate Consulting" at boards and associations, it was common for agents, brokers, and managers who didn't understand consulting to dismiss it as "discounting". This type of comment was always amusing to me because in fact, I developed my consulting model as an antidote to discounting.

In the 1995 movie, The American President, there is a scene where President Andrew Shepherd, played by Michael Douglas, is in a heated discussion with his domestic policy advisor, Lewis Rothschild, played by Michael J. Fox, about the President's falling poll numbers.

In this scene Rothschild pleads: "People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone. They want leadership. They're so thirsty for it they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand."

To which President Shepherd responds: "People don't drink the sand because they're thirsty, Lewis. They drink the sand because they don't know the difference."

Below is a response from one of the ACRE graduates and coach, Judi Bryan, to a post on a list-serv regarding programs that teach fee-for-service type models.

There is a program available which gives the "availability" of fee for services, but goes, I believe, a whole lot further. It's the ACRE® program for Accredited Consultant in Real Estate. Since the program is designed around a "consulting" model where the seller has options with what services they want and how they want to pay for them, and the agent has the opportunity to get compensated for time and expertise, whether a transaction ensues or not, it offers a real win/win. And there is no need to sell a prospect on anything. All it is meant to be is an option...an option that gives us "transparency" in how we are being paid and does not require that the seller take an "all or nothing" package.

Mollie, Merv and Paula will attend the Inman News "Real Estate Connect" conference in San Francisco July 30th through August 3rd.

The Inman conferences are the premier networking, information, and technology conferences for the real estate industry.

Executive-level real estate professionals, opinion leaders, technology giants, industry experts, and press gather each year at Connect Conferences to discuss a broad cross-section of traditional and cutting-edge topics critical to the real estate industry, opening the door to a wealth of opportunities for business development, information and idea exchange, discussion and debate.

Over the last year or so, as the market has softened in many areas, newer agents who found making money so easy just a few years ago are getting out of the industry. Agents who remain are being told to "get back to the basics". The problem is that "the basics" have dramatically changed in the last few years. Gone are the days when cold calling, sending out postcards, spending your valuable time at open houses, working floor time, etc. actually worked.

In real estate today, large numbers of agents are competing for a shrinking market. With unlimited real estate information available online and multitudes of sites competing with, and seeking to replace the agent, the public increasingly looks at the agent (and brokerage), who only offers the traditional full-service package payable only by commission, as a commodity to be shopped by price. Limiting themselves to the traditional commission model, agents and brokerages are indeed swimming in a bloody red ocean of cutthroat competition.

By contrast, real estate consulting, which provides the consumer responsible choices in the services they can obtain and how they can pay for them, while paying the professional fairly for their time, experience, and expertise, creates an "uncontested market space, ripe for growth that makes the competition irrelevant."

In a recent article, the founder of a leading online real estate referral site, tried to make the case to beleaguered real estate agents that buying leads is good for their business and intimated that failure to buy these leads from third party companies (such as theirs) is to miss out on business.

First, let's start with the basic premise - I agree with them that there is a cost of obtaining business. Whether you do old-fashioned farming, mailings, phone calls, or put your resources into your client base and get your business from referrals, business has to come from somewhere and it has a monetary cost.

In the article, "Discount Brokerages Band Together" Matt Carter of Inman News wrote that Virginia-based RebateReps.com helps agents who want to dabble in discounting without alienating full-commission customers, or work for a discount broker full time. "Most Realtors® don't want to advertise themselves as rebate agents because it cannibalizes their other business," said RebateReps founder and owner Daniel Rubén Odio-Páez. "RebateReps connects buyers to local agents who are willing to rebate part of their commission but don't necessarily want to advertise that fact." Odio said. "RebateReps allows agents to have their full-service brokerage and to service our (discount commission) leads."

One of the ACRE® Grads on our Graduate Coaching Exchange recently posted the following: "I have been talking up this whole consulting idea within my office and the other agents are so critical, suggesting that I am advocating limited service brokerage. And while I am saying no way, I am having trouble defending my position. HELP!"

My colleague and good friend Allyson Hoffman, like many of us, was dismayed by the incredible slant and half-truths that filled this past Sunday's 60 minutes segment Chipping Away At Realtors' Six Percent. But, in her blog, she focused on something that I also believe needs some clarification - the issue of the minimum service requirements that some states, including Ally's home state of Illinois, require. There was so much misinformation and lack of full reporting in this story that I could easily blog on different aspects for weeks, but like Ally, I would like to focus on the concept of minimum service requirements.

If the only thing we change about our business is implementing a different way to charge clients for real estate and real estate related services we have missed the point. You just become another real estate agent with a different business model. So, lets take a look at what "consulting" and "consultant" really means:

Zillow is now offering a "great deal" to agents: you can post your listings for FREE! What great exposure, and how kind of Zillow to offer such a wonderful service to agents without taking a dime-what a nice company!

Note: Republished from the Northern Virginia Real Estate Guide

October 17, 2006

The traditional commission model has no relationship to effort and expense across a wide spectrum of property types, markets and price ranges. We (Pam and I) began using consumer Choice models when I established our relationship with RE/MAX on August 1, 2004. We have accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.