Keep Your Have To To Yourself
There’s a lot of “have to” being thrown around these days. And I’m not even including the “we have to do something” mantra that’s been coming down from Capitol Hill for the last week.
The real estate industry “has to” change. Percentage-based commission structures “have to” change. Static websites “have to” evolve into blogs to remain meaningful as marketing and lead generation tools. Wait — that was 2008 — my mistake. Let me adjust my calendar.
All of these “have to” scenarios have one thing in common – they’re being promoted by those who sincerely hope the status quo changes to make their own particular way of doing business viable. And personally, I just don’t get it.
If I had a unique way of doing business, was the only one doing it and was wildly successful, why exactly would I want everyone else to become just like me? Wouldn’t it make far more sense to enjoy the niche that I’ve created and reap the benefits while everyone else works the same slag heap?
But that isn’t what’s happening. Instead, these niche businesses are crying out for the masses to change the way their business is done. And to what end? Is it just possible that it’s because without massive change, the niche model isn’t going to survive?
I realize I’m making a blanket generalization but almost every discussion of the real estate industry is based on just such a blanket generalization, ignoring the reality that we’re a bunch of independent contractors working in whatever method we deem fit.
Pay As You Go? Not So Sure
Let me tell you a story …
Last week I showed homes to a buyer for two days ahead of a long-planned vacation with my family. After about seven or eight houses on the second day, he looks at me and tells me that I’ve shown him all that he needs to see.
And then he promptly turns around and goes to look at more homes with another agent (and again the next day, even though I had buyers agents standing by), never once having mentioned that he’s going to be working with someone else.
If my business operated on a pay-as-you-go type of system, where buyers paid for the time I spend with them regardless of they purchase a home, this wouldn’t be much of an issue. I still would be compensated for the time that I spent. Instead, unless he decides to purchase a home through me instead of the other agent, I’ll end up with nothing.
So why don’t I go to a pay-as-you-go system? Because it’s not viable. Or at least I don’t believe it to be. Do you think the type of individual who changes agents like he or she is changing their underwear is going to pay me an hourly rate to show them homes? Or are they going to forget about me all together and go to the agent who doesn’t charge a thing and works solely on a contingency basis?
My opinion – a pay-as-you-go system wouldn’t work as long as there’s a “free” alternative available to the public. (And I know it’s not truly free – hi, Jim D. and Ardell – but it appears free at the beginning.)
I could scream from the mountaintops that the entire industry needs to change the way they do business because my way is so much better, but evidence from the free market indicates otherwise.
And that’s the big problem with “have to”. If something truly “has to” change, it changes. Everyone except for a certain governor from Alaska calls this evolution. But if it’s not changing, then “have to” just was another case of “needs to for my own sake.”
Arn Cenedella
February 16, 2009 at 9:46 am
Hi Jonathan
That is a frustrating situation – one that has happened to any agent who has been in the business awhile.
Your comments about “have to” make sense.
Species change through evolution not because they “have to” as much as they “just do” – minute changes in genetic structure happen by change and then nature tesats the change – if the change helps the species survive and propser than that change becomes more prevalent and change occurs. I think this applies to business too. There must be a reason, real estate is a commission business and has involved that way. CPA and most attorneys are fee based per hour in most cases. Yes the internet has changed the RE business but in my opinion what we primarily get compensated for is not driving people around in cars or filling out forms but rather mananaging the emotions around the biggest financial decision most folks ever make. Differeny RE biz models will arise and they will be tested. If a better one emerges, there will be change. If it is not better, our commission based business will remain one.
Matt Thomson
February 16, 2009 at 10:00 am
One thing you have to consider is that a lot of these folks make a lot of money by getting others to follow their ways of doing business. They may be able to survive in their model, but it’d be so much easier to sell it to others, make gobs of money, then come up with the next must have scenario.
Kathy Drewien
February 16, 2009 at 11:36 am
Sounds like the perfect justification to ask for a business retainer. Every time I fail to ask for a $500 retainer, I get burned. The biggest hurdle was my mindset.
BawldGuy
February 16, 2009 at 12:03 pm
Since I got all medieval on those wanting my time, back in the 70’s, I’ve only been hoodwinked once a year or less. When folks begin the ‘but you’re throwing away potential business’ dance, I have a ready response.
I don’t do potential business. I do real business. When you’re ready to be real, you have my number.
Jonathan Dalton
February 16, 2009 at 12:13 pm
I agree with you, Jeff, except I didn’t know he wasn’t real until after it was too late.
BawldGuy
February 16, 2009 at 12:22 pm
Yeah, when they get us, we usually didn’t see it coming. Me too.
Lani Rosales
February 16, 2009 at 2:44 pm
I’m not a Realtor, but I married one and work with him, so I know the pains in the you-know-what people that lead you on can be- it’s a fine line to walk because if you make mandatory a buyer’s rep agreement before you put the key in your car because some otherwise viable clients may feel trapped and will run… on the same hand, if you don’t, they can easily pull the wool over your eyes, right?
But to your bigger point of “have to”- the myth of “having to” do something is often perpetrated by (a) someone selling something, say web development, and they need you to pay them to change your static site to a blog, (b) companies that got VC funding on a wing and a prayer that their PR firm could cause enough industry disruption that it would make a good news story for a minute (never mind the long term ripple effect) or (c) people who reform for reformation sake because it feels good or it keeps them busy. Chances are, it’s a combination of a, b and c but it’s RARELY (d) companies seeking innovative measures to improve the industry (because as you noted, the *free market* indicates what MUST be done, not what could/should/would be done by those with the “shiny object” syndrome).
Ken Brand
February 17, 2009 at 11:00 am
Who the hell want’s to be told what they “Have to do!” I know I don’t. As you’ve shared, a keen eye, imagination, common sense and a commitment to deliver on your promises. That’s what generally works. If something new is really new and it works, it’ll be evident and you can make adjustments.
As for incorporating changes/enhancements, I keep in mind a quote from Roy A Williams – “Persuasion is a transference of confidence.”
Thanks
anonymous
February 17, 2009 at 12:19 pm
First time buyers aside, this oft stated “biggest financial decision/emotional hand-holding” reason for being is asinine.
First, where were all of these fabulous financial advisors when everybody and their dog were purchasing homes they could not afford?
I didn’t read many realtor web sites/blogs saying that people should not purchase homes without a 20&% down payment and a real job.
Fast forward 2009,to buy a 500K house, I need 20% in cash: to whit, I have saved 100K. Do I really need hand holding on how to buy a house?
Do each and every one of you have >100K in the bank to advise me on my finances?
Please.
For the vast majority of people who financially should be purchasing a home- 20% down, payment less than 25% of their income- you are an entry into a key box.
Build a good search site,charge by the hour,give honest advice, and get out of the way.
That will be the viable business.
If you want to serve the 3% down FHA crowd to perpetuate the foreclosures, that is your business.That, IMO, is the unsustainable model.
Matt Stigliano
February 17, 2009 at 12:32 pm
Jonathan,
If pay-as-you-go were suddenly a universal concept that was accepted and practiced, I could see it working, but much like you said, without everyone adopting something like that simultaneously, I don’t think its very viable. I would never pay AgentX agent to go look at homes when I knew AgentY was willing to get paid on the backend of the transaction through a commission.
I also think pay-as-you-go could hurt the industry anyway. People have enough trouble getting their down payments together and now they’re going to need a couple of grand just so they can go look> Plus you bring in the idea of ways to cheat the system – what if an unscrupulous agent kept showing houses he knew you would hate, just so he could get more money? I hate to admit it, but you know somewhere it would happen. And even if it didn’t, imagine the finger-pointing and potential lawsuits for something like that.
I don’t like it. I don’t think its a genius revolutionary idea that will take our industry to some great “next plateau” or solve the consumers differences with the industry. I just think it would open up a new can of worms that will come back as poisonous vipers.
Matt911
Jonathan Dalton
February 17, 2009 at 12:48 pm
Anon – there only were a handful of real estate blogs at the time, though I know that isn’t the point. I would argue that it wasn’t the 3% FHA crowd that caused the problems as that’s been around for quite some time. It was the exotic loans and a large percentage of speculators that caused the bulk of the trouble.
My question to you – would you personally be willing to pay as you go for real estate services? If so, my hunch remains that you’re in the minority of the general public.
Ken Brand
February 17, 2009 at 12:59 pm
Anonymous – Most business models are unsustainable over time. Today, the majority of buyers are keenly interested in working with a savvy, experienced and service oriented agent to help them find the right home, at the right price in the right location. Buying the wrong home in the wrong place can cost far more than the commission paid. Yes there are exceptions.
Today, the majority of challenged sellers are keenly interested in hiring a savvy marketing agent to get their property sold. An unsold or sold for less property can cost far more than the commission paid. Yes, there are exceptions.
Mr. A., you wouldn’t call yourself average or normal would you? I wouldn’t. It sounds like you have the place, the method and timing all figured out. Good for you. My 30 years of experience tells me you’re abnormal in that regard. Most don’t. For them, we’re here to help. If nobody needed us or wanted us, we wouldn’t exist. Like all personal service professions, the better representatives have crowds of people who recommend them, value their services and employ them repeatedly.
As for the “where were you” blast, no doubt we’d all agree It’s sad to see people over leveraged an in trouble. Personally, I know more people who enjoy living in their dream home bought with low down payments than I do otherwise.
Thanks for sharing, it’s interesting to hear multiple perspectives. I think your viable business model for the majority of consumers might see the light of day someday, but not tomorrow or anytime soon.
BawldGuy
February 17, 2009 at 1:14 pm
Jon — Don’t wish to offend anyone here, but some folks’ wish list for changes in RE brokerage biz models has been comic relief for at least three generations now.
The traditional model, in my view, is much akin to democracy. You may not like some of its shortcomings, but it’s still the best system around.
You want proof? Continuing the analogy, Cubans risk their lives to get to America, not the other way around. Capital by nature is attracted to the safest highest returns possible. If what some suggest as alternatives were worth more than a used Snickers Bar, it’d be in use everywhere.
Let’s list all the ‘new’ real estate biz models radically different than what’s been traditional since Truman was in office.
Crickets.
teresa boardman
February 18, 2009 at 8:35 am
Very nice Jonathan. I was kicking around a kind of fee system so that I don’t have to work for free as much. I can’t do it because everyone around me does work for free. I wish I could get them to use my idea, if they did we would all spend less time working for free but it isn’t going to happen and as a result my idea is not viable as a business model. You said it all so well. 🙂
ARDELL
February 19, 2009 at 1:42 am
Hi back at you, Jonathan. Once the buyers in a given marketplace decide the servies aren’t “free” or paid for by the seller, but by them, they begin to control the outcome. If that has not happened in your marketplace, it is likely because you don’t have a Redfin there 🙂
Jonathan Dalton
February 19, 2009 at 8:13 am
Most of us don’t have a Redfin where we are, aside from their new attempt to become a nationwide referral company.
Has their presence really caused that much of a revolution in Seattle, where the majority of buyers are taking control of what their agents earn?
dingdong
February 20, 2010 at 5:44 pm
“If I had a unique way of doing business, was the only one doing it and was wildly successful, why exactly would I want everyone else to become just like me? Wouldn’t it make far more sense to enjoy the niche that I’ve created and reap the benefits while everyone else works the same slag heap?”
“And that’s the big problem with “have to”. If something truly “has to” change, it changes. Everyone except for a certain governor from Alaska calls this evolution. But if it’s not changing, then “have to” just was another case of ‘needs to for my own sake.'”
In the first quote, you suggest that being selfish is an understandable and reasonable thing. In the second, you suggest that self-interest is a reason to disregard the claim.
So which is it – is self-interest a good thing or bad thing?