...whether they are dealing with Health Care or Real Estate Services.

I was chatting with a friend of mine last week when he admitted that he had been without health insurance since he got out of college. Given that he's a real estate agent, that's not so surprising: as an independent contractor he's on his own regarding health insurance and many in our industry have simply taken their chances, especially when they are young and healthy like my friend Jack.

But as part of the approximately 15% of Americans who are uninsured, Jack has a window on a phenomenon that few of the rest of us ever see: what health services actually cost. You see, Jack was playing softball one Saturday a couple of weeks ago and sprained his ankle. As luck would have it, a member of the team was a physician and offered to take a look at the ankle at his office. After his ankle was wrapped up, Jack offered to pay him.

But here's the interesting phenomenon: the doctor-teammate didn't have a clue as to what to charge him because he had no clue as to what his services were worth! As any doctor today will tell you: their charges are handled by insurance. And the truth is that if the good doctor had not been playing softball with him, Jack's lack of insurance would have dictated that he wouldn't be going to a doctor's office at all - rather he would have to go to the ER if he wanted his ankle looked at and the cost of his care at the ER would have been absorbed by the insured.

Meanwhile, most of us who have health insurance never ask a doctor what they charge because we don't pay for the lion's share of our care - insurance does, so we have been quietly oblivious until the last few years.

So, what does this have to do with real estate?

Continue Reading Lack of Transparency Befuddles Today's Consumer...

As I write this, the US government is embroiled in wrangling over how to overhaul our health care system. It seems to me that the system is not so much broken as it is hopelessly dated because as times changed, it never adapted. Our health care system was designed in years past, when you would hold a job for a lifetime. In that world, it made perfect sense to have your health care as a benefit of that job. But how many of us today stay in one job for our entire lives? And what about the growing legions of independent contractors and self employed entrepreneurs who have no access to a "company" plan? Health care tied to one's employment makes about as much sense in today's world as using a typewriter to write a letter.

Likewise, in the real estate industry, we continue to practice in a way that is not so much broken but hopelessly outdated. The traditional sales model was conceived in years past when we, as real estate practitioners had a very different role. If you think about it, real estate as a sales profession, paid by commission, made total sense when the agent's only job was to "move the merchandise". But in the 1990's our national and state associations expanded our role - it was no longer enough to simply sell the product, we now were asked to act as fiduciaries: working in the best interest of our client and putting their needs above all others, including, and most especially our own. In fact, our responsibilities as a fiduciary became a part of the NAR's (National Association of Realtors®) code of ethics that we are obliged to adhere to.

Continue Reading When a Model No Longer Works, it's Time to Adapt

I was pleased to see that ACRE made Inman News today: Timing the Real Estate Transaction http://tinyurl.com/lttej5.

I just got through reading World Wide Rave by David Meerman Scott. What an amazing book! I've been struggling over the last few months trying to figure out the best way to get my book, Ripping the Roof off Real Estate, as well as the ACRE Course and Coaching Program, more notice. Especially on a budget, since I don't thousands in venture capital : >.

After reading this book, I feel like I have a new lease on life and work. I'm not in the book review business and if you know me at all, you know I don't swoon over much, but this book is amazing. The best book on using social networks that I've come across, bar none.

Now, if I could just start implementing everything I read...

Mollie

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.

ACRE® Wynne Achatz made a very astute comment about our value:
 
"WOW let's go back to 1996 - That is when my consulting really began full strength. I was bedridden for 3 months. Took 126 listings and negotiated 32 transactions. How? Clients wanted my help (consultation). They took their own pictures with my camera, measured their own homes, we looked at options, discussed what was needed to get the property ready for sale, action was taken, seller listed and put up their own signs...never minced about the fees. What it all boils down to is that when you have something of value, folks will feel compelled to want it. The "I have to have it" syndrome.

Be confident in yourself. By the way: I am now charging $195 up front, non-refundable to take a listing or go under contract with a buyer. This is not considered part of a commission either. I have gotten more than a standard commission by listening to what the consumer wants and then getting paid for it! WE never had it so good. Mollie, Merv and all the ACRE® Coaches, thanks, thanks and more thanks for the opportunity for such a great sharing experience with ACRE®."

Michigan Wynne

Many of you may have heard of or know Wynne Achatz, but for those who don't, she is one of the smartest professionals out there. Let me underline what Wynne said: when she was laid up, clients were obviously not paying her to run around doing functionary administrative type tasks...THEY did them! Her value was that of a fiduciary: negotiating, interpreting, troubleshooting. She was sought after for her expertise, not her busy work. Read the rest of the article...

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:

"It's time to get back to basics."

"The market will recover and be like it was."

"Just use the market downtime to sharpen your traditional sales skills and when the market comes back, you'll be ready."

Deep down we know that this traditional advice just doesn't fit our current realities anymore. But, let's be honest. We like hearing it. It's comforting. It's familiar. It's sort of like a broken-in pair of shoes - when we put them on, our feet can just naturally settle in to where they are comfortable. Unfortunately, those shoes won't get us to where we need to be today! Now, it is true that real estate works in cycles, the housing market will come back as will business, but it will increasingly be a very different type of business. And this business will be going only to those practitioners who are trained and ready.

It's time to take our industry back. And as difficult as it is to stretch our comfort zone, it's time to break in a new pair of shoes. In our business, that new pair of shoes is Real Estate Consulting. Read the rest of the article...

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.

Like much of the real estate industry, Michigan is in the doldrums, to put it mildly. In fact, many economists have describes Michigan as having been caught in a "one state recession" for quite some time now. Leading up to the primary, the two leading candidates took very different approaches in campaigning for votes.

Candidate #1 campaigned as the savior of the traditional auto industry while being critical of new fuel efficiency standards signed into law: "If you vote for me, when I get to Washington I'll make sure that the auto industry is not broken by these new standards but rather is provided the funding to get their jobs back".

Candidate #2 took a much different tack, confronting the systemic changes facing the auto industry head-on by telling voters the truth: "My friends, I regret to tell you that your old jobs are not coming back. The global economy is here to stay. But if we prepare, we can bring new and much better jobs to Michigan and to the rest of America. But know this: we will not thrive continuing the same-old, same-old. To compete successfully in the new order, we must prepare workers to seize the new opportunities." Read the rest of the article...

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.

And even this year, despite the slow market in much of the country, there seems to be no slowdown in our quest to obtain the newest and greatest. Let's face it - a lot of us are trade-show and gadget junkies. Think about it: how many of the 1,119,000 iPhones sold in the US as of October, 2007 were bought by people who REALLY needed a new phone? Or did we convince ourselves that the iPhone and other cool tools and gadgets would really bring us the new business that we so desperately need. After all, you have to spend money to make money, right?

May I suggest that our problem might be that we're always looking for the quick fix? With our business purchases, don't we tend to go "a mile wide (as in the quantity of what we purchase) but only an inch deep (as in what we actually utilize)?" We go to NAR® and get all excited about a nifty new piece of software or a set of glossy postcards that we saw demonstrated. They look fantastic. And we buy and buy, because when times are slow and business is tough to come by, the more we search for the magic bullet. Read the Rest of the Story... 

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.

Smith is quoted as saying "I'm absolutely sure that the way we sell real estate is going to change," Smith said. "I foresee that there's going to be a division between what brokers do and what the Internet can do for buyers and sellers. I think the Internet is going to be the central marketing tool in creating specialized services for buyers and sellers. I think they're going to be able to find each other without a broker." He went on to say that he expects that real estate professionals of the future will focus more on handling the paperwork related to the transaction, such as purchase offers and disclosure documents.

I am amazed that Mr. Smith could have such an interesting concept in theory, yet present it in such a way to make most in our industry recoil in horror. It's not that I disagree with his premise that major changes are afoot in real estate: the MLS, as we know it, is terminal. Whether you believe that our MLS's sold us out or it's just the natural consequence of the free flow of information in the Internet age, the MLS, as THE place for property information is ending. As much as traditionalists may dislike the thought, there is simply no question that buyers and sellers, armed with information that they got WITHOUT going through an agent, will find each other more and more. Many sellers who have time will do their own marketing activities and buyers will do more of their own house hunting without us.

My problem with Smith is how he frames his argument and his apparent lack of understanding of what the Internet CANNOT do. He not only does a disservice to agents in cheapening their role, but, in pitching the wonders of the Internet as a matchmaking device without any acknowledgement of the importance of fiduciary counsel and care, he leaves the consumer increasingly vulnerable. A home is, to most people, their greatest financial asset. Buying or selling a home is not the same as selling clothes at a yard sale and without expert assistance, consumers "going it alone" more often than not, fail in their attempts to buy or sell for the greatest value. Read the full article...

Or Just "Fee-For-Service"? Think Again.

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 anecdote to discounting.

Commissions are, by their design, built on "high risk-high reward". In fact, the reason that commissions are a relatively expensive way for consumers to pay for real estate services is that the lion's share of what the consumer is paying for is risk mitigation. Discounting has nothing to do with what percentage is being charged (there is no such thing as a set commission). Rather, discounting is when an agent or brokerage agrees to continue to carry all the risks inherent in being paid on contingency, but simply agrees to less reward. That lower reward means that they have no cushion to cover them when other transactions don't happen. That's why I believe that discounting is a bad deal for our industry.

Consulting on the other hand, takes a very different approach: it offers transparent choices to the consumer in the services they can receive and how they can pay for them. A real estate consultant can lay out the cost of their various services and give the consumer a choice in paying for the services themselves (the way we pay most service providers) or pay for the risk mitigation that a traditional commission provides, but they MUST understand that they will pay a premium for that "insurance policy".

More recently, we sometimes hear from our colleagues that consulting is just "fee-for-service". Certainly, practicing real estate from a consulting model does entail offering fee options, but the consulting model encompasses so much more that. If you think of consulting as simply providing "fee-for-service" options to sellers, you're missing the boat on what consulting is all about. You're also missing out on a whole lot of extra income!

Consulting is a whole new approach to your business. It's having the "tools in your toolbox" to offer the consumer quality choices that pay you fairly for the expertise and years of experience that you bring to the table. It's knowing your value and having the confidence to walk away from clients who will sap your energy and not provide a good return on your investment. Consulting is about knowing what you are worth and settling for nothing less.  Read the full article...