H A R D C O R E R E A L E S T A T E T A L K - Part I
Are we going to permit the government to change the real estate industry as they killed the airline industry?
THE GOVERNMENT KILLED THE AIRLINE INDUSTRY AND NOW THEY'RE TRYING TO KILL THE REAL ESTATE INDUSTRY, all in the name of "competition" for the consumer by changing our brokerage models from one of "Agent Centric" to one of "Information Centric".
Are we going to be in the business of real estate brokerage or are we to become purveyors of information for "do it yourself real estate" in the name of consumer demand? I use information to serve my real estate clients. I do not provide information so that folks can help themselves. I'm a REAL ESTATE BROKER, not a database.
Over the past few years, there have been many that compared the public on line access to MLS listing information to that of the public on line access to airline scheduling and pricing information. I've always objected to the comparison of a real estate practitioner to that of a travel agent. That said, there is also one area of comparison that is demonstrably real, the consumers right to destroy an entire industry through the demand for more information, more control, more access, lower prices and to just about everything. The value of a piece of real property isn't comparable to that of an airline ticket. The comparison that I can make is that of the deregulation of the airline industry and the government's attempt to strip control of listing information from the real estate industry in a quest to reduce the cost of real estate services to the consumer.
IS THE REAL ESTATE INDUSTRY GOING TO GO THE WAY OF THE AIRLINE INDUSTRY? Remember when airline travel was an adventure? You got to the airport, sat in a comfortable seat waiting for boarding that was always on time. Airlines were regulated and scheduling and pricing was also regulated. You sat in a comfortable seat and the plane took off on time. You got in the air and were served refreshments and a magazine that took your mind off the fact that you were moving about 500 MPH about 25,000 feet above sea level without a parachute. If the flight was long enough, you'd be provided with a pillow for comfort and a tasty meal if meal time came during your flight. Airline travel was a luxury compared to travel by bus, train or automobile. The only mode of travel that compared in luxury was an ocean liner but that took a week rather than a few hours. Unfortunately, luxurious airline travel came with a price. The government regulation that controlled and guaranteed our comfort and convenience, was removed in about 1978 during the Carter administration. You remember Jimmy Carter? He was the president that gave us 18% interest rates?? The airline industry was turned over to the public demand for cheaper and cheaper ticket prices and the quality and convenience and comfort of airline travel has deteriorated in a downward spiral since. Anyone who doesn't believe the above should invest in some airline stock.
FAST FORWARD TO THE REAL ESTATE INDUSTRY IN THE 21ST CENTURY. Real estate agents and brokers have made the housing industry one of the most important segment of the national economy in the 20th Century. We, agents and brokers, have succeeded in making the transfer of real property safe, comfortable and efficient for the average consumer. We, agents and broker, provide knowledgeable and caring services to the consumer buyer and seller. The vast majority of real estate transfers occur smoothly when the consumers use the services of experienced real estate practitioners. The consumers are buying and selling a property that has significant value. Usually the most expensive piece of property most consumers will every own is their home. Since real estate transfers involve property of significant size, complexity, value and important to the consumer's day to day life, consumers have long recognized that using the services of an experienced real estate brokerage to manage the purchase and sale of the property was wise and, usually, cost effective.
"I can get it for you wholesale" was the phrase that worked in mid-20th Century advertising. "Discount Prices" is the phrase that works in the 21st Century advertising. "We eliminate the middleman" was a popular advertising phrase over the years.
Scott Daniels relates an on topic experience this morning that sounds like many of the calls I get on a daily basis. A prospective buyer calls demanding key box access to a home for sale. The caller wasn't interested in his services. They want just one thing, direct access to the property for sale. Many consumers believe that the public have the right to eliminate the real estate services in residential real estate transfers. It's a bit of a shock when one fine day you realize that many consumers with a home to sell or a need to buy a home wish that you would just go away and not get in their way to find the home they wish to buy or sell the home they wish to sell.
This is all fallout from the misconception on the part of the NAR, our local BOR, the media, the DOJ, the FTC, MLSs, the various consumer groups, etc. that believe that the real estate industry should be turned upside down to serve the whims, not needs, of the consumer. Consumer buyers would like nothing better than to have free reign to access homes for sale, forms, conduct their own business directly without any communication with any agents. They wish we, the real estate brokerage industry would just get out of their way. At this point, many consumers, like the one who called Scott, just want us to open the front door of homes until they make their buying decisions and THEN they'll be ready to use real estate services. Real estate agents, to many consumers, are just walking key pads.
ENTER THE INTERNET Once consumers began using the Internet to locate real estate services, agents and brokers were anxious to garner a larger share of the Internet user consumer by providing more and more information on line. Led by the NAR, the rush to put listing information on line changed the dynamics of the real estate industry to one of broker centric to one of information centric. History will decide if the decisions made by the NAR in the early 1990s were wise.
ENTER THE FRANKEN LEAD A new industry was spawned when companies used listing information to come between the home buyers and sellers and the real estate practitioners, agents and brokers. These companies contributed no value to the real estate transaction. They serve to keep brokerage fees high through by skillful use of the Internet to sell real estate services that they don't provide, but sell the consumers to the agents and brokers who do provide the real estate services. Consumers are woefully uninformed about the value of real estate services until they are in the process of buying or selling property. The realization that Internet lead companies contribute no value but add to the cost of their real estate cost for services is not understood by the consumer.
ALL IN THE NAME OF CHEAPER SERVICES FOR THE CONSUMER Deregulation killed the airline industry when the consumer demanded cheaper and cheaper airline travel. Carriers find it impossible to provide quality service, on-time service, comfortable service and a good travel experience by air for the price they can sell tickets. The same thing could happen to the real estate industry. Consumers are demanding more and more information and control over the real estate transaction and they want real estate related services at cheaper and cheaper prices. The government caused the decline of the airline industry and they are attempting the same thing with the real estate industry "because the consumer wants cheaper real estate services". Airline travel is, indeed, cheap. Does the public also want the level of service they get in airline travel in their real estate transactions?? We've already seen movement in that direction with the real estate brokerages that offer cheap real estate services because they do little beyond an MLS listing and a sign in the yard. Consumers who opt for these listing companies usually eventually list with full service brokerages because they realize that they don't know what they're doing. They don't use a broker from desire, but from necessity. They want cheap and cheap doesn't always get the job done. Just like cheap didn't get the job done in the airline industry, it won't get the job done in the real estate industry.
THE GOVERNMENT BELIEVES THAT THE CONSUMER JUST WANTS CHEAP Many consumers believe that the most important task in buying a home is finding the house that they want to buy. Actually, finding the home to buy is the easiest part of the home buying transaction. The homes are there, the consumer can find them on line. They can drive by and decide which homes look worthy of an interior tour. Consumers no longer need an agent to find homes for sale. Many consumers' first contact with a licensee is when they wish to see the interior of a home for sale. Many home buyers believe that, if they found the home they like without an agent, that they can then proceed to buy that home without the assistance of an agent to advise them on the myriad aspects of a real estate transaction. In this respect, home sellers are often smarter consumers than home buyers.
WHY DO SELLERS LIST THEIR HOMES FOR SALE WITH REAL ESTATE BROKERS? The need for competent listing brokers has not changed. Sellers need listing brokers for many reasons including but not limited to:
Safety - Controlled access to property listed for sale is important to home owner occupants. MLS - A centralized distribution of listing information makes homes listed for sale available to as many prospective buyers as possible. Contracts - Licensed real estate practitioners use forms approved by the state governments for consumer protection. Financing - Agents and brokers can assist in making sure that prospective buyers are able to finance the purchase of their home. Property Condition Disclosure and Inspections - Agents and brokers have the knowledge to manage disclosure and inspections. Settlement Services - Agents and brokers manage the settlement services to coordinate the smooth transfer of ownership.
For these services, sellers paid a broker fee that provided sufficient income to broker and agents to list the house for sale, find a qualified buyer and keep the industry running smoothly for the buyers and sellers.
THE GOVERNMENT ISN'T ALWAYS RIGHT Once faced with the complexity of real estate transactions, the consumer has a choice. Do I want it cheap? Or, do I want it right?
49 Comments on REAL ESTATE AGENTS AND BROKERS - BEWARE THE AIRLINE INDUSTRY MODEL
OCT
23
2007
Lenn- very thorough, thought-provoking analogy. It's frustrating to think that people want "cheap" when it comes to making the biggest, most costly, life-changing purchase of their lives. I would be more apt, as a consumer, to "get it right" rather than "get it cheap". Perhaps the time will come when it swings back toward quality over price- we can only hope!
Lenn - Another excellent post. Great analogy. Competition is good on a level playing field but, in the end, whenever the government gets involved, things seem to go downhill. Let's hope the government finds another industry to help...
Lenn, you're quite right - unfortunately. Many people do think of us as "walking keypads". The greatest oxymoron continues to be, "I'm from the Government and I'm here to help!"
You've done an outstanding job of defining the problem. The big question is: what do we do now?
Good post! Much food for thought! I think the key statement you made, "broker centric to one of information centric" is at the center of the issue. The ratio of brokers to agents is also a factor. In our area, seems that anyone who is registered to vote has a license to sell real estate! You now have 'broker owners', 'broker of record', 'broker in charge', 'associate broker', etc. Too much proliferation too quickly! Anyhow, JMHO! Thanks, Fran
Lenn, Thanks for another excellent post. NAR efforts to promote the value/services agents bring to the table is a very small step in the right direction. Keep up the drumbeat.
Lenn, you make perfect sense. My disappointment, likely incorrect (but is what it is) is with the real estate industry AS A WHOLE, with full NAR participation. I find it difficult, in the face of the shenanigans that are so prevalent in our industry, to feel any disappointment over the involvement of the DOJ. Had the NAR accepted alternative methods without exclusion, this mess would likely not be occurring. Had real estate companies, along with their new and eager agents, viewed alternative methods with respect and indifference (not vicious blackballing and whining) perhaps there wouldn't be the need for government involvement. That "non existant" commission has repeated itself over and over (in my area)- with sellers taking the FSBO route in some cases to avoid the cost. While it's certainly changing, it's the old boys network (OK, with women as well) that created this mess- let them relax in it. For the rest of us, we'll offer flexibility, rebates, whatever- thanks to the rigid and inflexible methods employed by many, we can all now compete with an opportunity to seal the fate of these networks with a simple DOJ email. A good thing? No, a terrible thing. But, self perpetuated. At least in SOME areas.
Great Post Lenn. I do believe the DOJ has been on this push for a while. The airline industry was made up by a handful of Giants. The real estate business is made up by a multitude of ordinary people each working for themselves. I believe the real estate business will be a much much harder push over.
Lenn, It's sad that people from inside our own industry are promoting the "cheaper service" in the name of competition, not knowing that they are destroying themselves and the rest of us. Also, the big internet based companies that offer MLS services and step-by-step buying or selling guidelines, are hurting our industry.
Great post and I am a little annoyed that I cannot high five it as it so deserves.
Setting Anti-Trust issues aside for a moment, if the Government right hand was actually talking to the left hand, the IRS would tell the DOJ to stand down seeing as how our involvement creates revenue in the form of paid income taxes that isn't otherwise generated on capital gains taxes until the limit has been exceeded. Knock, knock is anybody home on the Hill?
Our tax dollars are being used for the DOJ to sue NAR and our NAR dues are being used to defend the DOJ suits. Clearly, I am not a lawyer and I might be slow to catch on, but now I am REALLY annoyed.
Lenn.. As always an excellent and thought provoking post. NAR must accept a lot of blame for the current situation because of their continued refusal to demand higher qualifications to obtain a license. They are more interested in a larger dues paying membership then in better educated agents. Each time the market trends upward we are engulfed by a sea of poorly qualified new agents. The truth is that without stronger requirements for obtaining and maintaining a license the public will continue to view us as non-professional and under qualified. If we want professional status we need to have professional standards.
As you note.. the internet is simply one of the tools we use to help the consumer. I opened escrow on a property yesterday that neither the buyer or seller believed would come together.. the reason is that the other agent and I were able to work out the issues each party had and reach a compromise that was a win-win for both parties. It is unlikely that left to their own devices the parties could have set aside their concerns and reached an accord. My clients hire me for my skills and knowledge that go beyond a search of available properties.
Lenn, where are the 5's when we need them ? What a shame !
I agree, you know I do. We are being hired now for our knowledge not access to the data. Don't get me going on NAR, but this same thing will happen if we get National Health Care. Having just gone through dealing with Dr's and hospitals with Allyssa and us having great insurance, ( my husbands a teacher) I fear what will happen if we get national coverage. Slowly we are becoming more socialist. Sold a house to a Dr from Great Britian this summer who moved here. Why ? He said it takes forever for people to get MRI's and other tests. He said America is so much better, yet after I what I went through it is a mess.
This is long, feel free to delete. I remember the days we use to dress up to fly !! LOL
Lenn- very thorough, thought-provoking analogy. It's frustrating to think that people want "cheap" when it comes to making the biggest, most costly, life-changing purchase of their lives. I would be more apt, as a consumer, to "get it right" rather than "get it cheap". Perhaps the time will come when it swings back toward quality over price- we can only hope!
Sandi - Folks usually get what they pay for. The more experience we have, the more we earn because we can perform. It may not appear that way, but the more experienced agents get their buyers and sellers to settlement.
Lenn - Another excellent post. Great analogy. Competition is good on a level playing field but, in the end, whenever the government gets involved, things seem to go downhill. Let's hope the government finds another industry to help...
Gary - The government have not the foggiest idea what we do. How can they fix what they don't understand???
Lenn, you're quite right - unfortunately. Many people do think of us as "walking keypads". The greatest oxymoron continues to be, "I'm from the Government and I'm here to help!"
You've done an outstanding job of defining the problem. The big question is: what do we do now?
Brian - The best thing the government can to is protect us from foreign attack. Doesn't appear that they have that one solved yet, does it? Oh, and they can regulate Interstate Commerce.
Lenn,
Good post! Much food for thought! I think the key statement you made, "broker centric to one of information centric" is at the center of the issue. The ratio of brokers to agents is also a factor. In our area, seems that anyone who is registered to vote has a license to sell real estate! You now have 'broker owners', 'broker of record', 'broker in charge', 'associate broker', etc. Too much proliferation too quickly! Anyhow, JMHO! Thanks, Fran
Fran - Thanks Fran. Sometimes I have an epiphany in the midst of a post. I believe I made a discovery in this one.
Lenn, Thanks for another excellent post. NAR efforts to promote the value/services agents bring to the table is a very small step in the right direction. Keep up the drumbeat.
Bill - If the NAR had focused on our value to a complicated transaction rather than the numbers of members, we would be farther along with that message.
Lenn, you make perfect sense. My disappointment, likely incorrect (but is what it is) is with the real estate industry AS A WHOLE, with full NAR participation. I find it difficult, in the face of the shenanigans that are so prevalent in our industry, to feel any disappointment over the involvement of the DOJ. Had the NAR accepted alternative methods without exclusion, this mess would likely not be occurring. Had real estate companies, along with their new and eager agents, viewed alternative methods with respect and indifference (not vicious blackballing and whining) perhaps there wouldn't be the need for government involvement. That "non existant" commission has repeated itself over and over (in my area)- with sellers taking the FSBO route in some cases to avoid the cost. While it's certainly changing, it's the old boys network (OK, with women as well) that created this mess- let them relax in it. For the rest of us, we'll offer flexibility, rebates, whatever- thanks to the rigid and inflexible methods employed by many, we can all now compete with an opportunity to seal the fate of these networks with a simple DOJ email. A good thing? No, a terrible thing. But, self perpetuated. At least in SOME areas.
Laurie - I believe you are correct. FSBOs, Fee For Service, Discount, etc., brokers have been around forever. The NAR and state BORs should have ignored them and we wouldn't be in the midst of litigation. All of the "fringe" models together can't harm our industry. Internecine battles are self destructive and don't help our immage at all.
Great Post Lenn. I do believe the DOJ has been on this push for a while. The airline industry was made up by a handful of Giants. The real estate business is made up by a multitude of ordinary people each working for themselves. I believe the real estate business will be a much much harder push over.
Daniel - It is possible that the horse is out of the bard with respect to the listing information. It didn't have to be this way.
Lenn, It's sad that people from inside our own industry are promoting the "cheaper service" in the name of competition, not knowing that they are destroying themselves and the rest of us. Also, the big internet based companies that offer MLS services and step-by-step buying or selling guidelines, are hurting our industry.
Mana - I don't believe that the fringe business models harm the full service brokers and agents at all, except when we let them. They have always been, are now and always been fringe. They will persuade a few buyers and sellers, but their share of closed sales is very small. We have nothing to fear from competition. If consumers simply want cheap, they will get the service they pay for, just like the discount fares on airlines standing in line for hours just to go through security.
Great post and I am a little annoyed that I cannot high five it as it so deserves.
Setting Anti-Trust issues aside for a moment, if the Government right hand was actually talking to the left hand, the IRS would tell the DOJ to stand down seeing as how our involvement creates revenue in the form of paid income taxes that isn't otherwise generated on capital gains taxes until the limit has been exceeded. Knock, knock is anybody home on the Hill?
Our tax dollars are being used for the DOJ to sue NAR and our NAR dues are being used to defend the DOJ suits. Clearly, I am not a lawyer and I might be slow to catch on, but now I am REALLY annoyed.
Amanda - With falling property values, tax receipts for local governments is going down, down, down.
Lenn.. As always an excellent and thought provoking post. NAR must accept a lot of blame for the current situation because of their continued refusal to demand higher qualifications to obtain a license. They are more interested in a larger dues paying membership then in better educated agents. Each time the market trends upward we are engulfed by a sea of poorly qualified new agents. The truth is that without stronger requirements for obtaining and maintaining a license the public will continue to view us as non-professional and under qualified. If we want professional status we need to have professional standards.
As you note.. the internet is simply one of the tools we use to help the consumer. I opened escrow on a property yesterday that neither the buyer or seller believed would come together.. the reason is that the other agent and I were able to work out the issues each party had and reach a compromise that was a win-win for both parties. It is unlikely that left to their own devices the parties could have set aside their concerns and reached an accord. My clients hire me for my skills and knowledge that go beyond a search of available properties.
Kaye - I've been beating the drums for higher standards for licensure for years. Sad but our industry needs a real shaking up. Gone are the days when the neighbor had a license and serviced friends and neighbors. With the Internet and buyers looking for value, we have GOT TO DELIVER high quality services.
Lenn, where are the 5's when we need them ? What a shame !
I agree, you know I do. We are being hired now for our knowledge not access to the data. Don't get me going on NAR, but this same thing will happen if we get National Health Care. Having just gone through dealing with Dr's and hospitals with Allyssa and us having great insurance, ( my husbands a teacher) I fear what will happen if we get national coverage. Slowly we are becoming more socialist. Sold a house to a Dr from Great Britian this summer who moved here. Why ? He said it takes forever for people to get MRI's and other tests. He said America is so much better, yet after I what I went through it is a mess.
This is long, feel free to delete. I remember the days we use to dress up to fly !! LOL
Missy - Thanks. We don't have "5"s but we still have the "Flag". I recently sold a home to a couple who sold a home in England. Things are quite different there. Hey, I remember when the Flight Attendants dressed up.
Lenn, once again you have written a well thought out and resounding "Oh my - she sure is correct!" post. I've read it twice and am nodding my head while reading it in agreement with you.
Ana. We all hope with don't get reduced to order takers. Only with good agency services will the real estate industry remain viable. If buyers and sellers have to do it themselves, chaos will result. But, then, they don't know that yet. Let's home they never find it out.
Very well done Lenn. You know when IDX was first made available I was not a fan then and I'm still not. I just felt we were releasing way too much info to folks who would take advantage of it to our detriment. And they did. All the lead generators would have a very difficult time if they didn't have our sellers properties to use as bait. But it's done and we certainly can't take it back. I've read the DOJ suit against NAR several times and still don't know what the hell they are talking about. We are in my opinion about as transparent and competitive as you can get in are industry. The consumer has many many choices of who to hire and how much to pay or they can certainly choose to go it alone. No one is forcing anybody to do anything.
Big Gov really needs to stay out of it and let free enterprise do it's thing. And real estate professional need to start acting as professionals.
Very good post Lenn. I'm a little brain dead today so my comment may not make any sense.
Lenn, a wonderful article. I think real estate agents will survive. But you mentioned the travel industry. Look what happened to the formally trained travel agents once the Internet took off. I'm hoping with a downturn in the market the cream of the crop agents will get more business and the "hobbyists" and slicksters will just go away.
No, the lawsuit doesn't make any sense. I have to admit that the mega brokers didn't help us by attempting boycotts of limited service companies. If the megas had just let them alone, they'd probably be gone now.
As for the IDX, I did a tremendous business before it and I'd have figured a way to do business if it had never been developed. NAR boxed us into that one. They tripped all over each other to control agents on the Internet, shooting all of us in our collective foot on the way. They should have just let us do it. We'd have served the public well and competition would have kept fees down. Those of us on the Internet would have succeeded faster. The lead machines wouldn't have gotten the power they did if the listing information hadn't been spread over the world.
Joan. Thanks for commenting. One thing for sure, if a licensee wishes to continue in the business of selling real estate, they need to work harder than ever before. The same old, same old will not work forever.
Lisa. Thanks Lisa. Don't just "stick it out". Make things happen.
Lenn, one of my sayings is nothing is cheap, maybe less expensive. I think of cheap as junk. The consumer better be careful of what they ask for, they just mite get it. Yes, I do remember Jimmy Carter, he liked to get me killed in 1979.
I commend you on a well thought out post and All the comments as well. The more I read in AR, the more I gain insight into the issues of the industry. Thanks for all the sharing
Lenn, an excellent post relating aspects of both industries. As professionals, we need to stand up and refuse to act as "nothing but a lockbox key". If we perceive ourselves as such and act that way, consumers will believe it too. We need to show the value we bring to the transaction on a daily basis and let our clients know everything that we do. I was thrilled when a recent client told me "I don't need your help finding the house. I can do that on my own. I need you for your knowledge, advice, and negotiating skills." Amen. "Do you have any friends like you?"
Mike. Thanks for commenting. AR is a great place to get "the pulse" of the industry.
Brian. Thanks. Your client's comment was precisely why folks do need us. I refuse to be a "walking keypad". Got to find that image. I made one and now can't find it.
Bill. I've thought of that many times. Seems to me that the megas with their agents, loan originators, title companies, inspector affiliates, etc. already have that.
Michele. I can't figure why it didn't get featured either. I'm thankful for folks like you who read my blog.
Fran. I agree. I suppose the spector of RESPA violations stops some brokers from calling it that. But, we know what they do.
There are brokers or companies, Century 21 comes to mind, that have everything you can think of including home inspectors, termite inspectors, home improvement folks, lenders, agents, title companies, etc.
This is one of the best dissertations on the state of the industry that I've read in a long time. Thank you Lenn! You begin your discussion with the following question, "Remember when airline travel was an adventure?"
I think that in retrospect...NOW is the time when airline traffic is an adventure. You may find yourself trapped aboard an airline for hours due to delays with stinking overflowing toilets and limited food and beverages, you're searched like a presumed terrorist and don't know if your travelling partners have malevolent intentions, there is certainly no pillow or warm towel to provide a little comfort...AND meals...well, bring your own. NOW, that's adventure!
The demise of the travel industry has been running around like a little tape in my mind. You so eloquently state what is becoming an increasingly accurate analogy. Air travel going down the tube is an unfortunate inconvenience...the peril of the largest financial transaction which most Americans undertake being hijacked is truly going to be an unparalleled economic disaster. The question is will we wake up at the beginning of the nightmare or at the end?
Debbie. Thanks. I recall when a buyer once told me that she "just needed me to open the doors for her". She doesn't need an agent. I politely declined because as I told her, "I'm not a walking key pad".
Lola. Thanks for the kind words. There is no question that many entities wish to effect a disintermediation of the real estate industry. I'm of the opinion that with such a large financial investment, they need experienced help. The government would like to see buyer anarchy in real estate transactions. Dang. There's another blog coming.
John. I'd be quite willing to pay twice as much if the dang plane could get off the ground. My last flight took 3 planes and 8 hours to get off the ground. How much is my time worth?? A lot more than the $99 flight.
Lenn, very nicely done...and poignantly presented. The trend to demonize Realtors as money grubbers who do nothing for the money seems to have gained strength with media and action groups more notably the banking industry over the last few years. We need to do a better job of representing. Great post Lenn.
Lenn -I am usually a strong believer in the power of the free markets (given that I came from the communist Russia). Government has tremendous powers, but at the end of the day the consumers will be either happy or unhappy with their real estate experience. They will hopefully vote their satisfaction or not, with their wallets. Travel analogy applies here too. I now spend a lot of time researching a trip, and the end of the day I am not sure what I get, until I get there. Well, the trip is $10,000, not $500,000. If the consumers think that we open the door, and point- "this is a kitchen", "this is a bathroom", yes there isn't much value in that. On the other hand, If they come to believe, that they need advice, guidance, objectivity, negotiating skills, etc. , then they can see the value proposition. So, why do consumers not see our value? I think we need to be asking that question as well. Thanks for the "hard core". I truly enjoyed it.
Lenn, that was one of the best and most insightful posts I've read on the changing face of real estate. I didn't learn much new (but only becauseI've closely tracked what's been happening) but the way you presented was just superb and unique. I look for more from you like this, you've set the bar high! I'd like the DOJ to see that post in hopes they'd understand the damage they are about to inflict on the consumer.
Lenn,as usual you always write great posts. Great stuff. I still can't believe a home buyer requested a supra key of a real estate agent. This post needs to be on www.realtor.com and the Department of Justice. I can't wait to read part II.
I like Faina's depiction. Doesn't that partly reflect on the NAR's inability to educate the consumer about the value of 'realtors'...and shouldn't that be their mission? I hear now in some of their radio ads they're attempting to make up for lost ground. Too little, too late, I think!!! Thanks, Fran
Lenn, I need to warn you, this may sound a little bit like a rant, and I don't mean for it to. And I think your point that the government gets it wrong a lot of the time is a good one. I also agree that by introducing consumer choice into the market place, you create room for confusion and lower standards.
But, I think comparing real estate to airlines might be based on a huge misunderstanding a lot of people have of the role government's played in airline regulation. Let start by saying that I worked in the regulated industry for 10 years from 1963 to 1973, and I was a senior staffer at the now defunct Civil Aeronautices Board during the Carter Administrtion. The regulatory scheme operated, not to protect the interests of airline passengers, but those of the regulated carriers. The statute told the agency to "promote and protect" the aviation industry, and that is exactly what they did.
The CAB decided who could and who could not operate an air carrier. (Their decisions were not based at all on safety consideration, which were regulated by the Federal Aviation Administration.) From the time the agency was set up in the 1930s until Fred Kahn took over in the 1970s, it did not permit a single new airline to begin scheduled service on interstate or international routes. This would be like having the feds say that no more people could obtain real estate licenses!
The only low cost flights back then were charters, and they were laden with restrictions. To qualify, you had to have been a member of the club or orgainization that chartered the flight for at least 6 months, and there was lots of cheating. So, this would translate into some federal agency telling the companies that are trying innovative ideas ithat they can't provide the services currently licensed agents do, and require their customers to jump through hoops to take advantage of the services (federally limited) they could offer.
For the handful of airlines that won certificates back in the 1930s, they could not fly where they wanted to. The CAB told them which routes they could fly. Would I like the feds to keep already licensed agents out of my farm area? That would be heaven!
Airlines were obligated by the old federal statutes to charge consumers a minimum fare the routes they served. If was a federal no-no for an airline to under-charge a customer, and our tax dollars paid investigators and attorneys the federal pay cap to skulk around airline boarding gates to make sure the airlines were checking youth fare IDs, and making sure that nuns did not board B'nai B'rith charter flights. So, it would be like the feds forcing us to all charge some agreed to higher than market commission, it would make life easier, but like the airlines, we'd probably start to cheat and rebate under the table, creating a whole new class of federal investigators - and opportunites for us to wind up in the slammer.
And I read a lot of the tales of travel woes that came to the CAB, passengers begging for some kind of protection against delayed and capriciously caneclled flight, rampant overbooking, and lost or damaged baggage. Here again, the rules not only protected the airlines, but they protected the carriers from lawsuits filed by aggrieved consumers. This is the equivalent to a federal E&O program that makes it impossible for a client I abused to sue me. For many agents, that would come in handy, but i'm pretty certain that it wouldn't be great for consumers.
And, while most of the progress in airline deregulation seemed to take place during the Carter administration, it was an idea that started during the Nixon, then Ford administration and finally happened during the Reagan years. It had bi-partisan support, and most of the airlines strongly oppsed it.
And most of the hassle surrounding air travel today is linked to security concerns. OK, granted, the food sucks. And it's hard to eat, because if you're taller that 4 feet, you have to sit in a cramped seat with your knees in your mouth.
But when I fly from Washington to Houston, i pay less than people paid for the airline tickets I wrote on that route back in the 1960's. And if I want it, I can always pay more to fly business class.
And yes, as in the airline industry, there's a lot of confusion out there, but I'm not sure that competition is lowering standards in our business.
I think that a lot of us with traditional practices are having to become almost obsessed with service quality - we need to find new ways to provide real value to our clients.
OK. It's time for me to stop this and go back to making a living! Thanks for your post.
Lenn, I need to warn you, this may sound a little bit like a rant, and I don't mean for it to. And I think your point that the government gets it wrong a lot of the time is a good one. I also agree that by introducing consumer choice into the market place, you create room for confusion and lower standards.
Patricia. Rant on. I love different opinions. Your experience may be different than mine.
But, I think comparing real estate to airlines might be based on a huge misunderstanding a lot of people have of the role government's played in airline regulation. Let start by saying that I worked in the regulated industry for 10 years from 1963 to 1973, and I was a senior staffer at the now defunct Civil Aeronautices Board during the Carter Administrtion. The regulatory scheme operated, not to protect the interests of airline passengers, but those of the regulated carriers. The statute told the agency to "promote and protect" the aviation industry, and that is exactly what they did.
I understand that completely. That didn't work too well did it??
The CAB decided who could and who could not operate an air carrier. (Their decisions were not based at all on safety consideration, which were regulated by the Federal Aviation Administration.) From the time the agency was set up in the 1930s until Fred Kahn took over in the 1970s, it did not permit a single new airline to begin scheduled service on interstate or international routes. This would be like having the feds say that no more people could obtain real estate licenses!
Instead, in the hallowed name of "competition", they permitted anyone who could finance a rinky-dink carrier to get routes. What happened to scheduling? What happened to luggage management? What happened to timely take offs and landings?? It is NOT better than it was. It is a lot worse. IMO.
But when I fly from Washington to Houston, i pay less than people paid for the airline tickets I wrote on that route back in the 1960's. And if I want it, I can always pay more to fly business class.
I'm not yet convinced that price is the most important thing when flying. In fact, I'd fly A LOT more, if I could just depend on getting where I want to go.
And yes, as in the airline industry, there's a lot of confusion out there, but I'm not sure that competition is lowering standards in our business.
My post was never about eliminating competition. I have no problem with competition. However, when a consumer is involved in a financial transaction that may represent their all of their assets, eliminating safeguards that we have in our industry by encouraging some of the limited service brokerages we have today, is not, IMO, in the public interest.
I think that a lot of us with traditional practices are having to become almost obsessed with service quality - we need to find new ways to provide real value to our clients.
There is only one way for me and that is full service. I can't work in the dark and I don't work with folks who try to do my job. They just get in the way of efficiency real estate brokerage.
OK. It's time for me to stop this and go back to making a living! Thanks for your post.
1. The real danger is in a change in the public's perception. An example is that young people think music should be free & not sold as cd's or records as when we were young. I read that bands are begining to give away music online to get people to attend concerts. A change in the public's perception. The record companies are going the way of the dinosaur.
2. I thought that before Realtors there actually was a crisis in that property was sold buyer beware & that all changed as a result of the real estate industry. The goverment wants to add more & more laws but at the same time is trying to get rid of the gatekeepers (Realtors). Let to their own devises will consumers return to Buyer Beware Real Estate?
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real property isn't comparable to that of an airline ticket. The comparison that I can make is that of the deregulation of the airline industry and the government's attempt to strip control of listing information from the real estate industry in a quest to reduce the cost of real estate services to the consumer. 
basis. A prospective buyer calls demanding key box access to a home for sale. The caller wasn't interested in his services. They want just one thing, direct access to the property for sale. Many consumers believe that the public have the right to eliminate the real estate services in residential real estate transfers. It's a bit of a shock when one fine day you realize that many consumers with a home to sell or a need to buy a home wish that you would just go away and not get in their way to find the home they wish to buy or sell the home they wish to sell. 
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