It's no secret. Our industry is being transformed. With online venues cropping up faster than warts on a toad offering the consumer the answers to all their real estate needs for the price of a wing and a prayer, our industry is being challenged as never before. And those challenges are increasing exponentially.
For years now I've believed that we, as an industry, have to be more pro-active in listening to what the consumer wants and in transforming our businesses in ways that better meets their needs. The fact is, we ARE being transformed whether we like it or not. And the longer we stubbornly bury our heads deeply in the sand, the easier we're making it for these pseudo-services to replace us. The "big box" businesses may offer a good option in retail, but when it comes to real estate, they have serious shortcomings! That prospective home buyer or home seller certainly can take on some of the responsibilities that have historically been left to the real estate agent, like creating flyers, newspaper ads, a web presence for their property, having signage, driving past homes that might interest them, etc. The proliferation of technology tools and services has made such things simpler and more affordable than it was even a couple of years ago. However, NONE of those options give the consumer what they need most from us...and the things that make the BIGGEST impact on their home sale or home purchase, like:
- Our fiduciary representation
- Our understanding of the market, the competition, local trends, financial climate
- Experience in navigating the entire process of home buying or home selling
- Negotiating skills in the midst of what is, for most consumers, an emotionally charged situation
- Our undertanding of what is (and more importantly is not) in their best interest to disclose to someone who is (or might soon become) the "other" party in a negotiation
- Our specific understanding of their particular needs and how those needs are impacted by the terms of a real estate contract
- Our ability to translate that understanding into the language of a contract and the negotiations themselves
Recently, a fabulous agent in the Baltimore area, Margaret Rome, created a wonderful post telling folks about her affiliation with the ACRE Consulting program and how it's impacted her thinking and her business. It was a terrific post and has gotten people thinking (consumers and agents alike). Margaret is an innovative, resourceful, highly skilled agent who, like many of us, came to the conclusion that there must be a better way! And rather than sitting back and waiting for someone else to transform the industry she's loved and served for many years, she decided to take the bull by the horns herself and do something that made sense for her business AND for the clients and customers she served.
So, what is ACRE and why does it make so much sense for both the agent and the consumer? Well, first, ACRE is the anacronym for Accredited Consultant in Real Estate. At its core is the mindset that real estate is not a "one size fits all" industry. Not every seller or buyer or every situation needs to be handled in exactly the same way. The consumer has a right to have choices in what services they want and how they are going to pay for them. We call this "transparency". For many consumers, regardless of the options offered to them, the "commission" option where the agent is paid based on sales price with payment at the close of escrow will always make sense to them because it affords them the "protection" of deferred risk. If the home doesn't sell, or the sale doesn't close, the services they received were free to them (though they certainly had a high cost to the agent performing them). That's why commissions must be high enough to be a good incentive for the agent.
The consumer, when the information is provided to them realistically, does understand the concept of "high risk, high reward". What they typically do not perceive, however, is that their prospective transaction is high risk. The typical seller generally believes "of course my house will sell...so where's the risk?" and the buyer believes there's no inherent risk with working with them as buyers either! It's only when the are presented with "options", though, that the begin seeing the risk! When you say to a seller "commissions are what they are because there's always the risk that the home won't sell, or that something will go wrong with a transaction and it will not close, and if that happens the agent investing all their time, talent, and marketing dollars will get nothing in return", but you may be able to pay less if you are willing to reduce that risk by paying for services when they are provided or by making up-front non-contingent payments" (so it becomes their money being put at risk), that's when it hits home - they now understand the level of uncertainty in their prospective transaction.