That's a very serious conversation about the trends, possible outcomes and inevitable changes in our Real Estate industry.
I am very pleased that Active Rain authors allow to re-blog their writings. Please read and share your thoughts about the Jeff Corbett's brilliant essay.
So, I've been running my mouth about this word called ::Transparency:: for a few years now. When you wax philosophic on a topic for so long, watching it manifest in the main stream elicits redemptive emotions.
What is Transparency? The word has a far reaching and fascinating taxonomy depending on what the corresponding topic is. Generally, its a noun that suggests that the given topic can be seen and understood clearly with little left to the imagination. Transparency fosters a greater sense of awareness around a given topic. Most people will say that greater transparency regarding a given topic is generally a good thing.
So, is Transparency a good thing for business?
On paper, as an ideology, Transparency represents practices performed in a more truthful, enlightened and thus positive light.
In practice, in real life, Transparency tends to compromise established industry's, institutions and individuals ability to continue to function as they traditionally have, more often than not with extreme deleterious consequences to a rigid status-quo.
You can't handle the truth! - Colonel Nathan Jessup.
Copious amounts of raw disseminateable data, a byproduct of our progression into the The Information Age, has catalyzed the virility of Transparency creating fast moving paradigm shifts that corporations and industry stalwarts are simply unprepared to handle. Transparency exacerbates underlying 'issues' and causes rapid disintermediation to legacy industries like ::wait for it:: real estate (and mortgage).
The writing has been on the wall for years now:
- From 1997, Clayton Christensen's The Innovators Dilemma articulates that a 'successful company with established products will get pushed aside unless managers know when to abandon traditional business practices.'
- From 1999 Blown to Bits states that "the Internet and other technological innovations are changing the basic structures of most industries and simply destroying the remainder." and "Increasingly, your customers will have rich access to a universe of alternatives, your suppliers will exploit direct access to your customers, and your competitors will pick off the most profitable parts of your value chain. Your competitive advantage is up for grabs."
Transparency has brought many an industry to its knees. While it seemed like a good idea at the time, it's clear today that the money that was printed to create the Mortgage Backed Security Market created a bubble that popped. Consequentially bubble based business models are taking it on the chin, drawing out the knee jerk reaction of indiscriminate cost cutting. As a business, trimming unnecessary fat is very prudent right about now, but what shouldn't be ignored is investing in the type of innovation required to compete for future discerning consumers (and agents).
Today, more than ever, its time to 'abandon traditional business practices' if you want to stay in business much less maintain a competitive advantage.
Back in late 2007, I quickly rambled about three topics that represent vanguard of the future of real estate:
- Compensation reformation or divorcing real estate commissions is coming, since inter-broker compensation can be handled outside of the traditional MLS...A different version of the same thing isn't a viable solution and mass adoption of isn't probable considering the openness of the technology landscape, 2007-08 forward.
- Zillow and Trulia aren't it either...Both well funded 3rd party destination real estate information websites business models revolve around advertising. Advertisers pay money to players like Z & T because consumers are carousing their sites, not an agents or brokerage, so it would seem fair to say that both entities would like to keep the consumer there. This isn't a knock against either company, they do what they do and make no bones about it, however their respective agendas don't line up with the individual agent...
- An application (technology, widget, et al.) that allows for a real estate professional to 'share' their valuable information and market their services to others within similar spheres, while insuring an acceptable assurance of reciprocity has yet to be identified...though it should involve a strategy that implements an open Social Networking Optimization framework that allows birds of a feather to flock and fly together...
1) Compensation reform (initially) on the Broker to agent level (CGI splits, desk fees) is manifesting out of brute downward pressures on the market: depressive home values, heavy inventory and lack of credit. These conditions are pushing many agents out of the industry and causing the best agents to become rather brand or franchise agnostic, perpetually asking: What have you done for me lately? Loyalty means little in a Bear market. Broad compensation reform between agent and consumer is an inevitability.
2) My overall point that the agendas of the Zillow's and Trulia's of the world don't line up with the individual agent brokerage is shared and expounded on (far better than I could) by my very smart friend Rob Hahn. How long is it before a critical mass of the best agents adapt to open their own (very virtual) brokerages, adopt these types of sites as primary marketing channels, utilize their superior products and services in place of the expense of affiliating with a broker-franchise-brand that provides diminishing, even negative value?
3) The 'open web' proliferated by the likes of Facebook Connect and Google Friend Connect offer the 'open Social Networking Optimization framework' described above on highly scalable and cost effective levels. Aggregating and sharing granular information has never been faster, easier or cheaper with free communication syndication platforms like blogs, Twitter, FriendFeed and FeedFuze. Agents that have learned to harness these tools and services don't need to work for a major brand to succeed. They are becoming the brand.
Instead of dismissing these thought threads and seemingly diminutive products and services, real estate Franchises and Brokers would be wise to listen, adapt and adopt before they trip the line irrelevant. Over the past couple years a new position within the social spheres of the online real estate industry has popped up: Director of Social Media. It's a fancy name for someone who knows how to communicate online using the products and services mentioned above. Broker-Franchises should also seek 'Social Media Directors' and promote them from within their current contingencies. They represent a worthy investment as these folks have learned how to leverage information and create conversation around themselves and/or their business far more effectively than traditionally expensive marketing campaigns...they represent the future of real estate.
The generation that will pull this recession up from the depths knows nothing but the internet and how to communicate with the world using its cornucopia of social products and services. Tech savvy consumers will only connect with similarly tech savvy real estate professionals.
To tie this all together, I don't believe the real estate market will simply correct without major Transparent changes from and by the people who serve it. With money continuously being printed and infused into our economy, when things do turn inflation will be hard to control. Real estate is usually a sound hedge against inflation, as real assets typically rise in value in relative correlation with inflation percentages. These aren't 'usual' times. When real estate values do stabilize (aka bottom out), monetary inflation will likely increase at a hefty tick, further diminishing the buying and borrowing power of most people. Tough times are still ahead, there is no quick fix. Consumers will demand (and need) great service for less cost, or they simply won't buy.
The agent and business who ends up succeeding in this market will be the one who kept one eye on cutting costs and the other on investing in innovative resources, specifically industry relative content syndication applications like the examples mentioned above, and other similar technologies that promulgate Transparency. On the upside, these tools and technologies are rolling out cheaper and better than their predecessors...evaluate, adapt and adopt...or start looking for a new career.