Dream on

OK, the cold is long gone, so back to the dream sequence. Been doin other stuff--analyzing local sales stats for last 6 years, writing vacation rental treatise, etc, etc. I even slipped in a little real estate.

In the dream (see previous post), I saw with new clarity something I already consciously suspected. The idealized real estate agents that the trade associations are attempting to create with standardized policies, forms, disclosures, educational offerings, political ideologies, etc. may not be optimally suited to provide the services, knowledge, expertise, positive experiences and WISDOM that the public wants and needs when they buy and sell residential real estate.

I'll repeat (again) that the real estate trade organizations DO NOT represent the public. They represent the members, over 1.1M nationally and over 180,000 just in this state. The organizations are thriving corporate entities striving to become a major part of every aspect of the residential real estate purchase process. They create standards of practice and because membership is nearly ubiquitous there are no alternatives and the standards of entry are minimal. Buyers and Sellers get the kind of service the trade organizations decide they get. Sure there's some diversity in service levels based on franchises, firms and agents, but to a large extent it's merely variation on a theme defined by the national and state trade associations. Didn't used to be that way. The trade organizations had nearly no impact on day to day business 25 years ago. Are we better off now? More importantly is the public better off now?  

When have you ever heard a Buyer or Seller say "what I really want is an agent who has been thoroughly trained in managing his or her risks by using a host of hard to understand "one size fits all" forms, disclosures and procedures created by committees with assistance from attorneys on the staff of trade organizations who represent member agents and brokers, but not me"? Buyers want to find the RIGHT HOUSE and Sellers want to find the RIGHT BUYER. Managed risks aren't high on the radar screen as the search begins, so the public doesn't consider that excessive focus on managing risk could reduce the chance that a match of RIGHT BUYER to the RIGHT HOUSE even occurs.

When I started in the business 25+ years ago, finding that RIGHT HOUSE/RIGHT BUYER match was the MAJOR focus of real estate. Paperwork consisted of a brief contract template with some paragraphs inserted or included as addenda from The Blue Book. Contracts weren't the same for each Buyer. Agents spent a good portion of their time driving around town looking at houses and GETTING TO KNOW THE HOUSES AND THE TOWN. MLS data was minimal, so the only way to know the market, was to visit the market. Funny thing, most agents had been to ALL the houses for sale in the town where they worked and usually most of the houses in nearby towns served by the same MLS. A far cry from the new world on virtual real estate displayed on smart phones, iPads and computers. Of course current GPS technology comes in handy when the agent is out showing houses they've never been to before in areas they really don't know well. A huge problem is that the lengthy list of data fields included in the new MLS systems LACKS VOLUMES of information critical in choosing the RIGHT HOUSE or even in deciding which houses to actually show.

You could argue that the Buyers will know the RIGHT HOUSE when they see it, but what if they don't see it? Same goes for Sellers and the RIGHT BUYER, what if that perfect Buyer doesn't see that RIGHT HOUSE?

There's a balance at play here in a world of limited time and resources. The trade off involves risk management and standardized virtual world technology on one hand and the ability to match the RIGHT BUYER with the RIGHT HOUSE in the real world on the other hand. The matching process requires wisdom and understanding of the inventory, past market trends, plus an accurate read of Buyer needs and wants, in addition to thorough knowledge of the inventory and community. Employing that sort of wisdom can be considered an art, at times almost magical.

The trade associations are evidently just fine with leaving wisdom, art and magic unaddressed, while they eagerly load up the agents (and hence the public) with paperwork, legal updates in seminars and webinars, stern warnings and veiled threats that closely mimic right wing political scare paranoia. The trade organizations want to define how residential real estate is bought and sold. They want to standardize the process to manage risk and create a captive consumer base for their products and services in the process. They're doing a fine job, but what about the public? Oh, they don't represent the public, the agents do. If all the agents do the same things in conducting business, there's an erosion of the desire to discover if there might be a better way to buy and sell real estate. I believe there is, and I wouldn't be surprised if the members of the public might like a choice in how they make the largest investment of their lifetime.

Risk management is the new gold standard in education leaving the importance of finding the RIGHT HOUSE left up to individual initiative by agents. Now I'm not saying that risk management has no place in real estate, but if the Buyer finds the RIGHT HOUSE, pays a fair price for it and has realistic expectations that are met or exceeded during the whole purchase process, how much further is that agent's (and broker's) risk reduced by having a towering stack of contracts and disclosures that neither Buyer nor Seller understood in the first place? The industry should consider the possibility that spending huge amounts of time on risk management might actually detract from ability to attain wisdom, art and magic in helping Buyers and Sellers make wise decisions. Whoops! That would mean a change in policy and profitability--that's where the "Dream on" comes in.

Aspiring to attain outstanding performance in delivery of service to Buyers and Sellers is often lost among endless seminars on avoiding risk. There are a few of the good ol motivational seminars left, but in the final analysis those focus on how to make more money with less work. Again, not necessarily good for the Buyers and Sellers. Real estate is inherently a business of gray areas, regardless of what the attorneys teach in seminars. The business needs an injection of reality to renew a desire among agents to achieve art in serving the best interests of the public. It's not a menu kinda thing where you run down the checklist of forms and achieve magical results.

The business becoming more about controlling risk and less about providing the best possible experience and result for each Buyer and Seller. If present trends continue, cohorts of efficiently trained agent-technicians who measure success not by artistic achievement, but by productivity and effective risk management may send residential real estate toward a future having more in common with Wall Street than Main Street.

painters and artists

What if we consider real estate agents as though they were painters. All are given access to the same kinds of paint and a similar array of brushes, then told they'll get a commission check when they finish painting a large wall. Those walls will get painted pretty quickly and aside from some differences in color, the quality of the work will be similar. That's the current real estate business. Common tools provided by the trade associations and performance measured by finishing the task in a consistent way, then collecting compensation.

Now there might be a few painters with sufficient intrinsic creativity to paint a beautiful mural on the wall. The members of the public who pass that wall might enjoy looking at the scene depicted by the mural and they could savor the experience of the moment and some of those would probably remember the mural and experience for some time to come. Those mural painters are creating art, BUT how many of the painters COULD create art in a different environment with different metrics of success, more enlightened training and a deeper appreciation of the potential inherent in the service they provide?

New Year Happiness

2011 is here and I'm hopeful the weather isn't an indication of how the year will unfold. Rain, clouds and chill all day. I'm still recovering from a classic head cold--haven't had one in years. As I mentioned it gave me some odd dreams that may be productive in some way. Oh, my cat enjoyed my fever--a little extra warmth at night.

I didn't quite manage 2 posts a week last year, but pretty close--that's amazing in retrospect. Sorry if the posts were redundant--hard to keep track when you write on the same general topics and don't review all previous content each time you sit at the keyboard.

This year I'll try to broaden the scope a little, by focusing more on the larger scheme of things and less on the rather strange little world of organized real estate. One of the frustrating things about real estate is its insularity. It's interesting to consider how real estate reflects and differs from trends in other areas of modern life.
 
Despite all the references to serving the best interests of the public, the industry that's grown up around residential real estate has rather little to do with the public, what they want, what they think they need or what they actually do need. In this standardized world the trade associations have established a menu of strategies and tactics that the vast majority of brokerage follow pretty closely. It's a level playing field for the agents and the public, but, like any mono culture lawn, the diversity that enables selection and, ultimately, evolution is largely lost. The underlying assumption is that the world of real estate created by the trade organizations is necessarily better than any alternatives. That's a hypothesis that can't be tested, because there aren't any alternatives, at least at this time. Can you even imagine a brokerage advertising that they are NOT a member of the trade organizations and that they use contracts and disclosures that are user friendly?

Next post will address the fevered dream that illuminated the smooth path that leads in the wrong direction.

Have a great New Year! It will be an interesting one full of turning points--maybe some good!