What's $40 among friends?

Some blogs are all lit up over the national association's plan, trickled out at the association executive institute (of all places!) , to bump membership $40 and become a flaming, wild ass political party. Forget trade association, we're talking union-style big money, belly to belly lobbying in good old DC and bigger heaps of contributions for candidates who pass the piss test for real estate issues compliance.

Of course the Kool Aide drinkers are totally enthused at the prospect of $40,000,000 of additional political action money to apply generously where a few national association king makers believe it's needed. Yeah, it's for candidates and there's apparently no opt out, as was the case with the state association. I was one of the VERY few who did opt out of allocating the newly applied $49 for candidates. My extra $49 was used for issues (I'm hoping). Issues are issues. Candidates are like people, well sorta! That means you may LIKE some of their positions and you may vehemently HATE some of their other positions. At least for me, the HATE part can quickly overwhelm the LIKE part. For example, I don't care how politicians feel about real estate issues, if they have a radical pro life mindset (or fill in an array of other right wing touchstones). I'm not going to vote for them or give them money--ever. In fact, I'll vote for the OTHER candidate and give THEM money--a lot more money than $40.

The national association is quite willing to look the other way on a candidate's stance on any position not on their current real estate related hit list. Predictably, some of the ultra right wing folks who get national association PAC money are pretty marginal in their support of the civil rights act--private property rights can be taken a bit too far! Check out Open Secrets to see who got money.

If you're a right wing enthusiast (I didn't say nut!!), the $40 may seem like a pretty cool deal, particularly if you don't think too far into the cavern and wonder what beasts the national association has chained up in there waiting for their role in rest of the story. I'm also wondering what you're doing reading this, 'cause my political leanings are pretty apparent after reading a couple of posts.

If you're on the progressive left of left end of the spectrum, you're probably not happy with the $40, or the national association, or the state association--in fact you're probably not happy, period. There are always things happening to irritate the crap out of you and, to make matters worse, you're literate, a little obsessive, receive 29 lefty e-newsletters a day and are fully aware of each irritation! Now, I'm not going to draw contrasts to the right wingers, but you know where that would go--LOL.

Most of the blogs and comments I've read are concerned about the money, the power, the threats to their business (BTW progressives CAN spell paranoia) and where do they get one of those cute stickers with THAT nifty party logo?

That's not what this move by the national association is really about. The real deal is much bigger and darker. The people who should be concerned aren't the members of the national association, but their clients--the public--remember? The people who ultimately pay for the dues and the office rent and the SUVs (how many progressives still drive SUVs?) and the vacations to Hawaii? The public is already paying a very high price for the questionable pleasure of buying and selling real estate in the US, not to mention the increasing price and difficulty of getting the financing to make that pleasure possible.

The costs are about to go higher and not just due to the $40!

Spellbinding

I like to watch TED Talks and "follow" for Tweets as new ones are posted. Check out this TED Talk . The 18 minutes are well worth your attention. Sarah Kay, just 22, does an amazing job of captivating what is usually a pretty tough audience and perhaps offers some hope concerning the future of humankind. Vibrant, electrifying and entertaining with some solid messages of deep significance.

OK, so even if Sarah is amazingly compelling, what's that got to do with real estate? Just the point I'm going to make! The wonderful world of real estate totally LACKS the elements necessary to produces the kind of performance Sarah gave at TED. Why is that? Politics! Organizational politics! Real estate has been captured by the same flawed political mentality that characterizes most of our society's other institutions.

In my 26 years in real estate, including attending 35+ state association and a few national association business meetings, I've seen many of organized real estate's shakers and movers in action. A few had decent oratorical chops, but used their skills to "move the body", rather than seeking to pursue any personal passions.

I still believe finding RIGHT HOUSES and RIGHT BUYERS is a pretty amazing thing. It does change peoples lives, I've seen it happen. Yet the industry is increasingly dominated by "one size fits all" risk management driven seminars, assorted techie bling promising to produce more income with less work and a diverse assortment of ways to increase the bottom line of the trade organizations themselves. The net effect is to push the business away from the magical landscape of matching people with property, then working the transaction to a smooth close with minimal drama and uncertainty. It's a very personal business, or it used to be. I'm not suggesting that the personal element is totally lacking. There are outstanding agents out there doing business every day, but their true expertise (and magic) shines through despite, not because of, the performance template crafted by the state and national associations.

I trained close to 100 agents back in the day and the most striking lesson I learned was that each had their own way of doing real estate, so each needed different training. Now everyone goes to the same seminars and webinars, conveniently and profitably made available by the state association. Some get training at their offices, but the little subtleties commonplace 20+ years ago are often lacking. Agents that have been in the business for 10 years make gaffs a rookie wouldn't have made 25 years ago. Who suffers? Buyers who don't buy the RIGHT HOUSE and Sellers who don't find the RIGHT BUYER. BUT by golly they sure know how to fill out those forms--forget the fact that they don't understand them.

The psychology of the business is largely ignored. It's as though, if you use the proper forms and carefully follow directions from the cadre of attorneys always out on the seminar circuit--you've captured the essence of real estate. NOT!

Organized real estate is played out on a political stage, complete with lobbying, back room deals, compromises, shifting allegiances and manipulation of facts for just the right spin. Through it all, job number one is to enhance the power and control of the state or national association over every aspect of the buying and selling of real estate in the US. That includes cooperation with the BIG BANKS who were so scorned just a few years ago, but are now recipients of MLS data acquired for free and sold for millions. Will that data be used to benefit the owners of property who had a fiduciary relationship with their broker at the time the data was acquired? No one wants to go there, because the answer is clear.

Oh, there is no job two. Job number one is the only job. Passion, intensity, clarity of purpose? They'd only get in the way in today's brave new world of real estate defined by organizational dynamics, not by the primal need for a home in which to live in dignity and comfort.

In summary, you won't be seeing folks like Sarah out on the real estate seminar circuit!

Brief story re valuation

I ran 8 mile Team in Training route yesterday- getting lost and doing another half mile and missing a water stop. Felt pretty good after a week of reverting to old training program, but was a LITTLE tired. At 63 the hard runs take some zip out. Had to show property later in day, but got a call from a broker friend that a new listing was coming up for me to photograph and did I want to go check it out? We drove up, poked around, looked at the views, condition, neighborhood. etc etc. Then came the QUESTION--what's it worth? I thought a few seconds (I knew the QUESTION was coming) and named a narrow range of values. In response I learned, the property had already been listed--right in the middle of my range. The broker seemed relieved--not a very easy place to price and the market isn't on fire. I went back today and took photos--had to wait much of the day to get some nice ocean colors, but they came out well, capturing the feel and showing the strong aspects. Someone looking at the photos and then seeing the house will experience familiarity and reinforcement--that's what photos can do to lay the foundation of resonance.

Ok, you're probably wondering what the point is. This scene above could have happened 25 years ago--literally--we knew each other back then. So what's all those years and a heap of technology really done to improve things? The national property resource would have us believe that a few keystrokes at a computer are all that's needed to arrive at an AVM figure--that IS the value of the house--forget that the operator has never been to the house or the town. There are still brokers who do it the old way--looking at the house, the vicinity, the potential appeal, the negatives. As well as a host of other nuances that come into play without conscious effort. Yeah, it's sorta an art. Technology doesn't like art and because real estate loves technology, it follows that the future path of real estate is headed away from art and toward a new world where competent technicians replace artists.

What about the Buyers and Sellers? They are also impressed by technology. They want more information, faster, available though more hardware and increasingly diverse formats. They want more and real estate will give it to them, because corporations make millions delivering it, training how to use it and inferring that if it's not used, something dire will occur--like net profits of the tech companies might not meet next quarter's targets. Trade organizations enthusiastically participate in this frenzy to satisfy a need that shouldn't even be a want.

Real people live in real houses, not in a computer. Wisdom about the real world tends to arise from interacting with the real world, not with processing biased subsets of information that may have little relevance in determining resonance between Buyer and home.

What will happen when the artists are gone? People will still buy houses--that's one of the challenges that continues to distort the quality of service delivered by the real estate community. People would buy houses without the real estate community. The trade organizations strive to control the whole process, but the process  would flow forward without the organizations or its members. In other countries, the process is very different than here. It works--people buy houses. In some places they pay much less than they do in the US. We need to support the technology, the organizations and the training--lots of overhead there. How much of that expense supports art? That's a tough one!

Real quick-consumer phenomenon

Was in SLO this evening--March 11--walked past Apple Store and saw LINE of people and a big black out curtain hiding the interior. Took a second, but then I remembered TODAY is the day iPad2 is available. It was a cold day with stiff breeze, earthquake/tsunami distractions AND YET MANY fans were standing in line (not that common around here) and waiting to get inside and see/buy/be entertained. Amazing stuff!

I was amused at first. I still think the MacBook Air 11.6 is a better solution for most people (and soon, hopefully for me). THEN (OCD kicking in) I realized that you NEVER see anything like that sort of consumer excitement, devotion, enchantment with anything real estate related. NEVER. Real estate offices open (and close) all the time. Ever see a line of people standing in line waiting? Ever see fervent loyalty to a new business model or marketing approach or advertising strategy related to real estate? WONDER WHY?

You know it's got to be harder to develop an iPad successor than it is to create a better brokerage model able to provide unprecedented service. I know, Apple makes a huge hunk of change selling image and hardware and software, but if you add all the commissions up on all the real estate deals in the nation for a year---that's a pretty big hunk of change too. Oh, there are other types of computer platforms. You don't need to buy Apple. You want to--if you're a loyalist.

Back to the one side fits all world of real estate. Lots of subtle variations on a theme derived from trade association mantras and the everybody gets the same educational indoctrination program. Where are the Apple visionaries in real estate? It's not like there's no room for improvement. The public confidence levels in the quality of service received hasn't undergone remarkable change--mostly no one wants to know. The results of the bubble/bust cycle suggest that ratings might be lower than 8-10 years ago when we were all very brilliant.

Creativity, insight, innovation, exploration are not part of the real estate terrain. Even the vendors are mostly interested in being just a little better than the next vendor--that's why MLS systems have lagged so far behind the rest of Internet technology. Facebook, Twitter, Google and other firms not even in existence 15 years ago have changed the world.

Real estate isn't much different than when I started--tech is playing a roll, but not in very creative ways--largely because the measure of success in real estate is revenue, not outstanding service that generates impassioned loyalty among consumers. Member loyalty for the trade associations receives more attention than anything related to the public and, predictably, it's still looking for phenomenal service, excitement and maybe even a little entertainment in the way real estate is bought and sold.

When is the last time you stood in line to see a new product?

More perspective

Here's an additional comment on the national property resource and its role in the performance of those agents representing real live people in their effort to make the best possible real estate decisions. That's the key--the best possible decisions. Now, perhaps not every Buyer or Seller desires to make the best possible decision, but why wouldn't they? Real estate decisions can and often do represent the largest disparity in financial consequences of best and something significantly less.

I want to emphasize that I'm not saying the use of the property resource will necessarily undermine the performance of agents who use it. Excellent agents will undoubtedly use it, but they will fold much more into their analysis.

The problem is that the data is still very limited, even if is the best available. The AVM may be the best ever, but it is still focused on AVERAGES to perform in a superior way defining the risk associated with wall street and banking, ie bundles of mortgages. That's what the AVM system was built for ---remember to FOLLOW the money.

The Buyer and Seller are NOT concerned with averages--they'd like to BEAT the averages and they need the help of excellent agents to do that. The information and the analysis to beat the averages is NOT in the national property resource. Oh, it may be a good rough cut, but not much better than existing MLS systems.
PLUS the AVM is inherently flawed if the goal is beating the odds and pulling the rabbit outa the hat for your
client. We're back to fiduciary duty again. The national property resource creates a new AVERAGE standard and agents who are satisfied with becoming technicians and having their performance levels set by programmers who were designing an application for wall street and banks risk the disintermediation that is increasingly dismissed as impossible for real estate. It is not impossible and I believe the national property resource and AVM is a big step in that direction.

There are still outstanding travel agents out there, but most people have become satisfied with online tickets and less than stellar service. The standards changed and less is now OK.

Same thing could happen with real estate agent sales. One size fits all and that one size is pretty darn average. An even bigger problem is the one size doesn't really have much to do with finding the RIGHT HOUSE or RIGHT BUYER. The irony is that the trade organizations are behind the changes to real estate sales because the changes put them in a stronger position--control, captive consumers of their products/services and POWER, lots of POWER. The public is being manipulated by the false promise of voluminous data and techie agents when they actually need more of the wisdom that characterized the business 25 years ago. Gee, 25 years ago trade organizations weren't powerful, profitable or influential!

Another resource perspective

Here are some possibly overlooked elements of national property resource ecology.

Broker and Owner sign listing agreement/agency disclosure. Exclusive representation, fiduciary duty--best interests of Owner paramount and all that. 

The listing very shortly becomes associated with a considerable amount of information--alpha numeric data, creative marketing copy, photos, etc.

The listing agreement grants Broker the right to place that information into the MLS system--with the tacit understanding that such placement is consistent with fiduciary duty in the process of reaching the best deal possible for the Owner.  

The MLS system may then make the information available to other member brokers AND the public via IDX display, public portal--other websites, etc. Typically the information is not modified, just displayed in whole or in part. No one edits the photos and the copy may be truncated, but is not rewritten.  

Ok, now we're getting to the national property resource part. Owners can opt out of property resource display, but do they know what they're opting out of and why they might want to? It may be a little delicate for most brokers to gracefully explain?! Most will go with the flow and let the Automated Valuation Models (AVM) fall where they may. 

Here's where it gets a little sticky. The national property resource AVM application is VERY LIKELY TO exhibit predictable inaccuracies in the value figures produced. Special properties will tend to be undervalued and some properties in poor condition and/or with other, off site, issues that negatively impact value, will tend to be overvalued. In addition, properties in certain areas may owe significant value to factors that are NOT evaluated by the AVM--some of those factors mat not be adequately represented in the MLS data in the first place.

Neither situation is good for BUYERS, who are also represented by a Broker operating under the terms of fiduciary duty. Buyers could be misled by AVM figures on the low side or high side, depending on the property. A Seller whose property is undervalued is obviously at a disadvantage and less likely to receive full value for the outstanding benefits the property provides. A Seller with an overvalued AVM figure may also be at a disadvantage because many Buyers aren't stupid--they'll see a number of houses and AVM figures that are out of sync will jump out of the price grouping.   

The national property resource has no doubt done "ground truthing" and PRETTY MUCH KNOWS where the AVM applications tend to produce errors, BUT their profit model depends on repackaging the information (that originated way back at the Listing Broker/Owner agreement) and SELLING it to third parties, among wall street/banking firms and who know where else. How candid are they likely to be about the inherent errors of their model? Their failure to disclose the predictable nature of the inaccuracies is problematical for Brokers and MLSs.

Do Brokers ignore the AVM? What if the Buyer makes a claim that the figure was material, the Broker had access to it an failed to provide it? Pandora's box syndrome launched? Broker could do individual analysis to debunk AVM, but how many Buyer's representatives will do that for SEVERAL houses being shown? Listing Brokers have it easier-one house and a few comps, but there's still the Buyer's Brokers bringing in the offer.   

AVM applications have been around for a long time, but they have always, until now, relied on public records and other data drawn from sources linked to a fiduciary level of representation arising from an agency relationship.

Those new end users of the information obtained from the national property resource, who are unknown to MLS, Brokers or Owners of the property, may use that information for purposes NOT representative of the best interests of the public--particularly the SELLER and prospective BUYERS -- who are perhaps still expecting a fiduciary level of representation from their Brokers consistent with the contracts and agency disclosures still in effect. 

We know when fiduciary duty begins in this flow of information--but when does it end? Does it end?

If it doesn't end, to whom does the responsibility fall, if a claim is made that an AVM value resulted in breach of fiduciary duty and/or financial harm to a Buyer or a Seller?

Would a reasonable observer (as in juror) of this flow of information feel the Owner of the property gave up all claims when the Broker placed the information in the MLS? OR would a reasonable observer feel that the Association/MLS and the listing Broker had an ongoing responsibility to take reasonable care to see that the information was not used in a manner inconsistent with the fiduciary duty created by the listing agreement and agency disclosure?

Furthermore, would a reasonable observer feel that a Broker who believed inaccuracies in the AVM figures might exist AND also felt that the nature of those inaccuracies should be disclosed to client should also take steps to provide alternative verification of the validity of AVM figures?

Does the the national property resource agreement hold Associations, MLSs and Brokers harmless from monetary damages as well as charges of breach of fiduciary duty? Hold harmless may not be possible where fiduciary duty is concerned.

Regardless, is it a good business practice to knowingly provide an unknown entity with information that may then be modified and ultimately used by another, unknown party, to the disadvantage of a predictable proportion of the individuals who provided the information in the first place?

Is such a shiny techie bling really worth all these complications? It it worth disrupting the future of real estate sales for corporate profit and the promise of staggering power? The corporate profit part is questionable and the power will ultimately follow the money--wall street and the banks have way more of that.