Inside REALTORS®

About REALTORS®, what we do and why, hot topics, absurdities and more...
There are 20 articles written on this subject. The most recent 10 are listed here:

Interesting tidbits for Monday reading Starting a discussion on real estate commissions More on the agent Bubble Discovery... Dulles Area REALTORS® Gather at Lansdowne

60 Minutes put our knickers in a twist. So what? Everyone feeling the pain and an industry gone wacko! Accredited Consultant in Real Estate Program Launched Zillow sharpens its sword...challenges the status quo A well stated perspective on market forecasting

You will find a complete Index of Articles by Category and by Month in the Archives.

May 15, 2007

I did not catch the 60 Minutes real estate saga Sunday night as I had my favorite "mother" out on a date. If I get time maybe I'll catch up. It really doesn't matter. There is enough buzz around the Internet for me to pick up on the general gist of the investigative analysis. Redfin got lots of time, NAR did not. The simple fact of the matter is that consumers are being educated by the big world wide web. Consumers are becoming more demanding and want to know what they are paying for in the real estate transaction. The current system is a bit less than transparent. There are a ton of full service brokers but, in reality, full service is what an agent gives or does not give his or her client.

New players in the industry are "experimenting" with different business models. Some will die a natural death, others will survive. Most of these challenge the status-quo of the real estate industry. In my mind, that is not a bad thing. Serious challenges in any industry will have one of three possible outcomes for the incumbent: 1) the incumbent chooses to change for the better and survives, 2) the incumbent digs their heels in, is defensive, ultimately made to look foolish and dies or, 3) all live to coexist and thrive based on the articulation a value proposition that consumers can understand and choose between. This may be somewhat of an over simplification but true. Happens all the time.

So, here are my conclusions:

1. 60 Minutes didn't want to here hear from NAR for whatever reason. Maybe they already heard too much. Maybe it was a David and the Goliath thing.
2. Where do we go in the media to get fair and balanced?
3. The "sacrosanct 6% commission" gets more viewers and higher ratings than "we found out NAR is doing a good job."
4. NAR should stop whining and encourage their members to embrace change instead of fighting it.
5. Regardless of any good intention, minimum service laws look like protectionism.
6. Virginia addressed minimum (or limited) service by requiring a disclosure of exactly what services are being provided and what services are not when it comes to limited service. The consumer gets to choose and lives with the consequence, good or bad. Seems logical to me.
7. New business models will be embraced by consumers until consumers get screwed. Those new businesses that don't screw consumers (as in really do a good job at whatever fee) will prosper and set a new benchmark for the industry. Assuming, of course, the new business model can actually turn a profit.
8. Consumers sometimes forget the law of Cheaper, Better, Faster, The law says you can't have all three simultaneously (example: McDonalds).
9. I got an email from NAR asking me to send a note to CBS to complain about the unfairness. Uhhh, what's the point?.
10. Consumers aren't dumb, they just look that way when we are losing their business.
11. We are looking pretty dumb too (well, I can't speak for all of us).
12. I have talked about transparency in the transaction ever since I started Blogging. Why don't we take this up as our "battle cry" and then practice it? Then, maybe we would look a bit smarter.

End of story. Fin. Finished. I have more important things to do.

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February 4, 2007

Or, maybe it is always wacko. An article yesterday in the Washington Post has me shaking my head. A survey conducted reports that 90% of the appraisers surveyed indicated they were pressured to raise their appraised value. Here's the excerpt:

Appraisers Under Pressure To Inflate Values

By Kenneth R. Harney
Saturday, February 3, 2007; Page F01

With home prices softening and sales volume sagging in many local markets, real estate appraisers say that pressure on them to inflate values has reached pandemic proportions.

A new survey of the national appraisal industry found that 90 percent of appraisers reported that mortgage brokers, real estate agents, lenders and even consumers have put pressure on them to raise property valuations to enable deals to go through. That percentage is up sharply from a parallel survey conducted in 2003, when 55 percent of appraisers reported attempts to influence their findings and 45 percent reported "never." Now the latter category is down to just 10 percent.

Read the full article.

Can appraisers be wrong? Probably. An appraisal is simply an estimate of market value. Appraisers live by an industry code of ethics and industry standards. Their work needs to stand up in court. The biggest offenders are mortgage brokers (the middle man) and real estate brokers. Both want the "deal" to close. Sellers are on this list too. Feeling the pain of sitting on the market a long time, they don't want their contract to go south because it didn't appraise and the buyer potentially walks away.

I have had less than desirable appraisals on a seller's listing under contract. We first ask to see the report. We have an opportunity to offer questions about the estimated value. We can even offer our own comps that the appraiser did not consider. But, in the end, a good appraiser will stand by his or her work and only modify an opinion on hard facts. Maybe asking questions and offering more data is interpretted as "pressure." Beyond that, here are the sellers and buyers options (notice "pressure the appraiser" is not in the list):

• Re-negotiate the selling price. I had one where the appraisal came in $20,000 low. The buyer and seller agreed to a new contract price $10,000 lower than the original offer. A win-win conclusion in this case. Of course, the buyer had to come up with the extra cash to purchase the home because the buyer was financing at 80% of the appraised value. Lender underwriters need a number to hang their hat on; the appraised value is that number.
• Seller may not be willing to negotiate risking the buyer walking away from the deal.
• The buyer simply walks away because of the low appraisal. Happens all the time.
• If the buyer and mortgage company agree, obtain a second opinion at the seller's expense. Then go back to the top of this list.
• Are there other options? I'd love to read your comments or real experiences.

Appraisers I know say that even an experienced appraiser's report may have a margin of error of +/- 5 to 6%. So on a $500,000 property that is +/- $25,000 at a 5% margin of error.

Are there dishonest appraisers? Sure, just like dishonest real estate agents, brokers, lenders, clergy, police and (fill in the blank) ________________. When there is money involved, many will go over the ethical and legal line (or maybe just straddle it which is just as bad). Harvey concludes his article by offering this view by an executive of a large appraisal firm:

Bottom line in Hummel's view: Congress needs to enact legislation making pressuring appraisers to distort their valuations, or interfering with appraisals in any way, a federal offense, subject to criminal penalties. And state regulators need to step up enforcement against fraudulent appraisals, pressure tactics and appraisers who give in.

I still can't get over the 90% figure from the survey. No wonder our industry has a bad reputation. I'm feeling a little dirty. I think I'll go wash my hands.

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January 15, 2007

Mollie Wasserman and Paula Bean launched a new program at the recent NAR convention in New Orleans called the Accredited Consultant in Real Estate (ACRE™). Both have practiced successful real estate consulting for several years and Mollie is considered a pioneer in the consulting approach and fee for service business models. Mollie was my inspiration to enter this business with my own approach to consulting and fee schedules. Mollie recently finished the manuscript for her new book "Ripping the Roof Off Real Estate" about "consulting with" not "selling to" clients and the implementation of fee based services. It will hit the bookstores and online at Amazon or Barnes & Noble in early February.

In addition, they developed a course for agents to become skilled in this business approach with a followup coaching program that is rather unique in the industry. Learn more about the course at www.acrealestate.info. The Coaching Program will use an online Forum approach that is currently under construction. The Forum will be available to ACRE™ graduates when it is launched later this month (it will be closed to the general public).

More about Mollie at MetroWest Real Estate: The Home Consultants Realty Team, and at My Real Estate Consultants.

More about Paula at www.HomeOrlando.com and www.carib-gulf.com.

Here is an excerpt from Mollie's book:

REAL ESTATE CONSULTING

What IS It? How Does It Differ From the Real Estate Sales?

What IS Real Estate Consulting? Is it just a fancy new catch phrase that means the same way of doing business? Well, we can't speak for some agents who call themselves "consultants" but still remain salespeople in practice, but we can tell you that TRUE consulting is a totally different model - a whole new approach in Real Estate.

Let's look at the differences:

• The Real Estate Consultant is compensated for their expertise, time and/or the task. If they're paid contingent on a guaranteed outcome (a traditional commission), it is understood by the consumer that will be paying a premium to have this guarantee.
  
  The Real Estate Salesperson is only paid for a guaranteed outcome (one they can influence but not control).
• The Consultant is often retained and compensated the way other professionals providing a service are, such as CPA's or most Attorney's.
  
  The Salesperson is compensated the way other salespeople selling a product are. (By the way: this doesn't mean that a consultant can't offer commissions if that's what right for their client - the essence of consulting is providing choices. It's just essential that the consumer understand what it is they're paying for).
• Consulting covers a variety of skills and can be used to reach a variety of outcomes.
  
  Selling has one single focus - to SELL something.
• Sometimes the best choice for a consumer is not to buy or sell at all! (Or not now). The Consultant is retained to provide the counsel to help them reach that decision.
  
  A Salesperson, when there's no transaction, has nothing to offer (and no way to get paid).

The real estate salesperson usually has only one way of being paid: a contingent-on-a-sale commission. Consultants, on the other hand, can offer a variety of compensation alternatives such as hourly consulting, a flat fee, as well as traditional commissions, so that the consultant can tailor their services based on what the consumer needs to reach their goals. By the way, consultative service is not limited to transactions. As an example, wouldn't it be great to be able to receive (and pay for) just a couple of hours of objective counsel on the real estate market when you're not sure what you want to do?

Who might be interested in Real Estate Consulting?

• Any homeowner who's trying to decide whether to "move or improve" and wishes they could get objective counsel...
• Any buyer who isn't sure they're ready to buy but would like some guidance on the market...
• Any consumer who really doesn't WANT to play Realtor but feels forced to go it alone if they need to save money...
• Any consumer who's ever resorted to a Discount Broker or a Discount Commission and found out too late that they got Discount Service which didn't get the job done, or didn't get it done right - thus losing money and valuable market time.

This page is an excerpt from Mollie Wasserman's book:
"Ripping The Roof Off Real Estate"
It's Not What You Save, It's What You Keep
© Copyright 2006 Mollie W. Wasserman All rights reserved
Reproduced here by permission.

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December 7, 2006

The Blogging world is buZZing this morning about Zillow's announcement last night offering free listings tied to your homes tax and sales history in their gargantuan data base. And, it is up and running. Zillow is taking aim with their sharp, swift sword at the heart of the real estate industry. Every real estate blogger on the planet is reporting and offering opinions on the significance of this announcement and capability. My favorite commentary can be found at

• the BloodhoundBlog (Greg actually had advance notice),
• sellsius,
• Ardell and Galen at the Rain City Guide,
• Kris Berg at The San Diego Home Blog,
• Inman News and
• Jim at Real Central Virginia.

The significance of this might well be to make every MLS obsolete, realtor.com irrelevant, Google Base old fashioned, Craig's list history and significantly transform the role of a real estate agent as a central figure in the transaction to one of a real estate transaction advisor as buyers search for homes and sellers are empowered to market their own homes on a massive scale. The difference between Zillow and the rest of the world is the integration of "free" listings to the tax and sales records of nearly every property in the US. Will there be kinks? Sure, but these guys can figure out how to smooth them out. Incredible!

There is no better time for every real estate agent to figure out how to transform their business from sales agent to consultant. It may take awhile but, I truly believe this may be the single event that will force the industry to change. It is serendipitous that Pam and I had the vision to establish our business on a consulting business model with a complete, transparent fee schedule.

Watch for the mark of Zillow coming from the tip of their long sword of innovation on everything real estate. I love it! See Zillow now.

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December 1, 2006

Finding a great Blog is intriguing because I get to read all the good stuff that I missed not knowing about it. This is a case in point. Steve Berg of the San Diego Home Blog (and husband of Kris Berg, see a previous article) wrote this piece on Bubbleheads, Prognosticators and Shrinkage. Here is the closing paragraph:

The moral of this story is that trying to anticipate the future market and precisely when may be the perfect time to buy or sell is a losing proposition. We, as agents, do have an advantage over all those who are writing the doom and gloom newspaper articles and preparing economic forecasts with only the objective historical data (think Zillow). Our advantage is embodied in the instincts we derive from the everyday "in the trenches" experiences we have simply by listening to buyers and sellers. It might be a mistake to ignore the benefits of these experiences.

I could not have said it better.

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November 13, 2006

Repeat after me: homes are selling...homes are selling. [from the Inman Blog] They are. Just not very fast.

Do sellers really not know what their agent will be paid? [from the Inman Blog] Transparency is not that hard...we do it day in and day out.

Are FSBO transactions on a downward trend? NAR thinks so. [from the Inman Blog] Maybe more are finding Fee-For-Service agents...I wish.

Sellers scrutinize the value of regular brokers' services. [Saturday Washington Post] Another reason Fee-For-Service just might be the answer.

Real Estate agents do not control buying and selling! [Bloodhound Blog] Dammit! Maybe I did learn this somewhere along the way.

Finally, the name BLOG is being questioned. [Dustin from move.com and Rain City Guide] Have you noticed I try to avoid silly jargon like post, permalink, trackbacks, categories, Blogroll, Blogosphere......what's wrong with just plain talk? You can change the name of Blog to Juice...and it still won't matter! How about Real Estate Juice for a Blog name? Somebody jump on this one. In the meantime, we keep on Blogging (or, writing articles that express our knowledge, wisdom and/or opinions on topics of interest). I think Blog is here to stay. Lets get rid of all the other techno speak! Maybe then regular people will understand us better.

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October 17, 2006

The chatter in the real estate blogosphere on commission models is on the rise. Here are a couple of good articles, one by Douglas Headings of True Gotham and another by Greg Swann of the BLOODHOUNDBLOG. (Thanks to Jim Duncan for pointing these out...) Ardell at the RCG has written a great deal on the subject from her perspective and, Eileen recently weighed in at the RCG with her thoughts. Great discussions and lots of comments. The traditional model is broke because ONE SIZE DOES NOT FIT ALL. The traditional model has no relationship to effort and expense across a wide spectrum of property types, markets and price ranges.

At the risk of being perceived as extremely self serving, I want to start this discussion by pointing to a section of my Website (not the blog) that I published back in January of 2005. In addition there are a few articles on the subject published in the Guide over time that received little attention. Here are the links:

• SmartChoice For Sellers
• SmartChoice For Buyers
• Commissions inside the Guide

Pam and I began using consumer Choice models when we established our relationship with RE/MAX on August 1, 2004. We have accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.

Where did the models come from? We developed them based on a service/consulting fee model I used for over 25 years as an executive with EDS, an IT and Business Process services provider. In fact, it is a business model I have been familiar with for longer than my career with EDS. It is based on Activity Based Costing. Here's the simple explanation:

• Define every direct activity in a process at it's lowest convenient level and determine time and expense for performing that activity. In real estate, there are basically two types of labor activities: administrative (does not require a real estate license) and professional (a licensed agent).
• Group activities into major functions or components
• Develop cost models for each activity and major function
• Do the same for indirect (or overhead) function.
• Spread the indirect cost over the direct expense of each activity as a percentage of direct expense to the total.
• Add a reasonable profit margin (have to be careful not to price yourself out of the market).
• Develop a compelling value proposition on why you are better than everyone else at a competitive price (not necessarily lower) for your services.
• Show potential clients (sellers and buyers) your complete activity list that includes prices (this is called transparency) and collaborate with them on the services necessary to achieve their objective.
• Sign the contract (simple conclusion, there are, of course, other factors for both parties to be comfortable with before you get to this conclusion).

Determining the time and expense is easier than setting a value on your time for the different types of activities. Each individual must come to this conclusion on their own. I will say that it should be based (normally) on your skill level and experience in the business. Just like any other service business I can think of.

Using this model, we rarely let a consumer strictly define what services they want to buy. It is and must be a collaborative effort. Our skills and experiences must be a factor in developing an overall plan. In addition, we developed complimentary models for SELLERS and BUYERS. (Buyers can and will pay their agent when there is a compelling reason to do so. More about that in a future case study).

This is only an introduction to this subject at best. Our next series of articles will be real case studies on why it works most of the time and why it doesn't some of the time. Ardell is right:

For now…price matters is the key, and almost none of the discussions anywhere, focus on different fees for different home prices. So basically, they are ALL wrong.

We will attempt to fix that.

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September 16, 2006

In the Post this morning:

Influx -- or Glut?
Despite Slump, New Agents Rushing In

By Kirstin Downey
Washington Post Staff Writer
Saturday, September 16, 2006; Page F01

In the face of a real estate slump that has left home sellers longing for the good old days, when homes sold within minutes of hitting the market, real estate agents are still flooding into the business.

So many agents...so few sales. Over 100,000 agents in the DC Metro area and over 120,000 in Maryland, DC and Virginia combined. In the past year, the number of agents increased by 4,000 in Virginia. This report has many of us scratching our heads. The easy money is over. Read my lips...O...V...E...R. The law of supply and demand seems to be out of whack. Or, these people don't read. Many of us are still expecting to see a decline.

This is not an easy business (except for getting licensed...now that's easy). Recent studies show it takes 3 to 5 years to build a business that can generate an average income of something less than $50,000 per year (that may seem like a lot unless you live in Loudoun County).

At a time when the industry is concerned about its image and is focused on raising the professionalism of its practitioners, revising the entrance requirements becomes an imperative. My advice to those that want to get into this business:

• have enough financial resource to carry you 2 to 3 years,
• get some basic business education (or have suitable business experience),
• be able to create a business plan,
• understand completely the concept of customer service,
• determine what sets you apart from the crowd (develop a unique value proposition),
• be willing to work into the wee hours of the night and on weekends (ie; be available when your clients are)
and
• find a broker that will help you develop your skills and learn the "real" business of real estate.

Finally, understand the definition of professional:

"applied to describe a person (or work of such a person) with the following attributes: service orientation, making expertise available to others, based on a distinctive body of knowledge and skills underpinned by abilities and values, autonomy in performing working within defined boundaries, public recognition of the authority of the practitioner by virtue of working to ethical standards and being accountable."

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September 12, 2006

Time well spent this morning discovering the entertaining and useful Real Estate Tomato. What is this you ask? I asked the same question. A tomato? Then, browsing this Website/Blog I GOT IT! Jim Cronin is a real estate on-line marketing consultant/educator based in Sacramento, California...my hometown. Sacramento just might be the tomato capital of the world. Real Estate + Sacramento = Tomato. Juicy...

OK, enough. Jim has an awesome site giving sage advice on on-line marketing, technology as well as other relevant real estate topics. This is a must read for anyone contemplating a Blog and participating in Web 2.0. Check out these articles:

• Steal this blog
• The 8 P's to Blogging Success, and
• If You Write It, They Will Come

I'm feeling just a little humbled by my layman's attempt to promote Blogging to my peers...

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September 5, 2006

Tuesday, September 5, 2006: The Dulles Area Association of REALTORS® is hosting the annual Expo at the Lansdowne Resort in Leesburg, VA today. The Expo includes a trade show, notable (or not so notable speakers) followed by the annual meeting and networking reception.

The Expo website can be found here. The theme for this year is "learn - grow - become more."

Yours truly has a 45 minute speaking spot mid-afternoon on the subject of "Blogging for Business." This is the "not so notable" on the speaker list. My entire presentation is geared toward a practical introduction to real estate blogging and can be found here (a quick Blog of course). It will be delivered live using the Internet and the presentation Blog to acquaint agents to Blogging and its power to create web-based relationships. My theme is: How to stop worrying (about SEO) and love the Blog!

Comments from the Blogging critics are welcome. This is an open forum and contributions from my expert Blogoshpere friends are appreciated. Participants will be able to ask questions and get answers long after the Expo concludes.

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