It starts with an e-mail

Ok, so yesterday I received an e-mail from a blog reader who wanted to help me. They made two points. The first was that I need to stop using “words that normal people don’t know” and the second was they didn’t feel it was possible for me to be “smart and still naive about expectations of agents being more than what they have been” They felt that I needed to be more “honest” with myself that agents will always do the bare minimum.

Today I was reading a newspaper article on-line about the market being down. A reader commented on-line that consumers need to get smarter and we should be “honest” with ourselves that paying REALTORS 6-10% is crazy. They went further to say that data shown in MLS was not fully reflective of the market because it didn’t show FSBO information, etc… In addition, they were bemoaning the fact that agents aren’t trying to price the home correctly or ask the seller to reduce their price.

For the reader

I don’t feel that I am a lone voice crying in the wilderness when it comes to expecting more quality from a REALTOR, to include a more diligent level of education. If you don’t like the words I am using, than don’t read. Sorry if I challenge your limited vocabulary. If you’re d-u-m-b, then take the word and type it into Google.com and enter “define: <word you don’t know>” and hit that enter key. Google is one of those search engines that a couple of people are using. If you don’t want to use Google, then there is probably a dictionary somewhere about, you troglodyte.

(this part was said in jest, and I really have a smile on my face while I write it) See? ==>

For the “Consumer”

I hear your frustration, but it’s not the sales agent’s fault. They have to get paid for their work, just as you do. There are about 25 people with their hands in their pockets at any given time. They pay way more than professionals from other industries in gas, marketing, TAXES, brokerage fees, association dues, lenders ordering reduction in commissions for short sales (that are twice the work of any other transaction) because YOU didn’t or can’t pay your mortgage. The list goes on an on. The national average is far less than the 6% you think that agents get paid. FSBO information is grossly incorrect, represents less than 6% in our area and typically FSBO’s get about 12% less for their house, than those who are listed by a professional. So, excuse them if they use accurate data to report the condition of the real estate market.

I am not sure what sellers this consumer is talking to, but the agents I know are begging their sellers to list and reduce their prices to a reasonable rate. The problem is that Sellers all think they are better than the competition. They paid too much, or refinanced too much and they can’t lower the price to match the lower prices of other sellers on the market.

To Everyone Else

Why, oh why do people expect real estate information and education to be at the level of the least common denominator?

Why do consumers think that they can beat up on agents?

The answers are simple. Agents have been catered to for far too long. Pre-licensing educational levels are too low, continuing education is a joke all most everywhere in the country and many Brokers will accept anyone with a license, regardless of capabilities. This is a very litigious industry and agents are handing their clients lawsuits, because they don’t know what they are doing. They begrudge having to take any training, even if it’s designed to save their own butts and to provide better service to their clients. I also will add that the education providers MUST increase their quality, so that agents will actually be educated in the courses being offered.

Clients are getting the information that agents have been controlling for a long time. You’re not the keep of the data, which is why many consumers came to you in the first place. For too many years agents access to controlled data was their only identity and customer service went by the way side. Agents need to improve their consumer advocacy and quality of service to show that this very complicated transaction is best handled by trained and capable hands - otherwise the agent should just turn in their license. For much of the country the days of going into floor duty time and stumbling on a commission are over.

The agents have failed to meet the challenge of angry consumers, like the one mentioned above, because they don’t know their own market place well enough; even though the information is readily available to them. Agents are taking overpriced and unsalable listings and not saying “no, you can’t reasonably sale for this price and in this market.” Instead, the listing is taken without disclosing the reality to the Seller and being “honest” because we are trying to save the seller’s feelings and/or because the agent simply doesn’t know the market.

All of these issues contribute to the lack of perceived “honesty” from the agent. It’s hurting the industry. Better education and a professional frankness with the consumer will go along way to repairing the perceptions held by some consumers. Industry Professionals should not be afraid or ashamed to tell a buyer or seller that their expectations are unreasonable and not care if that consumer finds another agent. That other agent won’t be able to help them either.

How’s that for being “honest” and using small (and probably misspelled to make the reader feel more comfortable) words?

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Social Financing

Before you run out and begin thinking that social financing is going to help you pay your mortgage, understand that loans are small, but they can prove helpful in many ways. It is also not entirely without the use of a credit union.

How It Works

The basics of how it works is by connecting those who wish to invest in the “Zopa CD” with those who need to borrow for business or other needs. The intent is to keep rates low for borrowers, even adding other benefits to minimize the cost of borrowing, while giving good rates of return in a safe investment vehicle for the investors. Sounds like a win-win scenario, doesn’t it?

According to Zopa’s comparison, their best rates (those with great credit) are only 8.49% while investors can get 3.75% in the 1-year CD. Of course, they paint a prettier than reality picture, as they state banks personal loans are considerably higher (the lowest being 11.55%) and that bank CDs give only a average of 3.65%.

My Own Comparisons

Here are some of my own comparisons…

I have great credit (over 720) and my credit card only charges 7.99%, assuming I don’t pay it off each month. Why not just use your credit card since these rates can be fixed (mine is) on both a personal and business level? With good credit and reasonable qualifications, you can secure a credit card well over $10,000 dollars, even giving mileage or other benefit, that has a lower rate.

As for investing, CDs are OK, but there are numerous other options, not to mention having your money “tied up” is not overly appealing. Besides, the CD rates shown on Zopa only show an average of the top 10 banks. There are many banks that provide greater rates on their CDs as well.

That doesn’t mean Zopa will not be the best deal for you. Zopa’s real benefit comes in the form of members helping out, hence the social financing term. Investors can provide money for borrowers they chose to help by providing monthly payment if you will. That benefit lowers the cost of borrowing for loan recipients. So, if you want to borrow and feel that you can attract “investors”, you could end up borrowing at little or even no cost at all.

As with other financing and investing options, Zopa is likely worth looking into to meet your own needs. However, caution should be taken and deeper research are required before you make the final decision. I can see potential opportunities to for borrowers to keep costs minimal and for investors to assist those borrowers while receiving a fairly decent rate of return.

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Benn Rosales recently wrote a post called What’s a Lead which was very on focus and made some very telling points about the industry that has grown up to intermediate themselves between the real estate agent and the consumers. Its not a new idea. People have been trying to get between the consumer and the real estate agent since before the Internet.

• Real Estate Agents who make referrals have intermediated themselves into the real estate transaction.
• Relocation companies are intermediaries
• REO Asset Management Companies are intermediaries.
• Attorneys who represent estates are intermediaries
• Attorneys who represent clients in divorce or partnerships that are dissolving are intermediaries

But the real estate community accepts these intermediaries because they control certain types of business, and that business will only be distributed by those them. There is no other way to approach this business and therefore the intermediary is a valuable part of the transaction.

So What Happened?

Technology made a new type of intermediation possible. Through advertising, consumers were drawn to sites where people who neither controlled the product or service being sought, nor the consumer who was seeking the service or product placed themselves in a position where they appeared to have some control over both ends of the transaction. To the consumer, these new intermediaries seemed to control the product , or in some instances, the cost of the service. To the real estate professional, this intermediary seemed to have control over consumer inquiries, or over “quality” consumer inquiries. Most of it was done by smoke and mirrors and a certain amount of double speak.

• You should let your listings be posted on our site because we will be advertising your listings for free.
• You will bet exclusive leads -
  • That’s one of my favorites. I picture someone going out to the consumer’s house to remove their computer so that they remain yours exclusively -unable to surf the web any longer looking for houses.
• Just one sale/listing will pay for the service-
  • As if there were no costs associated with doing business other then the cost of this one thing (N.B. since most real estate companies operate at roughly 10% profit - you need to do 10 pieces of business to break even on any new dollar of expense)
• Can you spend 30 million dollars to drive people to your website?
  • No, and I don’t need to . I am not trying to draw every consumer in the country to my website. Only people that want to do business in my marketplace - a much less expensive proposition
• We offer consumers a rebate for using our service. That provides them with an incentive to list with you
  • So let me get this straight - I pay you a referral, you pay a portion to them and keep the difference so only you win. I get less money , and they get charged more?
• We qualify the leads so you only have to work with the good ones.
  • So now I don;t even get to “cherry pick ” for myself?

Because the members of the real estate community don’t all run at the same speed, there was enough confusion about technology and how the new electronic marketplace would work that we’ve allowed them to gain a foothold in our industry. Whether that foothold is sufficient to create a beach head and then a more permanent intermediation depends to a large degree upon us.

So What’s Wrong?

Our job starts with prospecting. I know that the term lead is not real popular on the site, and goodness knows cold calling and door knocking seem to be somewhere near beating your dog on the social scale, but meeting consumers, no matter how you do it is an integral part of any sales process. So whether you prefer to go to networking breakfasts, or farm using postcards, email, newsletters or flags in the lawn, leave a business card with your tip every time you go out to eat, hand out literature at the supermarket, cold call or door knock,or even blog - do something to meet new consumers on a regular basis and the need for intermediaries go away.

Look, I’m not knocking people for attempting to create a business for them to make a living, I just prefer to buy services that enhance my efforts instead of replacing them. And in this case, I just don’t feel that the intermediaries bring anything to the table that we cannot bring ourselves if we choose to. I really feel like we’re handing them our watches and then paying them to tell us what time it is. Its as if Paul Bunyan or John Henry ran out to buy the machines that were destined to destroy their jobs. Wouldn’t they have been better served to acquire the tools and then control the production themselves? If we’re too lazy to do our job, research new technology and change to fit the times, we end up continually outsourcing little pieces, over and over again, eventually we outsource ourselves out of a job.

Then do what?

So if you’re going to invest in something to build your business, let it be something that you control. Where you can make the changes to fit your philosophy and your business model.

Need more leads? Then increase your web traffic. Use print media to drive traffic. Redesign the site periodically- pay for clicks, write blogs, enhance the consumer opportunity, make sure you have reciprocal links, use social media to increase your presence, syndicate your listings yourself with links back to your site. But stay in control of your electronic presence.

Need your leads to be incubated? Buy a CRM. Get a website with a strong back end. Hire someone to work with your incoming inquiries. Install chat on your site. Set up your own methods of reviewing your traffic and then winnowing the results. And I believe you will not only get a more cost effective result, you will get the results you want, not what a third party technology company thinks you should have.

I know from my own experience that setting up an internal system in my company has enabled us to follow up with people that have contacted us in a manner appropriate to their needs. Some people needed to be called right away and they were- Others wanted to be contacted infrequently while receiving email updates on new listings and that’s what they got. And what we got as a company was a positive return on our electronic marketing, controlled by us.

And those guys that wanted to sell me “exclusive” leads at $30 each a few years ago, they’re around $7 per lead now, and since they’re the same ones I get from my own web site I think I’ll pass on those leads also.

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