Real Estate and the Four Levels of Competence

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People who talk about learning skills tend to discuss a model for learning called the conscious competence learning model.

It starts with unconscious incompetence. You not only don't know how to do something, you don't realize that it is a skill that requires learning. "Anyone can do that", people at this stage of learning will think, despite the fact that they never have. They have, in fact, no basis for comparison. Some things are as simple as tripping over your own feet, but most aren't.

The next stage is the conscious incompetent. You still don't know how to do whatever it is, but at least you know that you don't know how. Maybe you've tried and fallen flat upon your face, maybe it's something that you instinctively know is beyond your training or ability. Back when I worked for the FAA and people would find out what I did for a living, it's was amusing to see how many people would immediately volunteer that they couldn't have done my job. For some reason, I don't get that now, despite the fact that the skills of being a good real estate agent are at least as difficult to acquire.

The next stage up the ladder is the conscious competent. Some preparation, supervision, a few botched tries, and then you do it right without anyone having to step in. But you've got to think - really pay attention, take your time and be careful about what you're doing.

The final stage is unconscious competence, where the skill becomes second nature. You're good at whatever it is. Most people over the age of two are at this stage as far as the skill of walking is concerned. They do it without considering how to move the muscles that make the legs and hips move. They walk whatever distance they need to without even paying attention. And here's an important point: Sometimes by not paying attention, people step on something or trip over something and get seriously hurt. They walk in front of a semi, or trip over the coffee table and fall through a window or just step on an oily patch that causes their feet to go out from under them and hit the back of their skull on the pavement.

It is my contention that nobody is up to unconscious competence when it comes to real estate.

In fact, if you think you've achieved unconscious competence at most of the core skills of real estate, you're almost certainly stuck on the first level.

First off, real estate isn't one skill. It's at least half a dozen. The average client doesn't care about how good we are at attracting other clients. They care if we interact with them incorrectly, but I have yet to hear of a prospective client saying, "I want to sign up with someone who's great at prospecting for leads." They'll say highly correlated things like "I want to work with a top producer," or "I want to work with (insert heavily advertised brand here)" but they really don't care about lead prospecting competence per se. Yet this is probably the most discussed skill set on real estate websites. I don't understand why other agents think this is fascinating to clients, but by how often they talk about it, they evidently do. Maybe because it's one of the big focal points for every office - if you don't attract enough business, you're not going to be in the business. Nonetheless, clients don't really care about this one. You could be the worst prospector in the business, but somehow get enough clients to stay in business, and as long as you're good at everything else, the clients are going to be happy.

Then there are the interpersonal skills that most people have in fact developed by the time they're adults. Hello, how are you? Nice day, and so on from there until we get to the pinnacle of those skills, handling people so well that they never realize they've been handled. People care about this, and they know they care. Don't believe me? Whatever you do for a living, try calling your next prospect something nasty. You can't do real estate without these skills, but not only are they not the central job function for real estate licensees, but clients actually do not want somebody who is obviously too good at this. Why? They like the basic skills, but they don't like being played by sales persons, something that's happened to basically everyone by the time they're ready to buy real estate or get a loan. Nonetheless, many people choose agents and loan officers based upon feeling "a connection." *Buzz*. Thank you for playing. If a prospective agent isn't competent at the interpersonal dance, that's one thing. But 95% of all agents are quite good at it, and it doesn't mean a darned thing about their competence at real estate. Anybody with any competence at interpersonal skills can talk a good game in the office. They could be ready to crack that license prep course any day - not actually know a thing about real estate yet - and still manage to generate "a connection."

Then there's the paperwork and legal CYA stuff. I could name names of nationwide real estate firms that take months to cover these skills with new licensees, and brag about their training based upon that. The obvious snark that occurs to me every time I see one of their advertisements is, "How is being able to avoid legal judgments when you've hosed your client a virtue in the client's eyes?" In other words, it blows my mind that they actually brag about it to clients. To be fair, this skill set is a real part of the career, but I'd like to see more emphasis upon actually doing a good job for the client, not disclosing everything in small print, hidden among 500 other sheets of paper at final document signing. There is stuff here that you're going to see on every transaction, or almost every transaction, but pretty much every real estate transaction is going to have something going on that is different from some hypothetical "typical" transaction, and if you aren't thinking about what you're doing, it's very likely you'll miss something important. Even if you are thinking carefully, you might miss something. People successfully sue agents every day, and the defendants are not all incompetent. This isn't a skill that gets clients a better bargain very often, and perfect paperwork doesn't mean the client didn't buy a vampire property, that they got a good bargain even if they didn't buy a vampire, that they sold for a good price in a timely fashion, or anything else except that the paperwork is perfect. The paperwork will usually tell them if they are careful enough, but "careful enough" can be "reading documents for forty-six hours straight at final signing," and even then, it's pointless unless they've got the willpower to say no to the transaction at the last moment like that. Nonetheless, bad paperwork is what the attorneys of former clients find easiest to pin on real estate agents, and almost every judgment against an agent has "bad paperwork" behind it as the evidence. Paperwork is a necessary skill for agents, but it it's only evidence of a good or bad job - it isn't the good job or bad job itself.

Negotiation is a critical skill for agents, and many do actually study it. But for every agent I encounter who understands principles of negotiation, another is completely clueless and a third thinks negotiation is where you tell the other side everything about how the transaction is going to be. You should see some of the contracts my buyer clients have been told to sign - take it or leave it - in the middle of the strongest buyer's market of the last fifteen years. And these folks wonder why the property didn't sell. Actually, I'll bet that if you work with buyers, you wouldn't be surprised. I just randomly pulled up twenty listings in the zip code my office is in - and all but two had violations of RESPA right in the listing. Bare, baldfaced violations of RESPA - steering is illegal, no matter the form it takes. It's not only setting you up for a lawsuit, it's setting your client up for a lawsuit. If DRE wanted to put at least half the agents and brokerages in California out of business over this one point, I think it would be pretty trivial. But I digress - this paragraph is about negotiation. Everything about the transaction is negotiable, and refusing to negotiate anything can be grounds for losing an excellent offer. Price is not an independent variable, and it's not the most important of a series of completely independent points. It may be the central issue of a negotiation, but it influences everything else about the negotiation, and is in turn influenced by all those other factors. What does each side need, what do they want, what would they settle for, and what are they willing to give up in order to get it? If the answer to this question is "nothing," then they must not want it very badly! There are many factors other than money, but they all inter-relate, and the person who can figure out something the other side wants that isn't money can use that to make both sides happier. Negotiation isn't just faxing offers back and forth, and in the context of real estate, it's a skill that takes a significant amount of practice as well as study to maintain. Furthermore, more than any other skill involved in real estate, negotiation never gets to be so strong a skill that you can do a good job without thinking about it. For one thing, on the other side of that negotiation is another agent who does the same thing. I always presume the other side is better at it than I am to start with. Evidence quite often proves this presumption to be nonsense, but you don't hose your client in negotiations by paying attention and being careful. Nor is there any metric for negotiation skills except how good the deal you get one particular client is, and since every property is unique, often the client has no real idea whether you should be nominated for negotiator of the year or pilloried for incompetence. I haven't heard of anybody being sued for poor or non-existent negotiation skills. I have heard of buyer's agents getting beat up by their brokers for doing too good of a job - lowering the commission.

The next skill is property evaluation. This is more important to buyer's agents than listing agents, but listing agents can benefit by knowing it as well. It breaks into several skill facets, each of which is a skill that requires instruction and practice. The most important facet of this is the ability to spot defects that are going to cost the client money - actual structural problems. Ask yourself: Is the fact that the agent tells you they're not an inspector going to make you feel better about buying a property where the roof caves in three weeks later? Is that going to absolve the agent of blame in your mind? Don't expect your agent to note everything that a contractor or inspector or engineer will - but they should tell you about everything they see, and they should see most of it, and it should come as part of a full service package, so you don't have to spend $300 getting an inspector out, or $600 for an engineer, not to mention put a deposit into escrow where you may not get it back for quite some time if the seller wants to be obstinate. Furthermore, without a good agent who will tell you this stuff, you might have to do this multiple times. Instead, with a good agent you know about the problem before you consider putting an offer in - and instead of a costly drama that eats your life, you walk away unscathed and find another property that actually suits you. I just helped a client cross four properties off their list today, all of which would have sent him through that cycle. Decorator's eye is another facet of this - helping the client stage a property - or helping them see the potential of a property despite poor staging. Rehabber's eye is related, yet a distinct sub-skill - helping the client see the property with a few changes, usually not very expensive ones. Location evaluation: How does the location of the property fit with the client's agenda? Schools, traffic, shopping, environmental noise and other factors. Sometimes, the client doesn't know themselves, as I have discovered upon many occasions. All of these are part of the core job function, all are skills that must be developed and practiced if you want them. They are also critical to how happy a client is going to be with an agent's work - particularly if you're working as a buyer's agent, as I usually am. But it seems that this whole group of critical skills gets neglected in favor of "Which property has one feature that makes Mrs. Client swoon with delight?" This approach is conceptually similar to "throw enough mud at the wall and eventually some will stick." Out of sheer frustration if nothing else. But I have yet to see a single brokerage train their clients for any of this entire group of skills. Indeed, most of the major chains seem to be doing their best to pretend these are not part of an agent's function. Here's the thing: I can get people to buy and sell properties without these skills, and never get sued successfully over them. But then it's completely hit or miss as to whether the client will really be happy with the property - and who do you think is going to get the blame if they're not? I had some clients insist upon buying property on the corner of two moderately busy streets last year - and I made certain to remind them of the traffic and noise throughout the transaction - giving them encouragement to change their mind if they weren't certain they were going to be happy with it. But I'll bet you a nickel they call me when it's time to sell it because these opportunities to change their mind also generated a real buy-in to the situation for them.

Marketing skill is more critical for listing agents, but buyer's agents need to know marketing as well. How do you get the attention of someone who will want to buy this property? How do you persuade them it's worth making an offer on? What are the available venues, and what actually works? Theory says that there is one buyer out there who will pay more for the property than anyone else - how do you get their attention or that of someone close to them? Get them to come look, get them to see value, get them to make an offer you're happy to accept, get them to carry through on the purchase? On the buyer's side, you've got to be able to counter the fecal matter - and I can count on the fingers of one hand all the properties I've been in the last year where I didn't find some obvious fecal matter in the way it was represented, or the things that the listing agent said in order to get it sold. (FYI: This fecal matter has an ugly habit of biting the disseminators later on.)

Did you think I was leaving market knowledge out? Here it is. How does the property compare to everything else around it? What's the general market for real estate like in the area? What else has sold lately, for how much, and what was it really like? It's too late now to get a viewing of all the comparables that sold within the last few months - the lock box is gone, the new owners have moved in, they're done with all that transactional nonsense, and the vast majority sure as heck aren't going to let random strangers poke around their new house. How many agents get off their backside, get into their car, go out and look, take notes, and remember? Most of the agents I've done business with never leave the office except for an actual showing generated by clients driving around, or surfing the internet, or even reading the "for sale" ads. That is so backwards I have difficulty articulating precisely how messed up it is. A good agent knows the market, knows the comparables for sale, and knows how a given property compares. They might not have been in every single one, but they've been in enough for a good comparison. Patronizing an agent who hasn't done this, who doesn't make a habit of this, is like having half an agent - at most. How in the nine billion names of god are you going to help a client price a listing properly if you haven't looked at the competition? How in the name of ultimate evil are you going to know a property is or isn't worth making an offer on, and for how much? Yet people will do put up with this nonsense because they don't know any better. This is probably the agent skill that needs the most practice of all, and decays the most quickly if not practiced. There's this one neighborhood about three miles from my office that I haven't been into for almost three months, and I'm terrified I'm going to get a call for it before I can remedy the situation. There's nothing wrong with clients suggesting properties, and I firmly believe that no matter how messed up the property is, they should be given the opportunity to see any property that catches their eye - but doing that and only that takes zero advantage of the one thing good agents have that bad ones (and 99.999% of the general public) don't - precisely this expertise. It is this expertise that makes more difference than any other skill set in results for clients - whether selling or buying. You can't recognize either a bargain or the opposite without the context to put it in. You can't price a property right without knowing the competing properties and their relative strengths and weaknesses. But all too many people, both agents and general public, discount this difficult to acquire skill, thinking, "Anybody can do that!" Question: Which learning category does this place them into?

I don't know how many people I've met that seem proud to be stuck in unconscious incompetence. But just because you don't recognize the skill doesn't mean it doesn't exist, it doesn't mean that its lack won't bite you, and it most assuredly does not mean that its presence in others won't hurt you. For real estate transactions, to the tune of thousands of dollars at a minimum. Knowledge springs, not from the mental impenetrability of "Anyone can do that!", but rather from the admission that perhaps you might have something to learn.

Caveat Emptor

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About this Entry

This page contains a single entry by Dan Melson published on March 6, 2008 7:00 AM.

Avoiding Mortgage Prepayment Penalties by Partial Payment was the previous entry in this blog.

New Temporary FHA Conforming Loan Limits Announced! is the next entry in this blog.

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