Saving the Real Estate Agency Profession in the Era of Free Information

I try not to do a lot of "business of real estate" posts. That's not what I'm about. But I figure that we (as agents) have got about a year to save the profession from the traditional brokerages that control the National Association of Realtors.

Last night I attended a session of the San Diego Weblogging group. Being the only non-techie present, when real estate came up they were willing to be quite upfront about their reactions to real estate. When I said "everything is a matter of public record," in a different context, the entire group went off on me about NAR's policy of attempting to control information chokepoints via MLS and limiting what information IDX is allowed to display.

(For those who were present last night, I want to emphasize in no uncertain terms that the your reaction was a good thing from my point of view. I knew intellectually what the public thought about this policy, while not having precisely this sort of eye opening experience about how strong those feelings were. But having the cover of the group and a lone agent to target, you folks felt comfortable displaying exactly what you thought of this policy to that agent: me. The shortsighted reaction would be to get angry and offended and leave. The intelligent reaction is to thank you for providing concrete perspective on something I already knew intellectually, because I am grateful for you all completely clearing the air, and I'm glad it happened.)

For those who weren't present, this is a group of very bright, very intelligent people. It's only small fraction of the number of such people here locally. All over the country are similar groups of very bright, very intelligent people. They've got brains, they've got know-how, they've got marketing expertise and access to venture capital. It is only a matter of time before some group of them figures out how to defeat any MLS monopoly of listing information. Not that there's much of one right now, where MLS information goes out complete to IDX providers and parts are only censored to the general public because it's in the license. But eventually, what shreds of information monopoly are left will be gone. The only thing that needs to remain restricted is, as we all agreed, the showing instructions. Things like lockbox combos and when people are not going to be home so the criminal element can't cart their stuff off. CBB? It's valid information on the state of their agent's mind for buyers. Show it. Contact phone for showing? Show it. Days on market? Definitely show it.

One of the people that was present works for a large IDX provider. We had a good conversation about how even the traditional brokerages are loosening information flow in the name of selling real estate right now. We agreed that it was likely that there will be attempts to re-tighten this control in the future, but that those attempts are going to flat-out fail.

Now, let me tell you something else: While these folks were vehemently hostile to the notion peddled by the traditional minded brokerage controlling market access, they were quite open and responsive to the notion of the expert consultant.

Unfortunately, these folks were all previously unacquainted with that business model. There's a lot of misinformation and disinformation out there about the business of real estate agency. A lot of it's written by people outside the business who want a piece of the action, to encourage an agenda that gives them a piece of the action. The experiences of these folks leads them to be deeply suspicious of large corporations and large organizations with a profit motive.

NAR, for their part, is playing straight into the hands of these people outside the business who want a piece of the action. The entire "controlling market access and information chokepoints" message is anathema to these folks. It tells them that agents and their organizations aren't to be trusted, it tells them that our entire business model is based upon making money by constraining people to come to us. What happens when that constraint vanishes? I guarantee that it will vanish. If not this year, than next year or the year after. Precisely when isn't important. It's coming, and probably sooner than you - or I - think. Agents can decide to anticipate this event as a group, and prosper, or lose almost the entire market when it does happen.

Let's look at the basic inalienable facts of the situation. You have John and Jane Smith. They're looking to buy a house. This is the biggest financial transaction of their lives, and purchasing real estate is an enormously complex transaction they have no real understanding of. They're coming into the market innocent of any real knowledge of trends, or where the market is. They have seen none of the recent sales in the neighborhood. They have no idea how to evaluate a property for future suitability, investment potential, or any number of other things. Do you think people might be willing to pay for all that knowledge and judgment, and know-how? Now consider: If we market ourselves by telling them they have to come to us because we have a monopoly on information of what houses are for sale, what happens when we don't? Crickets chirp, tumbleweeds roll, and 99.9999 percent of all agents go out of business. Market yourself by sending the message that your value is in control of market access, and what happens when your control of market access goes away?

Let's look on the other side of the equation as well, at sellers. You have John and Jane Smith, a few years later. They've decided to sell for some reason or another - there are at least eight categories of reasons. Now they've got a long grocery list of factors that they've never before considered to deal with in selling that property. Time constraints, property constraints, competition constraints, staging, location, construction, layout, the loan, the lender, the market they're in. Do you think people might similarly be willing to pay for expertise in dealing with all of that? But most ways of marketing that agents do boil down to "Our MLS is where all the buyers are." What happens when it isn't? RIAA is learning this lesson right now, and they have a lot more law on their side than agents do.

Or maybe we're all going down the "constrained to deal with an agent by force of law" argument? All it takes is one licensed agent to put themselves into the deal, and the traditional brokerages have made it trivial to get that license as the way to keep themselves in clueless newbies. Not to mention that most states, including all of the big ones, don't have such laws, and passing them in current environment falls under the heading of "Not Gonna Happen." The few states that have such laws are going to wake up and repeal them eventually.

The "sign in the yard, entry in MLS" listing agent is going to go away no matter what we do. So is the "here is the living room" buyer's agent. Where there is no real value provided, people will go with the cheapest alternative, and you can't stay in such a business competing with "essentially free"

But good agents do provide value, and even more so when there's no agent on the other side. My average for the buyers that are the majority of my business in the last two years is almost twenty percent of the value. Let the people be free not to use any agent if they don't want to. It just makes my clients happier. Let your happy clients tell their friends, and there won't be any shortage of business.

For those agents who can compete with all possible alternatives, it would be a lot easier to attract business if we didn't have to compete by first defusing official NAR pronouncements that are nonsense, and sabotage our efforts by telling the public that the value of an agent is in places where it clearly no longer is. We are entering a new world of information transparency whether we like it or not. I've decided that I like it very much - basic information may be free, but context, analysis, and evaluation are more valuable than ever because of it. But try and charge toll for that basic information, and people will figure out how to route around you.