REALTOR® VALUE IN TODAY’S CHANGING MARKETPLACE
The real estate marketplace in the last few years is the toughest most Realtors® have ever seen. The closest that most remember, provided they’ve been in the industry long enough, was the early to mid -1980s. However, the only real similarity was that real estate sales had collapsed. But the reason for that collapse had to do with inflation and exorbitant interest rates. The causes of today’s collapse are multi-faceted, and bear little relationship to the early 80s. Today, interest rates are at all-time lows, and price affordability is bringing homes within reach of many. But low interest rates mean little to those without a job and those who cannot quality for the banks’ tougher credit standards.
The cliché that “knowledge is power”1 has never been more appropriate for the Realtor® industry today. For better or worse, the federal government has introduced a kaleidoscope of programs, some better conceived than others, designed to jump-start the residential real estate industry – which many economic observers regard as one of the leading signs indicating when we will start to turn the corner of this recession. The commercial real estate industry is a trailing indicator, which suggests that segment has a ways to go before “rounding the corner.”
First, let’s start from the proposition that most of the general public is completely in the dark about their selling and buying options today because of different credit requirements, new federal programs that get tweaked (or even discontinued) every few months, and the intimidating array of choices for distressed sellers, ranging from short sales, to loan modifications, refinances, deeds-in-lieu, lease-options, walk-aways, etc.
So what are some of the tasks ahead of Realtors® as an industry, if they are to survive and learn from the past? There are several. First and foremost is to capitalize on the opportunity to learn about this new and changing marketplace. Most of us remember in 2005 and 20062 when editorial writers and critics were questioning the survival of Realtors® as an industry, due largely to the fact that it seemed all one had to do to sell a home was plant a yard sign and wait for the inevitable bidding war. Realtors® were spending less time “brokering” deals and more time just shuffling offers and counter-offers between frenzied buyers and sellers. There was less value placed on “knowledge” and more value placed upon “speed.” Many commonplace rules went out the window. For example, in some instances, buyers were even waiving the standard home inspection contingency, just to get to the front of the line of competing offers.
Today, all of that has changed. Being on the front lines of this new playing field gives Realtors® the unique opportunity to acquire first-hand knowledge that the consuming public truly needs. Market dynamics have changed, so buyers can pick and choose, and sellers have to be properly counseled as to what to expect and how to properly price a home so that it will move. For Realtors® today, knowledge truly is power, and this is what distinguishes the merely average broker from the successful one. Here are some typical issues you should be prepared to discuss with your buyer and seller clients in today’s marketplace:
The second challenge for the industry depends not upon the Realtor® as an individual, but its organization as an interactive clearinghouse for the exchange of good information. Just as the market was starting to shift in 2007, I wrote an article entitled “Leadership in a Time of Change.” Since that “time of change” is clearly upon us, I thought it appropriate to quote some of my observations back then, as they apply, in spades, today:
A recent article in the McKinsey Quarterly, Making the Most of Uncertainty,6 approached the issue of uncertainty as a fundamental choice between two different business strategies. When confronting change, the authors asked, is it better to: (1) Try to shape the outcome by influencing the elements of change, or
(2)Try to adapt to the outcome by recognizing and capturing the new opportunities that the change brings with it? The authors of the article noted that “The truth is that no dominant solution exists” and sometimes the best approach may be to “shape” and “adapt.” They add that whether one should “attempt to shape or adapt depends largely on the level and nature of the uncertainty it faces.”
In this time of uncertainty, whether we shape or adapt will ultimately be up to Realtor® leadership. But is leadership up to the task? The answer to this question requires the type of introspection best left to the leaders individually. But one thing is certain – much is at stake. Change is occurring under our feet, with each passing day. We have only to read the paper or watch the news. Each day we learn of some new Internet company or innovative business model. Between satellite imagery, mapping, Zillow, Google, Yahoo, and a host of other innovations, there is little doubt that the Realtor® industry is becoming increasingly technologically driven. The days of the MLS books and lockbox keys are long since gone. There is no question but that innovative and progressive Realtor® leadership is needed for the industry to survive and flourish.
Today, more than ever, Knowledge is Power. This means remembering the lessons of the past – what is sometimes referred to as “institutional memory.” This is a valuable commodity and must be fed, nurtured and passed along, so the young blood that moves into leadership will have the necessary mentoring and background information to avoid costly and time consuming mistakes. We must avoid change solely for the sake of change.7 Good, effective and well-considered change must be collaborative, meaningful, and involve as many members as possible, old and new. This change must occur in the light of day, so that the process is perceived as fair and open to all. And above all, to be successful today, each and every Realtor® must place supreme value on learning and knowledge, because the consumer will expect it and the industry’s long term success depends on it.
© 2010 QUERIN LAW, LLC
1Sir Francis Bacon, Religious Meditations, Of Heresies, 1597.
2The credit and housing bubbles continued until the third quarter of 2007.
3Fannie and Freddie have made it clear that Realtors® are permitted to have contact with the appraiser under the Home Valuation Code of Conduct, so long as the purpose is to correct an error, seek clarification, or pose a question.
4There are two available forms with significantly different terms, and you should be familiar with the one most appropriate for your client.
5A new state law now allows the borrower to formally request loan modification of the lender, and the pending foreclosure must be held in abeyance until the lender processes the request and makes a decision. SB 628 (2009)
7The best example we have of this is the current DC administration’s numerous miss-steps. No sooner is a program rolled out, than it is changed or abandoned, primarily because the decision was made by a select few – mostly those new to the process with no institutional memory. The excuse that comes to mind after these programs are reversed, modified or abandoned is, “Well, it seemed like a good idea at the time.”