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Let’s All Open Doors for REALTOR® Safety

This article was originally published in REALTOR® Magazine:
by Sam DeBord
It happened again last month. A real estate agent took a call from a potential new client, went to the property for a showing, and was kidnapped at gunpoint.

Thankfully, she got away. But others aren’t so lucky.

Beverly Carter lost her life in a similar situation. So did Mike Emert, Vivian Martin, Sarah Anne Walker, Ashley Oakland, and Ann Nelson.

“The question ‘How do we make our agents feel safe?’ quickly became ‘How do we make all agents in our market feel safe?’ The answer is, ‘Give them a safe place to go.’ Our doors are open to any agent, from any company, anytime we are open, to meet a buyer for the first time.” ​—AnnMarie Janni, Better Homes & Gardens Real Estate Go Realty in Holly Springs, N.C.

Enter: Open-Door Partners

If you’ve seen the open-door policy I proposed in REALTOR® Magazine and featured in the Chicago Tribune, you know the idea is simple. Real estate brokers should band together and let any REALTOR® from any company use their reception space to meet new clients and verify their identities.

Well, recently I’ve been thinking even bigger than just brokerage offices. Everyone in our industry should be partnering with us for safety. Title and escrow professionals, builders, and lenders—you regularly stop by our offices, and we’d like to stop by yours. You’d probably benefit from seeing real estate professionals in person more often. Let’s make that happen.

“Unfortunately, one of our agents was attacked in the field. You always think it happens to someone else until something like that smacks you into reality. It can happen to anyone. If simply opening our doors to a competing agent can avert an incident like our agent endured, then I cannot imagine not doing so. There is a time for competition, and there is a time for just plain doing the right thing. Safety first; competition second.” ​—Rich Shearrow, Realty Ohio Real Estate in Worthington, Ohio

If every title/escrow company, lender, and brokerage across the country that agreed to let agents use their offices for safety check-ins with new clients was displayed on a web-based map, we’d have enormous coverage. Real estate professionals wouldn’t need to travel across town to meet a client in an inconvenient location. The temptation to show properties to unverified people would be greatly diminished.

“Meet Me Here First”

That’s the goal. We should feel comfortable telling every sign call, every Internet lead, every last-second showing request, “Meet me here first. It’s a new nationwide safety policy. And it’s only five minutes from the home.”

“Our firm’s new open-door policy is meant to create an environment where real estate professionals can feel safe. We will encourage other firms, title companies, and banks across northwest Arkansas to adopt similar open-door policies. Our safety, and the safety of our colleagues, is simply that important.” ​—Anthony Clark, Clark Partners Realty Group in Fayetteville, Ark.

With a single web-based map displaying all of our offices together, real estate professionals could easily find safe meeting places on the go. They would be able to verify the person’s identity in a public business setting convenient to the property location. The technology is insignificant—it’s basically already built. In fact, I already built a prototype at MeetMeHereFirst.com.

All We Need Now Are Our Open-Door Partners

Title/escrow companies, lenders, and other real estate industry vendors will benefit through this partnership. We want to advertise all of your offices as partners in safety. These offices alone would make for a massive database of locations.

“Beyond our immediate group of agents in our brokerage are many friends in other brokerages whom we work with daily to get deals to closing.  We all need each other!  Because of our love, respect, and adoration for these agents, and because we are one big family of REALTORS®, we want to help them to be safe by opening our doors as a safe haven meeting place.” ​—Vicci Hall, Front Gate Realty in Ridgeland, Miss.

Scattered throughout this article are quotes from real estate brokers who understand that now is the time to work together for the safety of the whole industry. Brokers themselves might have to swallow a bit of competitive pride to join the cause, but it would benefit their agents as well as grant them recruiting opportunities. Brokers work together often for common goals. Those of you that I saw in Washington for NAR’s Legislative Meetings understand that.

Stand Up and Show Your Support for REALTORS®

I’ve already been talking with lenders and title companies who love the idea. If you know a company leader who should be involved, please introduce us. Let’s do something great for this industry that will cost us little, and bring goodwill to all our businesses.

We want you as an open-door partner. Are you ready to step up for safety?

Upstream and RPR: the smart grid to power the real estate machine

This article was originally published on Inman News:
by Sam DeBord

The negotiation, dissemination and confirmation of an agreement to build Upstream this past week between brokers and NAR’s board of directors was shocking in its speed. Virtually the entire broker sphere is on board. Upstream, with its newly unified backing, has the potential to alter significantly the power structure of the real estate industry.

To put the agreement in its simplest terms: The brokers representing the vast majority of agents nationwide support Project Upstream. Their goal is to create a broker-controlled gateway to all online display of real estate data with broker-specific rules attached. They’ve partnered with NAR to fund building that gateway with RPR — the largest parcel-centric property repository in the industry — as its database.

Brad Inman wrote this week that brokers are biting back at “the machine” of technology that wrested control away from them decades ago. He wondered if Upstream would be just another middleman.

As I watched the partnership solidify in D.C. this past week, it was almost bizarre to see this new power player emerge during a nonprofit trade organization’s annual legislative meeting. All outward appearances were that this was just another buttoned-down event designed for measured, process-driven political decision-making.

In reality, a group of executives and technology minds were seizing an opportune moment and wresting control of the industry’s conduit to the consumer world online. This new power player, the middleman that he might appear, was Michael Corleone eliminating his stunned opposition while attending a baptism. No one thought him capable of such swift and broad consolidation of power until it was too late.

Brokers and NAR can now create a smart grid to control the flow of power to any vendor, MLS or portal that is dependent upon broker data for viability. This isn’t just “taking our data back.” It won’t just allow brokers to decide where their data goes. It will define how, when and where much of that data is displayed and used at any end point.

The real estate tech machine has always been powered by a tangled web of broker data too disjointed to control. It looks like a Brazilian favela, with rogue users strapping their own data lines anywhere they see fit and supplying unreliable power sources to anyone with the willingness to plug in. We know it’s a risk to the end user, but no one has ever built the infrastructure to replace it all in an organized and fully funded way.

That can end with the smart grid dashboard of Upstream.

Brokerages can curate their data-driven content on a granular level if Upstream is built out as a flexible, powerful platform. A brokerage could deliver its full data set to an MLS, restricting the data to co-brokerage and IDX uses. Controlling its own syndication dashboard through Upstream, it could decide it only wants Portal A to receive five photos of each listing and require a linkback beside each to the broker’s website (driving direct contacts from consumers). Other portals, vendors and partners might be required to follow a different set of display guidelines based on their relationship with the broker. Each broker could form its own set of rules for each of its data recipients.

Broker experimentation with subsets of data and rules, displayed on different advertising outlets, will allow us to develop long-term analytics showing what kind of marketing actually sells homes. No longer reliant upon the vendor’s statistics, brokers will be able to develop rational models for marketing that are based on sales instead of impressions.

Upstream is a gift to relations between brokers and MLSs. It takes away the MLS’ need to syndicate, and it takes away the broker’s ability to protest. The MLS continues to provide the cooperation and compensation rules at the broker-to-broker level, while brokers are free to experiment with their consumer-direct advertising as they see fit. RPR has always had a noncompete with MLSs, so there’s no national MLS controversy.

It’s a massive coup for NAR. Brokers could have built Upstream on their own, but interbrokerage rivalries would have slowed the process significantly. Recognizing this as an industrywide watershed moment, they tabled their past disputes and added a unifying voice to lead it (and to fund it significantly). RPR was a financial drag in the past, but it looks like a product that was built to do exactly this. Pivot or not, it’s an ideal partner to jump-start the initiative.

When it all shakes out, access to more standardized, reliable data will be available to anyone willing to play by the rules. That might inhibit a few tech companies’ plans, but it’s a much-needed maturation for the industry’s data foundation.

Real estate’s utmost service value is to the transactional parties, not hobbyists or entertainment browsers. The people directly responsible for helping sellers sell and buyers buy could once again be sitting at the control panel that powers sales-related real estate data across the Web. That’s a good thing for our industry.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and a director for Washington Realtors and Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com.

Point of Sale Mandates for Real Estate: From Cumbersome to Destructive

This article was originally published on NAR’s Blog:
by Sam DeBord

Government entities often attempt to place additional restrictions or costs on the transaction or transfer of real estate.  While there are often good intentions involved in the creation of these “point of sale” mandates, most proposals for new or increased transactional hurdles have serious negative consequences.

Point of sale mandates are a concern not only for real estate industry professionals, but also prospective and current home owners in a community. Barriers to the transfer of real property slow down the marketplace and often reduce home owners’ equity through transactional costs. Point of sale mandates can also create overall market depreciation by increasing failed transactions.

©cohdra, 2007. Morguefile

©cohdra, 2007. Morguefile

There is a wide range of point of sale restrictions on real estate transfers across the country. Some are minor in nature, while others are significant.  Any restriction adding costs, inspections, or bureaucracy to a real estate transaction is a drag on the industry and on home owners, but the effects of some mandates are much more severe than others.

Utility Inspections

Some point of sale mandates are intended to improve the community. Sausalito, Calif., has a mandate that requires owners to inspect their sewer laterals (which connect to the street sewer lines) and repair them before selling the home. While a buyer can (and often should) have a sewer scope inspection independently, the city has created a broad mandate that is sometimes unnecessary for certain property types, ages, and situations.

Municipalities in some areas, including Seattle, require inspection of on-site sewage systems or septic tanks to ensure they meet state regulation standards for operation. This point of sale mandate, much like the sewer lateral mandate, is intended to protect the groundwater and the health of the local community, but it only applies to those home owners who are selling.

This often causes an uneven distribution of responsibility and cost. Consumers can already get their own septic inspection independently when they buy a home. The governing authority may truly believe that all sewer lines or septic systems need to be inspected regularly to promote healthy groundwater. If so, they should propose a policy for all residents’ systems to be inspected on a regular basis and let the community decide if they agree.

Full Home Inspections

Some of the most concerning mandates include some form of government-managed home inspection at the point of sale. These can create fines, repair requirements, and even loss of occupancy rights if they are not adhered to by the home owners.

In Marin County, Calif., home owners are subjected to resale inspections before they can close escrow on a sale. These inspections can call for remediation or charges for items which are not in line with current code or permitting. This often leads to current building standards being applied retroactively to work that was previously done without a permit but according to the building code as it was written at the time.

In Austin, Texas, an energy performance audit is required to be performed and delivered to the buyer before a closing. These pricey inspections must be paid for by the seller. They rate the home’s windows, insulation, ducting, HVAC equipment, and even appliances for energy efficiency and make suggestions to buyers for improvements. They can generate significant repair requests from buyers that can scuttle sales agreements.

In Berkeley, Calif., resale inspections are focused on energy improvements as well. Toilets, shower heads, faucets, water heaters, water lines, duct work, chimneys, insulation, and weather stripping are all required to meet city standards. The cost to the home owners can reach thousands of dollars in many cases.

Point Of Sale Mandates Taken To The Extreme

The Cleveland area has some of the most heavy-handed point of sale mandates that exist in the country. In at least 20 of the metro’s suburban cities, inspections must be done before selling, and in some cities even before the home owner enters into contract to sell their home. If the inspection finds code violations, they must be repaired by the home owners even if they decide not to sell.

The onerous nature of these inspections is exemplified by the city of Maple Heights’ mandate. When home owners receive their point of sale inspection report, if there are code violations, they are granted a 90-day temporary permit to occupy. The city has taken the authority to revoke the home owners’ occupancy rights if they don’t fix the violations within that time frame. Even if the sellers never received an offer from a buyer, they are required to make the repairs to the home at their own expense.

Home owners may have to fix basement floors, electrical wiring and outlets, lighting, hot water tanks, window screens, gutters, fences, or even a concrete slab with three or more cracks. There are more than 40 categories of potential violations which a city-approved inspector can call out for repairs. If sellers can’t finish the repairs before closing, they must put the money for the repairs into an escrow account managed by the city to ensure they will be done. The occupancy permit for the home is dependent upon it.

Sensible Policy For Point Of Sale

Home buyers certainly want their homes to be safe, but they need to be able to make their own decisions about asking sellers for repairs or doing repair work themselves. Some neighborhoods are full of homes built in the 1920s or earlier. These homes have many features that would be considered outdated to an inspector and inefficient by new energy standards, but are often perfectly acceptable to the buyers.

Forcing a person who has lived in a home for 50 years to upgrade all of its systems before selling to a buyer who would have been happy with its previous condition is inefficient and an overreach of authority. It creates a significant financial detriment to the participants in the transaction and to real estate values as a whole in that community.

Our focus through REALTOR® policy has been to continue to educate the public on important safety and energy concerns about their homes. We educate home buyers about energy efficiency options and costs. We implore our buyers to have home inspections and, where appropriate, specialized inspections for sewer lines, septic systems, etc. We’ve taken on the primary role in advising home buyers and sellers about the dangers of lead paint, mold, and other hazards.

We don’t need point of sale mandates from government agencies to make these ideas into costly blanket inspection requirements for all home owners. Buyers and sellers already have the opportunity to research relevant information about their homes, and make their own decisions as to what kinds of features are valuable and necessary to them.

Point of sale mandates, at their very core, are not an effective way to make policy. They put an inordinate weight on the small part of a community that happens to be selling a home that year, while others who stay in their homes for decades don’t share in the cost. We need to continue to educate our clients, as well as our politicians, that empowering home buyers and sellers to learn more about the safety and efficiency of their homes is a far better way to promote those values than adding roadblocks to the sale of their homes.

Sam DeBord is a director for Washington REALTORS® and Seattle King County REALTORS®, and managing broker with Coldwell Banker Danforth. Connect with his team, Seattle Homes Group, at SeattleHome.com and SeattleCondo.com.

A National Open-Door Policy

This article was originally published in Realtor Magazine, and recapped in The Chicago Tribune:

The murder of REALTOR® Beverly Carter saddened us all. However, most were not shocked. While these occurrences are rare in absolute terms, the frequency with which agents are targeted by criminals is high enough that we all remember a handful of similar stories.

Our usual response is some hand-wringing, reminders about safety policies, the adoption of new apps, and the inclusion of a “Top 10 Tips To Stay Safe” list in our newsletters. It has never been enough, and it won’t be this time, either. Our primary goal shouldn’t be to notify others after we’re in trouble. It should be to significantly change the way we work in order to prevent those situations in the first place.

The ability to meet a potential client at a real estate office is by far the most effective way to deter stalkers and criminals. It avoids the situation that defines nearly every crime we hear about against agents: being victimized by an unknown person at an unsupervised location.

The core issue is time. Real estate is a frantic industry, and we’re always scrambling to save a few minutes. We may follow standard safety procedures most of the week, but when a home on the east side of town just needs one quick showing on a busy Friday, and our office is 10 miles west, we don’t want to burden anyone with the drive. We make the “just this once” excuse in our heads, and we show the property to strangers.

We all know that real estate is essentially about location, and so is our problem. Some of us work for companies with a dozen offices scattered around our region, but most of us don’t. If every agent only had an office nearby, the extra 10 minutes for a safety meet-up wouldn’t be such a hassle.

Here’s the thing: Every REALTOR® does have that office, if we only think of ourselves as a community banding together for safety. Every real estate office across the country should promote an open-door policy that would allow real estate agents with other companies to use their public space for quick safety check-ins with new clients.

We talk a lot about the unique spirit of cooperation in our business, but extending it to our competitors and associates in the brick-and-mortar world would really put our money where our mouths are.

I’m not suggesting brokers provide coffee, Wi-Fi, or a formal space for writing up contracts. This idea would simply allow any REALTOR® to ask potential clients to meet up and shake hands in a professional, public environment.

Some companies may already have an implied open-door policy. Our management at Coldwell Banker Danforth has committed to it for our offices in the greater Seattle market. The effect would be exponentially greater, though, as a national standard of practice. It would be an accepted requirement for being a part of the professional ranks, and agents in the field would know they could rely upon it if it was adopted across the board.

There will be plenty of broker objections, but most are shortsighted:

“An agent from across town may end up in my office every morning.”

“Virtual agents who don’t pay for their own desk will be trying to use mine.”

“That agent who stole our listing will be standing in my lobby, trying to sell it to her buyer.”

If we were always laser-focused on safety, these objections would melt away as petty, and we could secure our industry against predators based on goodwill alone. Luckily, there are also business advantages to such a national policy.

Brokers are constantly looking for ways to get in front of successful agents for recruiting purposes. The agent who ends up in your office regularly with clients is clearly someone who works your region well. She’ll make friends with your employees at the front desk. You can get to know her face-to-face and explain why she should be working in an office that so obviously fits her needs. These agents who are constantly out in the field are on the upward success trend. Most of us work for more than one company over the course of our careers, and it’s usually personal contact that creates those conversions.

Now think of it from the individual agent’s perspective: They wouldn’t bring clients in to your office and expose them to your branding if they didn’t really need to. They clearly value your office, and it’s up to you to close the deal. Even their clients will be sitting in your nice lobby, wondering if this might be the local company they should be working with in the future.

While this solution wouldn’t cover all showing situations, we’d have countless REALTORS® whose safety would benefit greatly from this policy. Brokers who pride themselves on positive branding, foundation building, and a forward-thinking recruiting strategy will understand the potential benefits.

As I mentioned above, we shouldn’t need all of these ancillary broker benefits for the open-door policy to make sense. We should adopt it immediately simply because a fair number of our own have been beaten, abused, robbed, and murdered for simply doing their jobs. Still, the recruiting benefits for brokers who employ a brick-and-mortar model are clear. Your new recruits will be walking through your door, and your long-time agents will have greater security when they happen to travel outside their usual neighborhoods.

An open-door policy costs nothing, improves safety, and increases collaboration within our industry. What are we waiting for?

Sam DeBord is a state director for Washington REALTORS® and managing broker of The Seattle Homes Group with Coldwell Banker Danforth. You can reach him atsam@seattlehome.com.

NAR has an opportunity to create the primary, trusted source of Realtor research

This article was originally posted on Inman News:
by Sam DeBord

Quelling the angry mob part deux: NAR New Orleans edition

There’s a lot of commotion this week at the National Association of Realtors’ annual convention in New Orleans about the “Realtor of the future” (ROTF) policy proposal.

The document, developed by a presidential advisory group under instruction from the strategic thinking committee, has proposed some improvements to the Realtor way of doing business.

The point that will likely get the most attention is the development of a Realtor “rating” system.

Part 1 of this article was written in the not-so-recent past when Realtors were lambasting the new AgentMatch beta program on Realtor.com.

There were all kinds of problems in its implementation, probably most important being the messaging of that never-really-launched product. Visually ranking members against one another is the kiss of death for a trade organization and its partners.

Let’s be very specific with our wording on this topic as we consider the “Realtor of the future” proposal this week, though. Rankings, ratings and reviews are three distinctly different things.

Rankings imply a best-to-worst display. Ratings, most often seen as “how many stars out of five,” can be displayed on an individual or accumulated basis, but don’t necessarily need to be stacked or ranked between members.

Rankings, ratings and reviews are three distinctly different things.”

They’re often accompanied by reviews. Reviews are what we as Realtors are already used to, and perform much like testimonials, except that some reviews might be negative. “Testimonials” are virtually always positive.

The words used to describe the policy proposal in ROTF were, frankly, unfortunate and could taint many members’ views: “NAR should develop a methodology to rate Realtors.”

I’ve had the privilege of working for a short time with some of the committee members involved with this policy proposal, and I know that the impression those words give are not in line with the intent of the objective. NAR, as an organization, will not rank, rate or review Realtors.

The objective was to create a review system that allowed clients to review members. NAR members could highlight their client interactions on a distinct, fair platform unadulterated by advertising sales models.

We regularly bemoan the loss of our listing data and our portal’s dominant place in online search, but this committee can see the loss of another huge opportunity coming down the line. Either a third-party review platform like Yelp or a real estate advertising portal like Zillow will own the mind share of consumers when searching for background on Realtors.

Not only will they no longer be reading the testimonials on your website for research, they wouldn’t believe them even if they found them — this dominant source of agent reviews will become the trusted go-to destination for verifying who you are as a business person.

While some members might prefer to stay out of online reviews altogether, that ship has sailed. Companies like Yelp, Agent Ace, HomeLight and NeighborCityhave been posting their own versions of agent reviews and rankings for years already.

Consolidation and greater visibility in the agent review space online is going to happen. It’s already is happening. We, as Realtors, are the content for this platform of real estate research.

The potential outcomes are fairly simple:

No. 1: Yelp wins. Consumers post reviews with scored ratings about you, and you live with it. You can respond to the reviews and ask other clients to post positive reviews, but unless you pay up for advertising, those good reviews are going to conveniently disappear. You play in Yelp’s back yard, and you pay up or your business pays. It sounds conspiratorial, but after speaking with many agents and reviewing their stores, it’s sadly true. There is no compassion for your reputation at Yelp. They exist to please their consumer users, and the businesses who buy advertising. That is all.

No. 2: Zillow wins. Consumers post reviews with scored ratings about you, and you can invite clients to do so as well. The reviews are verified by the transaction, and are, frankly, far better managed than Yelp. The platform is easy: Agents share those reviews on their own websites through the new API and spread the Zillow name as the trusted source to consult for information on Realtors.

If you don’t create your own profile, you can’t be reviewed by consumers on Zillow. I’ve been assured that won’t change, though I wouldn’t be shocked if future management decided to attach agent names from MLS sales data to transactions and allow any consumer to review any agent (remember when Redfin tried to give all Realtors a visual profile online with their data?).

With tech management, it’s usually not so much about whether they should expose more data, but why they haven’t done it faster. Zillow has created the best review-rating system to date, one worth emulating in many ways. That doesn’t mean an advertising portal is necessarily the best place for the industry to cede total control of the review and research of its professionals.

No. 3: NAR wins. The organization creates a Realtor-friendly review system that also caters to consumers’ desire for more information on the professionals they’re hiring. By developing a system that allows consumers to review Realtors, and for Realtors to respond to those reviews, all the while verifying that each review came from a true client before being published, the organization taps into its enormous membership rolls.

NAR creates the primary, trusted source of Realtor research online. Far more members use the system because it is ubiquitous, not tied to any single advertising outlet or broker’s website, but something that can be ported anywhere online and be recognized as the real estate professionals’ official seal of review authenticity. Consumers love the Realtor-based database because it combines the ease of use of the Zillow model with a much broader member base to research.

Adoption of a review system by even one-third of NAR’s 1 million members could easily be seen outpacing the number of reviews on other sites within a year. When consumers go online for reviews of real estate agents, they, and over time their search results, would gravitate toward a database of research far more expansive than any of its competitors.

The opportunity

Reviews and ratings can be scary for us as business people. I was against the entire spectrum of these ideas when they were initially conceived. The only reason I was asked to be a part of the AgentMatch advisory board and to work with some of NAR’s committee members in this discussion was my opposition to the ideas being brought forth and the way in which they were proposed to be implemented.

It has become clear, though, that there is not just a risk in missing the train again on agent reviews, but a huge opportunity to claim the public profiles and consumer reviews of our professionals as our own and build them into a net positive for the organization’s exposure.

It must be done with absolute care for our members, but not so blandly that it isn’t interesting to consumers. It can’t be castrated into a shapeless testimonial repository in order to avoid some Realtors receiving a few less-than-stellar reviews.

We will all receive reviews that aren’t perfect. That’s the point.

Consumers don’t believe that agents get five stars every single time they sell a home. They actually prefer a 4.7/5 because it’s believable. Getting honest feedback from our clients helps us improve our skills for our future interactions and improves the industry as a whole.

If that’s not a good enough reason to start creating reviews on a NAR platform, it also allows each Realtor to house their most significant source of reviews on a platform that’s sworn to protect their business interests instead of with the next technology upstart with a very different financial motivation.

We’re at a defining moment in our industry’s history for the control of Realtor research, and the ability to affect its display. We can own it, make it a consumer-friendly and attractive product, and also manage it in a way that is respectful of our members.

Or, we can sit back, watch another technology wave pass us by, and wait for our next set of data overlords to explain to us how we they will review, rate and rank our members in the way that will most benefit their company.

That’s much scarier than getting a public review from a client.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and a director for Washington Realtors and Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com.

REALTOR® Recruiting and Retention: The Non-MLS Value Proposition

This article was originally published on Realtor.org:
by Sam DeBord

Compulsion is the crutch that lulls our organization’s recruiting and retention capabilities to sleep. When real estate licensees are compelled to be members of a REALTOR® association because of their need for MLS services, we often fail to aggressively sell them on the broad spectrum of REALTOR® benefits, most of which lie outside of the MLS sphere.

The MLS is integral to our members’ businesses, and will continue to be important to our industry. Legal, financial, and technological shifts have significantly changed its role over time, though, and we should be prepared for the inevitability of future changes.

As a member of Washington REALTORS® and Seattle King County REALTORS® Board of Directors, I believe the long-term danger for REALTOR® associations is in resting on a value proposition that relies almost singularly on the benefits of compulsory MLS membership. Building apps and services that complement the MLS can reinforce the board/MLS’s value, but without member appreciation for non-MLS benefits, a REALTOR® board is putting all of its eggs in one basket.

The organization’s reputation has to be built on more than just transactional services.

Political advocacy, legal protection, corporate partnership benefits, and education are all services that can and should be relayed to members regularly to create a more consistent and broad picture of the value derived from membership.

the measure of membershipNAR has made a significant investment this year to define the REALTOR® Value Proposition, and our local boards nationwide could benefit greatly by sharing our successful strategies with one another. YPN members who serve on their local or state REALTOR® board, take note: More collaboration between REALTOR® boards could streamline the identification of the most effective messaging strategies to be leveraged in membership-building campaigns across the country.

I’ve had the opportunity to chair a communications task force for Seattle King County REALTORS®, and we’d like to share our first steps in reinventing our value proposition.  Our president, executive committee, staff, and creative agencies have been working for over a year to audit our communications and messaging strategies. This is our first concrete value proposition piece, which going out this week to members alongside the annual dues invoice.

The annual bill is the single piece of communication between boards and members that will be delivered without fail. We’ve added our benefits brochure this year, with the front giving a quick visual highlight of most concrete REALTOR® tools available from NAR, the state board, and local board. The back side highlights timely advocacy issues and the specific financial ramifications for the member’s bottom line.

This is the most poignant moment to clarify member benefits. Educating members on the wide range of protections and services we provide should happen year-round, but we should be especially vocal on the day that we ask our members to recommit another year of financing for the organization which supports their businesses.

The impetus for Seattle King County REALTORS® to create this kind of messaging was greater than most boards would have – our regional MLS is not REALTOR®-owned.  Our local licensees have to find enough value in non-MLS services to justify REALTOR® membership. Despite that challenge, our board continues to retain the majority of local full-time agents within our membership, and our members do the bulk of the total sales in our market.

This kind of messaging, with a few local tweaks, should be applicable to nearly any board and a great complement to those providing MLS services as well.  We will be redesigning our entire platform of communication this year to make certain we’re contacting our members with timely, engaging, and useful information every chance we get.  We’ll be sharing more as the process moves along, and we’d invite you to invest in the development of the REALTOR® Value Proposition by sharing your most successful communications campaigns as well.

Sam DeBord is a director for Washington REALTORS® and Seattle King County REALTORS®, and managing broker with Coldwell Banker Danforth. Connect with his team, Seattle Homes Group, at SeattleHome.com and SeattleCondo.com.

Real estate agent matching, rating and ranking: the big data placebo pill, and quelling the angry mob

This article was originally published on Inman News:
by Sam DeBord

It seems that businesses worldwide are turning to big data for answers in an increasingly frequent fashion. Big data has been credited with a wide range of professional successes, including identifying tax fraud in healthcare systems, predicting retail buyer behavior and improving water management. While the victories lend support to expanded uses, the creators of data analytics programs need to remain open to the idea that the answers they produce might not fit into a crisp, singularly conclusive box. Oversimplifying data crunching to make sure the conclusions are neatly formatted answers can easily invalidate the entire process.

Agent matching, rating and ranking

This is a particular problem for the real estate industry. Rating and ranking systems for real estate agents are popping up more and more frequently, with realtor.com’s AgentMatch beta being the latest stick to stir the hornets’ nest. Each one is met by a fair share of professional pushback, often with good reason. As we attempt to simplify ratings and reviews of agents, we rely on data created by millions of individuals from hundreds of different organizations, all of them seeking to consolidate an enormously complex transaction into a few defined data points. The solution is often to lean heavily on a few easily compiled measures and hope that they’ll create an answer that can be clearly displayed to a consumer in a “Who is better and who is worse?” format.

The arguments for more consumer access to agent sales data from a single trusted source are clear. The data is already out there; other companies are already doing it; and we might as well create an authoritative system that consumers can rely upon, before another shoddy version becomes popular. Notwithstanding those points, the real estate agent population, much of which is open to a broader display of its sales history data, would offer two significant challenges to the process.

First, the measures used to compare agents in most rating systems are inconsistent and produce ratings of negligible value. Second, a simplified comparative analysis can’t address the widely divergent situations, needs and preferences of consumers who would be better served by a broad set of background data than a dumbed-down, simplistic answer.

Consumers want an agent who sells their home for the highest price possible and provides an excellent service relationship in the process.  While some stats can show that an agent has local sales experience, none so far can accurately measure those two biggest consumer concerns.

Sale-to-list-price ratios: foundation material necessary to build a house of cards 

Let’s start with breaking down a dogma that pervades the real estate listing sphere. Sale-to-list ratio is a virtually worthless statistic in online agent comparisons. Unfortunately, it’s a cornerstone of many agent rating systems attempting to assign a simple grade to an agent. A consumer using this statistic in their evaluation of a real estate agent is just as likely to harm their financial outcome in the sale of their property as they are to help it. A high sale-to-list price ratio has no statistical tie to maximizing seller take-home proceeds or to the seller’s happiness with their agent relationship during the transaction. These are the two things consumers want, and it addresses neither.

A quick breakdown of the sale-to-list-value fallacy:

  • Listing agent A has a sale-to-list ratio of 96 percent. She sells properties for family and friends, and promises to maximize the take-home proceeds of her sellers, even if it takes some extra time and effort. Her vow to her clients is to never initially underprice their homes and leave money on the table. While it sometimes takes a price reduction and some time to find the right buyer at the maximum price, the seller is never concerned that they gave their house away.
  • Listing agent B has a ratio of 98 percent. His sales are comprised of 10 percent traditional resales and 90 percent bank-owned homes. The bank wants its properties sold quickly, and asks him to list them at 5 percent below market value to reduce their carrying costs. Every home sells quickly, and almost always at the list price.
  • Listing agent C has a ratio of 100 percent. She works in a quasi-pocket-listing group. Sellers are approached by the listing agent with a “buyer in hand.” The seller is given a price that the buyer will pay without the home ever going on the market. If the seller and buyer agree to the price, the listing goes immediately from active to pending on the MLS, and the agent retains a perfect full-price record. Open-market buyers might have paid more, but the seller’s home is never exposed to them.

It’s clear that these agents serve very different roles that can’t be explained by a simple statistic. The most damning conclusion from this scenario is that Agent C, whose practices could be seen as the least beneficial to the average home seller’s pocketbook, is purported to be the “best agent” if these ratios are given any weight. Even if a consumer was actively seeking an off-market sale, all three of these agents could provide those services, and the list-to-sale ratios given here would not help him or her know which of these three agents could make it happen more quickly or at a higher final sale price.

Days on market: further erosion of statistical support

The amount of time it takes a listing to go from active to pending is another big crutch for most agent rating services.  The “days on market” measure lacks the ability to capture even a portion of the complexity of why a home is being marketed for a certain period of time. Pocket listings sell quickly without being held up against market comparables. Short sales naturally take inordinately long time frames to close, and often involve agents who work far more hours for their clients than average. Quick sales by successful agents are often the result of outstanding marketing and pricing, and generation of open house traffic. Other times, the homes were merely underpriced and they sold right away. An agent who takes on challenging, unique properties often puts far more effort into those sales, but their marketing times will be much higher than average.

Remember the famous statistic that real estate agents, on average, keep their own homes on the market longer, and get higher prices, than they do for their clients? If we know that a short time on market isn’t all it’s cut up to be for our own homes, we shouldn’t push it on the public. It’s fairly clear that by combining these two horrendously overused statistics and building a product on top of them, the output is nothing more than a shaky house of cards. What we see with most agent rating systems is the attempt to make these kinds of statistics more palatable, easier on the eyes, and more shareable to the public. The use of data that is vaguely valuable on its own, and has no correlation to the consumer’s main goals, is merely a necessary casualty in the pursuit of an easy answer that drives traffic and popularity.

Transparency gets foggier the further we zoom in

As we continue to force complex data into ill-fitting metrics, we oversimplify the answers we’re giving to consumers so much that they can’t even see the real agent any longer. The focus of the consumer, whom we’ve told to compare agents based on these questionable stats, becomes myopic.

Meanwhile, a larger profile of each agent, combining their full sales history, unique expertise, background and verified reviews could be significantly more helpful to the consumer. Selling a home is a huge undertaking, and allowing the home seller to research local agents in a thorough, complex way would be the responsible direction to lead a consumer website that intended to inform the homeowner and support the agents’ outreach to them.

Why haven’t previous attempts at exposing more agent sales data gone this route? Either through the use of incomplete databases, inconsistent data sets, or just a lack of concern for the complexity of what they’re displaying, the creators succumbed to the zeal to put out a new shiny object as quickly as possible. It has inevitably created a simplistic caricature of the true agent profile. The resulting frustration from real estate professionals shouldn’t surprise anyone.

Dump the comparisons and rankings — just inform the consumer

The statistics used in attempting to rank agents rarely do it well. The goal of naming a “best” and a “worst” is always attractive, but the consumer is looking for more information, not beauty pageant results.

Imagine reading a travel guide that simply said Rome is an 8.5 and Prague is a 6.4. Why? For what reason? For which kind of traveler? It’s the same as attempting to compare Domino’s delivery and Uncle Anthony’s Little Italy. They both have pizza, but they serve different consumer needs, time constraints and budgets. There is no better or worse on a single scale. There is only better or worse for each individual’s needs.

Give consumers the red pill, and deliver the mess they deserve

Real estate is not a cut-and-dry business. There is no carbon-copy transaction. As much as data advocates decry this as a cop-out, and online traffic scrambles for one-touch buying and simplicity in all things, it’s a disservice to the consumer to pretend that a real estate sale can be packaged this way.

If we take the easy route, we can deliver the metaphorical blue pill, and the consumer will wake up in their bed the next morning with an agent who rated 9.5 and may or may not be a good match for them at all. On the other hand, we can deal with the serious nature of a home sale, offer them the red pill, and allow them to see the way real estate really works. This could include much more transparency about agent sales and other statistics, but it will be necessarily complex.

Consumers don’t know they’re getting the placebo

Consumers want answers: more transparent data about agents and sales. When they receive ranking data from a trusted source, they may very well make a decision to list their home with an agent based on those statistics. They will feel satisfied that they did their proper research. The resulting popularity of that rating system and the consumer’s feeling of accomplishment have no bearing on the question of whether it truly was a good decision for the consumer.

If we were to tell that same consumer that the statistics we used were highly unlikely to reveal the ability of that agent to get the best return on their investment, or to provide a successful agent-client relationship during the transaction, they would feel betrayed. The decisions they made, based on the purported answers we supplied, were merely a research placebo to make them feel confident that they were ready to make a decision. We didn’t actually help them make a wise decision.

Reporting real estate agent data in a heated sphere

Early creators of agent ranking systems stepped in it. They misrepresented thousands of agents in public spheres. They showed a lack of care for thousands of small businesses’ reputations, and the angry mobs that ensued were surprisingly unified for such a decentralized industry. This is the atmosphere that a company creating a new agent data display system is diving into. The water is boiling hot, and whether or not the newcomer is responsible for the buildup of distrust, they must be keenly responsive to it. There is a potential for a great consumer benefit in this space, but past transgressors have turned the path toward it into a tightrope.

It’s up to new agent statistical display builders to cover their bases before seeking the limelight.

  • Get your data in order first. Get all of the data. If you think you have it all, ask the local agents in that market. Without a full encompassing of the market’s data, any conclusions drawn will be incorrect. If that requires a custom data outreach effort in each distinct market, so be it. If you can’t get access to the local MLS data, don’t publish in that market. An incorrect picture is far worse than no picture.
  • Present a broad, data-rich display of each agent’s profile and history. Don’t dumb it down for the consumer. They need real statistics, not bite-sized buzz-stats. Treat them like adults making six-figure decisions. Reviews, unique expertise, and individual sales transactions allow consumers to ask agents questions that are relevant to their own unique situations.
  • Take your product back to the agents to see what they think. They will never all agree, but at least those who favor more transparency will be able to tell you if it’s truly ready for the public, or if it’s a time bomb waiting to go off. No matter how much pressure there is, don’t go public until you have some industry buy-in.
  • Skip the rankings and stick to educating. Consumers will learn far more by poring over a detailed report on an agent’s individual home sales in their neighborhood than they will by comparing the boiled-down stat of the day. Grouping agents by the communities they have sold in will allow for some level of clarity, but the minute you become the source of a “she is better than he is” conversation, you’ve overstepped your role and your support will flat-line.

This is no guarantee of success or of real estate agent support. It’s merely a few steps to keep your feet out of the fire long enough to potentially create a viable resource and give the consumer a more accurate look inside the real estate industry.

The REALTOR® Value Proposition: Do You Have an Elevator Pitch?

This article was originally published on Realtor.org:
by Sam DeBord

This week I’m in Washington, D.C., for the REALTOR® Party Conference & Expo, and it got me thinking: Some of the most interesting committees I’ve worked with lately have focused on a range of issues surrounding the value proposition for the REALTOR® brand. From a communications audit at our local board to a state/NAR combined idea building project, the question of member value has been at the forefront. Those of us who are heavily involved with our boards already understand the great value of our membership, but explaining it in a way that engages the average member isn’t an easy task.

There seem to be three main steps to create a scalable value proposition outreach, and some tempting pitfalls within each:

1. Identify and define those services that members currently value, or those that would hold value if the members were aware of them. Don’t assume you know, or hope that you know what members value. Measure it through surveys, interviews, or focus groups.

2. Craft the message that conveys that value in a sound bite – an elevator pitch, in effect. Don’t attempt to force everything you’d like members to know into this message, it needs to be brief and catered specifically to their business bottom line. Only tell them what will sell them.

3. Find the tactics and delivery mechanisms that will allow you to spread the message effectively. Don’t try new avenues because they’re flashy, or stick to old ones because they’re easy. Measure your response or engagement rates from past messaging in different media, and focus on those that drive ROI.

Most of us who have given a pitch about REALTOR® membership know that members will understand the value if we have enough time to explain the depth of the advocacy and industry support we provide. We also know that we rarely get a lot of time. The grumble in the office about paying annual dues can be retorted with a quick reminder of a recent legislative victory that saved the member an entire paycheck. Coming from a position of “putting out fires,” though, isn’t as effective as proactively driving a public relations value campaign within membership.

One of the interesting components of creating a value proposition is the geographic differentiation between boards. Some locations have a majority of local brokerages in their membership, which creates plenty of incentives for licensees to join the board. Most have REALTOR®-owned MLSs which are obvious enticements to membership. We also know, though, that there are REALTOR® boards in cities whose MLSs are broker-owned, and those associations thrive as well. The brokers and agents in those locations are finding value in the REALTOR® organization even though it doesn’t provide an MLS. Issues advocacy, legal guidance, professional standards, and education are often the services cited as most valuable by members in these non-REALTOR® MLS locations.

The future services that we provide will certainly be a significant factor in how much our members appreciate our boards in the long-term. Defining the current benefits, though, in a succinct and crystal-clear fashion, is ultimately important in educating and engaging our members today.

We’re salespeople. If we can’t sell REALTOR® membership to our associates, we’re either not very good at our jobs, or we’re just not interested in trying.

If I had been sold the REALTOR® brand as a new licensee, this would have been the elevator pitch that worked for me:

“Being a REALTOR® will cost you a few hundred bucks a year. For that, you’ll receive protection: legal guidance to prevent lawsuits, governmental advocacy to safeguard your current paycheck, and legislative steering to keep bad laws from harming your local market and your future paychecks.”

“You’ll also receive business building benefits: education to expand your skill set, career guidance and tools to promote a more profitable business model, and association with the industry’s top professionals for networking, referrals, and professional development.”

“Successful people don’t step over dollars to pick up pennies. Tell me you don’t want to spend a few hundred bucks to protect and grow your business – I’ll tell you that your mindset is not going to allow you to be successful in this business.”

I’d love to hear your feedback, as different members value different services. What’s your value proposition? What elevator pitch would have gotten you off the fence as a new real estate agent? Why are you a REALTOR®?

As real estate boards bare their teeth, the grand MLS experiment begins to illuminate the future of listing display

This article was originally published on Inman News:

Recent moves by Realtor and MLS boards have ignited the national conversation about the proper use of real estate listing data in mass-display formats like syndication and Internet Data Exchange (IDX). A variety of innovative approaches to properly transmitting and displaying listing data are being discussed and put into action across the country. The opportunity for a wide-ranging, multimarket experiment into data distribution may be one of the most transformative things to happen to real estate in years.

In come the teeth, and the future of listing display begins to appear

The impetus for the current rash of procedural changes are the incongruous rule sets for listing display and accuracy that govern agent-generated IDX listings and marketing portal-generated syndication listings. Portals’ popularity and profit margins don’t seem to be affected significantly by data accuracy issues at the moment. Brokers, Realtor boards and MLS boards have stringent rules as to how they are allowed to display real estate listings, but limited ability to control the way syndication portals display them once they’ve been released. Many of these boards have recently decided that they’ll need to bare their regulatory teeth to force downstream marketing to adhere to the same quality data display guidelines that govern the boards’ members.

In the past few days we’ve seen some of the most interesting clues as to where real estate listing display will be a few years down the road. A variety of boards have enacted new rules to tighten the reins on the quality of their listings’ display, including limiting their use, or managing the data agreements and delivery from within.

The nationwide MLS incubator experiment

The Austin Board of Realtors recently pulled the plug on its partnership with syndication conduit ListHub. Brokers or agents will still have the ability to syndicate their own listings directly if they wish, but the board will no longer assist in the process, due to their concerns about a lack of control and accuracy. This move will certainly slow the rate and volume of listings being syndicated to portals, but to what extent we’ll have to wait and see.

In a different tactic, North Alabama MLS just developed its own distribution platform for syndication, and set its own rules. They’ve negotiated agreements directly with major national portals to add links back to the original listing, increase listing agent visibility and update the data more frequently with MLS-direct data trumping all other sources.  The MLS not only sets the downstream rules for its data, but it holds the keys to independently altering the entire syndication process at the drop of a hat if it sees the need in the future. These moves are fueling wide-ranging conversations within other boards across the country as to how their listings are best promoted.

The fractured nature of the real estate industry finally provides an advantage

We talk a lot about the lack of consensus and focused strategy within the agent-centric real estate world, and how the distributed, loosely connected broker structure contributes to it. The absence of a unifying hierarchy with administrative clout impedes many of the industrywide efforts at changing course in an expedient fashion.

In this instance, however, our separation actually allows us to run a range of exciting, large-scale experiments that most industries would kill for. Boards from across the country can simultaneously take widely divergent steps to attempt to improve the way listing data is displayed.

As much as technology eggheads cry for national standards and unified portals, a local real estate market can operate in a vacuum quite efficiently. Each individual real estate consumer is a single-metro buyer. They’re not concerned with what the next state is doing to market their listings. They just want to know what their local real estate market has available. If every major metro’s MLS adopted a different approach to marketing and syndication, we’d get the largest test case we could possibly imagine with real-world results.

A test case in every city

HAR.com is already succeeding with a public MLS portal and syndication simultaneously. Austin and NAMLS are the two most recently created variations. There are hundreds of MLS organizations, and just as many different ways to approach the marketing of their listings.

Consider a Florida MLS restricting syndication to one single portal and negotiating a highly controlled and profitable agreement for doing so. The process could potentially cover the local MLS’s entire operating costs while creating a single efficient marketplace for its consumers to rely upon.

A California MLS could test the ability to transfer consumer traffic by going completely dark on syndication and allowing only IDX display. The scrutiny and anticipation in the real estate world would be immense as we watched the traffic numbers ebb and flow between different online listing sources. It would be the syndication critic’s Bethlehem star, and the syndication advocate’s opportunity for a statistical vanquishing of its detractors.

Flexibility for unique markets

A board in a small market with fewer resources could flip the entire listing entry process, with agents inputting listings directly to a portal and receiving back a feed for their agents to use as IDX. Strict data rules would still govern the process, but the board would take advantage of the portal’s superior engineering capabilities and govern compliance from the syndication level down. While the thought probably makes many brokers shudder, it would be an interesting exercise in focusing on the board’s assets and delegating those tasks that are not its forte.

A different board could pull the ultimate wagon-circling and shut down IDX, virtual office websites (VOWs) and syndication, creating the first MLS-run single-location listing market. The SEO experiment would be epic. One single Web page would be the only authorized “for sale” listing on the entire Web for a single home. As the links and social signals found that listing, it might very well dominate the property address long-tail search results. Consumers in this marketplace would certainly not be confused as to where the proper information for a particular listing was to be found.

Even a mix of science and competition would be intriguing. The local board could pit marketing portals against one another in a “Survivor”-style analytics battle for the right to display its members’ listings. Portals would be rated every month in terms of how much traffic they provide, how many buyer inquiries are generated for properties, and how accurately and timely their display of those listings was. The board could whittle down its list of syndication partners to a select few that are responsibly and effectively using its data to benefit its members and their clients. In the meantime, it would shed light on the often-overlooked fact that syndication is not simply the big three. Remember that companies like oodle, Yakaz, geebo and trovit are also receiving syndication feeds and must be monitored in a similar way.

The possibilities are vast, but the results could be hugely enlightening for every player in the industry. Very few markets would be directly affected by what was happening in another city, but they’d be able to very quickly see what was working and what wasn’t in the other real estate oases across the country.

Finding clarity in a sea of voices

Our opportunities for great conversations about the future of distribution and display of listing data are often short-circuited, unfortunately, by high emotions and lack of depth. There are a vast number of stakeholders in this arena, and most of them are shouting disparate arguments at one another without ever hearing an appropriate rebuttal.

Many of the statements we hear are, at best, simplistic:

  • “More exposure is always better!”
  • “They’re just trying to sell me back my leads!”
  • “Consumers like it, so they’re doing it right and you’re doing it wrong!”
  • “The MLS needs to go back to its original intent and get out of my way!”

There are some very smart, passionate people who make these statements, but they often get bogged down in clichés and make our conversations about proper real estate listing display shallow.

Let’s challenge some of the conversational sacred cows before we dive in again to discuss the propriety and opportunity involved in the shifting world of listing display:

1 – The consumer is not always right.
2 – Broad exposure is good, but there is a limit to its value.
3 – All businesses prioritize profits, even if they say they are “just here to help.”

If we allow ourselves to ditch the fallback platitudes and take a critical look at the actual players, motivations and parameters in the real estate marketing arena, we can have much deeper conversations about where we should be headed as an industry.

The consumer is not always right

Steve Jobs was well-known for telling consumers what they wanted. He once said: “It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”

He was famous for selling products that were at odds with what consumers said they wanted. Apple was always one step behind on consumers’ demands for new cellular data networks or wireless technologies, until it released its new product and consumers adjusted their demands to fit. Jobs knew that what these consumers thought they needed would change as soon as he showed them the right answer, and his success proved it.

Consider consumer popularity over the years of savings and loan (S&L) junk bonds, cigarettes and tanning beds. In real estate, we had negative-amortization loans, Chinese drywall, and asbestos-based everything that became wildly popular for periods of time and then disasters for years after. Consumer demand is often undereducated and counterproductive. When we know that a consumer trend is heading in a direction that is not in consumers’ best interests, it’s our job to continually redirect the consumer’s perception in the right direction, not follow it wherever it happens to be leading today.

As we develop policies to properly display listing data, understanding current consumer preferences is a worthy goal, but pegging their current tastes as the holy grail and following them at all costs would be a strategic mistake.

Ever-expanding exposure is not always necessary and can be detrimental

Any marketer knows that exposure to a sufficient buyer pool is essential to selling a product. At the same time, the location and quality of that exposure are just as important as its breadth when it comes to actually securing the right buyer.

Used car lots were notorious in years past for misinformation and disreputable marketing practices. Their marketing staff would advertise a vehicle far and wide in newspapers and TV ads, often with different “gotcha” prices to drive a large number of buyers to the location. Once there, the buyers often found that the price was different, the car was already sold, or it might not have ever really been available at all.

This unreliable marketing provided wide exposure, but inevitably affected the consumer’s impression of the salesperson and the product he or she was selling. Whether the inaccuracies were created from deceit or simply ineptitude, these buyers formed negative opinions about the trustworthiness of the salesperson, and the quality of the product he or she was selling, even though it was the marketing staff who misled the consumer.

Compare that with a well-run boutique that advertises its vehicles only to a select crowd of car enthusiasts. Its scope of marketing is narrower, but it advertises only guaranteed prices and focuses solely on consumers who are in the likely car-buying stage. The reassuring environment with trustworthy marketing and a straightforward salesperson will allow that same consumer to feel that he is engaged in a reliable process with someone who sells a quality product. While the spread of the exposure to the public may be narrower, the sales conversion percentage of a buyer who feels he is making a wise decision with a competent business partner will be significantly higher. The seller and buyer are better served by smaller, yet more refined, exposure in this case.

This isn’t an indictment of syndication, per se. It’s an argument against poor marketing in the pursuit of wider exposure. Whether on a broker’s website or a third party’s, marketing should be accurate and professional, or else it is a detriment to the seller. Professionals selling quality homes should be able to demand that their marketing partners present their product accurately and professionally, or eschew the marketing opportunity altogether if it can’t live up to those standards.

“I’m here to help” lasts only as long as that help is profitable

All businesses, including real estate businesses, are developed around a profit model. When we want to make long-term decisions as to how businesses will interact with our industry’s ongoing strategy, we need to honestly assess the profit motive.

This is important to remember whenever a corporation says it is here to “help the consumer do X.”  While that may be true, it’s true only as long as doing X is also profitable. As soon as it’s not, the corporation will shift to “helping the consumer do Y,” even if Y is less helpful than X was.

Jolt Cola and the Triple Whopper didn’t make the world a better place, but they were extremely profitable for a time. They’re not evil, and they’re not illegal, but the corporation making them also knows that it could be producing something that would keep consumers healthier. If the consumer will buy the unhealthy products at a higher profit margin, however, the corporation will happily sell them instead. This isn’t the corporation’s fault — it’s just the nature of corporate structure and motivation.

The slippery slope of the featured listing

The segue to real estate listing display is the order, prominence and probability in which a listing will be presented to a consumer. From the standpoint of providing an honest and transparent experience, a buyer who searches online for homes in one specific price range and one specific city should see only those homes. Of course, in the real world, a few “featured listings” get the first eyeballs. This is something we’ve become accustomed to in syndication.

To add a bit more advertising revenue, other paid featured listings that are just 5 percent outside of the buyer’s desired price range might begin to be displayed before the consumer’s intended listings. This doesn’t significantly affect the consumer’s experience, in the eyes of the ad team. Next, a preferred “premier brokerage” can pay to have all of its listings appear before any other company’s. Although this further skews the market picture that the consumer is viewing, it can easily be defended as just tweaking the process to make it profitable.

When advertising revenue is stronger than data rules, however, there is no safeguard in place to hold back this inevitable slide. As consumers become comfortable with the current norm, the creep continues. A premier brokerage may buy out an entire city’s listing display for the first five pages of every buyer’s search results. Without a regulatory leash, the marketing platform will continually bend toward its shareholders’ primary objective, which is the profit margin.

Realtor and MLS boards must have an authoritative control structure in place to regulate how listings are displayed. This data can, and will, be manipulated toward the highest profit margin, whether or not it serves the consumer in the best possible manner.

Agents don’t escape the profit-first paradigm

Real estate agents are for-profit businesspeople as well. There are a significant number who protest the process of their leads being “sold back to them” through syndication. Although they will often disagree, much of this motivation comes from the desire to double-side a transaction. It’s true that the listing agent can answer buyer inquiries quickly and knowledgeably, but the overwhelming reason a listing agent would want buyer inquiries is to increase his or her overall commission. Reasonable professionals will virtually all agree that independent buyer representation is superior.

This argument against syndication is certainly logical from a business perspective, but it doesn’t hold up in any way when consumer benefit and transparency is the goal. There are a plethora of reasons to dislike syndication in its current form, but the desire to capture every buyer lead on your own listing is merely a desire to increase income, not improve the system. If the agent/broker world builds its arguments against syndication on a balance sheet instead of a consumer-first platform, it is likely to continue to fall on deaf ears.

The train of logic here usually devolves into syndication and MLS expansion being the culprits in the downward slide of the real estate industry. In reality, they’re just the natural progression of competition in a lucrative marketplace being driven more and more by technology. As MLS organizations take on larger roles in managing the online real estate marketing space, we see far better results for consumers and agents. The real estate world has changed, and asking the MLS to get back in the box is asking to sit back and observe while the other power players steer the ship.

Proper display of real estate listings, without the clichés

After laying bare the real estate marketing conversation, it’s clear what motivates the consumer, the real estate professional and the marketing portals involved in this process.

Consumers want to buy homes, and listing agents want to sell homes. Both of these groups depend on listing data to be accurate and timely for their transactions to work smoothly. Syndication portals’ profits, on the other hand, are not as tightly tied to accuracy. Portals generate income based on total traffic and buyers’ agents’ desire for advertising exposure, which can both be increased without necessarily improving the accuracy of data.

It’s not that portals don’t want to be more accurate, they’re just not significantly rewarded for it. The ability of the listing agent, and his or her Realtor or MLS board, to create a framework to manage the accurate display of listing data is critical for a transparent marketplace. The added exposure created is valuable only if it lives up to these standards.

Moving forward with creativity and clarity

The stars are aligning for Realtor and MLS boards across the country to make some bold moves, and to stabilize their relationships with whichever marketing partners they choose to do business with. Wherever those decisions land, from full-bore syndication to centralized local MLS control, the industry and the consumer will be better for the data guidelines that come down from the data creators, not upstream from the marketing portals.

There is a surprisingly low risk level in making these big moves. Local consumers will find listings, no matter where the MLS allows them. Behavioral changes in online consumers are lightning-fast, and sellers and buyers in each market will quickly adjust to the changes in their markets. In the meantime, our local boards will also get a tremendous amount of education and research from their counterparts nationwide. The grand MLS experiment, even if conducted by many opposing viewpoints, will let the entire country see what is possible, what is profitable and what is beneficial to the consumer in the end.

Open real estate agent data generates vast new liability for ‘pocket listing’ brokers and agents

This article was originally published on Inman News:

A new twist in the expanding market of pocket listings and private listing associations may start to cause real estate brokers to reconsider their positions on the practices. Scrutiny over “whisper listings” has led to questions of potential financial liability for real estate agents, and their brokers, who regularly involve themselves in these transactions.

A panel last week at Inman News’ Real Estate Connect conference in New York discussing pocket listings showed little difference in opinion on the quality of service being delivered by practitioners who pocket-list homes. The forum participants included many executives from the largest MLSs in the country. The featured broker/agent speakers included Shaun Osher of CORE in New York City, and Danai Mattison of the Mattison Group in Washington, D.C.

Their views on pocket listings were refreshing and unequivocal. Osher was particularly frank. The main takeaway: There is no place for “premarketing” or “coming soon” in an MLS-accessible market. If a home is being marketed in any way, it’s for sale. Limiting its exposure puts an agent’s personal financial gain at odds with a client’s financial return.

Possibly more striking was the conversation with Neil Garfinkel, a partner with the law firm AGMB in New York. In his personal opinion, those who engage in pocket listings are opening themselves up to potential litigation. A former client who felt they were led into a practice that didn’t maximize their financial return, and didn’t fulfill the agent’s standards of duty, will at some point be the bellwether for pocket listing litigation in the industry. Real estate licensee duties can be fiduciary or statutory depending on the state, but almost always call for a high standard of care for a client’s well-being.

While the liability discussion on that day centered on a single former client suing their personal agent, there are a number of much larger issues that seem to collide at this one point. As real estate brokers and agents battle over opening large sets of agent production data to the public, the executives of most of the largest real estate companies seem to be signing on to the idea (Realogy’s and Re/Max’s CEOs concurred at Connect). It’s becoming clear that the dissemination of agent sales data is becoming a question of “how” as opposed to “whether.”

This new look into the practices of real estate agents and their brokerages will allow consumers to see everything their professional service providers do in a new light. Individual sales and practices will be boiled down into averages, probability and patterns.

For the agent or brokerage heavily involved in pocket listings, it may be the biggest liability they’ve ever encountered. The sales production they’ve been touting for years will now be scrutinized against the backdrop of nonexistent MLS-recorded sales. Off-MLS sales, known to be attributed to these agents, will be dredged up from public records and contrasted against similar homes that were exposed to the broader market. Class-action lawsuits and fair housing violations are just the start of the new potential threats that will need to be analyzed by a real estate broker entering this new world of “transparent” production data.

We’ve all heard the flimsy elevator speech as to why certain clients are better served with pocket listings. In reality, anonymity, exclusivity and other past concerns have all been overcome by the newest MLS rules and technologies. Even if those arguments held water for a unique few clients, pocket listings are clearly an unsavory practice when serving the vast majority of home sellers. So what happens when it becomes statistically clear that an agent is advising the majority of his or her clients to limit the exposure of their listing? When a publicly visible pattern of repeatedly pocket listing clients’ homes is now available online, the spotlight on the agent, and the brokerage, will begin to get a bit hotter.

Consider a “boutique” brokerage whose agents, across the board, almost exclusively practice pocket listings. The owner or managing broker of this office will inherently be assumed to approve of, or even encourage, limiting the listings’ exposure. This demonstrably repetitive practice will be available for every disgruntled, poorly served or financially troubled ex-client of the firm. There is a very real opportunity for a group of former clients to bring litigation against a broker, without having to prove the details of an individual transaction. The broker — and its agents — will have digitally written their confession in the form of a long-term record of off-market production statistics.

Fair housing violations have always been considered a potential red flag in pocket listing transactions. When an individual agent pocket-lists, he may or may not be limiting a home from any number of protected classes or groups, but it’s difficult to prove in a one-off transaction.

As open production data surfaces, however, the brokerage that repeatedly limits which groups of the buying public have access to their listings will be under an enormous amount of scrutiny. There will be, without a doubt, organizations dedicated to crunching this data and matching past transactions to buyers and sellers, attempting to determine if a certain class of citizens is being excluded in practice. The potential of being labeled as a fair housing violator should be enough for most brokers to immediately re-evaluate their agents’ policies.

As for financial liability from former clients, the potential runs from painful to career-ending. A single client suing for the refund of commissions paid would be a significant strain on the business. An entire class of clients bringing suit could bankrupt a brokerage in short order.

There’s nothing to say that the financial pitfalls couldn’t be heavier. The amount of equity a homeowner lost in a pocket listing could far-and-above outweigh the agent’s commission. If the client was truly wronged, this loss in equity could reasonably be considered as the amount an agent or broker must recoup for the seller. As the open data pool gets larger, analyses based on neighborhood comps will contrast open market sales and pocket listings, unearthing disparate sale prices and projections of losses (or profits) based on one practice versus the other.

It’s likely that a brokerage with a regular pattern of pocket listings will have a record that shows lower final sale prices than those garnered by comparable homes listed on the MLS. It won’t require a “he said/she said” client vs. agent level of proof. There will be a long-term statistical testimony of a brokerage’s approved practices, the industry’s knowledge of that practice’s deficiencies, and a data-driven picture of the clients’ losses.

Of course, this vast picture of liability could be overblown if the data reveals pocket listings to be a boon to home sellers. While the overwhelming industry consensus casts a great amount of doubt on that scenario, it is possible. Still, there’s far more downside potential to taking that position as a broker. Having your company’s pocket listing practices justified by data merely allows you to continue doing business as usual. If the data turns the other direction, the vultures looking for deep pockets will start circling quickly.

In the end, the publication of agent production data, done in a responsible and ethical way, could force some unintended positive changes on industry practices. If more consumers are advised by their agents and brokers to get full exposure in their local markets, home sellers’ personal financial outcomes will be enhanced. At the same time, an increase in public listings will expand and improve the quality of closed sales data used by brokers, appraisers, banks and others. Raising the level of real estate’s professional practices, improving clients’ returns and increasing overall sales data quality are just a few more reasons the industry is leaning toward a more accessible future.