Everyone knows about the 90/10 rule: 90% of the business is done by about 10% of REALTORS. Translated to a consumer experience, this means that most buyers and sellers have about a 1-in-10 chance of getting the “best performing” agent to sell their home or represent them in a purchase. Even a generous assessment of the business – quartiled for the top 25% of agents who generate more than $200,000 in commissions annually – leave the underperforming-bottom 75% of the business to muck up the works. And while banks, lenders, Fannie, Freddie, Frank and Dodd all share some blame for causing the current crisis, could it be that the “other” broken real estate market is the soft-underbelly of the brokerage industry itself?

Do we really need to answer that?

Actually, we do. While readily critical of everyone else’s responsibility to get the industry back on its feet – and with it, apparently the greater economy, – REALTORS themselves are discovering that their competition isn’t capturing market share from them. Instead, it’s simply destroying market share for everyone. And it’s much worse than simply not knowing how to price homes on the market.

The real estate industry today is barely surviving by picking off the bottom of the marketplace: Distressed sales – foreclosures, short sales or just panicky investors – make up significant portions of the best performing company’s sales volume these days. Rather than cut their losses and take mispriced inventory off the market, REALTORS instead are following a two-path approach that is further exacerbating the downward spiral. They are leaving un-corrected inventory available for months, even years, until their once-solvent sellers exhaust their remaining equity and become themselves one of the local foreclosures that started to sap their values. It goes beyond a violation of business best practices for REALTORS not to correct or remove their sellers’ mis-priced inventory from the market: it’s clearly unethical to destroy their client’s value as well.

Leaving aside the philosophical question of business ethics for a moment, we can remain in the practical realm to see the depth of the damage. The story is all too familiar to top agents.

Take, for example, someone from my social network: She’s a Ten-Percent-Top-Performer whose buyer made a full priced offer on a foreclosure more than a month ago. As her customer’s frustration mounted, the agent has documented more than three dozen calls to the broker’s office. Never mind how many emails. She has left messages not just for the broker, but for every other agent listed in the company’s directory. Short of conducting a “sit-in” at their office, a top agent with a full-priced offer cannot complete a purchase of a foreclosure - simply because the representing broker will not return her calls.

When full priced offers fall upon deaf ears of brokers representing foreclosures, don’t expect the Federal Reserve to do much better. Even the best plans by government, backed by trillions of taxpayer dollars, will be stymied by the fact that too many Seventy-Five-Percent-Performers remain in the real estate industry.

For the past five years, our company has helped thousands of brokerages overcome a basic sales challenge: the majority of REALTORS still do not own a smartphone, so they can’t respond to buyers and sellers who inquire by email in a timely fashion. Today we can pretty much forget about leads management and the online consumer: When the industry  won’t even answer the telephone – to accept or decline a full-priced offer – how do we expect the market to turn around?

What makes this scenario more scary is that it’s not an isolated situation. When brokers suddenly double their inventory – which is happening everywhere as they make deals with banks to represent their foreclosure inventory – their systems are pushed to their limits. Practices that barely got by during the best of times are bound to fail during the worst of times, even faster when one’s inventory suddenly surges.  If REALTORS cannot even return each others calls, it’s little wonder that they cannot explain the new housing credits to hesitant buyers.

As my friend and fellow professional Steve Harney points out, the burden for turning around the economy has fallen upon the shoulders of the real estate industry. Every government official and talking head in the media reminds us that the economy won’t bounce back until the housing market is corrected. That means it’s up to REALTORS – not bankers, not auto manufacturers, not any other industry – to revive the world’s largest economy.

Are we up to the challenge, when we cannot even answer the phone?

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