Recessions force us to change. When times are good, we get lazy. Why ruin a good thing? But economies and industries aren’t static. People, capital and most of all – customers desires – change every day. Peter Drucker noted that our very success today eliminates the conditions that allowed us to become successful. Recessions remind us that today’s strategies cannot be based upon yesterday’s markets.

Recessions are report cards. They check our assumptions and grade our practices. Who creates recessions? We do. When the outcome of something we always did profitably become different – a recession – we’re being told to discover and learn how things have changed, and that we may not have been keeping up with them.

As Groucho Marx once said, “It’s not so much that hard times are coming; the change observed is that soft times are going.”

The past two years haven’t been easy for the real estate industry. Falling prices and longer sales cycle have driven profits to historically low levels. Expenses, while drastically reduced, remain higher than at any time in twenty years, with new costs like technology, marketing, training and regulatory compliance. Our customers are struggling, too: unemployment, credit availability and overall uncertainty have changed the conditions in which both customers and brokers could be mutually successfully buying and selling homes in the past.

Which brings us back to Groucho: Just three years ago real estate brokers were creating historically high profits. Cheap and plentiful credit, rising prices and customers frenzy-purchasing supported the way we did things. While we hoped the good times would last forever, the music eventually stopped. When the economy moved on, the real estate industry was still practicing its old ways. But even with a few technology and social media band-aids, we can’t get back to the good-old days. The recession is tell us that we’ll have to do something different to create different outcomes for the future.

The recession’s lessons are that a healthy, vibrant real estate industry won’t be possible on the soft practices of the past, even if everyone gets a Twitter account and dumps classified ads. Cautious customers chasing scarce credit require entirely new practices to create new growth. That’s both the judgement of the recession, and the opportunity it presents to us.

Yes, there are opportunities in recessions. And the formula for success is right there, below the surface message (declining profits) of the recession. Smart brokers and agents can read this formula, but must be willing to accept the conclusions of the message. If we want to create the next generation real estate industry, we must be willing to listen to what the recession is telling us to do. A few of the elements are clearly visible today.

1. Performance requires performers. In the past, marginal agents – those who did only a few deals a year – were tolerable because each few deals they did still yielded such a good margin that it was worth it. Today’s margins are razor thin and will remain so for some time. The hard costs (technology, training, industry memberships, marketing dollar) of keeping minimal performers has become too high. The independent contractor model has been revealed as a financial myth: there are costs to every agent in the office, if only just in coffee. The recession’s lesson is the future requires every producer to be a substantial producers. And the recession offers us a solution: high unemployment provides choices to replace marginal performers with quality talent.
2. Reorganize the model. The industrial revolution was the product of a recession. When cottage industry could no longer produce the quantity, quality and low-cost goods people desired, Henry Ford changed the production model. Today’s recession teaches the same lesson. The cottage-model of “each person does it all” is unsustainable. Less than 10% of today’s agents can be the perfect prospector, seller, negotiator, closer, relationship manager, etc., anyway. The division of labor in real estate has remained mostly undivided – and that must change. The recession’s solution: modern technology permits specialized workers to create high performing teams. Gen X and Y future agents are being taught this in school and in online video games. They are ready to use technology to maximize their individual talent to participate in a collaborative outcome. It’s just a modern Ford assembly model, just faster. Brokers must reorganize operational conditions to maximize how future recruits are being trained to work, not ask them to use unfamiliar (historic) models.
3. Management matters. The recession challenges our concept of managing a real estate office.  If we make the two changes already mentioned, current management models are incapable of releasing the productive energies of high performing teams integrated through technology and a new division of labor. Managers who are recruiting cannot be guiding performance teams. Same if nobody shows up at the office for meetings when they could be held online. Managing future multi-generational workforces of highly-independent Boomer agents and newly recruited specialized Gen X/Y workers is new management territory. The recession offers potential solutions (Zappos comes to mind, but there are others). Yet a core lesson from the recession is that management will matter even more in the future generation of real estate brokerage.
4. Use technology differently. Some recession lessons come from successes despite the downturn. Many thriving organizations – some not even for-profit – teach us to think of doing something different with technology. The past/existing model of technology as an “advertising” tool – for listings, services, tax credits – is challenged by unmoving recession customers. So declaring via technology may be shifting to another approach: listening. The value of social media or instant messaging or even YouTube might be not what we can say through them to our customers, but what we can learn about our customers from them. Recessions remind us that the best companies listen and learn from customers, not incessantly promote to them. The solution might be to check our pre-recessionary egos at the door, and use technology to ask customers what they want, so we can re-tool to deliver it.

Unlocking the opportunities of the recession won’t be easy. We’ll first have to accept the market’s judgement that it’s not as happy with how we do things today as it was in the past. Of course, we do this ourselves with products and services we purchase: who would be happy with a computer from 1980 or paying 21-cents a minute for long-distance calls? The computer and telecom industries changed as a result of their recessions. As hard as it was for them to hear that customers who had bought their services “a certain way” for years suddenly wanted something different, their success nowadays comes from industry leaders who shook up their production processes, created new operational models, focused management on outcomes and used technology in whole new ways. They learned some valuable lessons from their recession. The real estate industry can learn some too from its own recession. The good news is that, if we listen to the recession, we might be able to create future thriving industries – like the computer and telecom industries did – in our future as well.

.

Originally published 5/6/2008, this blog entry comes to mind as one of the key decisions still left taken by the real estate industry in 2010. After meeting a few companies that are testing out such approaches, we thought it would be constructive to refloat this idea into the minds of our clients. Let’s see if the current market makes them a little more receptive to the concept that performance, not process, matters most….

Ok, stop shrieking. Take a breath. Think this out with me…

There is only one form of competitive performance that matters in business. Did the consumer actually buy from you? That’s it. Whether it’s measured by listing their home with you or buying a home with your help, if consumers are paying you, that means your company is generating value for them. And that’s the only rational and measurable metric of “success” in business.

It’s also one of the best indicators of your future performance. Actual success is the best indicator of future success.

Now consider how this applies to new leads – potential new clients – and how they are handled at your real estate firm. In other industries, if  you sell a product – like a computer or a stock – your personal qualifications to receive the “best leads” from the company is directly determined by the number of consumers who actually bought from you in the immediate past. In most sales industries sales, the only measurement of performance is, well, performance!

Now, back to real estate leads. Today, most companies generate the vast majority of new leads for their agents. They do this through various forms of advertising. These leads arrive as consumers who walk into the office, call by phone or inquire by email. Each lead – which we ought to really call potential customer – costs a lot of money to generate. Yet the vast majority of these prospects fail to actually buy our products and services, even though the same majority eventually buy those services from another company in the next 12 months.

So the consumer isn’t broken. Even in this market, the trouble isn’t that the consumer isn’t buying real estate services; It is that most companies are failing to convert the consumers into deals a greater proportion of the time. So their marketing is working. The problem is their sales intake process.

It’s the case offline and online. Offline, telephone calls, property showings and open house have a huge failure rate to create paying buyers or sellers. Open houses are the premier example. Virtually no sales activity is conducted at an open house. It should be called “house sitting” in most cases. The vast majority of visitors to an open house do not purchase the house they visited or any other house from the agent whom they just met there. In other words, the agent failed to convert the consumer into a customer of that house or any house.

Online, it’s worse. Even scary. In recent studies of brokerages, the average number of leads that are simply abandoned by agents within the first 72 hours is 88%. This means that nine out of ten potential customers never become actual customers of the company. The marketing worked to catch their attention and encourage them to inquire. Yet for some reason, they aren’t actually buying. We could blame the “product” for not turning them into customers – but we all know who chooses the houses and sets the prices they are offered at, so that would be dishonest. In truth, the failure to turn most prospects into customers isn’t because of the commodity we offer; it’s because of something else.

That something else is our new business sales process. Today we call that “leads management” but for most of the industry’s history, we called it “turning leads into deals.” No matter what we call it, the process is gravely dysfunctional at most brokerages today.

Traditionally, most brokerages assign  company-generated leads to an agent according to arcane rules of “fair play.” Essentially, they assign leads to agents based upon non-performance standards. For example, if a consumer sends an email to a broker requesting help purchasing a home in “Andover” the broker usually finds an agent who claims that market area. Simply put, their “territory” on a piece of paper includes Andover. So agents can “claim” leads based upon arbitrary personal preferences.

The broker rarely asks himself, Who has sold the most homes for us in Andover in last month or year?

The same is true for most other criteria like house type or price. If a consumer is interested in a luxury property, the broker matches them up with someone who has taken a “luxury property course” not necessarily the agent who has sold the most number of luxury homes recently. Some agent says they “work with renters” and we direct renter leads to them. Another agent says they are “qualified” to work with land, and we zip land-requests to them. Everyone scrambles to claim their qualifications so they can get more leads. The result is that everyone is qualified for everything, so we’re back to legacy “round robin” lead distribution. And if the numbers are be believed most of everyone isn’t converting any of the leads into actual sales.

If brokers wanted to convert more leads, they need to radically rethink their lead assignment system. Performance is what matters. The only measure of an agent’s qualification to be considered with the high-value opportunity of a potential new consumer is their actual past performance turning leads into deals. Period.

Look at it another way: when you go to the hospital for an appendectomy, do you want the surgeon who is “qualified” to do the surgery because it’s on their general resume, even though they haven’t done one in years? Or, do you want the doctor who does ten appendectomies a week and every patient goes home fine? Do you want the mechanic who can make a flyer saying he works on Mercedes cars, or the mechanic who repairs ten S-class models a week reliably and consistently?

Do new consumers want to work with “qualified” agents or “performing” ones?

Leads are too expensive and too important to simply hand out to the next agent in line. Brokers are converting a paltry percentage of their potential business: Averages are 2% or 3% of online leads, and only slightly more of walk-ins and calls. Agents throw away most leads handed to them: our research indicates that they simply give up after a few contact attempts. The most common reason leads are abandoned is that  ”the consumer didn’t call them back.”

Each lead thrown away is company dollars down the drain. Perhaps companies had this money to burn in days gone buy, but today it’s unlikely they can sustain such a leads management approach. For many reasons – mostly due to lack of manager oversight – most agents treat incoming leads very poorly. They either don’t have the skill or the stamina to work with consumers who are taking their time approaching a volatile market. And they have been empowered to discard – cherry pick, we say – the vast majority of new business that somebody paid to generate. No wonder marketing budgets are going bust.

To turn this situation around, here are three radical leads management ideas whose time has come:

1. Assign new leads to agents who actually convert them. Pick a start date and set everyone’s record at “zero.” Then look back at the last six months of performance. Rank agents according to their actual results, not the towns, property types or price ranges they prefer to work in. Now match incoming leads to those people whose performance record warrants it. Send more leads to the top performers.
2. For everyone else whose performance record is yet to warrant the opportunity of expensive new company generated leads, create an opportunity window. Assign each agent three new leads. Then monitor and measure what they do to them. It’s possible those customers won’t become deals for perfectly legitimate reasons: they are working with another agent, they lost their jobs, whatever. But at the very least, measure the tenacity, stamina and process the agent applied making the absolute best effort to turn that lead into business. Based upon the test leads, qualify or disqualify them for future leads. Then send them back to training.
3. After six months, start incorporating new consumer feedback into the criteria for qualification. While we certainly want to give leads to agents who can close deals, if they can’t create customer service experiences that generate future referrals and repeat business, then they are good but not great. Considering the vast majority of new business in real estate is referral generated, the customer satisfaction element is a critical metric of leads management performance. Survey every consumer from every closed deal. Rank important feedback related to their experience. Collect that information and incorporate it into a new filter for agent performance. Many other companies do this (see Guru.com, where service providers can sell their services online but their customers can “rank” them online which helps new customers evaluate them for new projects).

If you do even one of these three steps, here’s what you’ll get. More paying customers. Happier customers. And natural attrition of non-performing agents. Plus more profit. You’ll be converting more leads because you’ll be assigning them to people with track records of converting leads.

It’s possible that after time, you’ll end up with a few of agents with high conversion rankings and good consumer feedback. So you might have to return to a “round robin” distribution of leads amongst these top performers. All of your non-performing agents will have left (or been fired) so you’ll have the unfortunate problem of evenly distributing business to a few agents who will be converting a high percentage of it.

What a nice problem to have!

With our sensors on full, we’ve scanned the real estate metaverse online to find some of the latest links to research, industry thinkers and opinion that can help you chart a course to success in 2010.

Data please, Mr Spock:

• Renters poised to lose Upper Hand, from Wall Street Journal
• Mortgage Rates Sink below 5%, at CNBC Real Estate
• Existing Home Sales fell January 2010 over December 2009, NAR Research

McCoy, what’s your opinion?

• Don’t Bet on a Recovery, Peter Schiff
• Is it Better to Wait until the Tax Credit Expires? Wall Street Journal Real Estate Blog
• The Great 18-Year Real Estate Cycle, by Steve Hanke

Set a course, Mr. Sulu:

• Freddie Mac Abandons Ship on Interest Only Loans in September, WSJ
• Are you about Effort or Achievement? Mike Staver
• How to Avoid having your Facebook Page Deleted – Stephen Fells

Kirk to Enterprise: Beam me up, Scotty!

• Thoughts on Social Media and Branding, Notorious R.O.B
• Boomers Slowly Warm to Mobile Web, eMarketer.com
• Does Google Make us Stupid? Pew Research

Hailing frequencies are open below! So please add any links to sources and data that would be helpful to the real estate metaverse by posting a comment.

This article appears in this month’s e-newsletter from the Women’s Council of REALTORS website.  If you haven’t become a member of WCR, we strongly encourage you to consider joining today! – MF

The answer comes from a simple change of words. Rather than “social networking,” try viewing it as “social network prospecting.” Add one word to the activity, and so much of what needs to be done, and left un-done, becomes crystal clear.

Creating Valuable Dialogue

If we think of social networks as modern prospecting tools, we suddenly have purpose for adding Facebook and LinkedIn to our daily activities. Social media offers a chance to communicate with prospects and clients. Unlike traditional one-way media, social media creates dialogue with our sphere of influence. And dialogue is critical to creating prospecting outcomes, especially referrals and repeat business.

It is different than our social networks with family members. Certainly let your hair down when updating and sharing with your inner circle of relatives and friends. However, where social networking meets your business sphere, it’s critical to remember what you’re supposed to be doing online — prospecting by building and maintaining business-valuable relationships.

Social prospecting changes what you might post on your wall. Gone are the updates of today’s breakfast cereal or latest weather patterns, because your prospects’ time and attention is too valuable to inundate with mundania. Likewise, many advertising activities should be off-limits in new media – especially incessant and irrelevant postings of the latest listings, price changes and open house times.

If you are prospecting, why is such seemingly real-estate-specific content off limits? Because announcing new listings and price changes amounts to advertising, not prospecting. It’s announcing, not engaging. It talks “at” your sphere of influence, not “with” them – and it’s the fastest way to get them to disconnect from your presence. It doesn’t add value, because if they are interested they already can obtain such information from your Web site and/or e-mail alerts.

More simply, it makes no sense to spam your sphere’s wall with such content because you’d never do it in person. If you were meeting a past client for lunch, would you whip out your latest listing sheet before ordering drinks? Would you interrupt every topic with the latest price reductions scrolling across your smartphone? Of course not. You’d talk to them, ask them what’s important to them and engage with them, not your products. As in real life, so in virtual life.

Prospecting with social media requires the highest form of relationship management: community. It is about maintaining relationships between people, not products. Otherwise social media becomes just another Sears catalogue of your stuff. And people stop visiting. Prospecting by building relationships means social media activities become easier, clearer and more likely to help you reach your goal of building more business.

In fact, good social media prospecting can be done without “updating” anyone on anything. Really. You can create and reinforce relationships without being the primary talker. As long as you’re the best listener.

Let your sphere of influence do all the talking. Just be watching and learning, and when necessary, posting helpful comments on a conversation they started. Suddenly you don’t have to think about what you’re going to say, post, link, photograph or update at all. You simply have to look, listen, read and learn. And be there at the right time. Social networks will even notify you – if you’ve missed a comment, of an upcoming birthday, of someone you haven’t connected with in a while and so on. Prospecting couldn’t be easier.

A Constant Flow of Opportunity

In the top 10 reasons people buy or sell real estate, listing sheets, open house updates or even price updates are never mentioned. Nor tax credits, Web sites and so on. Certainly not postcards or newspapers.
People buy or sell real estate because of things that happen in their lives. They get married or unmarried. They get promoted or fired. They have another baby or the youngest finally goes off to college. They are entering the workforce or leaving it. This is why people buy or sell real estate and when they need a REALTOR®.

In the old days, learning about these things from our prospects was hard, almost impossible. They didn’t want to spend time with us on the phone. They shied away from personal conversations at open houses or when trapped in our cars. Asking consumers to open up took a huge leap of faith, even when they were past clients.

In modern times, it’s exactly the opposite. Everyone wears their life on their sleeve and their “wall.” Everything and anything happening to them is posted, tweeted and texted to the entire universe and to you. “Joe is retiring. Sally got married. Betty is having another baby.” Things that create a need to buy or sell real estate are public information. It’s right there for the picking if we know what we’re supposed to be doing online: prospecting.

Social media prospecting is better than being a spy. It’s like telepathy for our sphere of influence. You can see exactly when to reach out and touch someone with a comment, an e-mail or even (gasp) a telephone call. More likely you’ll have to text Gen Y, who doesn’t answer the phone, but they will be first to tell you what’s happening in their lives. Social media prospecting means a constant flow of opportunity for well-connected sales professionals.

Of all the ways we make selling real estate harder than it has to be, social media doesn’t have to be one of them. I suspect we didn’t like prospecting by phone, so we invented the Do Not Call List. Now it’s nearly illegal to phone a prospect. We can’t afford prospecting by postcard, which is fine because it’s colossally ineffective unless your target market is postal workers. Even open houses – perhaps the last place to meet new customers face-to-face – have suffered from agents who scrunch their noses at nosy neighbors who stop by. At some point we’re going to run out of ways to build our business without busting our budgets.

So try calling it social media prospecting and see what happens. Suddenly a Facebook page isn’t such a scary necessity for generating referrals and repeat business. Focus on prospecting, not advertising or announcing, for clarity on how to interact. Watch, listen, learn and then place a judicial comment or two. You don’t have to say much or often, to be in the right place at the right time. And it’s about time you started prospecting with social media.

In one of our recent management workshop, a group of managers and brokers were brainstorming ways to “make agents more productive.” It’s always instructive to hear this kind of language, as if agents were programmable robots who merely need a few new parts and software upgrades to be more efficient. The discussion turned to the usual solutions like training agents to use technology, encouraging them to purchase smartphones, mandating minimum photo and video features per listing and getting them involved on Facebook. All excellent ideas, but all missing one essential point.

Improvement isn’t spontaneous.

If it were, why would we need managers, coaches or trainers? Hardly any of us wakes up one day and “becomes” more productive. Olympians have trainers – really, managers – who show up with them every day. Yet even the best trainers will tell you that it’s not just the “training” during the class but the “implementation” after class that changes outcomes. George Washington led his men across the Deleware. He didn’t stay back in his tent.

Most of what agents and companies need to do to increase productivity isn’t rocket science. It has already been discovered, tested, proven and perfected: Prospect 50% of the time, focus on referrals and repeat business, and communicate with consumers the way they want to be contacted (such as text messaging or social media). In fact, most agents know these things.

It’s up to managers to help them do them.

What’s the best way managers can help agents do their job – whether it’s old-school or high-tech in style? The answer isn’t contests, cash-rewards or speeches. It’s not new technology or more marketing dollars. Any manager can tell you today that they have plenty of those things, but the needle isn’t moving.

Instead, managers need to do what they ask agents to do – if they want to change the outcomes at their companies. And that means one simple thing:

Get out of their office!

Managers need to be a daily – and constant – part of the production process. They need to be in the action, as it’s happening. This simply cannot be done from their corner office. And for the most part, it cannot be done in the physical office at all. But let’s not get ahead of ourselves. One step at a time.

Imagine what would happen if managers did not have back offices within the company. Where would they sit? Right next to the agents. What would they do? Listen, watch, learn – and be involved. That’s exactly where companies need managers to be: at the front of the action, a part of the process of creating and nurturing new business.

Managers without offices  would change everything.

Suddenly, agents sitting around chewing-the-fat would be visible to the manager. And the manager would be visible to them. Not picking up the phone or sending out email marketing would not persist for long under the watchful gaze of the production manager. Within proximity of the action, managers would see and hear how customers were being handled by whoever is answer the phone. Good interactions could be praised; bad ones could be corrected, mentored, improved. Right away. Not at some future date.

Managers in the action could greet customers and learn critical market information. How did the customers choose their company? How were things going with their agent? Are they aware of the other services the company provides? Oh, and thank you for the business. Managers meeting customers would change everything.

But without an office, how would the manager do “their work”?

Just what work do you mean? Paperwork is not the work of management. It’s the work of an administrator. Managers read reports, learn from them, and adjust production by coaching their agents. Managers don’t write reports. So who needs an office to do that?

Managers don’t plan events. They don’t order trophies. They don’t go to wasteful meetings – inside or outside the company. Managers manage output from the production floor. And that cannot be done from the corner office, a meeting at the local Board or picking out a hotel for an event. Surely there’s someone else who can do that.

But there’s only one person who can manage.

Everything would change at a company where the managers sat next to the agents all day long. Morale would soar, as agents reconnected with their leader – and received consistent support, encouragement and advice from them as the action was happening. Interpersonal conflicts would be managed, as hearsay was replaced by first-hand observation. And the act of making or capturing new business would be managed. No paperwork could ever be more important than that.

Now consider the ultimate conclusion. What if the manager actually left the building? Not by themselves, of course, but with their agents. What if managers accompanied agents on listing appointments, showings and closings? That would really change everything. New agents learning the trade would have their manager by their side, mentoring and supporting them as they applied skills for the first time. Experienced agents could move to the next level of performance, as their mentor helped them refine their skills even further. Even Olympic trainers have to actually watch their students perform in order to point out their opportunities for improvement.

A manager accompanying an agent could debrief, correct and coach the agent’s performance within minutes of the action.

Managers out of the office would not only support an agent’s performance right away, but they would learn incredible amounts of valuable information from actual consumers – many of whom are never in the office. Managers at open houses could observe and interact with consumers and learn about their expectations, concerns, trends. They could identify which marketing approaches were effective. They would conduct a “higher order” assessment of consumers in actual sales situations – and take that information back to the rest of the office. When was the last time an agent debriefed the rest of the office on what they learned at a showing or an open house?

That’s the job of management.

Some managers do this and it’s why their companies consistently beat the market and produce successful careers for agents. In fact, companies with managers who aren’t in the office find they rarely have to recruit new agents. They are too busy making existing agents productive – by participating in the production process – that there’s little need to replace failing agents. Managers outside of the office see potential failure in advance – and can take action to avoid it. Retention becomes a non-issue as well, as agents realize they couldn’t possibly substitute a higher commission or new tech-tool for real-time management involvement.

For some companies, kicking managers out of their offices may be a radical idea. The corner office is long-seen as a reward for achieving a certain level in one’s career. Yet all too often the rise in a manager’s career coincides with a drop in the company’s performance. It’s easy to blame the market, the consumer, new technology or ill-trained agents: but it would all be self-deception. Companies have sold record numbers during recessions, without the opportunities of new technology, during times when agents weren’t even licensed. Time and time again, when we look at highly productive companies, we see the same formula at work. Hard working sales professionals who are led – daily, consistently, directly – by a manager who is on the front lines, in the middle of the action. Leadership cannot be done from the back office.

If you want to change everything at your company this year, lock the corner office door. And throw away the key!

Some of the new Brainchain features include:

Entirely new content management system, combining individual video pages with “channels” of videos in playlists of related content. Now you can learn about one topic – or watch a channel of similar lessons in a series

Enhanced search features so you can find videos by keyword, channel or tags. Just visit the site and search for a solution to your learning objectives.

MORE Free Videos on one page. Share them on your social networks or re-post them to your blogs, too!

Popularity and ranking features, to see what others are watching and rate your favorite video lessons

Follow us on Facebook, LinkedIn, Twitter or subscribe to our email alert to stay on top of our latest releases

Ultra-fast delivery of content on a specialty content network – so videos play fast and in high-definition

Of course, we don’t plan to stop adding features and content any time soon. Here are a few features that are coming soon:

Watch videos on your smartphone, for the ultimate “just in time” on the go

New Premium Level featuring Matthew Ferrara’s Live TV internet show you can watch right from your computer. Each episode will be packed with cutting edge ideas, opinions and envelope-pushing techniques you can use to boost your career into orbit. Plus special guests will join the show regularly, adding their wisdom and experience to your opportunities to grow!

Live Seminar Library – a massive clip library from our live seminars each month, around the world. Now you can search for topics and ideas from our live events, and watch Matthew deliver them “on-demand” via the site.

So visit the newly redesigned Real Estate Brainchain site and see for yourself just how easy we’ve made it to learn the best practices in real estate sales, marketing, management and technology. We welcome your comments and feedback and hope you’ll decide to become a member, too.

Agents who are busy building new business will benefit from our new Convert! program that teaches them how to convert more online business without spending a single penny more in marketing. Too much new business is lost by agents who need to improve their qualification, incubation and relationship-building approach to managing their leads. Convert! Leads into Deals refocuses agents on the conversion process of building their future business pipeline.

Both programs are available in sequential web-tv delivery or half-day onsite workshops.

For more information about these programs – and our popular keynote and certification workshops – email us or call 800-253-2350 to speak with us by phone.

Ford is the best historical example of the Failure Mindset: Where it once dominated the automobile industry, its “you can have any color you want, as long as it’s black,” mentality led it within a few short years to a second- and then third-tier spot in the business. Other companies followed the same path. Motorola once held the largest share of the cell phone market with its popular Razr phone; then slipped into obscurity after its “we’ll stick to this model” formula left it out of touch with increasingly savvy younger customers. And IBM’s story is legend: From global pacesetter to near-bankruptcy in one generation, the stories of how “the IBM way” tried to rewrite its customers’ businesses rather than support them are basic reading for how not to run a corporation in the modern economy.

One might think that with such clear examples over the last century that modern businesses would clearly understand and avoid the Failure Mindset. Wouldn’t a constant policy of  innovation and customer responsiveness be the standard, not the exception, in the 21st century? Obviously not, especially in legacy industries like booksellers and real estate brokers.

Barnes and Noble is a case in point for the Failure Mindset. A simple anecdote explains it all. Yesterday I ventured into the bricks-and-mortar of the local B&N for the last time. Not just because I am a proficient consumer who does more than 50% of his shopping online already. But because the experience of the Failure Mindset was so pervasive that B&N might not even earn my online business in the future, either.

Browsing the bookstore on a chilly winter Sunday afternoon isn’t shopping; it’s a pass-time that used to involve sipping coffee while getting started on your new book. Except that I couldn’t find the book I wanted, because I had forgotten the author’s name. It was then that I encountered the Failure Mindset.

I expected to find no employees on the floor – razor-thin margins limiting staff these days. What I didn’t expect was a complete obliviousness to the modern consumer: There wasn’t a single computer anywhere I could use to search for the book I wished to purchase.

There were two computers on each floor, but both were unattended by staff. As a Gen X’er, I attempted to access them anyway, but they were blocked by passwords. After looking around in frustration for another machine, I got into the checkout line. When my turn came, I asked if there was a computer somewhere I could use to search whether my desired book was in stock and where it might be located.

That’s where I experienced the Failure Mindset full force. I was told that there were no computers for customers to use. I had to tell the staff what I was looking for and they could look it up for me. When I replied that there were no staff to ask on the floor, I was smugly told that I was talking to one now. When I noted that it seemed silly in this day and age not to have a computer for customers to use on their own, I was informed that it wasn’t “how we do it” at Barnes and Noble. So either tell the clerk what to search for me, or move out of the way for the next customer.

What made the Failure Mindset even more amazing was that – as I walked away, having refused to comply with the smugly unfriendly process – there was a Nook kiosk off to the left of the registers. The Nook is an e-book reader that lets consumers search and purchase electronic books and magazines anywhere using wireless technology. It’s so advanced that it’s better than the convenience of purchasing online. Instead of visiting the physical store or logging onto the internet from your home computer, consumers can search and purchase from anywhere with unlimited 3G cellular internet access. It’s the next generation of book consumption, powered by a friendly interface.

The Nook is not smug. And it’s not mired in “the way we have always done it.” The Nook is an example of the Success Mindset. And it was right there in the middle of the Barnes and Noble store.

Now I’ll admit that I didn’t purchase a Nook at that moment; I was too frustrated to think about giving Barnes and Noble any of my money. Yet I left the store wondering how it’s possible for a company to be so smart and dumb at the same time? There wasn’t a computer for customers to use – in this day and age? I had to tell a staff person what to search for me – like I was incapable of doing it myself? I had to wait in the checkout line – without anything to checkout – in order to talk to a cashier whose mindset was do it our way or move out of line?

Of course, this made me think of my own industry. Failure Mindset still occurs when consumers try to navigate the brokerage business – online or offline. We still have real estate websites that make customers register before letting they can search for homes. Agents smugly throw away online leads from customers who are “just looking for information.” Either make an appointment or contact me later when you’re ready. It’s still common practice to hold a bricks-and-mortar open houses on Sunday afternoons, a time totally inconvenient to busy Gen X and Gen Y consumers. Because we’ve always done it that way.

And then I heard a beep, as my smartphone alerted me to a new message on my Facebook page. It struck me that I could ask my friends for the name of the author of my book – and they’d readily, quickly and pleasantly reply – plus refer me to other books I might enjoy. I could have searched for my book’s author using the smartphone’s browser. I could even have ordered it – from Barnes & Noble’s online competitor who didn’t even have bricks-and-mortar stores or an eye-rolling staff member. It was encouraging to think that some companies had learned the lessons of the Failure Mindset, and were actively pursuing the opposite.

It seemed paradoxical that Barnes and Noble would have such a poorly engineered in person experience for customers, within sight of it’s modern, wireless, customer-driven always-ready-to-search-and-serve product. If I do order an e-book reader in the future, I’ll probably order it from online. After checking with my friends in my social network for feedback. And probably from a website with friend chat-based customer service if I have any questions.

E-readers could finally close the doors of every remaining brick-and-mortar bookstore forever. They are products built from a strategy that listens to customer feedback and designs an innovative experience geared to the way the customer wants it to happen, not the other way around. They are even better than internet ordering, because you don’t have to wait for delivery. Some people lament that e-readers will eliminate an entire industry of traditional book sales – including the experience of browsing the aisles and touching the books.

From what I experienced of the Barnes and Noble Failure Mindset, perhaps they should.

To be clear, social networking is not advertising. It’s prospecting. That’s why simply posting listings and open house invitations is useless. Consumers already have access to all the property information they need. They do not need – or want – listings blasted on their Facebook wall. If they happen to know three or four REALTORS, the prospect of dozens of listings cluttering their update feeds is downright scary.

The same goes for snooze-content like open house alerts, price reductions or just about every other market mundania that too many REALTORS think is valuable to the social network. Online networking isn’t a data-exchange. It’s a dialogue of interesting and useful content.

People want to hear from people, not data.

This doesn’t mean that REALTORS shouldn’t periodically update their sphere about the marketplace or their personal success. Everyone talks about what’s happening in their careers. But you’d never see a stock broker or insurance salesman posting his latest offerings on his Facebook page. Your friend who works at a gas station doesn’t tweet this morning’s price for a gallon of gas.

So what should REALTORS say to their sphere of influence online? How can they create meaningful interactions (beyond an update of which breakfast cereal they ate this morning) people they hope will someday become paying clients? Let’s list five ideas:

1. Decision Enabling Content. Consumers buy homes for personal reasons. Families get bigger or smaller, jobs are gained or lost, the desire for a better neighborhood are still  major drivers of real estate sales. So offer ideas that speak to the personal reasons for moving. Post links to articles or news about life in town, the economy, unusual weather, entertainment or public services. Focus on what’s important to the prospect. First time buyers want to know about jobs, sports, music and nightlife. Retirement prospects are interested in financial planning and healthy living. Think about what’s in it for them, and you’ll think of lots of topics to post online.
2. Analysis, not Data. Don’t tweet mortgage rates to your sphere. Tweet about mortgage trends that impact their decisions. Trends – in pricing, finance, costs of living, public services, weather, and so on – let agents apply knowledge and experience to help consumers understand data, not just receive an update on it. The current price of a home or mortgage is less useful than discussing the meaning of the 3-month trend. Post a chart or graph to make the point, then add a few thoughts on “why” the trends are happening.
3. Congratulations. People work with people they trust. Sales is about relationships. With online social networking, building trust and reinforcing relationships is easier than ever. Your prospects are constantly posting about their lives on their profiles, which presents a huge opportunity to literally “see into the minds” of  prospects. The easiest thing to do with that information is to congratulate. Did they get a new car,  win a big game or have a birthday? Post a congratulations comment. Offering praise, encouragement, sympathy or just “liking” your customers’ lives is a powerful way to connect with people.
4. Ask a Question. A question is worth a thousand statements. If you want to know what concerns your customers, ask them! You don’t need create a formal poll. Just pose  a “Question to my friends” and watch them tell you what’s on their minds. As Sam Walton used to say, find out what the people want and then give it to them. Social media presents a constant opportunity to at least find out what they want.
5. Make them Laugh. Imagine you are going to a cocktail party to catch up with friends. Part of the conversation would inevitably include humor. A good joke, a funny story, a weird observation all put people at ease and start conversations. There is an endless supply of funny videos, curious images and silly stories online that will make your sphere of influence smile. And while they’re chuckling, they’ll be thinking of you.

What to say to consumers online is really no different than what to say in person. When meeting a friend at lunch or a party, you would most likely not whip out some listing sheets or agency agreements. But you would talk about each other’s career, the marketplace, the weather, and so on. You’d tell a joke. And you’d ask questions about their lives. That’s social networking and it’s a different from advertising. You’re not qualifying leads, but talking to people. It’s significantly easier to do, actually, then other forms of prospecting, and ultimately more rewarding.

We know that 64% of consumers found their real estate agent by personal referral or worked with the same agent again. Consumers like the personal connection – to people they know or trust. You can build that by talking with your sphere of influence online, not speaking “at” them.

And that suggests everything you need to say to consumers online!

Imagine if automobile manufacturers did what technology vendors did every so often: Changed around the reliable basics. Your new car might have the steering wheel on the right, where your current one was on the left. The brake goes from a foot pedal to a hand crank. And just where the heck did they put the horn now? Oh, under the seat. Right next to your Windows button and your Facebook news feed…

Somebody please tell companies to cut it out!

Consumers love predictability. Consistency is the promise of branding. Great companies build reputations around establishing and fulfilling a set of expectations for consumers. And while they “upgrade” their features from time to time – like new LCD televisions at the Ritz Carlton or a GPS in your new Acura – these modifications never get in the way of the expected (and valued) methods by which their customers enjoy their products or services.

This is the mistake that companies like Facebook make when they suddenly change their user interface. When their members log in one morning to find significant differences in how they use the system, it causes distress. It’s fairly certain that thousands, perhaps millions of users will express their displeasure in their status box when it happens.  And this cannot possibly be good for the Facebook brand.

Even if its members will eventually get over it.

There’s a big difference between upgrading how consumers access a product or service and how they consume it. For example, when Hertz put its rental system online, it made it possible for its customers to access their cars in new ways. But the changes had no impact on how the customer actually used the car. The online system sent their reservation by email, but when the consumer arrived at the airport, everything else stayed the same. Take the bus, look up your name on the board, go directly to the car, get in and drive away. The innovations to the reservation process had no effect on the use of the rental service; and possibly it made it even better.

Ironically, Facebook’s recent face lift did the exact opposite. Users didn’t wake up to find newer or better access to the system – such as a much-needed upgrade to the Blackberry Facebook app or the ability to access Facebook from their cable television network. Instead, they found everything moved around, hidden under new menus, flipped from bottom to top, and generally discombobulated. Millions of users didn’t use the system, but instead had to waste time posting “how do I now do this or that,” to their friends. Even a few days later, users are still asking how to do things, where to find content, how old features work anew, and even when some are going to get the new interface, because the change didn’t happen to everyone.

Just the unlucky members.

Of course, it’s not just Facebook that makes these big “reset” mistakes with its customers. They are just the most recent ones to do it, and on the scale of hundreds of millions of people at once. But it’s a lesson for all companies not to disorient your customers in the process of improving your products or services. Innovation should enhance the experience. It should build upon what a consumer already knows, but also not disorient them. Asking customers to relearn their computer, television or automobile dashboard cause anxiety and dissatisfaction. An extreme example is relearning cell phone menus: it’s why so many customers stick to older models, rather than reset their hard-won mastery. Customers just don’t like having to fight with their products, even if they eventually conquer them. So while Facebook’s members will quickly get over the new changes, their sense of frustration will linger on, as a fear of the “next time’ it will happen.

That’s no way to create confidence in a brand.

Even service industries without hard-wired products, like real estate brokers, appraisers or mortgage bankers need to bear this in mind. When the rules change radically, it causes deep confusion and lingering frustration in the minds of consumers. Innovation – whether moving from the phone to email or from printed documents to a paperless transaction – can cause consumers to hesitate to engage in the future. It can be worse if there is little help for the consumer when they get stuck – such as wondering why an email remains  unanswered when they reach their agent. It can be a nightmare when the innovation leaves customers bewildered about what is exactly going on with their information or account. Facebook is free, so it didn’t provide support other than some online screenshots.

When customers are paying hundreds or thousands of dollars for service, innovations must increase the value, not cloud it.

This year there will be hundreds of innovations in the real estate industry. Some will be in technology, others will be in service. They will all aim at improving how the business is done – for companies and for consumers. Brokers will upgrade their web sites, move agents from cell phones to smartphones and transition large parts of the transaction online. Bankers will create new loan procedures and documentation. And the government keeps changing the rules every day. It’s enough to cause consumers to give up – and shut down.

It could send consumers back to the sidelines rather than into the market.

While real estate sales has never really followed a consistent set of rules from agent to agent, office to office, major systems over which the consumer has little control, but affect their personal deal have set some expectations. Facebook isn’t the only site to move things around and confuse customers. REALTOR.COM does it just about every time.  MLS systems are certain to do it, too, with rules that expand or prohibit or simply rearrange how photos or text or videos are used. Sometimes it will work for the better; other times it will not.

Hopefully before any of it is done, the industry and the programming geeks will ask an important question:

Are we about to press the Facebook reset button?

On Screen: Real Estate Industry news launch for February 9, 2010:

• The Wall Street Journal reports that Fannie and Freddie have already consumed more than $111 billion in taxpayer dollars. And they are likely to need more.
• A real estate bubble in Canada looks like it’s already inflated and expanding. Some markets are experiencing surges of 20% month-over-month, and it shows no signs of stopping.
• NAR Economist Lawrence Yun finally acknowledges that the tax credits are causing housing data to skew wildly every month in the latest release of pending sales figures from the National Association of REALTORS.

On Screen: Expert Advice from Industry Leaders:

• Steve Harney reminds REALTORS that the housing “recovery” is shaky in “Built on Jenga Blocks.”
• Stephen Fells offers ideas on how REALTORS can keep an eye on what the social sphere is saying about their business in “Why Every REALTOR Should Use Google Alerts.”
• Ron Hahn offers thoughts on how branding differentiation works in the real estate industry in “Interesting Branding Insights: Real Estate Companies Pay Attention!”

On Screen: Technology Trends (with Comments)

• Cisco says there will be more than 5 billion personal devices connected to wireless mobile networks. (Important trend considering under 50% of REALTORS reported using a smartphone last year).
• Comscore research shows that more than 178 million US citizens watched more than 33.2 billion videos in December 2009. (Amazing considering so few property listings have videos on them.)
• Nielsen research says that use of social networking online soared more than 82% last year over the year before. (Yet less than 35% of REALTORS had a social networking presence in 2009)

On Screen: Smart Ideas to Sell More

• Entrepreneurs should beware “vanity metrics” when measuring true performance, says the Harvard Business Review.
• Timeless ideas on innovation from Peter Drucker at Human Resources IQ’s website.

On Screen: But Wish it Were Not!

Here’s the MLS photo of the week from “Really Bad MLS Photos” group on Facebook:

Thank goodness, then, for Hagerty’s Quarterly Housing Report.

Real estate professionals love to say that “all real estate is local.” Yet most real estate analysis contains very little local data. The traditional real estate “comparative market analysis” (CMA) is economically useless: Not only does it rely upon incredibly inaccurate and unverified data entered by agents barely conversant with their MLS software, such reports suffer from the biggest defect possible:

Lack of context.

Real estate agents can tell you how many homes are on the market. They can tell you the trends in new listing volume, sales units and homes that failed to sell on a given day. They can tell you how much a property sold for – even as a percentage of its asking price. And then they can’t tell you almost anything else that would be useful to purchasing and owning a commodity like a home.

Which is why they start talking about nonsense like school systems, parks, subways and other mundania.

Never have you seen a broker’s market report that contains a trend-line for local tax rates – a very important piece of information for owning a commodity that carries an annual “fee” attached to it. Nor do such reports show current rates and trends for other supporting costs, like local cable television, electricity, trash removal or any other “ownership load” related to the future requirements to service (ie., pay for) the home. In fact, it’s amazing that any decisions whatsoever can be drawn from the local real estate agent’s report, when so much contextual decision-making data is left unaccounted for.

Almost any other commodity purchase with an “ownership duration” requires contexts. Take the simplest of such purchases: a new car. Consumers don’t simply evaluate features or prices when comparing models. They examine “ownership” costs – like fuel efficiency, average repair costs, and even projected resales value. Their decision to purchase a model is based upon data points within a broader context.

Try to ask your REALTOR for your home’s projected resale value the next time you meet with her. Yeah, right.

Such lack of context and content is no longer acceptable to today’s housing consumer. Generation X is used to seeing the “full story” when it comes to purchasing anything of lasting value – whether it’s a laptop, automobile or home. They want to see the behind-the-scenes costs to construct, acquire, service, maintain and own the commodity. They understand that large purchase decisions don’t exist in a vacuum but a constellation of conditions.

They know how much it costs to run the television, not just purchase it.

Yet when it comes to buying or selling houses, so much contextual data is left unverified, or simply unmentioned, by the advisors to the consumer. That’s why new reports – such as Hagerty’s Quarterly Housing Report by James Hagerty at the Wall Street Journal is such a refreshing improvement. Certainly, it’s just a start. There are many factors left out – such as tax rates, energy costs and local tax impact. But the mere fact that it presents home prices and inventory in the context of unemployment and foreclosure rates – in one simple table – is a step forward in consumer education.

And makes Case-Schiller seem downright silly.

Ironically, real estate agents generally operate from the premise that people buy homes for “other reasons” than price. Countless stories (and industry cliches) claim that buyers choose homes for emotional reasons, like location or how it “feels.” Yet the modern consumer isn’t so fickle, or vacuous, as to simply fall in love with a home, regardless of price. Most certainly not during a recession. Consumers have been schooled to ask for “operating costs” – energy, taxes, water, repairs – and they understand the concept of “trade in” value for the future. They have lots of experience buying expensive items based upon the monthly fee – whether it’s data  plans for expensive smartphones or fuel economy for expensive hybrid automobiles. It is senseless to think such issues do not matter when it comes to purchasing a home, a commodity of far longer lasting value and higher cost.

Hagerty’s Quarterly Housing Report makes a start of positioning homes within contexts – beyond emotional data such as greenery or convenience to shopping. Even after the housing recession, local data on unemployment, tax trends, energy costs and other operating factors will be required reading for Gen X and Gen Y consumers. In a future of windmills and solar panels, maybe even weather patterns may become valuable context for the housing market.

It’s time for better reports for home consumers on what makes for a good decision in housing purchases. Case-Shiller’s focus on volume and price is outdated: It treats homes as if they were pork bellies or cell phone minutes without any other influencing factors. And traditional real estate market analyses must evolve as well. Buyers of the future won’t let their emotions carry them away – at least not so far, any more – especially when the market requires them to put real money down.

But that’s a report for another day.

In the few days since we started the clock, the housing market hasn’t exactly shown signs of improvement. On January 27th, the Federal Reserve reconfirmed its intention to discontinue buying distressed mortgage-backed securities at the end of the first quarter. It had been buying about $21 billion worth weekly, and has already cut back to purchasing half that amount now. What interest rates will do once they stop completely isn’t hard to guess – history tells us to expect rates to rise fast and far. Consider what a single point increase to 30 year mortgages would to to a market that – at the same time – no longer has $8,000 worth of free money to make down payments.

But wait. There’s more.

Leading research and indicators tell us there’s a perfect storm brewing:

• John K. McIlwain, senior resident fellow at the Urban Land Institute, expects home prices to fall another additional 10% this year. That could push foreclosures and underwater mortgages over 21 million by December 2010.
• Home sales inventories are falling. Contrary to popular belief, this isn’t good news for sellers, because higher prices (and even bidding wars) increase costs for buyers, who are too smart (and too worried about unemployment) to be burned by bidding wars again this time. Sales will fall as they return to the sidelines.
• Of course any sales depend upon employment, which stands at 10% nationally, and is higher in 16 states, including disastrous real estate markets (DC, FL, CA) and states where the real estate market was considered “balanced.” Job losses mean more foreclosures and less purchases.

Suffice it to say, on the Day After, it won’t just be bad because the free money will expire, or FHA standards will rise or the Fed won’t be able to hold down interest rates. It will be bad because we’ll finally be feeling the real sting of a recession. So it’s simply going to be bad.

But not impossible.

That’s what real estate professionals have to decide for themselves, however. Even after moving up one (maybe two) quarters of sales into the first quarter of the year, it’s possible to have a very successful spring and summer. It won’t be easy because many of the mid-year sales will already have been consumed. Yet recessions are still opportunities if managed properly. Most of all, however, creating success will depend upon taking some very uncomfortable actions today, if REALTORS want to stay in business for the rest of the year. And the most uncomfortable of things that REALTORS must do are things they don’t want to do:

Exactly the opposite of everything they are doing now.

Since there isn’t any time left to waste, let’s list those opposite things now. Remember, they won’t be pretty. But neither is the prospect of meltdown on the Day After.

1. Stop recruiting. Every additional agent in the office dilutes the sustaining income of the current sales force. Traditional thinking says more bodies equals more sales. Nothing is further from the truth. More bodies only guarantee more expenses in technology, association fees, marketing, training and management effort. But more sales? In a downturn? Ridiculous. At best, “lucky” new agents who have never sold a thing in their lives will bring in a distressed listing and be stuck with it for months – consuming marketing dollars. At worst, a new agent will pick up the potential deal that would have gone to an existing agent who is struggling to keep their career going in the downturn. The commission will be misdirected and wasted. The new agent is 65% likely not to last their first year anyway. By mis-allocating the sale away from the experienced agent, you’ve increased the chance of losing both.
2. Stop over-listing. The average brokerage has too many listings of the same shape, size, features and price. They are working against themselves trying to sell similar commodities, which drives up expenses and down prices. Companies are competing against themselves. Conventional wisdom says that another listing brokerage would simply pick up the listing anyway, so why not control it in-house? Contrarian logic remembers things like expenses, marketing advantages and even fiduciary responsibility to existing sellers not to dilute their potential sales price – at least not in-house. You can’t control what the rest of the market does, but you can at least do the right thing for your current clients.
3. Stop over-listing (2): On the same issue of managing inventory, housing experts could help their local marketplace by properly advising potential sellers to simply keep their property off a saturated market. Companies could create better returns for current and future sellers by advising unnecessary sellers to keep off the market for a few months or years. Imagine how non-listing as a strategy could rescue the market! Stabilizing inventory will not only stabilize prices but revenues in the commission-based business. Likewise, stable inventory – not gluts and shortages – creates buyer activity. Gluts cause buyers to wait on the sidelines for bottoms; Shortages drive them away with bidding wars. Only sensible control over inventory flow will create market stability and consumer confidence. And confidence is vital when other economic indicators are wildly fluctuating.
4. Find better sellers. Three strikes and sellers are out of this market. That should be the listing attitude of smart brokers this year. If you didn’t put any money down last time, if you haven’t paid anything but interest since then, then strike three is trying to over-price it in the recession. Brokers need to start targeting owners with equity. Look at property sales records for pre-2005 purchases to target sellers with equity and real-scale appreciation. Remember that 50% of all home owners in America have no mortgage. Many of them are potential up-sizers looking for a bargain in the recession, or down-sizers who planned to move anyway and can get a great deal by pulling out their equity.
5. Make up with lenders. After a decade bad-mouthing and politically hampering banks from actively playing in the business, real estate professionals find themselves in desperate need of banking friends. Some companies smartly created their own lending sources, but most real estate agents don’t have that luxury. But they cannot leave the buyer on their own to navigate the process of more complex and demanding lending process. REALTORS will need strong relationships with bankers big and small. And that’s going to take a big “mea culpa” from agents and their Associations to rebuild bridges they spent a decade burning.
6. Find buyers with cash. When rates soar and lending tightens, cash will be king. After spending a year putting ten-times as many people in homes with only 3% down than normal, real estate agents have only laid a new foundation for Q2 foreclosures. FHA numbers prove it, with 15% of all FHA backed loans delinquent after only 1 payment. This has to stop, if the real estate industry wants to plant the seeds of long-term growth. Better buyer qualification will help, but improved marketing practices must find and target the “smart money” hiding out there. Generating new business has to shift from “anybody who can qualify” to “those who can create equity” and form the foundation of a long-term viable marketplace.
7. Stop throwing away business. Last year, studies continued to show that 9 out of 10 leads generated by brokers and handed to agents were thrown away in less than a week. More than 77% of those were abandoned without the agent actually having a conversation with the potential customer: Voice mail and emailed responses aren’t sales activities. There is simply too much business being flushed down the drain of neglect. Why bother marketing – there’s another expense to cut this year – if that’s how your company is going to treat new business opportunities?
8. Stop thinking locally. Many markets – especially distressed ones like California, Nevada and Florida – are attracting foreign dollars. It’s a global market, and even in a recession, America’s private property laws are the best in the world. With prices on clearance, it’s a prime opportunity to find out-of-town buyers half-a-world away. Even for small towns.
9. Stop wasting money. If the recession hasn’t caused agents and brokers to stop their insane wasting of money by now, then the Day After will. This means finally being done with postcards, newspaper ads, newsletter mailings and refrigerator magnets. And while we’re at it, agent websites. With the exception of agents in the 100% clubs, and the absolute top 5% of the business, every other agent in the business is never going to be found in a search engine. Save the money and work the leads generated by the major listing portals, your company and (where applicable) your national brand. Even the top agents need to wise up: Nobody is building shrines to you with magnets and postcards featuring your face. Get a Facebook page instead (65% of REALTORS still don’t have a social networking presence). It will save costs and generate referrals and repeat business –  the two largest sources of new business today.
10. Show up and do the work. There’s a huge difference between going to the office and going to work. Did you make 25 prospecting attempts today? Did you catch up with five people in your sphere of influence? Did you ask for three referrals from your family and friends? Then just what are you doing in the office? When asked what activities they are doing every day that are not generating business, too many agents name them and blame them: floor duty (where they wait to receive calls); open houses (where they get upset that the nosy neighbor shows up); door knocking (as if they are really doing it). But they’ll sit in class after class on short sales or Feng Shui. Come on – do the work! That goes for managers, too. Make meetings count: Teach something helpful and useful. Don’t waste the time announcing new listings that could be done in a memo. Sit down with every agent and make them write two clear goals and the names of 100 prospects. Go with them to listings and showings and then coach them on ways to improve.

Most of these ideas will probably make REALTORS uncomfortable. Many of them will be counter-intuitive and contrary to the traditional wisdom. Yet it’s fairly clear that such wisdom isn’t turning around the market either. It’s time for REALTORS to think smarter, work smarter, and try doing something other than what they have always done.

Because on the Day After, Uncle Sam is going to stop doing it for you.

Look, I get it: Times are tough in the housing industry. The market fell more than 17% in December and an era of free Federal money is coming to a close. Even with a vote to curtail inflationary spending by big government, Massachusetts still leads the nation in housing inflation. Case-Shiller’s latest report puts Boston housing at 153 on the scale – meaning homes are up 53% from the 2000 baseline. Nobody can possibly believe that’s a realistic level of appreciation, even if liberally applied.

But just how far will the real estate industry go to turn things around? Will they start by keeping overpriced homes on the market? Will they try finding buyers with more than 3.5% down? Might they even stop shilling for the government’s tax credit program, which merely transfers dollars from one part of Massachusetts’ economy and to another? All of these seem like good places to start – but to try any of them, agents would have to agree that markets are ruled by the laws of supply and demand.

Not the stars and planets.

Enter the witches. Forget economics! Massachusetts real estate agents are getting serious about turning around the market. They are calling upon powerful forces – on broomsticks no less – to descend from the heavens and restore balance to the housing market. Relax everyone: The housing problem is about to be solved.

Back by popular demand: The “all new” Feng Shui class at the local Association of REALTORS. (I am purposely omitting the hyperlink to the actual class, for fear of creating a negative psychic link between the class and my blog.)

Now, I admit I’m not a very superstitious person. I think it’s bad luck to be superstitious. Plus, I went to a school where we read books – you know, those things that teach you ideas like the principles of economics, marketing concepts, reasoning and trifling other things to help mere mortals cope with the modern world.

Apparently, however, I missed all the really good classes. I’m going to call my old college advisor and find out why he didn’t sign me up for a potions class. And defense against the dark arts – I would have enjoyed a class with Professor Snape. Herbology with Professor Sprout might have come in handy with all the headaches these days. And who wouldn’t have enjoyed a few semesters of transfigurations with Professor McGonagle, turning buyers into closings?

Funny thing, though: my invitation to the newest Feng Shui skill-builder came to me by email. I would have thought I’d have received a scroll by owl. Or at least had a premonition that the class was coming up. I must have missed the divinations class, too.

No matter! I can make up for it all now as a Professional Real Estate Witch or Wizard! Years of wasted time learning about things like supply-and-demand be damned: All I had to do was burn some incense and cleanse the bad spirits from the marketplace to increase my referrals. My personal success would have been assured by now, if I’d only used the right colors on my business card, with a few carefully inscribed success symbols. Just how many points are there on the pentacle? No wonder I failed geometry – I should have been taking neuromancy!

I assume if I take the class that I’m going to become powerful enough to help others, too. I should be able to call up the forces of the four winds,  the earth and the sun – and restore the entire housing market with a wave of the wand. Maybe my compass can tell me how to realign and balance the entire economy!

Of course, signing up for the class is not as easy as I thought. No, I can’t register online. Nor could I register by email. I actually have to call the Association to reserve a seat. You know, make a call on a device of science, which operates by the laws of physics and makes possible affordable communications according to the laws of economics. Seems a bit ironic, but I’ve tried to conjur up a reservation through telepathy for almost an hour and all I got was a headache.

Maybe there’s a Feng Shui incantation that eliminates headaches along with bad housing markets?

On May 1, 2010, we’re going to see what two massive collapses in five years looks like in a commodity market. Make no bones about it: we’re talking a whole new housing wasteland when Uncle Sam takes the real estate industry off life support.  And there’s little chance it’s not going to happen: FHA has begun tightening the screws this month. The White House is looking for a fight with banks – and it just proposed a moratorium on all non-defense-related spending. Even Barney Frank, Patron Saint of Fannie Madoff and her relatives Freddie and Ginnie are about to be disowned. According to the Wall Street Journal, Frank was quoted as saying, “As I believe, this committee will be recommending abolishing Fannie Mae and Freddie Mac in their present form and coming up with a whole new system of housing finance.” A bit late, considering the government poured more than $100 billion into the dysfunctional funding family.

Of course, nobody should really be surprised. There is no free lunch, even if Uncle Sam is paying. Consumers are learning this the hardest of ways in the recession, even though it’s crocodile tears for the loss of equity for the sub-prime set. Yet the ancillary damage to neighbors, businesses and jobs caused by the housing bubble – an inflation-fiction everyone knew was a fantasy – is why the housing industry needs to be preparing now for the Day After.

Because it’s going to be a very cold Spring.

On the Day After, there will be no more gimmicks to gin up the housing market. Already, credit is drying up for all but the absolute best borrowers. Big banks, berated but able to make money overseas or in stocks aren’t going to make real estate lending their recovery centerpiece. Attempts to regulate them back into the plain vanilla lending business will simply cause them to shed their lending operations, leaving small banks to pick up the slack. Without Fan/Fred/FHA backing them up, minimum standards for small banks to lend into a further-declining housing market will be draconian. So the real estate’s industry will finally get what it’s wanted for the last decade:

To keep banks out of real estate.

Maybe it will become a cash market. Unfortunately, most real estate agents have no idea how to work in a cash commodity market. During the boom little or no qualification of buyers was needed; any buyer with a pulse would do. After the crash, buyers were backed by the government. More than 25% were made with only 3.5% down. Once that pyramid collapses, buyers are going to need real money – hard cash, not a temporary loan until their tax rebate comes in.

Finding cash-ready customers isn’t something REALTORS have had to do in decades; and most never have.

Equity is also going to be a necessity. Owners will need to have real equity or no mortgage, the case for more than 50% of owners in America, to become qualified candidates for selling their homes. But finding sellers with equity is a far cry from the “take any listing, no matter how poorly priced” practices that dominate the real estate industry today. Again, how will agents target-market owners with equity when their standard practice is mailing street-alphabetized postcards to neighborhoods?

Most concerning is the current march of the lemmings: A “get it while you can” attitude that’s leading agents like moths to the flame, except on the Day After, it’s going to be a mushroom cloud. Look at their advertising – it’s all about getting the tax credit, putting as little as 3.5% down – any trick in the book – except, finding buyers who can really afford to buy a home and sustain a mortgage during the greatest recession in decades. The industry has been busy with the 300,000 extra sales that the November-near-end to the tax credits created. But have they simply been adding fuel to the fire? Ask FHA, who says nearly 15% of its mortgages entered delinquency after only one payment last year.

So buy today; foreclose tomorrow. But at least the agent got a check in the meantime.

This is no way to run an industry. No way to plan the seeds of a real recovery, or create the conditions for sustained long-term growth. And it’s really no way to treat customers, who, in the end, will barely be unpacked before they are thrown out of their new house. On the Day After, when all of the “extra” sales that would have occurred in the second and third quarter of 2010 have been rushed through in the first quarter of the year before the money runs out, just what to real estate professionals expect to be doing?

Hopefully it’s not listening to its economists, especially the puffery coming from the National Association of REALTORS‘ chief economist Lawrence Yun who claims that, “By early summer the overall market should benefit from more balanced inventory, and sales are on track to rise again in 2010. However, the job market remains a concern and could dampen the housing recovery – job creation is key to a continued recovery in the second half of the year.” At least he got the job market part correct: With long-term unemployment reaching 17% and without easy government money, just how does he expect the market to benefit from “more balanced inventory”? Have we forgotten the millions of foreclosures Fannie and Freddie have been hiding in their pockets – or was RealtyTrac’s announcement that 2.1 million foreclosures in 2009 was up 21% from 2008 and 120% from 2007 not in the NAR’s spin-cycle? Even if Yun is correct and housing inventory stabilizes, that only means prices are going to rise. It’s already happening in some areas of California. Sounds nice, doesn’t it, for housing prices to rise – unless, of course,  you’re a marginally-employed buyer with shaky credit and not more than 3.5% down payment.

Does the Day After have to be a wasteland? Probably not – but it won’t get better with real estate agents sticking to the current script. Simply lowering listing prices until they can get a government-subsidized buyer to qualify and make an offer before they lose their job isn’t the solution. But like the last time the market collapsed, simply going around saying we know it’s coming, but doing nothing about it, isn’t either.

What should be done, to prepare for the Day After the government takes the housing industry off life support? Those answers will come in our next installment. In the meantime, the most important thing real estate professionals can do is take the first step: Look ahead, over the horizon, more than just the next few days or few weeks. It’s coming – we’ve already seen the signs – the first shots across the bow. Whether it’s an Administration berating banks for not lending or the Congressional Finance Committee Chairman suggesting they scrap the housing subsidy system, the signs are clear. For a while now we’ve been worrying about a “W” shaped recovery in the housing market.

It seems more likely that rather than just another “little dip” then a rising recovery, we’re heading into a nuclear winter that always starts on the Day After.

Next edition: Planting the real seeds of a Spring Recovery.

When you’ve spent almost a year feeding on free financing, it’s hard to suddenly stop and know what to do with buyers. That’s the challenge facing real estate professionals. Not only is there a looming deadline with the government will turn off taxpayer subsidized down-payment assistance, um, the tax credits for buyers. Today FHA announced it’s going to change downpayment requirements, raise the insurance premium for backing risky borrowers, and cap the amount of cash sellers can contribute to closing costs.

In other words, FHA is going to cause the housing market to stall.

There are many reasons this action is likely to stall the housing market, even with a few more months of tax credit availability. Some examples include:

• The ability of borrowers and real estate agents to find acceptable substitute lenders will decrease. Under the new rules, borrowers with credit scores lower than 580 will need a 10% downpayment for FHA backing. This is not only nearly triple the historical amounts borrowers needed for FHA loans, but it’s a double-whammy because the increased amount will hit consumers with the lowest qualifications.
• The tax credits value will fall. Even if most borrowers can still get the 3.5% downpayment deal, insurance fees from FHA will rise. While FHA states less than 1% of its borrowers had low enough scores to warrant the higher 10% downpayment in the future, even traditional borrowers were using FHA as a simple financial cheat. They could put $7000 down on a $200,000 home and get almost all of it back in the tax credit. That won’t work for anyone needing 10% down. And everyone is going to get hit with an increase in insurance fees, up from 1.75% to 2.25% across the boards. So monthly payments will hurt more. Borrowers will pause. The sidelines are going to swell with cautious buyers once again. Even if it’s affordable, it will be a psychological stall in the minds of consumers.
• Capping seller contributions will cause property prices to plunge. While seller contributions were another form of “wink-wink” cheat that propped up prices artificially, the new limits on seller funds at closing will cause buyers to demand lower actual prices. As prices fall again, lenders will move even farther from the real estate market. The falling asset value of houses – needed to attract buyers off the sidelines – will cause lending will stall. And appraisers – already burned once by the market – will be certain to under-estimate in a falling market.
• Real estate agents haven’t been practicing how to find qualified buyers or quality lenders for more than a year. With nearly-nil FHA downpayments and Federal reimbursements at tax time, it’s been easy for agents to find buyers “in the margin” who can be enticed to move – even in a declining market. Last year’s estimated 350,000 extra transactions were essentially”no-money-down” stimulated with other people’s money as downpayments. If banks remain uninterested real estate risk (with easier profits made borrowing from the Fed discount window and investing in stocks) REALTORS may find themselves in a crunch for both good-risk borrowers and willing-to-risk lenders.

The bottom line is simple: FHA is increasing the likelihood that we’ll have a double-dip recession – at least in housing – if not broadly across the economy. Whatever you thought of the initial use of taxpayer funds for housing downpayments, FHA now admits it can not continue backing 25% or more of the riskiest mortgages in the market. The country’s mood for more bailout dollars has soured, so even Fannie and Freddie may hit a wall. And while the Federal Reserve continues to make it more attractive to play stocks rather than make risky loans on declining commodities called houses, we may not have to wait for the tax credits to expire. When 1 in 4 borrowers only came off the sidelines last year because of some sort of subsidy, suddenly charging sensible lending and insurance rates is a sure-fire formula for stalling any housing recovery this year.

You can’t turn back the clock; better if FHA had never grown involvement in the first place, but that’s water under the bridge. Now they are trying to wean the consumer off the dole. And that means stalling the market at the worst possible time. It’s going to get tough for buyers and sellers – and that means tough for REALTORS. Most REALTORS are independent contractors. They won’t even be able to claim unemployment benefits when the market stalls. Let’s hope they saved enough from their tax-credit deals in the last year to make it through.

Imagine a company that rarely recruited. What would it look like? How could it possibly expand or grow without constantly adding more salespeople to its staff? You don’t have to imagine it, you can find it today – just not in the real estate industry. In fact, you can find many companies so focused on productivity that they only recruit when absolutely necessary. They have the recruiting/productivity management process so well implemented, they have also never had a layoff!

Ever.

Such a company is Aflac. In a recent interview with CNBC, Aflac’s president made a statement that snapped heads to the screen: Aflac has never had a layoff. Not once. Even with 4,700 employees.

This week, Aflac’s stock hit a 52-week high and the company announced it was actually hiring during a recession. How could it possibly have this level of strength and expansion, in the insurance sales business, when the entire insurance industry is off by half compared to 2007 levels?

Maybe one reason comes from Aflac’s CEO Daniel Amos’ philosophy to, “… not overhire during peaks and during the valleys… put on hiring freezes.” This approach, of course, is completely opposite of the real estate industry’s typical approach, best described as “hire all the time.” Whether the market is up or down, recruiting is the magic talisman of profit-making in real estate. During the 2005-2007 boom, almost 250,000 additional real estate agents entered the business nationwide; since the recession, more than 300,000 have left.

But during both periods, brokers were still hiring!

We’ve long contended that constant recruiting without productivity-driven expansion is the sign of a sick company, if not an irrational industry. The costs of adding, training and mentoring additional salespeople is not what it used to be, when all an agent needed was some business cards and an MLS account. The legal barriers to entry may be low in real estate, but the financial costs (marketing, technology, training) of adding agents is higher than ever. Not to mention such operational challenges as team disruption, disruptive personalities and diluted management attention that occurs when  someone new enters an office.

The Aflac story demonstrates how a rational, productivity-oriented alternative to the recruiting turnstiles found in the front doors of real estate brokerages actually works. When markets peak, a focus on per-person productivity for existing staff – including almost certainly technology and system efficiencies – permits the same number of people to handle cyclical increases in business. Only when absolutely necessary is new manpower added to the mix. Profits are maximized this way, especially for individual commissioned sales agents. The  company reaps higher returns and hopefully saves or invests for the day business returns to normal (or falls). Rarely does Aflac suffer a glut of agents competing – and diluting – the per-person margins especially during market downturns.

That’s why they can expand even in the recession.

All of this presupposes that companies are focused on individual and organizational productivity – not sheer volume. It means each agent maintains a significant and consistent production level of business every month. The per-person productivity must be both high and sustained. More importantly, non-production is not tolerated in the hopes of the mythical “one deal” an agent might bring in. For Aflac to hit its 52-week highs, you can be sure they don’t have a bunch of insurance agents sitting around resisting prospecting calls or social networking, waiting for their one deal to come in.

It’s a different way of thinking about the sales business. In an August 2009 interview with CBS, Amos said, “We have never had layoffs in Aflac’s history…We will let an unproductive worker go in a minute. But, if you are a great employee, we will do everything in our power to keep you.” Note that he said employee, too. Aflac has never laid off employees because there were too many bloating their payrolls, including benefits. Compare that to real estate brokers who struggle to fire (and then seek to hire more) non-producing independent contractors.

Not too many real estate brokerages today are hitting 52-week highs in their stock or company value. But plenty of brokers are still running around hiring agents of marginal productivity. Perhaps the Aflac spokesduck can teach real estate brokers how to avoid quacking-up by the time the housing market turns around.

From Wall Street Journal Chart

At the start of 2010, REALTORS need more from their news sources than footsie interviews with government policy makers. In the January edition of REALTOR Magazine, another opportunity to set the record straight and get critical insights for its members about FHA’s role in the marketplace was wasted. Here’s a short list of alternate questions REALTORS need to ask policy officials soon.

In classic “let’s all get along” style, the National Association of REALTORS’ Magazine sat down with FHA Commissioner David Stevens to discuss how, as they headlined it, FHA was “prudently keeping the housing market alive.” Given that 2009 was an unmitigated disaster for real estate – both consumers and agents – I’m wondering what FHA’s definition of a “dead market” would have to look like. Maybe we’ll learn that later this year?

You can read the article for yourself, so let me get to the point. NAR put the key question to Stevens: Will FHA need a bailout? Answer? We verify income. We document things. We have to keep 2% reserves by law, and we have $31 billion in capital. Today we’re fine; if a double-dip were to occur, we’d be in the same boat as the other big banks.

So, no answer.

REALTORS need better answers and guidance from policy officials. Not just a rehash of the same-old, same-old stuff. For example, where was the follow up with this question: Mr Stevens: Do you mean FHA won’t need a bailout the same way the other big banks did, even though they had lower exposure to risky loans than FHA does today and far more capital than your $31 billion?

The rest of the interview goes into mundania like loan limits and condo rules and paperwork. Wow, really good stuff that today’s REALTORS can thank their magazine for saving them the time to look up online.

REALTORS need to get policy officials pinned down on the future of the government actions in housing market. Otherwise,  REALTORS will cease to be the “voice” of real estate and end up the “mouthpiece” of it instead.

Off the top of my head, I think REALTORS need to  know the answer to these issues, so they can advise their customers – especially those who are contemplating using FHA finance. Here’s my imaginary interview with Mr. Stevens and FHA:

Mr. Stevens, in November the Wall Street Journal reported that your “capital-reserve fund fell to $3.6 billion as of Sept. 30, down 72% from a year earlier, leaving reserves at just 0.53% of the $685 billion in total loans insured by the FHA.” Can you tell us how this corresponds to your initial statement that you won’t need a bailout, and whether $30 billion in reserves would be enough money to make up for shortfalls?

Mr. Stevens, recent data released by HUD and FHA show that the rate of delinquencies for borrowers of FHA-backed mortgages was faster than at any time since 2004, with more than 15% of borrowers more than 60 days behind within the first year. Does it concern you that FHA-backed loans, even with all their documentation, may be a significantly riskier pool and defaults could destabilize the market further?

Mr. Stevens, we’re hearing a lot of news about borrowers who are simply walking away from their mortgages, even though they can make payments. These strategic defaults are occurring because owners have lost the equity in the home, some despite sizable down-payments. Do you think there’s an increased risk of that happening to FHA backed loans due to its low downpayment requirements – and if so, will your reserves cover that risk?

Mr. Stevens, we’ve heard that someone borrowing a $200,000 home with 3.5% down can receive that money back in the form of the home buyer tax credits. This means that many borrowers are essentially putting no-money down of their own. We’ve seen how this “no skin in the game” has a direct impact on consumers’ decisions to walk away from loans. Are you concerned about this fueling higher default rates in 2010?

Mr. Stevens, can you tell REALTORS how decreasing the amount of money a seller can contribute to closing costs is going to help move excess inventory from the marketplace? It would seem that lowering the contributed funds limit would slow the pace of home sales at a time when sellers may be using closing contributions as a competitive advantage to attract buyers.

Mr. Stevens, recently FHA announced plans to increase its credit score requirements for borrowers. We’re also hearing that credit card companies are cutting back their customers’ limits, which can immediately change their credit scores because their previous balances will now look like “higher” percentages of lower limits. Can you explain how FHA will account for what could be a broad “downgrading” of credit ranking due to changes in credit card policies and reporting?

Now, it seems to me that these are the kinds of things REALTORS need to know about FHA, its impact on their customers and their business plan for the future. What a shame that REALTOR Magazine wasted two pages to essentially a “press release” memo about FHA’s requirements, paperwork and role in the condo market. When so much public policy plays havoc with even the most local-of-agent’s business plan, it’s time for real estate leaders to ask the tough questions. If not for themselves, then hopefully for their customers.

…from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A….Market observers, rating agencies and investors were unaware of the number of subprime and Alt-A mortgages infecting the financial system in late 2006 and early 2007. Of the 26 million subprime and Alt-A loans outstanding in 2008, 10 million were held or guaranteed by Fannie and Freddie, 5.2 million by other government agencies, and 1.4 million were on the books of the four largest U.S. banks….

To be clear, the subprime lending crash was not due a failure of private banks. Whistleblower Pinto tells us that systematic “mislabeling” of subprime loans by Fannie Mae – a government entity – was rampant. Call it what you want, but the Fannie fraudsters withheld critical information from the market. Private banks, encouraged (at regulatory gunpoint?) by HUD and Fannie to offer loans to marginal borrowers didn’t have the facts necessary to properly model the mortgage backed securities necessary to do it. It wasn’t greed but mismanagement by the largest public and regulated entity in the market that laid the seeds of the crash.

It was a ponzi scheme worthy of Bernie Madoff.

Pinto suggests reasons why Fannie Madoff cooked their books: Perhaps they wanted to keep the patronage of Congressman Barney Frank, who hoped to “roll the dice” with the housing agency for social engineering purposes. Perhaps the GSE’s could not otherwise comply with the law mandating at least 55% of their lending be in pursuit of “affordable housing.”

Either way, the real estate industry is paying the price of this lie. For years, much industry operational and growth strategy was based upon their public patron’s policy of risky lending. When the financial scheme crashed, it took with it a decade of “home selling” strategies that brokers had built up – around a lie.

The real estate industry and homeowners lost a decade of growth and equity because its strategy was underwritten by government fraudsters at Fannie Madoff.

But why bother revisiting history? Because the industry was more than happy to go along for the ride – and it’s doing it again today. Real estate professionals based their entire sales strategy upon “affordable housing” – and developed training classes, certifications and seminars that led both agents and the public down that path. They never questioned the causes of the price inflation they were enjoying – even though it was historically unjustified – because they had a vested financial interest to not ask questions. Just cash the checks and go on. It was an age where rookie agents earned more in their first year in the business than veteran counterparts.

And it’s happening again. Fannie Madoff received another blank check from its Rich Uncle. And her sister, FHA Madoff has exploded her exposure to risky loans in the last twelve months.

Once again, REALTORS are going along, straight to the slaughter.

Just as once the REALTORS were the biggest voice (or most silent supporter, you choose) for affordable housing, and the exotic loans that made it possible, agents continue to pursue the go-along-with-someone-else’s-plan-to-pay strategy. FHA, tax credits, cramdowns are simply new chapters in outsourcing sales strategy to the whim-of-the-day by anyone: the media, the government, the Madoffs.

Either real estate is a commodities industry with market mechanisms for establishing, trading and financing market goods, or it’s just a flea market, where agents help consumers haggle over price and pay with someone else’s credit card. When that credit card runs out – as it will again shortly – there’s going to be another market crash.

Funny how the Fannie fraud story has disappeared from the news. Maybe it’s been overshadowed by the recent report of 80,000 more jobs lost in December. That’s the trouble with economic reality: fraud is easy to hide, but people without jobs still cannot pay the bills.

Real estate agents need to develop a better strategy – one based upon selling and financing real estate like any other commodity. That means people paying for the goods with real money backed by real credit and supported by real likelihood of repayment (ie., jobs).  Otherwise the industry cannot control its own destiny. The industry remains “sad” about foreclosures – right on political cue – when any other commodity trader would rationally price it down, clear it out, wipe out the excess and move on.

Meanwhile, everyone’s gaga about the extended tax credits – Madoff Scheme 2.0. is just as risky as the last version. How else can they sell homes, it is argued, if there isn’t some money on the table to “induce” people to do it now?  How soon we forget when plenty of homes were sold without subsidies or exotic finance – for decades. Does nobody in America have any credit, cash or equity any more? Makes you wonder.

Entering 2010, it’s high time for REALTORS to have a real strategy for future success. One that does not even consider listing overpriced properties. One that does not expound the virtues of preventing foreclosures. One that does not hail as profitable an agent who shows buyers 200 homes.  It’s time for a strategy that means business – and does not need handouts or gimmicks to do it. One that requires agents to find buyers who have real equity and ability to buy a home.

Because one of these days, Fannie Madoff may actually go to jail. And the free miracle money will dry up. Then what will REALTORS do?

The other lie to be discovered is called FHA default rates; count on it – someone is about to notice. In conjunction with unsustainable debt and public outcry over spending, plus many more months of unemployment, the market is set to fall further – this time from from a historic low point. Once the free lunch line is closed (think, May 1) it will be REALTORS who again suffer the consequences of letting everyone and anyone else set their strategy on how to be a real estate industry.

REALTORS need to get in front of this problem. Consumers don’t read the full reports but they do see the headlines. That’s bad news for real estate agents. Case-Shiller gets regular headline news, drowning agents’ voices.

Consumers implicitly trust Case-Shilller because it appears “scientific.” That’s unlike their usual experiences with house value “estimates” from agents or websites. REALTOR data is perceived to be self-serving, and MLS systems are based upon terribly incomplete information. Even sales prices are worrisome since some systems use tricky days-on-market reporting.

And then there’s Case-Schiller.

Great damage has been done to the housing market’s ability to recover by the Case-Shiller report. Every time this hobgoblin of an analysis is published, buyers and sellers are further misled about the market. Even real estate brokers can’t match up the reports conclusions with the realities of the marketplace.

Case-Schiller data is not inaccurate. It’s the conclusions drawn from it that are erroneous.

Sellers and buyers are led to believe that the market is turning, up or down, every time the report is released, because media headlines are tailored and spun for news value, not consumer decision making. And Case-Shiller does very little to correct this themselves, for unknown reasons. Perhaps they just like the press spotlight.

Every few months, Case-Shiller tells sellers the market is back up, or falling again. That’s a conclusion anyone could make – with 50/50 accuracy and no need for all the data and studying. But it’s confusing sellers. Likewise, buyers await a bottom that has either already passed them by, or is yet to come. Again, a 50/50 shot that requires little more than a flip of the coin.

That’s why REALTORS must vigorously address the erroneous conclusions every time Case-Schiller is published.

Don’t expect the media to do it. It’s not in their interest. Micro-blips up and down grab attention and sell ads.

Real estate professionals should be the ones analyzing the data and communicating with consumers about what it means. Every time the Case-Shiller-Erroneous-Conclusion Report is published, agents should apply the data to their local market conditions. They need incorporate their experience and knowledge of the local market – and cast the Case-Shiller data within the pricing and buying conditions their actual customers might experience.

Not simply parrot its conclusions on their blogs.

How should REALTORS address the Case-Shiller conclusions? Here’s the short list:

1. The Case-Shiller report – especially the headlines derived from it – is all about averages. Statistics can be made to say anything. Averaging a national market is troublesome for local sellers. Case-Shiller define the “housing market” as the top 20 cities in the country. Yet any conclusion about the “market” is like averaging the temperature of the country. On any given day, the national average might be 40 degrees Fahrenheit, but that doesn’t mean it’s not minus-2 in Bozeman and 80 in Miami. Certainly, some cities are affected by national trends, such as retirement destinations and vacation markets, but Case-Shiller doesn’t account for those trends. Its headline conclusions are just a mashup of averages. So sellers in a declining market hear that the market is turning,  even though two feet of snow can still fall in Yellowstone in June.

2.  The report is backward facing. Case-Shiller reports on what happened not what is happening today. This is incredibly misleading to sellers who have to price  their homes for sale today and tomorrow. The December report saying prices went higher – in October. That’s virtually meaningless to a consumer today, especially if mortgage rates have risen in the meantime (as they have). Try selling a lower-priced stock today at last month’s higher value. Yet buyers and sellers see Case-Shiller conclusions as “news” that leads them to  believe such trends are relevant today.

3. Falling or rising trends depend upon perspective. The report covers more than a decade of data. It fixes values at 100 points as of 2000. From that point, you can look at data as higher or lower depending upon what time frame you select. But consumers think of value as a function of when they purchased last. If you bought a home three years ago, the market is down. If you bought in 2002, the market is then you’re up – in every market, including Nevada, Californa and Florida.

4. The report does not account for one-time or market distorting events. One of these was the collapse of the mortgage market. Prices declined rapidly because exotic financing and Federal interest rate intervention suddenly stopped. Case-Shiller conclusions today about falls from that period are exaggerated because real value didn’t rise: it was merely inflation. Likewise, more recent conclusions about stabilizing prices are also erroneous. The December report uses October figures to claim the market is flat or rising. But that data was skewed by the (expected) expiration of another the Home Buyer’s Tax Credit. Short-term units and prices rose only because buyers thought the credit would expire. Still, the extension of the credit didn’t prevent the top 20 cities from reporting real year-over-year declines.

These points might seem like economic arcana that statisticians would  fight over. Yet there’s real danger that such theoretical errors harm actual consumers. Every new Case-Shiller report has become a media sensation and a public event. Its conclusions become news that consumers talk about around their dinner table. Decisions about pricing and purchasing are influenced by the so-called conclusions of the Case-Shiller report.

Possibly, bad decisions, because of bad conclusions.

REALTORS need to be more vocal interpreters of such pronouncements about “the market.” It’s dangerous to consumers and brokers to simply parrot Case-Shiller headlines, and have the industry itself come to false conclusions about what’s really happening in housing market.

At Matthew Ferrara & Company, we don’t believe in the “overcoming weaknesses” method of business planning. Rather, we think everyone should focus on their strengths and find ways to maximize the use of them every day. If your resolutions involve working on things you don’t like to do, don’t have a propensity for, and mostly do poorly, you’re heading for underachievement, frustration and disaster. On the other hand, if there are some things you’re already doing that leverages your natural talents, you enjoy doing already and would be more inclined to do more of or better, those should be the focus of your strategy for the next twelve months of business.

Focusing on your strengths lets each of us create business resolutions that best suit us – and therefore have the greatest chance of success. Rather than adopt someone else’s “must do” lists that we’ll never even try, we’ll be more successful if we take our “already doing” list and fine-tune it. Here are ten ways to do just that.

1. Know your strengths: The first thing you need to do is identify what you already have some talent for doing. Very few of us have talent for everything in business. So we need to figure out where our talents lie and organize our strategy around them. So sit down and make a list of what you are already doing that you do fairly well every time. Every other resolution you’ll make must focus on taking those talents and turning up the “volume” on their effectiveness.

2. Accept your strengths: If you list the things you have talents for, you’ll also bring to mind everything you’re not so good at doing. Make a side list of those things. Review the list and label each one “QP” or “NC” – Quick Possibility of mastering and improving or No Chance of being really good at soon. There are some things you might be able to improve – if they already relate to your existing strengths. Maybe you’re a strong prospector, but you are fairly week at generating new contacts. That is probably a QP with a little technology and technique. On the other hand, if you are really bad at paperwork and numbers, then list if NC and put it aside. You will deal with it – but not personally – later.

3. Outsource everything that’s a NC or clear waste of time. Look at your No Chance list from #2 above. Decide whether you can simply stop doing it (and nobody will notice) or if it’s a vital activity required for your success. If it’s vital, determine how you will outsource it. Remember, you’re already not doing it – or not doing it so well you should stop doing it harmfully – so someone else is going to have to do it for you. Find an office staff, another agent or third party business who can do it for you – at peak quality and performance – and resolve to stop wasting time trying to fix things you’re never ever going to actually do well.

4. Set goals, not to-do lists for your business. Rather than make a list of lots of things you’ll buy, try or do, focus your mind on the most important outcomes you wish to achieve in your business this year. Stress and chaos are created by task-oriented planning. You can easily create a list of things you can never get done in the time you have each day. If you want to succeed differently this year, stop worrying about tasks and keep your mind on the goals. Whether it’s financial, professional or personal, three clear and measurable goals which you review and keep in mind every day will more effectively guide you to what needs to get done than a “master list” of intimidating to-do’s and tasks.

5. Organize your time. Most business professionals make the mistake of trying to organize their tasks, rather than their time. They erroneously think the goal is to find the magic combination of scheduling tricks to get the most things done in the least amount of time. That works if you’re a machine on an assembly line. However, most real estate sales is knowledge work, and your brain cannot work “on command” in an unbroken stream of activities. Deal with your time differently this year, by organizing it into periods of most useful outcomes. Determine what is most useful to your business – prospecting, training, presentation skills, negotiating – and then organize your time around getting those things done consistently. Look at the week and ask yourself how to best use the time you have to work towards your goals. Then schedule the right amounts of time to using your best talents to achieve those goals. Eliminate, delegate or forget about everything else.

6. Get effective before you get efficient. We sometimes mistake efficiency for effectiveness. This often leads us to mis-use our talents and time, and especially technology. For example, using technology to organize our databases and create labels for mass mailings may be highly “efficient” compared to the days when we tried to remember everyone’s name and send handwritten notes. However, it could be massively ineffective if the consumer’s preference for contact is email or social media. When you look at turning up the volume on your talents, don’t just take for granted that improvements come from simple efficiencies. You could outsource your prospecting calls to a call center, who could call 1,000 people a week for you; but that might not be nearly as effective as making friends with your past ten clients on Facebook, and writing a personal note on their Wall each week. Both are prospecting. One is efficient by volume. The other is effective by goal.

7. Fire things. Just like you clean out the drawers of your desk at the end of the year, simply throwing away paper and items you packed away rather than dealt with all last year, start your new year by firing everything that no longer works toward your goals. For managers, this might be non-productive salespeople, unattended office meetings, or handing out leads to agents who just throw them away. For agents, this might mean unreasonable sellers who refuse to market-price the home, buyers who won’t work under contract and other agents who refuse to pull their own weight in a deal. Your problem solving must be different this year. If avoid-and-forget didn’t work for you last year, fire-fast-now might be the different approach you need.

8. Stop copying others. Too many of us think that if we just copy someone else’s activities, we’ll reach the same success they have achieved. This is a bad strategy for two reasons: We only see the outward side of others’ success, without the back-story of challenges they handle, but some of which might sink us. We are simply not the same people; problems they can handle with their talents could overcome us if we have different strengths. Secondly, copying others activities means implicitly accepting their goals. Our goals should direct our own activities; There are many paths to success, and it’s important for each of us to follow their own. Some agents achieve high sales performance with lots of technology; others are masters of the telephone and handshake. Both can achieve measurable successful outcomes – based upon different strengths. But adopting the techo-approach for a techno-phobe could be the wrong strategy, and vice-versa.

9. Listen to customers. Lots of consultants, planners, leaders and technologists in the industry claim special access to the future. They have systems, tools, programs you can purchase to get there. Some work; some don’t. But what always works – every year, boom or bust – is talking to customers. They will tell you exactly what they want, how they want it and how they would like to pay for it. And since they pay the bills – not create them, like everyone else – they should be your most important source of information. Then you can go back to the others and ask how their products and services jibe with what consumers are saying, and incorporate the best of these into your optimal use of time and talents.

10. Get to work. While this sounds obvious, it is most certainly not. Most people go to the office but never go to work. They hang out, chat, catch up, eat lunch, run errands, do paperwork, upload a file, check their email, and lots of other activities. But they never actually get to work. If your job is to make sales, then going to work only happens when you make sales. At the very least, you’re only working when you’re doing activities that directly correspond to the next sale you will make. The sales will not make themselves. Others – your fellow agents, your broker, the government – will not make the sales for you. If you want to really do something differently in the next twelve months, then go to work and get to work for every minute you’re there.

So there’s a quick list of ten things to do differently in 2010. Note that none of them are silver bullets, get-rich-quick schemes. There’s not a single specific techno-gadget or snappy-comeback to use for or against consumers. The list requires each of us to assess, evaluate, plan, organize, delegate, focus and do that which is necessary to reach our goals in 2010. To create your next year of success, wishing for a thing is not enough to make it so. It’s time to do the right things – and differently – to make next year your best in the business.

What happens on January 2, 2010? It’s the first acceptable day to get back to work in real estate. Saturdays and Sundays are usually workdays for real estate professionals, but none in the last year will be as important as this particular Saturday:

The first work day after millions of listing agreements expire at the end of 2009.

Certainly, someone will argue that ambitious real estate agents could pursue expired listings on New Year’s Day – but let’s at least pretend to some decorum in an industry that usually spends most of its time at the jewelry-booth at its Annual Convention. Leave the First off-limits, if not just for hangovers.

But on Saturday the Second, the gloves come off. And they should. It’s going to be a field day for every over-priced, newspaper-and-postcard marketed listing that failed to sell in the last quarter of 2009. Most listing agreements run 3 or 6 months, and many consumers tend to think in terms of calendar periods. So the end of 2009 is a very natural “end date” for thousands of listing agreements nationwide.

So you’d better be prepared for the first work-day after. And that means starting today.

Smart real estate agents should be laying the groundwork in December for Saturday the Second of January. It starts with information gathering – like making an appointment to tour potential future targets before they expire. Sure, you probably won’t know which homes exactly are about to expire at the end of the year. But it doesn’t take a math whiz to run a MLS report by days-on-market. Just sort by 75 and higher; or 160 or higher. Then make some appointments to see the home before it possibly expires.

And take some notes. Maybe even some photos.

Oh, that’s naughty, you say! Coal for you, in your stocking! Isn’t that the entire point of targeting expired listings, anyway? To demonstrate you can do what the other agent couldn’t or wouldn’t – which is get the job done, using ambitious techniques. It’s called sales, and not everyone gets a trophy.

If you wimp out on the ambitious technique, then at least printout some MLS sheets and file them in advance. This will provide you with more information in case your MLS system purges data when a listing expires. It will be helpful to identify any weaknesses in the past marketing strategy being used, like awful photos, weird-abbreviation descriptions and missing data.

And if there was a virtual tour, was it a silent-movie?

Speaking of movies, that’s be another thing to prepare now, so you’re ready to target expired listings on Saturday the Second. Record a video or two or three about why homes don’t sell, good marketing techniques and current market conditions. Upload it to YouTube and post it on your blog. Then promote the video to the local marketplace. Provide consumers with information in advance about why (their) homes didn’t sell. That way, when you reach out to them on the Second, some sellers might recognize you from your video.

Recognition is important, of course, so make sure you tell the people who already know you that Saturday the Second is a big day. That means creating a campaign over the next few weeks on Facebook, Twitter and elsewhere to spread the word: Should anyone in your sphere of influence know anyone whose home might be falling off the market at the end of the year, share your video with them. Or contact you. Referrals still represent the single largest source of new listings. So why not get referrals of expired listings? At least you have a targeted date and time to push for them at this time of the year.

Which brings us back to Saturday the Second of January, 2010. What’s your plan for the big day? Will you have a marathon telethon, hitting the phones hard enough to make the New Year your best ever? Are your email marketing pieces ready to follow up with every call you make? Have you prepared your market reports and customer trend graphs to offer sellers – and you’ll just stop by to drop them off? You can’t possibly start doing this on January 1st, and there will be some holidays and hangovers between now and then.

So get to work now, because the importance of January 2, 2010 cannot be underestimated. On that day, careers will be won and lost. The seeds of success will be planted, or hard ground lost by those who thought that now is the time to slow down. That’s the funny thing about real estate: We actually know when the most important days of the year will be. Now it’s up to each of us to decide whether we’ll be ready for it or not.

Let’s hope so!

Being part of the real estate industry is one of the most exciting careers in modern times. It’s no small thing to say that REALTORS make people’s dreams come true. One’s home is at the center of their lives: It’s where families are born, people grow and play, and where we gather for dinner. Home is where people gather to enjoy the world. And especially the holidays.

Sometimes it’s around the pool and barbecue; other times it’s around the oven or fireplace. Almost always it’s around a table – with family and friends. In each of our homes, stories are told, and memories are made. Owning a home is the foundation of building our lives.

The real estate industry plays a very special role in people’s lives. We are charged with the responsibility for their most valuable assets. We affect an item full of emotions and memories. We become a part of a complex – joyous, stressful, exciting – period of people’s lives. And when it’s all said and done, we have done something wonderful: We’ve created another special place in the universe.

Some say real estate isn’t brain surgery: True. But it is a matter of life and death. The American Dream is about home ownership. Enjoying life to the fullest best happens when we own our homes. And the rest of the world believes it, too. Liberty – and the fruits borne of that tree – come from unfettered personal ownership of property. It wasn’t a fluke that Jefferson wrote, “Life, liberty and the pursuit of property,” in his first draft.

Today, real estate professionals around the world are changing lives through home ownership.  It’s an awesome responsibility. And a wonderful career. Millions play a part in reshaping people’s neighborhoods, countries and futures. Top sales agents and busy assistants, hard-working managers and risk-taking brokers: Together they make the machinery of home ownership run. So families can grill or swim or play or dine or simply warm their toes around the fire.

So as our thoughts turn to family and friends, to meals and gifts, to joy and cheer, let’s not forget to give thanks. To the millions of hardworking agents and managers – to the builders and bankers – to the trainers and teachers – and the industry leaders worldwide – raise a glass once and proclaim. Home for the holidays is made magical by our friends, the REALTORS,  every day of the year!

According to research by the National Association of REALTORS, buyers habits are changing when it comes to real estate. The report, recently released by NAR, asked more than 100,000 consumers to rank the usefulness of information sources to their efforts to learn more about the marketplace. The good news was that for the first time in years, the real estate agent edged-out the internet for top-spot as “very useful” (81% vs 77%). The bad news is that, by a factor of 4, most buyers think open houses suck.

Within the margin of error, the agent-vs-internet top-spot is essentially a tie. That’s good, because the agent-as-most-useful had been on a steady decline for the last decade. Landing on-par with the internet is mostly good news, depending upon how you interpret it. On one hand, it could mean that today’s agents are providing excellent information and service when buyers contact them. On the other hand, it could mean that REALTORS have been putting steadily worse information online, to the point that the consumer feels their online listing content is so poor, they might as well just contact the agent (and get it over with).

That would be unfortunate.

If we compare the data year-over-year, some of the results seem ponderously unchanged. For example, the 2008 survey indicated that 46% of buyers felt yard signs were “very useful” compared to 42% in the 2009 survey: considering the data margin, it seems strange that usefulness of yard signs in the era of foreclosures-on-every-corner remained about the same. Not to mention most yard signs today still don’t feature text-message options to attract and inform Gen Y buyers.

Makes you wonder.

Then there’s the surge in usefulness in two categories that is noteworthy: Billboards went from near-bottom 9th rank to 4th ranked usefulness this year. So did television, which was in the last spot in 2008, but earned the middle spot this year. Most observers would think we’d think these rises as unbelievable, since neither seems like a growing medium to reach modern consumers. But their rise is mostly due to steep falls in other categories:

• Home book magazines dropped from 27% “very useful” to 90% “not useful.”
• Newspaper ads went from 29% very useful to 98% “somewhat to not useful.”

Now if only REALTORS would show their sellers this data, they might get on with actually selling more homes and raising margins in 2010. But don’t bet on it.

The research number that worries me the most – and brings into question how agents took top-spot this year – is the data regarding the usefulness of open houses. In the 2007-2008 time period, buyers ranked open houses as “very useful” 40% of the time; They said 92% of the time they were “very to somewhat” useful. But in the last 12 month study, buyers only ranked open houses very useful 10% of the time. barely 35% of the time did buyers feel that open houses were “very to somewhat useful.”

So, basically, buyers think open houses suck.

The real estate industry should be shocked and worried. Alas, more REALTORS seem focused on how much free money it can get from Uncle Sam, to fund FHA loans, so more people can put even less of their own money down on homes they’ll be defaulting on at a soaring rate in the future. Once again, something’s rotting on the inside, while all eyes are focused elsewhere. Let’s hope nobody tells their clients – the sellers.

Why might it be that buyers find open houses so useless? The data doesn’t say, but I have a few suspicions:

1. REALTORS themselves consistently badmouth open houses. Perhaps they have created a self-fulfilling situation from their own attitudes. Ask any agent what they think about open houses and you’ll find no lack of complaints. Neighbors are nosy (thus, routinely ignored). Agents have convinced themselves that consumers don’t want to be “sold,” justification for standing around saying little to nothing. And rarely do you hear the words “Would you like to make an offer?” from the mouth of the agent (nor their surrogate assistant) at these sales-less selling events.
2. If they aren’t soundly ignored, then most buyers are intimidated by the open house experience. Too many agents have been taught the “Gunslinger” theory of objection handling. “Go ahead, punk. Make my day!” so they can “overcome the objection” like a quick-draw contest. Gen Y is completely freaked out by this environment, because when they grew up, everyone got a trophy! They can’t possibly out-draw Top Agent Betty Barracuda, so they rapidly walk through keeping their opinions to themselves. Even Gen X sees no reason to engage in a shootout with someone who won’t really answer their questions unless they register or sign a representation contract. There are plenty of other houses to  see without the hassle, like the For Sale by Owner (ie., Bank) down the street.
3. Open houses are still done on Saturdays and Sundays – because that’s when most Baby Boomer agents have free time. But Sundays aren’t free time for the typical buyer, made up of Gen X and Gen Y’ers. Their weekends are busy with personal life, kids, or simply sleeping after a 60-hour work week. Visiting houses isn’t a priority. So maybe open houses are useless because they are held on the wrong days at the wrong time. For the consumer, that is.
4. Managers have no idea any of this is happening, because the last time a manager went to an open house to coach their agents was probably….. um….never. The sales event has been essentially unsupervised for years – and remains unimproved, or worse, degraded. This year’s consumer data proves it. Without proper management or coaching, agents struggling with the few modern consumers who do stop by won’t spontaneously improve their outcomes all by themselves.

It begs the question as to whether consumers would prefer visiting a car showroom to a Sunday open house.

Either real estate is a sales business, or it’s not. Either the sales event has to be convenient and conducive to the buyer’s preferences, or they won’t show up. Either the agent is going to be useful, or they will not. When four out of the top five “very useful” sources of information this year were not a human being, the industry should stop and ask why. As for the fifth most useful place buyers used to find a home – open houses – it actually had a human being present. But in less than 12 months, consumers ranked it four-times lower in usefulness than the year before.

In the mind of consumers, open houses suck. Not even a recession can account for this.

As usual, let’s start with the research. Last year, more than 50% of home sales were to first time buyers. The average first time home buyer was 30 years old, and the vast majority are under the age of 44. The move-up seller is also squarely within the 30 and 47 age bracket. From a real estate standpoint, the target buyer and seller for the next few years is essentially Gen X and Gen Y. With less than 19% of sales happening with consumers over the age of 55, let’s just say the 401k-home-equity-drained-downsizer is not going anywhere for quite some time.

Now let’s assume an operational premise: Successful real estate sales requires brokers to sell real estate the way buyers want to buy, not the way they (or sellers) want to sell. Of course, we know this lesson goes largely unlearnt in the industry, as the proliferation of newspaper and postcard marketing are two of the three pillars of failure for most brokerages (constant recruiting being the third). But for the sake of argument – and hope for the future – let’s assume that someday soon this lesson will be understood and brokers will sit down and ask themselves:

How does my customer use the internet?

Not, how do I want to market homes to customers? If we leave it to brokers, we know exactly how they want to market homes – even online. We don’t even need to mention them here – but a fruitless search through REALTOR.COM should prove the point. And when it comes to social media, the case becomes worse, not better. Just based upon the number of friends updates I’ve had to “hide” in Facebook lately, it’s clear that many agents have not understood that social media is about relationships, not e-blasts of their overpriced listings or open house dates.

If we think about how the real estate target buyer uses the internet – especially social media – we’ll see that games are vital, not incidental, to our marketing strategy. Playing online video games isn’t just an introvert’s pass-time any more. Farmville has more than 72 million active users. That blows away every real estate website – combined – if you consider these visitors play multiple times a week, and often for 20 minutes or more per visit.

Now would you like to play a game?

There is nothing comparable in online real estate marketing as we know it to game-playing online. Of course, the activities are different: REALTORS are simulating their product catalog online, and game players are entertaining themselves. But the objectives are not dissimilar: REALTORS hope to connect with their sphere of influence via their websites, and game players are already connected to their sphere of influence – and interact with them nearly daily – through the gaming nexus. Social media gaming, in other words, is just another excuse to get together with friends.

Of course, some of those friends may also be clients – past, present or future. It’s no different than the days when we used to play games – like golf or bridge – with our networking buddies, past clients or Association friends. It’s simply moved online – because so has the consumer. Keep in mind that Gen X grew up playing Atari and Nintendo games; and Gen Y doesn’t know fresh air exists. The 20-something buyer literally evolved online, interacting with friends online via XBox and Playstation, while exploring dungeons and foreign planets. Their sphere of influence was largely virtual. And unlike the coffee shop or golf course, it met just as regularly.

Online.

This is why social media game playing is a powerful sales tool. It connects people to people, not people to machines. Gen Y doesn’t want to “search your website” and then wait for someone to return their email (assuming they ever do). They already eschew search engines, preferring to ask their friends what cars to buy, schools to attend – and agents to use – via social networks. They don’t talk on their phones, and they don’t check voice mail. They don’t go out to play – so they won’t be seeing their Baby Boomer laywer or accountant or hairdresser or real estate agent at the local pub or health club.

In fact they won’t see them at all – if those people won’t show up online.

Gaming is about relationships. Competitive “war” games let Gen X’ers pit their mobsters, vampires or poker hand against their peers’. Collaborative games like Fishville, Farmville and Cafe World let Gen Y’ers play nice with the collective. But note that none of these games is played alone. They all involve playing with others.

And that means building and maintaining relationships.

Relationships, which are the heart of successful sales practices. In the past, relationships were built by a traditional sales theory that revolved around an advertising-prospecting-proposal structure. Maybe that sales structure is evolving, along with the modern consumer. Decision making processes in consumption are not what they once were: Gen X’ers don’t believe one word of marketing from anyone, and Gen Y’ers are usually put-off by pushy-scary-closing methods that make up the classic Top Agent Betty Barricuda sales playbook. Even awareness marketing is changing, as fewer people use the newspaper-phonebook-mailbox channels to gather product information, but return to the “town square” model of friendly referrals and family advice.

For Gen X, it’s important to use trusted vendors their peers prefer. For Gen Y, advice from the family, extended but reachable online, is more powerful than any price inducement.

That’s why playing games online matters. It’s a chance for sales professionals to make friends and interact in non-traditional sales environments. They can play winner-loser games with Gen X prospects, and earn their respect through game-play competition. Such respect can later be translated into sales propositions and referrals in the future. Gen Y prospects can become part of your company’s family by participating in collaborative games, egg-hunts and “sims.” They will readily accept new connections from anyone working toward the same goal. Later, when the goal becomes buying or selling a home, they will be primed to trust someone who they have already worked with to reach a (entertainment) goal.

Clearly, playing social media games is time well spent building relationships that are the foundations of future business. There’s no doubt that the next generation of real estate consumers is socialized and prefer to interact through this medium. And it’s not just younger generations of consumers: According to a study done in the last 5 years for AOL Games, “women over the age of 40 play most often and spend the greatest number of hours per week doing so, beating out both adult males and teens of both sexes.” The study also shows that adults are more likely than teenagers to play online games. Maybe that’s why Nintendo’s marketing strategy for the Wii features people of all ages – young to old – playing together.

Now it’s time for the real estate industry to understand that social media can build relationships that turn into business.

And isn’t that the name of the game?

.