Matthew Ferrara, Philosopher
 

Real Estate’s Best Days are Ahead

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“Reports of my death are greatly exaggerated,” So quipped Mark Twain after hearing his demise had been published in the New York Times. The same might be said today about the industry. A lot of hullabaloo has been making its way through the web these days – the end of brands, numbered days for independent , ready to do it on their own. Trouble is, it’s mostly punditry that supports these assertions. Certainly, real estate brokerage is under a lot of pressure to produce profits, cut costs and improve customer satisfaction these days. Even more likely is the potential for the industry to further downsize, eliminate waste and fracture away from grossly inefficient organizational structures and innovative models. But dead? Methinks some people doth protest too much.

When any industry undergoes a lot of changes, there’s a tendency to want to throw the baby out with the bathwater. “Remember the travel agents!” is heard more than “Remember the Alamo!” these days. Some may indeed feel surrounded. But trapped, with no option than surrender? Not likely.

Anyone who knows REALTORS understands that they are masters of transformation. Not always gracefully – as twenty years of our experience has proven. Yet even the worst feature of the business – that 60% leave the industry every 18 months – is also its saving grace. Fresh faces mean a greater opportunity to create try fresh practices during changing times.

The real estate industry is transforming, not dying. In fact, while it seems to be changing daily, many aspects of the business are likely to stay the same for years, maybe decades. Separating what will change from what will remain the same is important. It can show why the industry isn’t about to collapse, at least not the same way typewriters disappeared when computers came along. Such comparisons like travel agents or typewriters fail, because they don’t account for the “” aspect of the real estate business.

Commodity sales industries still need sales people. Perhaps now more than ever.

Consumer goods don’t need salespeople. So it makes sense to buy discrete, limited-information-required items like groceries, airline tickets and iPods completely online. Technology displacement of “retail” sales is just another form of production efficiency. But real estate sales is information-imperfect; there are too many variables for any technology to account for. In fact, it’s a technology-using generation that’s going to save real estate from collapse – while still transforming it into a better mousetrap.

As long as the real estate process remains complex much of what we call the industry today will still be present.

The industry would be doomed if houses could sell themselves. But that would equate the products with the process of selling them. Books, computers and music can sell itself online because its value can be readily understood by the consumer. All that’s left then is fulfillment. Not so with complex information items. WebMD didn’t put doctor’s out of business; but it did alter the way they do it.

Actually, the process of real estate is extremely stable; it’s still sales, no matter how you look at it. Mostly, the tools used to sell are doing the most changing. And as long as the sales process is implemented by people who can learn and adapt to new tools, the best days in real estate are still ahead.

So what’s staying the same in real estate, even in these chaotic times?

  • The largest source of listing business still comes from past clients and referrals, not random consumers caught from a search engine.
  • Buyers continue to work with a real estate agent almost 9 out of 10 times, even though they have more information than ever.
  • Most home owners find themselves unable to sell homes more effectively than professionals can, despite nearly equitable technology access.
  • Consumers show every indication of preferring  convenience over price when it comes to these transactions. Plenty of price sensitive models have not disrupted much more than industry niches.
  • Real estate information transparency has not proven to lower complexity for the consumer, but actually to increase it.
In other words, real estate business fundamentals aren’t really changing. Even after two decades of rapid and highly disruptive technology integration, real estate remains a sales business. The forms of selling may have changed, but the process of selling remains does not.

Future referral business may come in tweets rather than rings; but it still takes a personal relationship to evoke one. Buyers may preview thousands of homes on their own before contacting an agent; they may tour it by video, make an offer by transaction platform, but they won’t execute upon it without professional advice – if only by email conversation. Home owners can distribute listings broader and wider than many agents – blasting social nets and posting to Craigslist while some REALTORS are still wondering who Craig is; but the availability of tools does not equate to professional implementation of them. Even the supposed biggest nail in the coffin for REALTORS – ubiquitous inventory information – hasn’t been able to reduce costs for the consumer: Commissions have barely moved in comparison to other “self-serve” online sales channels (think, 99-cent music) and online buyers actually take longer to complete a transaction than offline ones (think, time is money).

They key factor in all of this remains people. Real estate brokers and agents are extremely adept at adapting. They have already made significant changes in their practices, and their performance outcomes. Not all have, and not always willingly (don’t we know!), but how is that any different than any other industry that has undergone massive transformations? When the textile industry moved from cottage hand-looms to to factory production lines, more people, not less, were employed and earned higher livings, not lower. Those people adopted to the changes – in tools, in techniques, even in sales methods – and the textile industry profits, employment and customer satisfaction exploded. More clothing, in more sizes, colors – and costs – were possible.

When the textile industry turned itself inside-out, it created the best days ever. It expanded, not disappeared.

This is why the real estate industry’s best days are still ahead. A lot may still change – how we employ agents, how we compensate them, whether they specialize or continue to be jack-of-all-trades. We might charge consumers less; some may figure out how to charge them more. Local may become international; global may think locally. Some brands will fail; others will emerge. Nobody remembers Royal typewriters, founded in 1904; everyone knows Dell computers, founded in 1985. More letters are written than ever these days; just nobody’s using Wite-Out.

All of this is called innovation – not disintegration. Real estate professionals are extraordinarily resilient business people. Even when they fail, you regularly see them pop up somewhere else in the industry a few months later. They’re entrepreneurs; they are creative. At one time they didn’t know how to send a fax; today they send them from their Blackberries. Technology didn’t kill them. It made them stronger.

Best of all, there’s a whole new generation of REALTORS coming this way. Raised on technology, these Gen X and Gen Y professionals don’t see change as a problem – but an opportunity. They don’t mind the constant drive to innovate, experiment, fail – and then succeed.

The real estate industry still has a lot of work to do. Many outdated, unproductive practices impede the business of selling. Some customers have turned away, but many others have turned toward, too. As an industry, evolution might eliminate major players, just as the financial meltdown erased some century-old bank names. Yet as long as real estate remains a sales business – or until homes can start to sell themselves – reports of its demise may indeed be greatly exaggerated. Hopefully, for a long time to come.

  • Very insightful and optimistic piece. Thanks for writing it. While it is certainly true that technology is the way of the future…it is also true that the real estate industry will also continue to need the same creative professionals to put that technology into action. The real estate industry, and it’s professionals, will most certainly adapt to this brave new future.

  • Very insightful and optimistic piece. Thanks for writing it. While it is certainly true that technology is the way of the future…it is also true that the real estate industry will also continue to need the same creative professionals to put that technology into action. The real estate industry, and it’s professionals, will most certainly adapt to this brave new future.

  • Jodi Tussing

    Excellent as always …btw – I still have spools of thread from my great uncles thread mill….

  • Jodi Tussing

    Excellent as always …btw – I still have spools of thread from my great uncles thread mill….

  • Thanks Matt…….I always enjoy your commentaries and appreciate your willingness to share.

  • Thanks Matt…….I always enjoy your commentaries and appreciate your willingness to share.

  • Very well written article and very optimistic. However, in the meantime we have considerably fewer buyers than sellers and this is probably not going to change for two or three years. So old techniques-new techniques may not matter. And regardless of our business flexibility and adaptability, many of us will be going around singing “Brother can you spare a dime” or “Trailer for sale…”

    George from Tucson

  • Very well written article and very optimistic. However, in the meantime we have considerably fewer buyers than sellers and this is probably not going to change for two or three years. So old techniques-new techniques may not matter. And regardless of our business flexibility and adaptability, many of us will be going around singing “Brother can you spare a dime” or “Trailer for sale…”

    George from Tucson

  • Very insightful and timely article. Thank you!

  • Very insightful and timely article. Thank you!

  • Debbie Moore

    Thanks Matt! You are right on target as usual!
    It is up to us as Realtors to continue to work in the best interests of our clients. In doing just that, we will continue to be of value as professionals to the public and our industry will florish.

  • Thanks Matt! You are right on target as usual!
    It is up to us as Realtors to continue to work in the best interests of our clients. In doing just that, we will continue to be of value as professionals to the public and our industry will florish.

  • Very interesting! I am not new to sales but am new to real estate sales (first year). In this market, I think that may help me because I don’t know anything else. I don’t have outdated practices and don’t know any better. I see experienced agents struggling but that is all I have known. Your post makes me feel better because this is a great career and I don’t want it to go away. I will keep trying to innovate. Thanks!

  • Very interesting! I am not new to sales but am new to real estate sales (first year). In this market, I think that may help me because I don’t know anything else. I don’t have outdated practices and don’t know any better. I see experienced agents struggling but that is all I have known. Your post makes me feel better because this is a great career and I don’t want it to go away. I will keep trying to innovate. Thanks!

  • Matthew Ferrara

    Thanks everyone, for your comments.

    Patty – you will have a unique advantage as a new REALTOR but someone not-new to sales. Go for it!

  • Matthew Ferrara

    Thanks everyone, for your comments.

    Patty – you will have a unique advantage as a new REALTOR but someone not-new to sales. Go for it!

  • This is a great article. We have been in the business 28 years, and one of the things that drives us is the change that is always needed in the business. The basics remain the same, but the methods and response change. Learning new things help stimulate us personally as well as professionally; we love it. Thank you for this well written article.

  • This is a great article. We have been in the business 28 years, and one of the things that drives us is the change that is always needed in the business. The basics remain the same, but the methods and response change. Learning new things help stimulate us personally as well as professionally; we love it. Thank you for this well written article.

  • Debbie Watson

    Excellent! I appreciate all you do for our industry and keeping us focused.

  • Debbie Watson

    Excellent! I appreciate all you do for our industry and keeping us focused.

  • Matthew Ferrara

    Thanks, Debbie! Glad to help.

  • Matthew Ferrara

    Thanks, Debbie! Glad to help.

  • Maxine Lewis

    BRILLIANT!
    Thanks for sharing!

  • Maxine Lewis

    BRILLIANT!
    Thanks for sharing!

  • Great article. I have been in the business for 32 years and the fact that the business changes continually keeps us on our toes. This is one career where you will never get bored. I agree the best is yet to come.

  • Great article. I have been in the business for 32 years and the fact that the business changes continually keeps us on our toes. This is one career where you will never get bored. I agree the best is yet to come.

  • Encouraging article! I agree the fundamentals of real estate are still the same but the tools are changing. I am so excited about what is happening after spending the entire day in a Social Networking class taught by Donnis Palmer. We have an opportunity to be soo creative with our marketing at 1/3 of what it used to cost us. We just need to get on board. It really is going to be a great time for Realtors who take the time to learn about Generation x & y. I look forward to learning from you!

  • Encouraging article! I agree the fundamentals of real estate are still the same but the tools are changing. I am so excited about what is happening after spending the entire day in a Social Networking class taught by Donnis Palmer. We have an opportunity to be soo creative with our marketing at 1/3 of what it used to cost us. We just need to get on board. It really is going to be a great time for Realtors who take the time to learn about Generation x & y. I look forward to learning from you!

  • Oh, that was up-lifting, right on, and timely for me. Just had an office meeting this a.m. with all my agents on much the same topic, trying to determine what’s of value to them , to consumers, and how we reinvent ourselves and come out the stronger as the market tupurns. We concurred we can “get ‘er done” despite current challenges! But it helps to have confirmation from your post, Matthew. Thanks.

    ~Ninah

  • Oh, that was up-lifting, right on, and timely for me. Just had an office meeting this a.m. with all my agents on much the same topic, trying to determine what’s of value to them , to consumers, and how we reinvent ourselves and come out the stronger as the market tupurns. We concurred we can “get ‘er done” despite current challenges! But it helps to have confirmation from your post, Matthew. Thanks.

    ~Ninah

  • Anonymous

    I recently did a series of blogs about the Reality of the Realtor. It addresses the myths surrounding Realtors. I think readers will find the series interesting and hopefully understand our business better!

  • Anonymous

    I recently did a series of blogs about the Reality of a Realtor. I think it helps to eliminate the stigma and perception of a Realtor. I hope that your readers find it interesting and informative.

    Karol

    http://paragonlifeblog.com/2010/06/11/what-is-the-reality-of-a-realtor/

  • karoloconnor

    I recently did a series of blogs about the Reality of the Realtor. It addresses the myths surrounding Realtors. I think readers will find the series interesting and hopefully understand our business better!

  • karoloconnor

    I recently did a series of blogs about the Reality of a Realtor. I think it helps to eliminate the stigma and perception of a Realtor. I hope that your readers find it interesting and informative.

    Karol

    http://paragonlifeblog.com/2010/06/11/what-is-t