Editor’s note: This guest essay was submitted by Inman News reader Larry A. Whited Sr. as a part of the Roadmap to Recovery editorial project. This project is a call to action in finding a new path forward for the real estate industry. Click here for details.
I am so tired of hearing real estate professionals say, "We need to work on our image, convince the public it is a great time to buy and prove to them we are worth our commission." They want to keep pumping life into last century’s model, but it is way past CPR help. "The World is Flat" (see Thomas L. Friedman’s book by that name) so deal with It!
Real estate professionals need to face the real issues:
- Our market will get worse until foreclosures slow down.
- Foreclosures will not slow down until we have job growth. I am counting on the new administration to repeat the Franklin Delano Roosevelt’s "New Deal" ideas (Work Projects Administration, Civilian Conservation Corps, etc.) to get people back to work. God knows we need new bridges, infrastructure, etc.
- Property values will continue to fall until we have job growth and stop foreclosures.
- There are too many Realtors. We need only 500,000 or less. That would also reduce the political action committee funds used by the National Association of Realtors to support last century’s high-priced business model at state and federal agencies.
- Our barrier to entry is too low. When the market improves there will be a flood of new agents coming back into our business. If you look at the last few decades the average number of sales per agent is usually around six per year. (See a previous guest article I wrote in 2006: "Close and consolidate: The new reality of real estate."
- Brokers will not self-regulate. We will hire as many agents as we can because we know everyone else will and we will fall behind if we don’t.
- Commission is too high and subsidizes last century’s business model. Lower commissions will force efficiency and cut the growth of agents. Realtors act like it is in the Constitution or at least the Bill of Rights that they deserve a 5 percent, 6 percent of 7 percent commission. The real estate world has changed and they are in denial.
- Our hold on information and our monopoly called the multiple listing service is hated by every homeowner who knows they need it but also knows it is an outrageous cost in today’s Internet world. We need only one MLS system for each state that downloads all their information to every site that will post it. It is ridiculous that we have 800-plus MLS systems that can pass rules that I believe are protectionist, restrain trade and allow subtle price-fixing, and that these policies are protected with real estate professionals’ money.
- If we don’t reinvent our business now we will be replaced by a craigslist.com for real estate very soon. The buyers would then only call us to write an offer … or they may call an attorney to write it and pay less than the 3 percent co-op we demand. We have no idea how close we are to killing our golden goose because we refuse to change except for minor surface changes.
As the old saying goes: You can put lipstick on a pig, but it is still a pig. Last century’s real estate model needs a tummy tuck, facelift and a heart transplant at the very least.
Larry A. Whited Sr. is broker, president and founder of MaxUnet.com Franchise Systems and WebMLS.net.
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