There has been a lot of talk about how to fix the National Association of Realtors or even how to supplant the organization completely. As an outsider looking in, I have one simply question: Why are realtors paying good money to an organization that they hate? As an investor I cannot not think of a more egregious instance of throwing good money after bad money. I have said more than my fair share of bad things about the NAR and realtors, so I think it is my turn to be solution-oriented.
My solution is simple, instead of working from the bottom up, start top down. If the best realtors/agents formed their own group, they would instantly dominate whatever market they chose. Imagine, if you will, that the NAR was made up of only the top 10% of agents in the country. These agents have a proven sales track record, impeccable ethics, and strong client feedback. Additionally, the MLS is one of many marketing vehicles they understand and use regularly. Simply guessing, this group would probably have quicker close rates, achieve better prices for their clients, and have a much better pulse of the direction of the market.
Such a simple idea must have many flaws, so I will start naming a few obvious ones and propose solutions that would seem to work. Remember, I am on the outside looking in, so feel free to comment if these are way off. First, the most obvious problem is the MLS access issue. I think this problem actually solves itself. Consider how large the listing database would be if the top 10% of the real estate community decided to leave the MLS and start their own listing service. Additionally, many areas now have a public MLS or many other listing services in addition to the current NAR controlled MLS. Finally, imagine the hit the MLS would take if the top 10% of the real estate community chose to stop listing with them? That might open some eyes at the top.
Second, how do you get the top 10% of the real estate community to come to this new organization? Entice them with cold, hard cash. Consider certification organizations like ISO or even the CFA. While these organizations do not guarantee their members more money through membership, it comes with the territory. ISO certified companies charge customers more because of the implied guarantee of better service. Members happily pay more because they know they are getting the best of the best. This is the same with any “best of” membership. How much more could the top 10% of the real estate community charge? Maybe 0.5-1%? Regardless, they would have more customers beating down their door simply because they have proven time and again that they can provide superior service. This might also have the unintended affect of self-selecting bad customers away from the top 10%. Let the cheapo customers not willing to pay their agent and inevitably the appropriate price for their home (either buyer or seller), deal with sub par agents.
Third, how do you get the word out about this new organization? Promote the heck out of it and let the service speak for itself. Buyers and sellers are hungry for honest agents working in their best interest. While we may currently have a horrible perception of most realtors, it’s not because we want to. I, and many of my counterparts, would gladly pay above average rates for a trained professional that could give me great industry analysis and make the transaction go as painless as possible.
Last and most important, how do you determine who gets in the group? I have been using the top 10% of agents as an arbitrary number, but this group has to truly be select. It should almost be the opposite of the National Association of Realtors. This new organization should have hurdle rates that even an average agent could not exceed. I would propose a mix of number of transactions (note this is very different than number of years in the business), random customer satisfaction surveys, market analysis certification, plus a minimum number of recommendations from their peers. Think national honor society of real estate agents.
In addition to simply selling real estate, this group could offer classes, lobby for good real estate legislation, and literally change the perception of real estate agents. I really think real estate is an 80/20 business, with 20% of the agents generating 80% of the sales. If you sliced off the top 10% or even 20% of agents, you could put together an organization that could literally change the way real estate is sold.
More viewpoints, pro and con, on supplanting the NAR:
-
< ?php c2c_get_recent_posts(9999, "
- %post_URL%”, ’30’); ?>
Kevin Cottrell says:
Michael…I believe you are on to something here… What Michael is proposing a very similar to the leadership concept outlined in the MBA Case study by Stanford (also in the MBA Programs at Harvard and Yale). The Stanford case study reviews in detail the Agent Leadership Council, a concept that Gary Keller of Keller Williams Realty and his top agents in Austin, TX came up with in the 1980s.
In fact, here’s what the Stanford Case Study states about the leadership concept that it considers a market differentiator or strategic weapon.
“Agent Leadership Council
The management of the market center was not the sole responsibility of the team leader, nor was it the joint responsibility of the OP and the team leader. The leaders of Keller Williams believed that agents had an equal stake in the success of the market center and therefore should share in the decision-making process. As a result, management of the market center was a shared responsibility of the OP, the team leader, and the top agents within the market center who all jointly served on what was called the Agent Leadership Council (ALC). Subcommittees of the ALC made recommendations on specialized issues such as financial planning, recruiting and retention, marketing and advertising, training, technology, social events, and philanthropic giving. The ALC structure ensured that each market center was run as a true partnership.
The leaders of Keller Williams believed that having an ALC management structure accomplished several goals. First, because the top 20 percent of agents in a market center (measured by gross commission income) were invited to sit on the ALC, the committee was comprised of the agents with the most knowledge of the local market. These individuals would be able to make better decisions affecting the success of the business. Second, and closely related, management decisions that were made by top agents instead of an owner would have better validity throughout the market center, particularly with agents. Decisions would be recognized as having gone through a negotiation and buy-in process and were less likely to be perceived as .cram downs.. Third, by participating in management decisions, agents would learn a business mentality with special attention to cost control. When agents were asked to approve fixed costs and pay for them by effectively reducing their own profit share, they had more incentive to be cost-conscious. Finally, the ALC structure led to better retention of top-performing agents who felt they were truly managing their business.
Mark Willis, CEO of Keller Williams explained how the ALC structure and shared decision making led to a greater sense of partnership:
‘What we do is we empower our people to make decisions that they literally own and are accountable for, because they have been given a voice. They’ve been treated like partners and they’ve been respected.. If I define your win for you, and I tell you how we are going to win on some level you are going to resent me. Whereas on the other hand, if you get to define your win, and I help you get that win, then you.re going to feel good. You.re going to feel like you’re contributing and that somebody has given you what you want. In Keller Williams, there was an ALC not only at the local level, but also at the city, regional, and international office levels. Agents who served on these higher-level ALCs were greatly respected throughout the company.’ ’’
This is not meant to be a publicity item for Keller Williams Realty but rather to show that this concept that Michael has outlined has in fact been implemented in a large scale (the leadership concept is in operation across many offices and regions)by the fourth largest real estate company in North America.
Now, imagine if the top 20% did get together and jointly provide leadership in a new Multi-company leadership council.
The traditional old-fashioned companies who believe that they and not their agents are the brand would fight this concept. Only with complete buy-in and cooperation would the concept take off. Agents need to understand that they, and not their company, are the brand and their standards for service and business are the reason they are successful.
Like at Keller William with its ALC, for this top producer agent leadership council to work, all participants would have to get that they are to leave their ego’s at the door if they want to make a difference. It’s a high clash of ideas not a high clash of egos. That’s what makes it work.
Maybe it’s time for a multi-company top-producer summit to discuss a Multi-Company Agent Leadership Council?
September 2, 2007 — 10:02 am
Chris says:
Most agents don’t give a flip about the NAR and hardly know it exists. I’m a member so I can get MLS access.
The NAR could fall apart tomarrow and I wouldn’t know or care much.
September 2, 2007 — 10:24 am
Jeff Brown says:
Being a free enterprise capitalist, I strongly believe anyone is free to try anything. I prefer the cream to rise to the top on its own however, without using a vehicle designed to abort potential star agents from actually becoming star agents.
This conversation will, as it has for the last 40 years, die of self generated boredom. 🙂
September 2, 2007 — 11:12 am
Derek Burress says:
Answer: They join because it’s expensive and because it’s expensive, it keeps people like me from getting into real estate full time. With firms requiring their agents to join, most new comers are in debt to their knees by the time they reach their very first month in business.
A large percentage of that goes to NAR. The big excuse is you need NAR so you can do your CMA’s and have others to help sell your listings, etc. I can do most of what the MLS can do by going to the courthouse and pulling records. A bit time consuming yeah, but is it once you know what you are doing?
As for a solution, someone start a free database of listings (I have free hosting and unlimited bandwidth). I know some open source listings programs if I can get say 25 of you to join and upload your listings, I’ll pull it up on my site and give it a spin. Free of course and if it works, we’ll get a better program. The only problem I see right now is doing CMAs. Were do we find comps using a database like this? Perhaps require listings to remain on the server for xx days, etc with a disclaimer that it has been sold?
September 2, 2007 — 7:36 pm
RE Investor says:
I am afraid that the reason this never goes any further is not technology. The technology is already there. The will is obviously there. The real problem is the same problem anyone has with trying to go up against for example – The church of scientology (sorry scientologists), General Electric, the IRS, Microsoft etc. They have the money and lawyers to stalemate you or buy you out before you have a chance to become a threat. Look what has happened to Redfin….I don’t like their concept necessarily, but the NAR went after them with a vengance, and has successfully drained them with many lawsuits and dirty politics. As long as lawyers and politicians exist, and are greedy (about as predictable as the sun rising), it will be difficult for someone without the backing of Warren Buffett or similarly deep pocket to supplant the NAR. It would be great for someone to do it, and many many at least in the community of RE Investing would welcome it, but I am not holding my breath.
September 2, 2007 — 9:46 pm
Michael Cook says:
Chris wrote, “Most agents don’t give a flip about the NAR and hardly know it exists. I’m a member so I can get MLS access.
The NAR could fall apart tomarrow and I wouldn’t know or care much”
Jeff wrote, “This conversation will, as it has for the last 40 years, die of self generated boredom.”
The obvious question here is why not get what you pay for? If you feel the MLS is worth your dues and that the NAR is a no factor fine, but wouldn’t it be better if they provided a real service to its membership. I think the reason they are allow to persist this long, doing this poor of a job is because of this apathy. I mean if they are going to get your money no matter what, why should they bother to change? There is no way I would be apathetic about an organization I send regular checks to. Either I get something positive or I stop sending checks.
I think its interesting that realtors rail on the likes of Redfin, but give the NAR a free pass. Sure, you all talk bad about them, but then turn around and send in your dues as if nothing is wrong. Am I the only one that thinks this is crazy?
September 3, 2007 — 2:50 am
Michael Cook says:
RE Investor wrote, “They have the money and lawyers to stalemate you or buy you out before you have a chance to become a threat. Look what has happened to Redfin….I don’t like their concept necessarily, but the NAR went after them with a vengance, and has successfully drained them with many lawsuits and dirty politics.”
I think this point is interesting because I would fully expect the NAR to do something like this to outsiders; however, I would be very surprised if they attacked a group of former realtors, who represented the very best in their industry. One, they would certainly lose and two, this would probably cost them the rest of their membership. Its much easier to gang up on outsiders, than to attack a large group of former, well respected members trying to improve the industry.
Consider the fact that their control of the MLS is already being watched very closely by the Department of Justice and the fact that their membership is “voluntary.” Finally, they would be dealing with the best the real estate industry has to offer. I do agree that they will need more than a few million dollars in seed money, but not necessarily Warren Buffet type money. I bet they could get by with 1 years worth of NAR dues.
September 3, 2007 — 2:57 am
Chris says:
Michael excellent point.
Here is my take:
My NAR dues are pretty cheap, one of the least expensive things I pay, so I’m not losing sleep over them. Are they worth it for the MLS? Sure. I think having that little “R” logo on my cards can’t hurt either.
Could we use a better orgnaization?
Absolutly, and if another comes along I will head over to them.
Do I care enough about this subject to do something?
No its not worth my time.
September 3, 2007 — 8:51 am
Jeff Brown says:
Michael – All salient points.
Yawn.
We don’t care, because they don’t matter. You could lose some change from your Levi’s today and never know it. That’s how much most of us miss the money sent to NAR. Stupid? Indisputably. Impactful? Hardly.
They don’t matter to me, because they don’t, as a rule, get in my way from making a living, or for that matter, improving.
September 3, 2007 — 9:42 am