Trim The Fat…No, Throw Away the Meat and Get a New Cow

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Frank Nelson, writing for the Sunday LA Times, outlined the knowledge crisis that affects our industries today:

“About half our members have never seen a down market,” said Colleen Badagliacco, president of the California Assn. of Realtors.

Edward Barrios, an agent with Shorewood Realtors in Manhattan Beach, believes a “gold-rush mentality” accounts for many of the people jumping into the real estate profession in recent years.

Some lack the necessary skills to keep pace with and interpret changing market needs, he said, and others are getting licenses just to trade their own homes, or do so for family and friends, saving thousands of dollars in commissions. “Every day,” he said, “I see agents who don’t know what they’re doing.

Agreed. I was astonished at the “gold rush” mentality in the real estate brokerage and mortgage origination business when I moved to San Diego in 2003. The effects of that mentality are being felt today. A local mortgage brokerage opted to cease its origination operations and concentrate solely on their business of buying out structured settlements. Essentially, they wanted to cash-in on the gold rush and hired originators, with little or no experience, and offered them unprofitable but generous compensation plans. Their strategy was to skim some money from the high volume.

They did themselves, their industry, and moreover, these originators a disservice. We’ve talked to a large number of their originators in the past two weeks; we’ve extended employment offers to two of them. One recent conversation was so ridiculous it was comical:

Are you closing 5 loans per month?

Uh, no. The market’s all jacked up.

Hmmm…perhaps you need some product education. How proficient are you on the AUS?

Say what?

Nevermind. Are you talking to at least five Realtors each day?

I won’t do business with Realtors.

Okay…how about CPAs, CFPs, insurance agents?

They refer business?

Let’s try something different. What sort of database management system are you using to keep in contact with your old clients?

Ah, man…I already refinanced those people up to their limits. They’re all pissed off now.

We, most likely, don’t have the resources you need to thrive in this business.

Okay. I’ve slammed the bottom-feeders the LA Times so aptly points out to us. In California, there are just too many untrained and uncaring people in our industries today. I can beat that dead horse all day long here but I’d be singin’ to the choir. The media, however, is really starting to pick up on this and that can be bad for business. The public perception is that it is YOUR fault and MY fault that they are in their leveraged predicament today. They think that you didn’t protect their interests by selling them an overpriced property and that I didn’t protect their wallets by lending them money to buy a Hummer from the equity in that property.

eg-Look at the caption below the picture at the beginning of this article. Was it the new agent or the lower price that sold this house? You and I get it. The public doesn’t. The media will want to sell newspapers. While the media’s views are skewed towards the sensational, their premise really isn’t that bad. We need to shrink our industries to the committed players. There is nothing wrong with rookies, as long as they’re committed.

Now, more than ever, the cream of our industries need to move away from the existing, dues-collecting organizations and create our own country.