The Real Estate Standards Institute (RESI), a recently incorporated grassroots organization of 26 plus real estate associations, has released a white paper about the need for standards called "Driving Profitability and Consumer Satisfaction: The Need for Standards in Real Estate," authored by John Ansbach, vice president of RECON Intelligence Services.

"Standards represent the best hope the industry has for maintaining a unique, sustainable high ground that can be defended against all business, professional and economic challenges," says Greg Rokeh, chairman of the Institute Steering Committee, and president of the Orlando Regional Association of Realtors.

The white paper makes the case that:

• Standards are a fact of life for most professions and represent legal, professional and economic opportunity.

• Standards are already an essential part of the industry effecting every transaction; the proposed voluntary RESI standards will codify them into a readily available, easy-to-understand format.

• The topic of standards should be discussed fully, as it is critical to the success and future of the industry.

• RESI represents the mainstream of Realtor members, and leaders, who recognize the need for national standards.

Numerous industries, particularly service-based industries, have standards because consumers "fully expect service providers to meet, or exceed, their needs." Real estate already has standards in the relocation sector, as evidenced by the RELO® Network, a group of leading independent residential real estate firms." RELO claims to "set the standard of quality service in the real estate industry, focusing on the special needs of individuals and families relocating from one area to another," by establishing the first standardized measure of quality and performance through its RELO Quality Certification Program.

Also exampled are NAR designations and certifications, conferred by Institutes, Societies and Councils, some of which "reach almost graduate levels in terms of both coverage and required training." GRI's provide "a superior level of professional services by earning the GRI designation. Realtors with the GRI designation are highly trained in many areas of real estate to better serve and protect their clients," says the NAR's GRI website.

Time is of the essence

Real estate commissions are predicted to drop from a high of six percent in 1991 to less than 4.5 percent shortly, a 25 percent tumble. The industry's own practitioners are telling consumers there is little difference between services for six percent and MLS-entry for $295. When prices decline, a gap has emerged between what the consumer is willing to pay and the value of the service being offered, suggests the white paper. Only a clearly outlined set of standards will help brokers compete.

Broker profitability, in part due to brokers' inability to sustain standards for their agents and build powerful client relationships, is at an all-time low -- from a profit of $300 to $400 per transaction, down to just above $100 per transaction, an unsustainable level.

Recent developments in the past few years, particularly the emergence of the Internet, have shifted power to the consumer who is empowered with knowledge gained on the Internet, suggests real estate consultant Steve Murray, and made the real estate agent more of a trusted advisor. "Broker profitability and relevancy depends on the industry's ability to provide the 'trusted advisors' that consumers are now looking for," says the white paper.

The median age of homebuyers is getting younger; almost 40 percent of homebuyers are under the age of 34, and this group is "fiercely independent." Minorities will represent 50 percent of new home purchases in the years to come, and will value reward companies that give good service and refer those companies to other people.

Consumer expectations and dissatisfaction are rising while standards in the industry are lowering, which is impacting commissions and profitability, as well as the consumer experience.

If the real estate industry doesn't set higher standards, outside parties will

Powerful third parties such as LendingTree and HouseValues are using standards to attract consumers with the promise of consistent and reliable service they can trust. These companies promote themselves using languages such as "trained and certified Realtor," "highest level of service" and "accountable to our customers" to illustrate that their affiliates offer something above the norm.

Recent intrusions by the Department of Justice, Federal Trade Commission and General Accounting Office suggest the government would like to regulate the real estate industry instead of allowing state regulators to set standards.

Real estate transaction management solutions build basic standards into their software, to "optimize all aspects of the real estate transaction and enhance communication between all involved parties."

Errors & Omissions insurance carriers have raised premiums and cut back on coverage, in large part due to the significant entry into the marketplace of inexperienced agents over the last three years. Lack of oversight and supervision of agents is another cause. Brokers should be able to demonstrate quality of service to consumers. In an exclusive report in 2002, Realty Times learned that E & O insurers charge higher premiums to brokers who practice transactional, dual and designated brokerage.

Regaining Control

By regaining control over their service agendas by adhering to a national standard, brokers can better control the consumer experience and their own profitability. So far, the standard of service has been set collectively by thousands of independent contractors, which gives the consumer little more than the luck of the draw.

The real estate industry isn't the first to be challenged by low-cost competitors. Today, Southwest Airlines is the only airline to turn a profit for 32 consecutive years, based on consistency of service. Wal-Mart is growing while former top-dog Sears, is barely able to maintain market share.

If they aren't careful, the famous brokerages of yesterday will be displaced, not just by discount brokers, but brokers who can provide consistent, superior service at a price consumers will gladly pay.

Published: May 13, 2005

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.