The following is hypothetical testimony from a mythical Congressional hearing.

Question: Why do big national banks want to be in the real estate brokerage business?

Answer: Because banks can make it easier and less costly for consumers to get mortgages.

Question: But isn't mortgage lending already mouse click easy and haven't affiliated business relationships with brokers made one stop shopping a reality for most transactions? So, why do big national banks want to be in the real estate brokerage business?

Answer: Because banks think that by getting closer to the point of sale they can provide consumers with a better real estate transaction experience.

Question: But selling houses is nothing like managing money and since when have the terms consumer experience and banking been used in the same sentence? Really, why do big national banks want to be in the real estate brokerage business?

Answer: Because banks view brokerage as another adjacent business, like insurance or stocks where they can make easy money.

Question: But aren't most brokerages small businesses that would be very difficult to integrate and since when do large brokerages generate the profits that would make them acquisition targets for financial institutions? Come on tell me the truth, why do big national banks want to be in the real estate brokerage business?

Answer: Because banks are in the business of "knowing." Big banks especially have a critical business need to find out more about the financial wants and needs of consumers and the trends in the real estate market.

Question: OK, now we are getting some where. What do banks already know ... about me for instance?

Answer: Banks know your personal history, where you have worked, where you have lived, where you went to school, where you travel, your family profile and neighborhood characteristics. Banks know all about what how much money you make, current and past loans, the car you drive, the stocks you buy, the stores where you shop and what you buy there.

Question: My bank has been sold five times in the last ten years. What do you mean they know me?

Answer: Banks don't know you personally, but they are on intimate terms with your digital shadow, the historical trail of information that describes almost everything about you. They use this knowledge to better manage risk, create new products and services and reach new markets. Identity theft aside, this capability to spin data into gold has been very good for consumers, for the country, for banks and their shareholder as the industry continues to consolidate both its assets and its data.

Question: So what don't banks know and what does that have to do with real estate brokerage?

Answer: Even after huge investments in customer information and analytics technology, banks don't know when you are making a major lifestyle change that may alter your buying and investment patterns and your attachments to major brands. Banks don't know when you are going to sell your house, downsize, buy a vacation property or pre-pay your mortgage loan. Banks don't know about your buying intentions or important pending or future financial events. They want to know as soon as possible from one of the most insightful and timely intelligence sources on the planet … a Realtor.

Question: You are saying that big national banks want to be in the real estate brokerage business so they can know more about consumers and markets and make more money. But can't banks make the industry more competitive?

Answer: Mr. Chairman if you think big banks have spent years lobbying Congress and their regulators because they want to be in the brutally hard, fiercely competitive, agent driven, volatile, low margin, complex, paper intensive, liability strewn, local, analog business of buying and selling houses then I have a bridge I'd like to sell to you.

Banks covet the data that flows through the real estate sales process. And having the right to own real estate brokerages is considered necessary to get control of it. The banks are looking after their own interests, not the consumers.

Question: Aren't big banks taking the legislative route to get their hands on the same data that other third parties are trying to obtain?

Answer: Most third parties want listing information. Banks want the information that agents and brokers know about their customers before a property is listed … and they want the listings too.

Question: So, this is really all about who is going to control real estate data?

Answer: Yes Mr. Chairman, the big banks believe that if you control the information you control the transaction, all of the attendant services and the customer relationship … and they are right.

Published: July 29, 2005

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