What Politics in 2008 Can Teach our Industry about Confronting Change

Written by Posted On Monday, 03 March 2008 16:00

The Republican primary in the state of Michigan was held this past January and the way the two leading candidates approached this primary provides a fascinating primer on how real estate will fare in the next few years, depending on our reaction to the systemic changes that confront us.

Like much of the real estate industry, Michigan is in the doldrums, to put it mildly. In fact, many economists have described Michigan as having been caught in a "one state recession" for quite some time now. Leading up to the primary, the two leading candidates took very different approaches in campaigning for votes.

Candidate #1 campaigned as the savior of the traditional auto industry while being critical of new fuel efficiency standards signed into law: "If you vote for me, when I get to Washington I'll make sure that the auto industry is not broken by these new standards but rather is provided the funding to get their jobs back".

Candidate #2 took a much different tack, confronting the systemic changes facing the auto industry head-on by telling voters the truth: "My friends, I regret to tell you that your old jobs are not coming back. The global economy is here to stay. But if we prepare, we can bring new and much better jobs to Michigan and to the rest of America. But know this: we will not thrive continuing the same-old, same-old. To compete successfully in the new order, we must prepare workers to seize the new opportunities."

It's interesting that we are now watching most of the "pundits" in the real estate industry, like Candidate #1, preach the same old traditional line: "It's time to get back to basics" you hear from the same writers and seminar speakers that have been around forever, preaching the same gospel for decades: "Don't worry about the current downturn. Real estate works in cycles. While things are slow just sharpen your traditional sales skills and when things come back, you'll be ready."

Sorry folks. Like Candidate #2 I believe in telling it like it is. So here goes: while it is certainly true that real estate works in cycles, the ills that face our industry will not be cured when the current down cycle turns up again. That's because there has been a fundamental systemic change: it's called technology. Prior to the Internet, real estate agents were in demand primarily as information providers. The traditional model worked for many years when agents were the sole gatekeepers of property data: if a seller wanted their home on the MLS or a buyer wanted to see what was available, they needed to go through an agent to do so. And since the agent was the only way to get to this data, the traditional sales model, which limited its offerings to a one-size-fits-all (not!) package, payable only by commission was accepted by the consumer as the only avenue to get the services they needed.

However, with the proliferation of property search, valuation, and listing sites, and almost universal access to the MLS that we have now, the traditional model has broken down. The industry is fighting an uphill battle for control of property information, and for its very livelihood. But, in the age of the Internet, this is a battle that will certainly be lost. In fact, it's been lost already only the vast majority of the industry refuses to see it. An upturn in the real estate cycle will not change the fact that the consumer no longer wants to pay big bucks for access they can get on their own.

But, it's not all doom and gloom -- far from it! Remember Candidate #2 also said that if we prepare, we can have much better jobs by seizing new opportunities. And in the Internet age, those opportunities in real estate lie in a new model called consulting.

You see, unlike a real estate salesperson who may call themselves a "consultant" but is really a salesperson in practice, a trained consultant is in high demand because their role is not that of a gatekeeper of the MLS, but rather someone whose job is to take the property information so widely available, and make sense of it all. Rather than trying to compete with technology in performing functionary-type activities that the consumer can do themselves if they choose, a real estate consultant gets paid for the know-how that can only come from years of experience.

Consulting is the future because as a consultant, it doesn't matter who has access to data; the value lies not in the data itself, but in the interpretation of that data. As a trained consultant, the agent is no longer paid to provide information but to interpret it. And that's something that the Internet can never do.

So, my friends, I regret to tell you that your old jobs are not coming back. The Internet-savvy consumer is here to stay. But if you prepare, you can thrive because in the world of real estate consulting, you can get paid for your expertise, not for your access. And instead of working for free in hopes of bagging a commission for an outcome that you can't control, you can get paid for your time and your work. ALL of your work - not just the deals that close!

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