Lowering the Bar in Real Estate

h670qzLast week I was complaining about an inaccurate view of the MLS that I saw on Inman News, and this week I’m even more upset about a new business model called REAL. I’m not concerned about the recruiting incentive that I think is an example of misdirection,and a reliance on agents not understanding what constitutes success in the real estate industry,  but I am concerned with the gift to the industry that this CEO is providing. As the article states;

Poleg previously told Inman that he envisions some people looking at Real’s business model, and thinking “I’m able to get a real estate license, and with a little bit of mentoring using that tool — real estate is made easy.”

 

Seriously? Am I alone in my amazement? There are far more people in the United States who have gotten their real estate license and failed than have gotten their real estate licenses and succeeded, and that’s with substantial training being provided, and a manager or trainer or “coach” doing their best to help the new agent. And that’s not even addressing the issues of compliance, ethics, providing an industry level standard of care for the clients (all issues that aren’t even near the minds of new agents), or competing with other agents that are well trained.

Real estate is made easy because they don’t bother talking about the difficulties of being in the business and dealing with consumers on a daily basis. It seems that with 7.2 million in VC money and a killer App, real estate agents don’t need to be trained – they can act as agents for people in one of the most expensive and complex transactions of their lives and do no wrong. So I guess that these agents will have no contractual deficiencies, no communication issues with sellers or buyers, no environmental issues they need to be informed about, no fair housing issues, no transactional problems, no litigation from dissatisfied clients, no disputes with other agents, and no need for the messy business of actually learning the job.

After years of people ranting in social spaces about how “big box” traditional companies recruit too many low-producing and unprofessional agents even though these companies all have structured training for new agents, continued training for experienced agents, and a wealth of management resources directed at increasing agent productivity, we now have a firm that breaks the constraints of traditionalism by building their business model on recruiting inexperienced agents because real estate is so simple that anyone can succeed armed only with the basic license course and an app!

“Training? We ain’t got no training! We don’t need no training!I don’t have to show you any stinking training!” – With apologies to The Treasure of Sierra Madre

I am a fan of technology, and I’m fine with the idea of a new business model, but this is not that thing. The idea of creating a real estate business based on offering a higher commission to agents regardless of their skill, expertise or experience is so 1970s – when it started with Realty Executives and went national with ReMax. And the idea that a company will grow by paying their agents to recruit is at least that old if not older,and was memorialized by KW and Exit Realty, and frankly, both of those franchises need to have people dedicated to recruiting because agents aren’t generally recruiters. In fact, they lose money when they recruit because the time and effort that they devote to that long term relationship building job would be far better spent selling or listing properties if you’re a good or even competent agent. So all we’re left with is that this is a virtual company – again, nothing new, and in my experience, those companies have no assurance that the agents that the recruit will be productive in the virtual environment.

So here’s a company betting on what? The venality of agents that want a higher commission split but haven’t had the production to achieve that in a traditional setting? Agents that have so much spare time that they want to create a one year override on another agent by spending the time to recruit them? On recruiting agents without training them?  Having a great ratio of developers to agents? A referral network of a few hundred agents? That the real estate business is so simple that anyone can do it? I’m just confused, but I’m not smart enough to think that it’s a good idea to get rid of our company’s training, management, recruiting and support staff and believe that our company’s agents will be more productive, we will recruit more agents, and our clients will be better served.

There seems to be a ton of VC money that is willing to invest millions of dollars in backing any run at the real estate industry, without a great deal of investigation into what it takes to be successful in the real estate business. And because they inject large amounts of money into these ventures, without any expectation that they will be profitable for a period of time, it’s hard to determine if they have a project that’s a winner. But I don’t believe that removing knowledge, experience, training and a clear career path is going to be the way to achieve that goal.

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