A Game Changer

Simply stated . . . forget a reFresh - this has all the makings for a true potential game changer.

Few revelations in this industry are ever actually realized or even discovered yet alone really happen.

This one did.  It took six months to soak in - but it has happened.

The permitted use of nationwide IDX listing data by the NAR in search by franchisors may just be one of those realizations that provides the catalyst for true and disruptive change.

Who ever thought Yahoo could be taken over by Google?  Or maybe now even Google trumped by Facebook?

In the case of the NAR, when you get so big that you think you're infallible and you stop being paranoid, stuff just tends to happen.

Today a "request" - tomorrow a "demand"?  I think so.

Read on courtesy of this excerpt from Inman News reported late yesterday afternoon.

NAR asked to repeal franchisor IDX indexing policy
The Realty Alliance warns of potential liability, lawsuits
By Matt Carter

The Realty Alliance, a network of 60 real estate companies whose members include HomeServices of America Inc., is urging the National Association of Realtors to repeal a policy that allows national franchisors to index property listings displayed on their affiliated brokers' websites.

NAR's board of directors approved the new policy -- which greatly expands the pool of listings national franchisors are able to display on their consumer-facing websites -- at the group's annual meeting in November.

... More »

The NAR Redefines RSS

There they go again. 

Will we ever see the end of the constant meddling of the NAR in the business of real estate brokerage?

Check out this latest one.

Report and Recommendations

of the

IDX Data Use Work Group

of the

Multiple Listing Issues and Policies Committee

March 2011

This time the NAR has literally redefined the true meaning of RSS.  From that of "really simple syndication" to now mean, in terms of a newly revised IDX policy, "really stupid solution".

There are some things that would take just way too long to discuss even in a blog - and this may be one of those "things".

Suffice it to say that I believe the NAR and MLS should never meet nor intersect in business. 

One is supposed to be a professional association and the other SHOULD BE a utility designed for the effective management of real estate data on behalf of the BROKER.

The use of the data and the permitted use of the data should ONLY be determined by the owner of the data - the BROKERS.  Not the NAR, not the State Association, not the local Board and not the MLS.

It is the listing broker that is fully liable and responsible for the display and use of the listing information contained in the MLS - and it is each listing broker's decision what happens with their listing and sold information - period.

For a select group on an NAR committee to decide and rule on such business critical matters is simply ludicrous.

Unfortunately, after years of measures and legal cases that have been intended to separate organized real estate at the national, state and local levels from the data management utility the MLS - the NAR still feels compelled to architect and evolve the rules, policies and regulations of the MLS industry.

Maybe someday the Brokers in this industry will realize that this addiction to the power demonstrated by the NAR over data decisioning needs to be treated with immediate, let's say - intervention and rehab.

How much damage needs to be inflicted before maybe, just maybe it's time?

Flipping Unbelievable

TECHNOLOGY

For Flip Video Camera, Four Years From Hot Start-Up to Obsolete

By SAM GROBART and EVELYN M. RUSLI

The camera had been a great hardware start-up success, but it lost traction as the smartphone came on the scene.

I never thought I would read this headline in the New York Times. But there it was this week.  The unfortunate and gradual death of the ever popular Flip Video Camera because it's obsolete?

The Flip video camera that had been a truly great hardware start-up success, lost huge traction with the consumer as the smart phone came on the scene.

Ouch!  All this just as the use of video online surges to unbelievable levels of adoption.

Everything technology seems to come and then as quickly go if it is not eventually integrated and constantly enhanced.

In this case a micro video camera that stayed a micro video camera lost out the a more integrated consumer device – the smart phone. 

Too bad the Flip camera wasn't chosen to be the video part of the iPhone.

OK.  So why then has the integrated Garmin phone failed as well?  You know, the GPS device with a phone added on.  That's integration, yes?

Not really.

Garmin's attempt at creating a smart phone is an example of when a sum of the parts is worth less than the whole.  Apple and others were capable of creating amazing integrated personal handheld devices that “did the job” and were fully integrated.  Like the Flip video camera, the Garmin GPS functionality was not unique enough to be chosen by Apple to power the iPhone and others.  

I liken what Garmin tried to do to simply duct taping a phone to a Garmin GPS device.  Not so. 

Integration like this doesn’t really pass the test of the consumer.  And that brings me to a similar parallel in real estate.  Namely, the real estate transaction. 

Why is it that today a real estate transaction looks a lot like a fully disassembled airplane?  A bunch of parts that if you can figure out how to assemble them, could become an airplane and might even fly.

More importantly, why is the consumer in most cases left to piece the transaction together?

Somehow we think that the consumer enjoys assembling the transaction on their own while at the same the REALTOR association professes the REALTOR to be the center - the hub - of the transaction. 

Where’s the integration?  The streamlined experience that is predictable, a reliable process that is a standard that is duplicated in every transaction?

For as long as I have been in this business – all 32 years – I have doubted the wisdom of having 1.2 million ways to do deliver the services associated with the real estate transaction.  A unique way for each agent in the business. 

How can that be good for the consumer? 

Most of what we deliver today is one part of the transaction literally “duct taped” to another.  And the worst thing is that most of the transaction is organized poorly to avoid consumer frustration and stress.

If we were like the airplane example, the real estate transaction has integrated the engines inside the fuselage, the flight deck in the tail and the landing gear installed most times backwards.

My opinion? 

The days of sustaining an industry on 1.2 million different ways of delivering disintegrated real estate services are over.  The challenge?  Figuring this out as an industry before someone else does and offers the integrated services alternative. 

It is about the effective management of the data, it is about the relevance of a company and its products in search, it is about having good people, it is about creating a brand that stands for something real and at the center of all this IS the organization of the transactional process.

A basic standardized business process is needed for the integration of services in a transaction in an orderly, logical process  - delivered by 1.2 million very personal, each unique and creative customer service experts.

The only question is who will be the "Smart phone of real estate" to emerge and reengineer the real estate transactional process and order?  To create the new standard of delivering services to consumers?

Maybe it's you?

On your mark, get set, remove the duct tape  . . . .  and integrate.

A Matter of Life and . . .

One of the most disturbing headlines that I have read this year was this one.

REALTORS® re-examine safety policies after shooting

As I read the details of the danger and the resulting loss of life that recently occurred in Iowa I cannot believe that our industry has not reFreshed its policies for exposing properties to the public.

This should have been done years ago.

In contrast, other industries have established firm and logical policies that deal with providing open access to valued things to the public.

Here in Newport Beach, more than 5 years ago, an automobile salesperson took a stranger for a test drive in an expensive sedan.  As the salesperson walked around the vehicle to exchange places with the stranger on the test drive, the stranger locked the doors and took off with the car.  Never to be seen again.

Fortunately the loss was only the car and there was no loss of life but point made.

Since that time, the dealer has mandated a policy that all those that want a test drive must first surrender their driver's license and the dealer makes a copy BEFORE the test drive.

For years, millions of open houses have been conducted in our business offering literally unlimited access to personal property with little or no supervision.  In addition, millions of showings have occurred whereby unescorted agents have arranged to meet total strangers at properties.  Not to mention the millions of times that an agent has previewed a vacant property with no idea of who or what they might find "lurking in the wings".

So what should we do?

I think it is way past the time for our industry to turn up the heat on the security practices involved in everything we do that faces the public.

Here's a short list that I hope causes someone out there to rethink and refresh their current showing and open house policies.

• No solo showings of any kind are permitted at anytime
• Consumers must show their ID and meet at the office to see a property
• All open house guests must register and show an ID
• No solo listing presentations are permitted at anytime 

I know, I can hear it now. 

But Ken!  It would be impossible to enforce these type of policies!  We might lose the opportunity to sell a home, we might turn away an open house visitor, it would be a real problem having two agents at every listing presentation and no one is going to present their ID to see real estate!

Really.

If you stop and think about it in most cases when you ask for permission to fly on an airline, use your credit card for a purchase, or even get into a favorite  night club you are required to show an ID.  If you really want to do any of these things you gladly surrender your ID - mostly because without doing so you don't get what you want.

Forgotten or unpracticed security measures in any business have direct consequences.  In the case of real estate the consequences involve much more than taking a flight, making a purchase or having a night on the town - they are literally a matter of life and death.

So you decide.  Or better yet before another tragic incident like the one that occurred recently in Iowa - if you can't - someone else should.

A Sign of the Times

These days achieving home ownership is no easy objective to accomplish.

In fact no thanks to many variables in today's resale real estate and financial markets - it is nearly impossible.

The process is vastly complicated by wild price fluctuations, a market flooded with distressed properties, tight restrictions to qualify for funding and the need to considerable down payments just to get into the game.

The other day I was leaving a local restaurant and I saw this sign in front of a vacant home owned by a developer. 

Say hello to what I now call in this real estate market - the sign of the times.

I am becoming more convinced than ever that for the near term the residential real estate market needs to more flexible.  Everything for sale almost needs to be for lease as well.

Why?

Opens up the market to more options - buyers and potential tenants.  Allows the Seller to buy some time for the market to recover.  Gives the consumer an option and more flexibility.  Makes qualifying someone to move in a lot easier.  Stops the outflow of cash.  And these days, the after tax cost of leasing versus buying could well be a wash.

If there was ever a doubt why do you think that Trulia, Zillow, RealtyTrac and others online started offering rental listings for display to consumers?  Do they know something about the consumer's demands that we don't?  The answer is yes they do.  They listen closer to the consumer than we do and they reacted to fulfill a new expressed need - basically months and months ago. 

Face it folks.  Rent versus buy comparisons are a reality in this market.

But hey, what about my lost commission income on a lease versus a purchase transaction?

It's not lost money. 

If you do a good job for the Seller and provide an interim solution your opportunity to sell the property is nothing more than deferred for a year or so when the lease expires. 

But do beware.

If you do nothing now and try to market a listing without success, it will assuredly be lost money when the listing expires and the Seller terminates you - that is guaranteed.

Crazy times like these call for crazy solutions.  Added flexibility and creativity may be different than what the masses are doing but what's wrong with that?

Think about it.

Since when has anyone made anything worthwhile out of applying traditional thinking and conventional wisdom to anything? 

Go open up a new conversation with your Sellers today.  Explore the options and please do something other than just pound on them for yet another price reduction.  

Today's Sellers are more confused than ever - and they need your help more than ever to solve problems with flexible solutions.

Turn an obvious sign of the times into a unique marketing offering now and build your book of business for the future.

Last Things First 3

In this industry we always seem to love to fear something. 

Well now there are real issues that we really should fear - they are the potential "invisible monsters" that could well be hiding under the bed of every home in America.

We here about these issues affecting unknowing people every year and shutter at the thought of those poor people actually being us.  We read about the devastating results of what happens to people because these issues exist.  We see amazing footage of the destruction caused by these issues on TV.  And we all have heard about how we should fear those things we can't see that could have a major impact on our health and well-being.

And now for the good and the bad news. 

The good news - there are ways to find out about these issues and the bad news - there are ways to find out about these issues.

I am speaking of natural hazards and environmental issues that could exist around and under the improvements that have been built on the real property.  The dirt and immediate environment and all that could happen to it over time in special circumstances.

More than just freak incidences of nature these are real issues that have been mapped, recorded and logged publicly.

These issues are in the air, in the dirt, related to a specific location, regional, in the water and generally are realized only when they become the cause of something very bad. 

And by that time - it's too late. 

In real estate we have chosen now to deal with these issues last - why I'm not sure.  Or worse yet, not to deal with them at all.

Remember this classic statement?  It's the things that you can't see that will hurt you.

Well in this case - that is very true.

In a real estate industry that is obsessed with "physical inspections" and "tours of properties" we have done a very poor job of providing any detail related to a property that we can't inspect or see early in the transaction.  The invisible things that Sellers, Buyers, brokers, agents, appraisers and even inspectors can't see, but are known to others today.

I think unfortunately most real estate professionals really believe, "out of sight, literally means out of mind". 

So what do these things - these issues - potentially include?  Here's a short list:

• ground water contamination
• soils contamination
• vapor intrusion
• flood plain areas
• leaking storage tanks
• existence of drug labs
• fire danger areas
• proximity to earthquake faults
• areas prone to landslides
• and more

Ouch!

It is very unfortunate that we as an industry we wait for some governmental agency to suggest we disclose these types of dangers in a real estate transaction.  And it is even more tragic that when we do it at all it is only done in some States and usually as a last step in the transaction at the closing table.

Look again at the list above and imagine a portion of that critical information about the property buried in the stack of paperwork at the closing office - or worse yet, not disclosed at all.

Then there's this matter how this all relates to our industry's answer to declarating a property to be "green".

In short, it doesn't.

How in the world can we make any such a determination if something is truly "green" if we are unaware of just these types of environmental issues?  Leave it to the NAR to have the solution to the problem.

Declare that what the consumer really needs is a "green REALTOR".  Yes, you heard it right, a green certified person to evaluate a property and declare it "green". 

Right.

No surprise, no where in that program is anything about bringing the disclosure of relevant environmental issues - putting these last things first - in such an evaluation. 

In my book the importance of a property having low flush toilets, an EneryStar water heater, and double pane windows takes a back seat to knowing if it is sitting on a Superfund site, an area that is subject to landslides or an earthquake fault.

After all, few REALTORs I know want to be the bearer of potential bad news that could kill the deal.  The discovery of the existence of a Superfund site near a home I'm about to buy?  A definite deal killer.

But maybe once again I'm guilty of being just way too consumer-centric.   

You know there is an awful lot of "noise" in this business about quality service and the measurement of service.  The lingering question I have is when are we going to begin to speak to the question of providing a new standard of consumer care as a meaningful part of delivering a higher quality real estate services?  That's very different than delivery good service.

It's what you do as a services provider versus how you do it. 

In this case it's the transparency and information that we provide that isn't forced on us that creates a new level of care that leaves no consumer unaware and exposed to these issues.

I don't know about you but combined with the professional appraisal and the professional inspection the need for a full understanding of the environmental and natural hazards associated with a property is definitely not an option.

Come on all you real estate professionals out there - refresh your transactions and think about the impact of these real issues and consider making them something you surface first rather than last in your next transaction.

If for no other reason than it is simply a matter of "life and health".

Six Blogs to Separation

Well it happened.

And congratulations might be in order.  Six or so blogs later - I have evidently been successful at breaking through the “real estate curtain of no change”.

One or more of my large group of friends on Facebook has determined that my blogs are too abusive and as a result have asked Facebook - the supposed open platform that supports the socialization of all content - to block me from posting a link.

From Facebook to my blog today:

You're seeing this error message because the content that you've attempted to post on the site has been reported as abusive by other Facebook users. You should be able to edit your account if you do not include the offending text or URLs.

If you believe there is no abusive content on the specific website you are trying to post, unfortunately, the web domain that hosts the website has already been identified as abusive. Facebook does not have control over content that is hosted by particular web domains. To request the removal of abusive web pages that may be hosted by this domain, you will have to contact the specific domain provider.

Oops!

Offended friends aside.

Your comments are always welcomed.  And the debate is forever encouraged.

Onward!

Last Things First 2

So the last time we talked about moving one of the last things in a real estate transaction to first - the property appraisal prepared by the licensed appraiser.

Why?

To avoid the inevitable renegotiation of the sales price after the appraisal is completed by assuring that the true value of the property as it is related to the bank is exposed to the Buyer and the Seller much earlier in the transactional process.

Today we will explore the next most common cause for renegotiation of the transaction.  The home inspection conducted by a licensed home inspector.

Every prudent real estate professional completes a Seller's Disclosure form at the time of the listing.  You know the one that has the Seller state that they have not done anything to the property that was not without a permit and that the Seller knows of no defects in the property.  That is all well and good but that does not remove the pain of discovering things not known to either the Buyer or the Seller at the time an offer is negotiated.

So what do we commonly do now as it relates to property inspections?  We do them last.  After the offer is made and negotiated and we treat them as  a buyer contingency.  Once again, we suffer through a painful "root canal" process of settling on a final sales price just in time for the home inspection to upset the fragile balance of the transaction yet once again.

Huge mistake.

The property inspection needs to be first, not last in the transaction.

Sellers that do not have a licensed property inspection ask for nothing but trouble and after an offer is negotiated. 

AKA - huge headaches. 

Despite what is disclosed on the Seller's Disclosure form, very few Sellers truly know the condition of their property especially after living in their home for years and years.  Stuff happens and things age.  These conditions will always become the topic of discussion in any property inspection report and they will always be associated with an estimated cost to remedy.

This will always trigger a renegotiation of the sales price - always.

Don't get me wrong.  Just because a Seller does an inspection of the property doesn't mean that the Buyer will not do one as well.  The Buyer will and the Seller should.  That's the difference.

If something is made aware to the Seller in a property inspection report completed before the property is marketed, the Seller has time to consider the cost and to disclose allowances made in the price for such costs.

In the ideal situation, the Seller would take the appraised value of the home made by the licensed appraiser, adjust it for the historical listing to sales price difference and then deduct from that value the cost of what needs to be done in the inspection report to bring the property into marketable condition.

Why isn't this being done as a normal course of business today?  You got me.

Sometimes I think that we are afraid to suggest there is a cost to listing and marketing property.  Most times I think it is because we are simply afraid to do things differently.  Why?  Because we fear that others in our business who practice the current "process of least resistance" will win the at business. 

What a shame.  What a lost opportunity.

The industry continually gets low marks from consumers because its common business process management is never examined and truly improved - it is just practiced every day.

Time to reFresh the transaction again? 

I think so.  So far we have added about $700.00 (appraisal and inspection fees) to the cost of listing and marketing a home for the Seller. 

And what would we get in return for suggesting this vastly improved process?

Lots.  Two very relevant sources of valued information and disclosure that will serve to remove a tremendous amount of confusion and stress from the transaction sooner than later.  And second, the acknowledgement from the consumer that as an industry we have a better plan and a renewed transactional process that creates - by design - a higher degree of consumer care.

And that's precisely when putting last things first in the transaction alters the business of providing quality real estate services in a very good way.

Forever.

Last Things First

It's amazing to me.

The residential real estate industry has the strangest ways to order the essential parts of the transaction.  When I say essential parts I am referring to the timing and process used to value the property, inspect the property, disclose critical conditions related to the property.

There are many examples but let's take the first one and work through the list over the next few blog entries.

OK, here goes.  First up, property valuations.

So you want to list your home for sale.  You do what everyone else has been taught to do - you parade five or six real estate agents through your home and ask them what it is they intend to do to get your home sold.  And oh yes, how much their services will cost you.

It is then that you are introduced to the CMA.  The competitive market analysis or the comparative market analysis - the name depends on the agent.  The CMA quickly becomes the focus of all Sellers and will soon be the focus of the entire marketing offer.  It is supposed to represent a comparison of sold properties (MLS and public records), those properties that are for sale now and those properties that for whatever reason were offered for sale but did not sell or were withdrawn from the market.

So what is a CMA?  It is the agent's opinion of value based on the use of data from the local MLS, often some public record data adjusted by a local opinion of value adjusted by the agent.

It is the CMA that sets the listing price that quickly becomes the source of much distress and anguish as the Seller and Buyer go back and forth trying to agree on a sales price. 

So here's where I believe this last step really needs to be first. 

Beyond the use as an educated guess of the value of the property a CMA is not a measure of anything that will ultimately assure the close the transaction.  A CMA is really just one degree above the accuracy of an AVM - an automated valuation based on the use of public record data.  An AVM is what Zillow provides today on its web site - an admitted estimate of value.

So what should come first to improve the property valuation process in the transaction?  It is the formal appraisal of value.

This is the valuation prepared by a licensed appraiser.  The appraisal determines the most critical valuation of the property.  It is only the appraisal that will contribute to getting the transaction closed and it is ultimately the only measure of what a bank will lend on the property.

The appraisal results from the work of a licensed professional that understands how to value properties based on numerous measurements to include; MLS information, public record data, replacement cost estimates, rental multipliers and specific standards for determining a valuation banks will rely upon to fund a purchase of the property. 

So what could the use of a licensed appraiser earlier in the transaction do for the consumer?

Start with reducing the back and forth over what usually comes down to the level of haggling over pennies is often blown to pieces when the appraisal arrives and is injected into the transaction.  This is when the value of the home usually differs with the "sales price" that has painfully been agreed to by the Seller and the Buyer with the use of numerous counter offers and counteroffers to the counter offer.  Unless it is an all cash offer to purchase or the Seller intends to finance the property for the Buyer - it is only the appraisal that really matters as it relates to getting the transaction closed.

So why is the formal bank appraisal last and not first in the transaction?  Good question.  And in this very difficult financing environment - a really good question.

If the property doesn't qualify for a loan then the transaction doesn't happen.  Period.  The appraisal is the banks only means to determine if a property qualifies for a loan. 

So why last and not first in the transaction?

I'm told by agents that the reason is because it costs money for a real appraisal and the CMA is free.  Really.  A free CMA versus an opinion of value from a licensed appraiser?  Which would you chose to use in marketing the single largest asset you now own?  Is the investment of $400.00 worth knowing what the bank will ultimately finance for a qualified Buyer on your property?

I don't know about you but I would pay the cost of the appraisal as a Seller.  Anything to avoid the high likelihood of a root canal experience that most real estate agents now put their Sellers through in the seemingly endless renegotiating the sales price of the home during the closing process. 

The only real question here is what is it going to take to break the "CMA mold"?

Your guess is as good as mine but in cases like this one I tend to defer to the two most powerful words when envisioning change.  They are - viable alternative. 

Someone who agrees with this observation and offers an improved way of doing things and then goes to the bank sooner and more often.

Someone like what Apple did to Motorola.  Like what Virgin Atlantic did to British Airways.  Like what Google did to Yahoo. Like what Trulia did to REALTOR.com.  And on, and on.

Think about the increased level of satisfaction in the real estate marketing and sales experience.  Think about the differentiated service offering for reordering the transaction by putting what everyone else does last - now first.

So where are the other "last things, first" opportunities in the standard residential real estate transaction? 

Stay tuned.