Wednesday, September 06, 2006

New Article on Darwinian Real Estate

I am excited today to announce that Broker Agent News published another one of my articles this week. This specific article deals with inefficiencies in our current system as well as some tools that may be useful in getting additional clients and leads.

Here is the link to the full article: Darwinian Real Estate

Darwinian Real Estate, a New Value Proposition
By Barrett Niehus

One of the most significant impacts that internet technology has had on our economy is that it has given significant buying power back to the consumer and has eliminated many of the inefficiencies that were once present in business. These effects have been seen in a number of industries, and are finally catching up to the industry of real estate.

Consumers now have access to more information about real estate than ever before, and very often can become very well versed in each aspect of the transaction without the guidance of the real estate professional. Consumers can now learn about and orchestrate the entire transaction without needing the resources of a real estate agent. It is this expanded access to data and increased expertise has monumental implications on how we are going to do business in the future.

The revolution is upon us and there is no way to stem the tide. Companies like RedFin and Zillow are providing data and services that were once kept under lock and key by the NAR. The heated discussion about open MLS' is mute as home sellers now expect maximum online exposure as a minimum level of service by their representatives. Every day, new technologies and companies pop up that address inefficiencies in our established real estate system. Technology and access to information is creating these changes and there is no way to stop the flow.

So what do we do now? Adapt and survive; refuse to adapt and die (well not die actually, more like find a new line of work.)

I applaud and their edict to help each of us reach our potential and remain an integral part of the real estate transaction. Their premise, which I support 100%, is that behemoth companies are taking the REALTOR® right out of the equation and it is time to take action to stop the process. The question is: how do we do it? These companies are growing because they leverage inherent inefficiencies in the transaction process. RedFin leverages online access to listings to take the buyer's agent completely out of the equation. Zillow doesn't go that far, but removes the need for a comps report which is a fundamental service offered by REALTORS®. With companies such as these taking away activities that were traditionally reserved for the REALTOR® where does that leave the rest of us?

Whether we like it or not, it is time to adapt.

The days when the real estate agent could exclusively control the transaction and reap all of the reward are long gone. By extension, so are the days when an agent could just get a license and survive with no additional education or expertise. We need to change our value proposition and provide services of inherent value to our clients. Thanks to new technology, inefficiencies that once created revenue and opportunity are quickly going away. However, if we change how we present ourselves to the client we can survive and thrive in this brave new world.

I'm not a chameleon, how do you propose I adapt?

Changing your paradigm is not an easy task. However, it is time to take a look at the services that you bring to the table and critically evaluate which parts really add value to the client. Clients can now access listings online and shop for homes themselves. However, they don't know anything about their legal exposure in the transaction or the mountain of paperwork that it requires. Clients can find the property that they like, but they rarely know how to negotiate the deal, generally have little understanding in the financial process, and typically don't understand where to find the red flags in the transaction.

There are many areas where a REALTOR® adds value to a transaction and including these as core points in your value proposition can be an effective way to establish the necessity of your services in the transaction. Real estate professionals that adapt to the new paradigm are most likely to assume a role that better fits the definition of an agent: One that acts to advise and represent the best interests of their client in all aspects of the transaction.

In attracting clients, the adapted agent needs to refine their value proposition so that clients in the niche they serve understand and value the agent's services. We are no longer transaction managers; we are now advisors, consultants and guides. People looking to buy or sell property can do the shopping for the property all on their own. They can figure out the retail cost of the property and even develop their own buying or selling strategy. However, very few buyers and sellers understand the minutia of the process and everything that goes into the transaction. Our opportunity lay in our ability to communicate how convoluted and risky this process can be and how we can be an effective guide in the process.

For me, I choose to adapt. I am trying to identify where the inefficiencies are in the transaction and taking these out of the value proposition (The RedFin's of the world will fill those holes and they are far-better capitalized than me.) Instead, I encourage agents to leverage technology to get in front of the customer while they are shopping or learning online. They should develop tools to become an educational resource to their prospective customers and establish themselves as necessary experts that represent the best interests of their clients. Technology has shifted the industry and if real estate agents can adapt their value propositions and paradigms to this new industry, they will survive and thrive.

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