Let’s face it, the world has changed. Along with the value, we bring to the table.
In the palm of our hand, we have access to more information than we know what to do with. We can learn whatever we desire. Ask, and the big Google in the sky will provide.
But we can’t know everything. It’s information overload.
There’s useful information & Infomercials. News & Fake News. Truths & Untruths. Opportunities & Scams. Webinars & Pitches. Coaches & Conmen. Advisors & Salespeople… How can we know the difference? How do we know who or what to believe?
There are only two ways: To specialise. (To research. Gain in-depth knowledge, and experience. Become an expert in a particular field); Or seek help from one. Giving rise to the era of Consulting.
This knowledge mega-cloud is also helping the world to become more conscious. More aware of our impact on others. Since it’s easy to shine the light, it’s becoming harder to hide in the shadows. Harder to get away with practices that cause harm to others. People want to feel like they are helping to make the world a better place. So support is growing for conscious businesses. Those striving to make a positive impact.
As individuals, we are more empowered than ever. We can, and do make a difference. One person. One idea. One spark can change the world. With instant global communication, that spark can ignite a movement with viral growth. Opening eyes. Ripping down curtains. Exposing truths. Doing good. Inspiring change, in a short period of time.
So what does all this mean for the real estate industry?
One word: Disruption.
Yes, I’ve heard all the anti-disruption arguments. I know the real estate industry has “always done it this way”. How we’re immune. We’re different. We’re in a bubble. Disruption can’t touch us.
As a friend of mine recently said: “The status quo never lasts. Innovation always trumps the mighty stagnant.”
And consider this quote I came across on Linkedin: “Being non-customer centric is the biggest threat to any business.”
Sellers no longer need us to find buyers. Buyers don’t need us to find sellers. We are no longer the gatekeepers. The matchmakers. The middlemen.
Our clients want to be protected. Not persuaded. Inspired. Not stalked. Empowered. Not manipulated. They want transparent choices. Not a sales pitch. They want to deal with a Trusted Advisor. An expert. Somebody who has got their back. Serving their best interests. Not a Commissioned Salesperson.
In alignment with that, our legislation is also pointing in the same direction. Encouraging us to lift our game. To never forget our duty. To put our clients best interests above all else. To act as a Profession.
“Professionalism. Ethics. Fiduciary Duty. Transparency. Honesty. Disclosure. Avoiding Conflicts of Interests. Serving. Advising…” are the words used to license us.
Still, our industry, it’s entrenched in a system at odds with that path.
The Commission Only Business Model. It’s driven by a sales culture. It’s non-customer centric.
“Self-promotion. Prospecting. Scripts. Listing Presentations. Closing techniques…” are the words used to clone us.
It’s a numbers game. The Number of calls made. Listings. Sales. GCI. The 100 Million Dollar Club. Being NUMBER 1… are the metrics used to motivate us. To stoke our egos.
I once heard a wise man say: “There is no better proof of the success of anything than to look at the results. The outcomes that come from it.” And he was right when you think about it.
This model has managed to achieve 2 things of significance:
- Real estate is one of the most inefficient and bloated industries in existence.
- Consumers hate us. From their point of view, our agenda is dubious and our commissions outrageous.
You would think, with modern technology, our industry would become more efficient? Yet here in New Zealand, in the last decade alone, the average commission has risen by around 40%. In the same timeframe, the number of salespeople has ballooned. While the number of transactions has dropped.
Bottom line: Kiwis are now paying 40% more for the privilege of selling their home.
Does it now take 40% more work? The simple answer is no. In fact, with the recent market conditions, technology & internet marketing… it takes less work and outgoing expenses.
Have we as an industry added 40% worth of extra services or value to home-sellers? Also a resounding no. Sure, clients now receive a higher sale price. But that is because of market forces, not us.
What about us as individual agents? Are we any better off? Has that increase in commissions passed onto us?
I remember the early 90’s when I started in real estate. Average gross commissions were around $4 – $5k. In those days as an individual agent, we were making at least 3-4 sales per month. On a team of seven, we were doing 30+ transactions per month. Our best month was over 40. Fast forward to 2006… nationally, the average production per salesperson was down to 9 transactions per year. With average earnings per agent of around $53,000 p.a.
Now, today, the average production per agent has dropped to a measly 6 transactions per year. Making the average earnings per agent still around $50k pa. Last week a local salesperson was boasting to me about how his office had made 20 sales last month. How many salespeople do you think they have? Wait for it… 17 plus 4 or 5 P.A’s plus god knows how many admin support staff.
Here’s what is happening:
As property values increase, the commission increases. Supporting the recruitment of an increasing number of salespeople. As the number of salespeople increases, the production per salesperson drops. And the earnings per agent remain similar.
The net effect: clients pay more for a less efficient industry. Let me say that longhand. Our clients are now paying more, to support more salespeople to do less work on their behalf.
What is all this doing for our reputation?
Again, let’s face it. Before we even walk in the door, consumers see us as self-serving salespeople.
You might say its only a minority of agents that give the rest of us a bad name, but the issue runs much deeper than that. And, like it or not, we are all tarred with the same brush. Even if we do care about doing what is best for our clients, the reality is:
They don’t believe us. Can we blame them? As commission salespeople, how can we expect them to trust our advice? Would you trust your doctor if they relied on commission from each prescription?
So who is benefitting here?
Not our clients. Or the large majority of us individual agents.
From our clients point of view:
- Why should they fund such an inefficient industry?
- Why should their fees be high enough to support more and more salespeople to do less and less?
- Why should they pay twice as much for the same service, as their friend on the other side of town selling a cheaper home?
- If they present their property well and price it right (enabling an easy sale)… why should they pay the same fee as their neighbour who wallowed on the market for 6 months. Needing 2, 3, 4 times as much work and outgoing costs by us?
Of course, as a commissioned salesperson, stuck in this system, we need it to be this way. We go hungry for weeks, sometimes months. Demean ourselves trying to win a listing. Prospecting. Doing Free Market Appraisals & Listing Presentations – many of which come to nothing.
Then there’s all the time, effort and money we lose working for clients who then choose not to sell. Who withdraw from the market. Or worse… ignore our advice… Fire us to save face, and list with a different agent at the price we advised months earlier. Leaving us out of pocket and having to watch Johnny on the spot pick up an easy commission. Ouch.
So, when we do get a sale, the reward needs to be high enough to compensate for all that lost effort. Which means: Our genuine sellers are subsidising the non-sellers.
This system. This thinking. The commission business model. It is failing us all – clients and agents alike.
At Restate, we are on a mission to fix it.
Both us and our clients deserve much more.
As an industry, as individuals, we are better than that. We must rise above the status quo before it destroys us.
I can see an industry that is more efficient. Puts the interests of its clients above all else, and adds genuine value to those it serves. An industry consumers trust and we are proud to be a part of.
So we rejected the sales culture and restated real estate as a “Professional Service”.
Which changes everything about how we work: Our purpose. Our culture. Our Core Values. The services we offer. The advice we give. Strategies we use. Our fee structure. The relationship with our clients. The relationship with our business partners. How we measure our success… the lot.
Over the last few years, with a small team, we’ve run an experiment. Developing. Testing. Proving that a Professional Service Model is more efficient for both us and our clients.
It’s a breakthrough. Clients are banking more. While at the same time we are more profitable.
We’ve figured out how to operate in a way that is in alignment with our core values, and the modern world around us.
Most satisfying: The relationship with our clients is on a much higher level. It’s a partnership. A Client to Trusted Advisor type relationship, rather than Prospect vs Salesperson.
Our client satisfaction has gone through the roof. Many becoming raving fans. Spreading the word, recommending their friends and family. Their encouragement, support, and written testimonials have been humbling.
(NB. In the last two and a half years we’ve done no traditional prospecting. Zero. Zilch. Not one cold call. Yet we are generating far more genuine seller appointments than ever before.)
As a team, we love feeling like we are making a positive difference in our clients’ lives. Like we’re fighting for something worthwhile.
Yes. It is still early days. We’re a ‘start-up’ so to speak. A spark challenging the status quo. Although we know we’re onto something revolutionary. Industry changing (in a positive way).
It’s time to share.
So I invite you. It’s an obligation we have when we discover something good. When we share that good with the world, more good happens. And that is what I want to do here. To help like-minded agents also change your world of real estate.
Because there’s no doubt our industry is in dire straights. The good news is a new door has opened. A more efficient and client-centric breed of agent is emerging. Ditching the top-heavy franchises outdated model. Building our own practice. One that’s respected and trusted. Seen as the authority in our community.
The era of the professional real estate consultant has begun.
That flame is lit and the winds of change are feeding it. You can stick with the way it is, or be a leader. You can stagnate or innovate. You can be Blockbuster or Netflix. That is now your choice.
But excuses like “That’s the way it is”… “We’ve always done it that way” … “It will never work”, no longer hold water. After all, if we’ve made it work, so can you. Or someone else in your area.
If this has resonated with you. If you can also see the writing on the wall. If you’ve thought there must be a better way. If you care about your clients and want to get involved in elevating our industry. If you wish to be part of something more meaningful than scrapping over commissions.
Then I invite you to learn more.