Out of town until Sunday

I'll be out of town for a few days and would like to leave a few thoughts.

From what I've witnessed in the past year or so the RE.net is strong and alive. It's fun and informative watching it grow. I think what it would be like without it to wander around in everyday. The information I've gathered online through all the connections has helped me as a professional to expand my outlook regarding this industry and I'm glad to be a part of it. I never knew there was so many intelligent people in real estate. It's good to know that all across the country there are professionals working to improve every aspect of what we do, and are willing to freely share their thoughts, methods and predictions.

Recently I've felt the backed up demand growing restless, so I don't think it will be long before housing begins to turn around. Through my association with all of you, I feel better prepared for the business coming my way. Plus, I now know people all over the country I can safely refer to and know that the RE consumer will taken care of in the best professional manner.

It's an exciting time to live in with so many changes taking place and so many on the horizon. I look forward to the challenges.

I'm also a Homegain Watcher

Another company on my watch list is Homegain. Not too long from now they will anounce some changes that I think are definitely in the right direction. Why am I concerned with companies like Homegain and Redfin? I don't know. It gives me something to do between clients. Actually I find it all fascinating. Some people hate change and some people love it. I love dynamism, esspecially in business -- I got hooked  many years back reading Peters, Drucker, Gilder, Senge and others as they discussed trends and looked to the future prediciting what might develope.

Some of the buzz materialized, some of it faded, but one thing is for sure, much about business has changed and I believe it will continue changing even faster. Not to say that all old methods will disappear -- I think many time-honored practices will be around much longer than I'm around.

Homegain seems to be a company that mixes the old with the new and doesn't buzz a lot; however, Louis Cammarosano's recent foray into the middle of the real estate blogosphere has created some buzz as he holds his own in the back and forth of the ongoing conversation about real estate.

Louis has shared with we a little about the direction Homegain is taking. It's a viable resource for agents marketing in the online real estate business, offering many tools that are ready-made.

Recently, I read about Estately on Bloodhound. I was vaguely familiar with the company but didn't really pay a lot of attention because of it's regional focus. While checking it out I noticed an emphasis on something I've written about lately -- a partnership between an RE site and vetted agents to promote quality agents in particular areas. I saw several times where they emphasized quality, not just any agent on a list, making a straighforward distinction, when making a referral.

I've wondered if this would work, whether consumers would appreciate the process of picking the best qualified agents to promote and recommend. It narrows the playing field and most likely will insult many agents who are not chosen. A company like Homegain has quality assurance built in through a consumer evaluation function, but this is different than being handpicked by Homegain after meeting requirements for acceptance based on strict criteria set by Homegain. I see the difficulties of handpicking -- how is the criteria decided and does it hurt business to narrow down so severely? Would it be beneficial business-wise to limit the agents to certain strict criteria or is it best to have consumers be the watch-dogs and handpickers? 

In an ideal situation, from the perspective of the consumer, it would probably be best for them to know that a site has carefully chosen only the best agents who've met strict requirements for inclusion, but the difficulties of doing this on broad-scale business model would be daunting. It's probably not going to happen with a nationwide company but Estately's approach is interesting and worth considering, at least building up the quality assurance efforts to give consumers confidence that who they do business with is being evaluated closely.

If online competition heats up in the future, as surely it will, the distinctions that set one comapny above another will be excellent service and delivery of the best. Price will be a factor, but I believe the determining factor of who profits and who doesn't will be based on the best service model. Like I said, from my humble perspective, Homegain is going in the right direction.

Redfin's success may depend on service, system and volume

When I first got into real estate in 1996,  I started as an exclusive buyer agent for an exclusive buyer agent company, Buyer Agent of Savannah. There were three agents in the office, Jerry, the broker, Dottie, his wife, and me. I worked there for four and a half years and during that time Jerry averaged about 40 transactions a year, I averaged about 45 a year and Dotttie averaged around 30. We had experiences with discount brokerages (Redfin hadn't come along) but didn't consider ourselves a part of that model; however, we met some resistance to EBA because it was a fairly new concept in this area. Once the good agents discovered we had plenty of buyers, they bought in quickly and would call us lobbying their new listings.

The company's average take was 2.4% of the sales price. I was on a graduating split that went from 50/50 to 75/25 as I met certain levels. Since we never got both sides of a transactions we had to make it up in volume. I was always amazed to see some downtown agents, selling high dollar properties with many on both sides, who did 15 transactions a year bring in the same amount of commissions as I did, and some more. Yet their office had many agents who did far less. Per agent, our company was ahead of everyone, but we had only three agents.

Could Jerry have gotten ten, twenty, thirty agents averaging 40 transactions a year? I don't know, he started having heart problems, slowed down and eventually had a major attack and died. But it go me thinking. I also had heart problems shortly after Jerry, so I haven't tried it either. :)

One reason we could handle volume was we were a small team with a great system that Jerry took from a Memphis franchise, then went independent and further developed it into a team that worked together in a very efficient way. I could have handled more volume within this system and was headed that way, increasing every year. I could have handled 80-90 transactions. I've heard of agents doing more with an assistant. I began thinking about teams of ten with a great system handling very high volumes, then recently started thinking about the Redfin model of compensation and online technology.

But to handle that type of volume you have to attract that type of volume. We attracted clients through superior service. At some point we could have lowered our side of the commission and still made good money, through volume. However, comparing a little three agent company in Savannah to a potentially nationwide model leaves much to be proved in regards to whether certain concepts can be implemented on a large scale. Can superior service at a low price attract enough volume (and can the volume be handled while keeping costs down) to be profitable and sustain a large nationwide operation.

This is where I see Redfin's opportunity -- maintaining their price and technology advantage while stengthening their service offering and producing high volumes of transactions in small teams around the country. But one of the challenges I see is -- will the Seattle attitude play in Atlanta, Dallas, Charlotte, Kansas City or other such cites that ain't Seattle, Boston or San Francisco. Even before that, though, they have to play profitably in the cities they're in. But if they can produce volume/profit where they are, will they be able to grow to the midwest and south?

The south and midwest will be harder nuts to crack, and the way I see it to get respect  they will have to compete on equal quality of service. I'm sure the way the service is provided will be different coming from a company like Redfin whose mindset is geared toward innovation -- but if Redfin is seen as cutting services in order to give rebates, many agents and companies will feel like they are gimmicky and I'm not sure they can attract enough volume from consumers.

I understand the Redfin idea is to have the consumer do some of the work in order to save money in the process, but I see this as the weakness. I think THIS is what hasn't caught on and delivered enough business to make a profit. It's too easy to be attacked as "pulling a fast one". Redfin may hold on to this part of their business model as an attraction to Gen X buyers and sellers, but I don't think it's necessary and could actually be down-played as only one piece of the model -- an option for do-it-your-selfers. I think Redfin, or any company who chose to, could provide full service along with the price and tech advantage and the compensation model by creating great teams/systems to handle huge volumes efficiently.

The image of "superior service at a lower price" is more powerful image and deserves more respect than the image of "you do-it-yourself and we'll lower the price and help out a little bit in the process."

Even if Redfin gained ground in the areas they are in, it would be too easy for a full service company to adjust their prices to compete as a full service model at a slightly higher price than Redfin's discount causing consumers to prefer to pay the little bit extra for full service. Then Redfin will be in even a more awkward position of catching up on service. It's easier to work from the price side with adjustments than it is to start way down the road trying to rebuild a service model.

Brief Interlude

A day beginning like any other with coffee, morning greetings to my wife, email, the neighbor's barking dog who barks for the same reason Chauntecleer crowed, for the pure joy of it, yet something changed and a switch of senses, like flipping the pillow to the cool side, came over me, an awareness, alien yet strangely familiar, enough to create an edge of attention accompanying me as I went downtown to a meeting.

Entering the park on my way to the designated building, I slowed my gait to notice a napping man, then stopped altogether in awe of the broken sunlight that lit his face in curving streaks through the twisted, dense limbs of the giant oak above where he sat.  Wishing I had my camera or was an artist with brush, paint and canvas, he appeared to me as a fine work of art hanging in a high musem. The deep lines in his brown face suggested a long, harsh life and a thousand stories - his clothes were the coverings of the dispossessesd, yet something of a different wealth surrounded him like an aura. A wealth of understanding? Understanding a side of life most of us would only read about or donate to? The pure appreciation of warmth on a bench in April down south? 

When I started forward, the movement excited a few pigeons feeding on crumbs and the loud fluttering of their wings woke the old man - for a moment our eyes met, and although an impulse to avert mine was strong, I held a gaze, as did he, while passing. Smiles and nods exchanged between us before he again closed his eyes and, perhaps, returned to a dream, as I went on in search of my next, somehow better prepared.

Why the relativist argument doesn't hold water

This is a quote from Dave on Greg's post at Bloodhound.

"But, my general point is that “true believers” whether it of socialism, capitalism, democracy, or any other ism are always proved to be wrong because rigid ideology seems to require of them to think they are right and others are wrong and to give the others “evil” intent as you have done. There are some members of the environmental movement who fit this bill too, but I learned a long time ago to stay away from those folks because they were.. well boring… and ineffective at acomplishing goals. You might not agree with the goals of the environmental movement, nor its methods, but you do your movement no good by imputing evil in others who think differently.
And it is generally agreed in the movement that the biggest polluter is and has been the federal government. So there is room for agreement."

What is the opposite of a "true believer"? A false believer? A partial believer? Once something has been established with facts, one is justified in believing. The person using a relativist argument hardly ever really thinks all ideas are equally valid, this would be nonsense, but rather the person uses relativism as a technique to weaken the opponents argument in an attempt to have his argument prevail in spite of facts.

When up against an opponent armed with facts and evidence, the person who attempts to have his arument prevail on emotional appeal, because facts are against him, must place the opponent armed with facts and evidence in the light of "true believer", "zealot", "rigid" to create doubt. This never works because free thinkers can judge by the facts who is wrong and who is right.

Just by using the term "true believer" as a disparaging attack, the person using the relativist technique has admitted defeat. Otherwise the person would use facts of his own to show his idea is factually correct and that his opponent is factually incorrect. On matters of faith there is room for open disagreement where each side can present their articles of faith admitting they have no proof, yet maintaining they stand by this faith and recognize the other person's stance on their faith.

But on matters with historical evidence and facts used to decide the correct "belief", there is nothing wrong with this belief being believed truly. You believe it because it's proven to be true. It would be ridiculous to say here are the facts and historical evidence but I will only partially believe this to be true so that I don't become a true believer and offend your beliefs which aren't based on facts. No course of action could be taken toward progress if  we could never decide something to be true based on facts and to truly believe in a correct, factually-sound way to proceed. To do otherwise is "evil" because it destroys reason and potentially puts humans at risk. We survive by the use of reason, not feel-good compromises that make us vulnerable to dangerous realities we should be combatting while fighting imaginary demons that waste our resources. Progress, by the use of reason, has taken us away from the wasted and dangerous practice of witch-hunting and fighting unsubstantiated evils cooked up by witch doctors to produce fear and maintain the witch doctor's power status. We can now judge the facts through scientific methods and the use of reason.

People living in fear of imagined dangers seek protection. What better way for political parties to build a power base than to be the compassionate protectors -- protection against foreigners, against evil corporations, against the rich and mighty, against pornographers, against baby-killers, against baby-savers, against dangerous ideas, against religious zealots, against "them", against gun-owners, against homophobes, against homosexuals, against white men, against minorities, whatever, left and right, the political parties love to protect and expand their voting base. They appeal to emotions, both base and noble, to spread fear of too much freedom. Too much freedom in their minds leads to chaos and losss of control -- it's in government's nature to control, it's what they do -- it's up to us to use reason and limit the government's control to what we actually need them to do -- protect the borders, police to protect innocent citizens from crime and decide disputes in courts of law.