Quick Questions and Contrarian Thoughts about Real Estate 2010
At the recent Leading Real Estate Companies of the World Annual Conference, Matthew Ferrara participated in an “ask anything” salon where the audience posed questions about the future of the real estate industry. Here’s a summary and some reflections upon some of our more contrarian answers.
Q. Do you think companies could benefit from an outside coach?
A. Let’s ask the question differently: Could companies benefit from coaching their agents? Absolutely. Should they hire an outside coach to do so? Probably not. This doesn’t mean brokerages shouldn’t hire outside experts – but it does offer a different answer to the question, Who should coach your agents? And for me, the answer is, Your managers!
Outside coaches should provide new ideas, strategic opportunities and deliver training to both agents and managers to start the process. But at the end of the day, when the outside coach leaves, it’s the managers who are left holding the reins. Managers must be prepared to continue coaching agents on the new skills and information, and to maintain the momentum every day after the workshop. That’s why we usually coach managers, so they can support the agents who are trying to implement new skills introduced by our workshops.
Let’s also keep in mind that coaching is a powerful relationship builder: We advise companies to help agents build those relationships with managers, not with outside coaches. We want agents to be connected to the brokerage company, not a third party.
Q. How do you define the Return on Investment (ROI) on social networking?
A. The same way you define every other ROI: profit-positive sales. Social networking is just a prospecting tool. It’s major investment is time. Other tools used to grow your business have less expensive inputs – paper, ink, postage – but time is very expensive. So you have to use your time online constructively. That means building relationships that become sales or referrals, and maintaining your sphere of influence to generate repeat business.
The ROI for Facebook or LinkedIn is no different than for a newspaper ad or a website. But it’s harder to “track” because referrals aren’t based upon hits or traffic, which make agents “feel better” about websites, but we know don’t really lead to sales. More than 65% of listings come from referrals, not advertisements or refrigerator magnets. So the ROI is still sales. Companies will need to develop more vigorous tracking of the “people process” that generates new deals to measure social media success.
Q. What do you do with agents who just won’t do social media?
A. You’re asking the wrong question. You need to ask, What do I do with agents who don’t make sales? If an agent makes sales that are profitable and have good outcomes, then social media may not be an immediate issue for them. You should take them in hand and build confidence to prove the benefits more carefully – not just a slam-dunk training class. This might involve a “pilot” project with them, to figure out how social media enhances what they are already doing right.
As for agents who are not making sales and not using social media, well, if you ask me, most companies are going to do what they already do with those agents: nothing. But if we pretend that we’ll use social media as a “reason” to confront unproductive agents, then I’d suggest what I’ve suggested for twenty years. Agents who won’t prospect – by social media or otherwise – should be invited to go to lunch where their lunch has been ordered “to go.” Problem solved. Only then will managers have time to spend with agents who are making sales, and help them integrate social media into their current success with your full attention.
Q. What does the real estate company of the future look like?
A. We already know what it looks like because it exists today within most companies. It’s the real estate team. In most brokerages, the teams are the highest performers in terms of both volume and margin. That’s because they have learned what every other company in the world – except most real estate companies – knows: Division of labor works. It saves times, applies the right resources to their most effective use, and creates positive results.
Asking agents to “do it all” by themselves works for about 5-10% of the business. The other 90% is simply on a slow-burn toward it’s own exit. The numbers have proved this for decades, but throw in a bubble here and there and the “more bodies!” management theory has survived despite its obvious failures. Companies of the future will be divided into teams: big ones, small ones, multiple ones.
Leaders at the top, specialists in the middle, support experts at the bottom. Size will be irrelevant: Toyota uses a division of labor and they are huge; Craigslist uses a division of labor and they are much smaller. Both dominate their relative industries. But the myth of the “independent” contractor will disappear in favor of an “interdependent” contractor organizational style that creates better profit margins, lets people do what they do best, and lowers costs for consumers.
Q. How do you see the real estate website of the future?
A. One thing is for sure: it won’t be based upon the Sears Catalog mentality.
Today’s websites still base their approach to selling real estate around a “database” of listing sheets. And as you know, I’ve written many times that the listing sheet is pathetic. It forces everything into a flat space, that is little more than a “retread” of a printed sheet of paper. Even online, with a few dozen photos and a fish-eye-lens virtual tour, the entire approach is flat, columnar, and ugly. And most of all, it’s not “interactive.” Now, go look at the Mercedes-Benz website and see how they sell cars: The database portion only serves to help you “find” a model. After that, Mercedes does everything it can to get you into the driver’s seat. It’s a simulated driving experience, with video, sound, music all geared towards your emotions.
Even their virtual tours let you look around the car from the “driving” position, as if you were turning your head and touching the leather, the controls, the wheel. It’s time to move away from the “you can print out a listing sheet” model and get people emotionally involved in properties. The future real estate website will look more like YouTube and less like a glorified database. Otherwise, Gen X and Gen Y will totally tune out.
Q. What do you see 5-7 years from now in our industry?
A. In the last twenty years, most of the “industry evolution” has been implemented – or resisted – by the current leaders of the industry. All of that is about to change. Many, many brokers are going to leave the business for basic demographic reasons: they are reaching retirement age. Or they are close enough to it that they are deciding whether or not they want to slug-out another decade to rebuild the money they lost in the recession. Some will decide not to do this; others are going to have it decided for them. But we’re entering a phase in the real estate industry evolution where change is going to mean much more than “adding tech gadgets” to the process. The next generation of consumers are already demanding a far different set of value propositions – from lower costs to higher standards of outcomes.
It’s not just that they want their agents to “tweet” to them; they want agents to sell them products and services based upon more than the “I’m the expert” mentality. Likewise, the next generation of brokers and owners is coming from an entirely different place than in the past. Most brokers and leaders today went from a sales person to an owner, but future owners are coming from places like displaced Wall Street execs with MBAs. These people are dumbfounded when they see how things are “traditionally” run in the industry – so for them, change is obvious and mandatory.
There’s also a lot – more than we can imagine – of money sitting around looking for new businesses. It’s going to pour into the housing industry who will require business plans and division of labor to create value for customers and profits for shareholders. That’s why I’ve been excited by the recession. Most people have been mad at it, blame it for their troubles. I see the recession as the necessary “break” with the past that buries forever dysfunctional models and mentalities. It’s going to be very exciting. Once the shift moves away from “what’s the next technology” to “what’s the next operational model,” all bets are off.
And the next generation of real estate will finally go to warp speed.
(Matthew Ferrara is CEO of Matthew Ferrara & Company, a technology organization that delivers training, consulting and technical support to real estate companies worldwide, including their new "Support on Demand" REALTOR help desk service available at 866-316-4209.)