by Grant Wakelin
The annual Readers Digest survey of most (and least trusted) professions is out. Real estate agents continue their cellar dwelling in the good company of sex-workers and politicians.
If you look at the bottom of the list what do the professions have in common? Self interest above all else. Contrasting this, the most trusted professions are those that place their ‘clients’ interests above their own - firefighters, paramedics, nurses and pilots.
Agent self interest is one of the reasons the Real Estate Agents Act was introduced in 2008 - to protect consumers from "land sharks".
So, how does the industry change from self-interest to working in a clients best interests? Which, by the way, as an ‘agent’ is supposed to happen anyway (look up the Law of Agency for more on this). Interestingly, the Law of Agency is the industry compulsory education topic for 2015.
The need to change this perception is not on the agenda of any industry group I am aware of. Please let me know if it is - I have some thoughts!
The answer to this is simple, but really, really hard because it runs smack up against ingrained industry practices and entrenched consumer behaviour. Industry practices are driven by remuneration. We have looked at this previously. We somehow expect agents to act to a moral code in conflict with what their compensation drives.
If you look at professions higher in the trust stakes - you choose the professional you wish to do the work and then you pay them for their services. Sometimes that can include a bonus for getting the job done - the investment banker for example.
Contingency based jobs (note I didn’t use the term profession) are easy to get into (low skilled), with high churn. The guys at the top of the pyramid make all the money, with the front line doing the work and taking the risk. The door-to-door salesperson, pyramid scheme sellers, even drug dealers.
Higher skilled professions require you to choose your service provider and then pay them fairly for the services they deliver. The model for consumer trust isn’t the door-to-door salesperson or drug dealer.
There are some very small pockets of change, for example, in the business/commercial sales arena with some agencies charging a fee up front to get the business documents ready for sale and a commission upon completion.
The general perception of real estate agents will not change until there is industry discussion and movement on how real estate agents are paid and even their structure (employees versus contractors).
Will things change?
No. There is too much self interest.
200 Square is of course a new real estate business model that addresses some of these issues. So the self-interested side of me says long may the traditional industry continue down the current path...
Firefighter Photo By: Lance Cpl. Manuel F. Guerrero and The Wire cast photo via http://thewire.wikia.com/
Carl Slade said:
We'll said Grant and good on you for getting it in the open.
The underlying conflict of interest between an agents fiduciary duty to their client and the 'old' real estate model is actually glaringly obvious to consumers. It's just that, until now, nobody in the industry has been willing to openly talk about it or had the balls to actually try and change it.
I say 'old' industry model because in my view its already dead - it just doesn't know it yet ;-)
You are not alone in your thinking. In fact there is already a momentum of change slowly but surely growing throughout the world. Check out a book called "the end of 6%" by an ex American agent called Mollie Wasserman (you can find it on Amazon). Mollie hits this issue on the head.
Here in Timaru we have been quietly working on how we want to address this issue. We have chosen more of a "consulting" model and are very proud to say that as of the first of 1st August 2014 we have committed to making it happen.
I personally believe that shifting from a 'sales' model to a 'consulting' model is the natural progression towards true professionalism within our industry.
Just today in our local property tabloid we ran an advertisement, along with a graphic of a grave stone showing "RIP - Old real estate model - died 1st of August 2014"...
"We are sorry it took us so long
The real estate industry has been stuck in an inefficient business model that is both out of sync and in conflict with the needs of today's home sellers and buyers.
We believe that you deserve real choices, total transparency, value for money, and above all, true professionalism from your real estate agent.
In order to live up to those beliefs, we have laid to rest the 'Old' real estate model and are no longer just real estate 'salespeople'.
We are real estate 'Consultants'
This may sound like simply a change of wording, however, it is in fact a fundamental shift from the old industry way of thinking that has massive positive effects on how you can get help with you real estate needs going forward.
At it's core, consulting is ..."advising and serving in your best interests", while a salespersons focus is to 'convince you to do something that enables them to get paid'.
This difference will become a lot clearer as you talk with us"...
We are only a very small team, without a big marketing budget and have a lot of work to do upgrading websites and rewriting all of our material, changing our systems etc, however we are committed to slowly changing the real estate world - one client at a time.
And as Mollie quotes in her book...
"Never doubt that a small group of thoughtful, committed people can change the world. Indeed, it's the only thing that ever has". - Margaret Mead
You ask "will things change?" ... We answer - "it already has" :-)
Will consumers support the change? ... They already are.
Keep up the good work Grant
Regards
Carl and the team at Professionals Timaru
Posted 7 th August, 2014Lynne Johnson said:
Fantastic stuff. Keep it coming - and thank you !!
Posted 15 th October, 2014Cheers
Lynne