Happy Thanksgiving!

Picture: Jean Louis Jerome Ferris’ painting of the First Thanksgiving.

I found this article courtesy of the excellent industry publication put forth by MAR (Minnesota Association of Realtors).  It is a reality check and wake up call for all of us in this business…buyers, sellers and their agents.

Austan Goolsbee is a professor of economics at the University of Chicago Graduate School of Business and a research fellow at the American Bar Foundation.  His article, “Reality Check for Home Sellers” was published September 27, 2007 in the New York Times.  He has some great quotes in his article, including:

“Economists tend to think people are crazy because they won’t sell their houses for less than they paid for them — and people think economists are crazy for thinking things exactly like that,” said Professor Christopher Mayer, director of the Paul Milstein Center for Real Estate at Columbia Business School and an authority on real estate economics.

Professor Mayer goes on to say what he tells his own family members:

“If you want to sell your house then you list it at the market price and you sell it,” he said. “If you don’t really want to sell then don’t put it on the market. But don’t say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That’s just painful — and expensive.”

And if this quote isn’t true about this market, I don’t know what is…

One source of difficulty arises from a basic fact of real estate economics: about half of home purchases are by people moving within a metropolitan area. If sellers can’t sell their houses because they want too much for them, they also can’t become buyers of new homes.

This is especially true with “move up” buyers where they have a tremendous opportunity in front of them right now, but they are unwilling to lower the price of their home they are selling by $20,000 – $30,000 in order to take advantage of the current discount on higher end homes where they will likely be able to save $50,000 – $100,000 by buying now.

People can’t stand to lose money even if there’s big opportunity in front of them.  Something has to give to get the market moving.

Scott Einbinder published an excellent article entitled, “The Pursuit of The Real Estate Truth.”  He’s very direct if not a little harsh with Realtors and brokers, but I believe he’s speaking the truth about the real estate profession today.

Einbinder challenges the tried and true real estate service model:

The truth that our value proposition to the industry needs to stop focusing on ancient concepts like marketing plans, advertising gimmicks, open houses and misleading personal awards. (emphasis added). Almost every listing presentation I evaluate is dominated by the company’s marketing plan and advertising strategy and personal agent success.

We show these features to a seller with the hope that they will believe it works. With the hope that this concept of “exposure” will convince them that our value somehow has a relationship to our marketing and advertising strategy. Yet every real estate professional reading this article knows all too well that the old open house and classified ad is not there to sell the home. It is not there to accomplish our objective of exceeding our clients expectations. It is there to benefit us.

The leadership of our industry must step up and stop holding on to fiction and side agendas and demand their brokers and agents be authentic. I speak to agents every day who still believe their marketing and advertising plan sells houses, yet inventory levels have never been higher of unsold listings. Is it because you did not deploy your marketing strategy or does it have something to do with the inability to price and position the house correctly? Is your listing not selling because the three open houses you had did not draw enough people, or is it because 90% of the homes similar to your listing are on the market for less money that yours? Is it because you did not stage the home correctly filling it with candles and flowers, or because you were afraid to speak to the homeowner about a price reduction?

He goes on to challenge the idea that fancy marketing programs and brochures will sell houses:

The leadership of our industry must step up and stop holding on to fiction and side agendas and demand their brokers and agents be authentic. I speak to agents every day who still believe their marketing and advertising plan sells houses, yet inventory levels have never been higher of unsold listings. Is it because you did not deploy your marketing strategy or does it have something to do with the inability to price and position the house correctly? Is your listing not selling because the three open houses you had did not draw enough people, or is it because 90% of the homes similar to your listing are on the market for less money that yours? Is it because you did not stage the home correctly filling it with candles and flowers, or because you were afraid to speak to the homeowner about a price reduction?

The essence of our business must circle around client and customer benefit. As leaders we must demand our agents understand that value is derived from the ability to understand merchandising of real estate, having a clear strategy of contract negotiations, acute knowledge of financial and mortgage aspects, and an effective transaction management and risk mitigation protocol. This is what our industry is. This is where the firms that are winning are moving. This is truth.

As some of you may know, I have been a licensed real estate professional for four years.  This industry is still too focused on itself and not enough on the consumer, customer, and client.  I spent many years in the field of technology media as the tech driven customer centricity models started impacting many, many industries.  It seems like real estate may be one of the last for this movement to reach, but it is coming.