The Sky is Falling!

Chicken Little said it and it’s become a great analogy for the perpetual fear and panic that has spread throughout the Real Estate industry since long before I got my license almost 25 years ago.  Since I got into this business, I’ve heard the panic almost every single year.  Whether it was the “Banks are going to take over”, “Internet is going to Screen Shot 2017-07-08 at 11.45.49 PMreplace us”, or the seasonal discount broker that shows up with plans to “disrupt the industry”, so far, none of these things have managed to replace the skilled customer service oriented full service real estate agent and firm.

With that said, this is NOT a post about other business models, and it’s certainly not a post designed to discredit or discourage the entrepreneurial spirit and competitive nature of our business or any business for that matter.   Over the years I have seen many businesses succeed and fail but I have always appreciated how these business attempts either prove me wrong or validate my beliefs.

So what is this post really about?  It’s about VALUE vs COST!   Most of the attacks on the full service brokerage model have been almost 100% focused on attacking the COST rather than the value of a real estate agent/firm.  Oh yes… They try to diminish the value of the competitor by implying that they are overcharging for what they offer, but in the end, all that’s being sold is COST.    Sometimes it’s because the market shifts up or down that drives the emergence of these COST focused businesses, but whatever the reason, the common sense is that no matter what business it is, there will always be a large majority of people who demand VALUE over COST.   IF cost was all that mattered to the IMG_2329general public then expensive doctors, lawyers, engineers, and frankly every luxury auto maker would disappear in light a cheaper/less expensive option.   Think of any business, service, or product… There is a low cost version and a high cost version and in every single case there are significant differences in their offerings/products.   It really is about common sense.  An entire industry like the real estate business would not be dominated by full service brokerages if there was such a demand for low cost/discount brokerages.   It’s not like real estate or real estate agents are something new.  And regardless of whether it is a company like Zillow offering “Instant Offers”,  Discount Brokers, or a Tech Company wanting to automate the entire transaction on an APP or website,  the ONE business model that has been sustainable and withstood the test of time has been the FULL SERVICE REAL ESTATE BROKERAGE model.   The fear surrounding the “instant offers” offering by Zillow is not worth the drama either.  Almost every home seller wants TOP DOLLAR for their home so those few who don’t, are willing to sell “under market” to an investor, and that is NOT the Full Service brokerage customers.  So Zillow is welcome to do what they want but until they figure out how to replicate what the Full Service brokers offer and deliver on, they aren’t really our competition.   I’d even venture to say that since Zillows model is to sell leads to real estate agents, that their “instant offers” program is likely a ploy to gather seller leads to sell back to the real estate agents at a premium… Sound familiar???

So the bottom line is this…   IN THE ABSENCE OF VALUE OR EVEN PERCEIVED VALUE, PEOPLE WILL SEEK OUT COST.   And overall, our industry has done a great job not only proving that we are worth our fees, but we have demonstrated it in our overall results over a very long period of time.   Selling a home is NOT easy, and closing the escrow is FullSizeRendereven harder in many cases.  The amount of skill, patience, strategy, & experience it takes to get through most transactions is staggering.   In most cases, there are more things that could go wrong than could go right and it takes incredible insight, anticipation, and problem solving abilities to get these transactions closed.   Furthermore, the amount and quality of marketing, advertising, and over all exposure necessary to drive the demand to achieve the top dollar price cannot just be duplicated by anyone.  Some brokerages and agents simply do more than others and some do it better.  This is an unarguable and easily proven fact.

So who do these other business models have any success at all?  They literally bank on not having to compete with the top brokerages and agents in a competitive listing presentation.  They often count on a seller just seeing a lower COST and assuming we’re all the same and calling them.   Or they hope that a seller is so focused on saving money on real estate commissions that they don’t apply their normal way of considering VALUE in every other aspect of their life to this huge decision to sell their home.  And lastly, they hope that if they do end up competing with a full service real estate agent that he/she will not be skilled enough to articulate their value proposition and justify their fee, leaving the decision to COST where they can always win.

What’s my advice to the full service real estate agents out there?  BECOME EXPERTS AT KNOWING YOUR AND YOUR COMPANY’S VALUE PROPOSITIONS that WILL benefit the sellers and buyers.  Don’t just say that Exposure Creates Demand and Demand Drives Price, but know how to showcase the specific dramatic difference in the amount of exposure that you and your firm can deliver to attract more buyers.  Be able to articulate HOW you are able to deliver a higher level of service, safety, and overall end result to them when they choose you as their agent/company.  And be able to help the customer realize that there is a significant difference between agents and firms.

If you can do that then there really is nothing to be afraid of.   People demand VALUE… They demand SERVICE… And they demand RESULTS.   These things are hard to deliver at a low COST.

I want to leave you with this great quote that really does make it clear as day.  And it’s one that is nearly impossible to argue with.  I would even go as far as to say it is a “law” in our society:

“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey. It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot — it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”  -John Ruskin

In the end and in closing, I believe there’s enough business for everyone.  There is a market and a customer for every model.  And what makes our country so great is that the customer is given choices.   For me, I will always be a VALUE guy when it comes to large and very personal decisions that will affect my family.   I drive a nice, safe, and expensive car, I seek out the best doctor, we have a great, but pricey family lawyer, I pay a little more for great insurance from a large company, and yes… I shop at Nordstrom almost exclusively because of their service.   But I don’t fault those who choose the opposites of those to save money as that is a decision we all should be able to make for ourselves and options that should always be available for those who want them.
Thanks for reading!

Brad Pearson

About Brad Pearson

Regional Vice President, Coldwell Banker Residential Brokerage Orange, San Diego, & Riverside Counties.

Posted on July 9, 2017, in Education/Coaching, News, Uncategorized and tagged . Bookmark the permalink. 2 Comments.

  1. Karen Carlson

    Well said!!!!!😀

  2. Amen! Technology makes a much better slave than a master.

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