I have to admit I was one of those typical Denver Real Estate agents that would be offended, if not insulted, if anyone asked me to “reduce my commission” to sell their home. After all this is my profession, my vocation, my passion, my…well you get the idea. And there is no way I was going to work for less than I deserve to sell your home. Maybe this argument sounds familiar…
“…Of course I will not reduce my commission. How would you feel if your boss came to you and told you he wanted you to do the same amount of work, the same amount of time for 1/3 of the pay? You wouldn’t do it and neither will I!”
Blah, blah, blah… This is the standard answer that a real estate agent will give you if you ask that question. He/she has to. It is engrained into their psyche ever since they were baby real estate agents. I think they had to memorize that answer to even get into a Tom Hopkins seminar! I know this for a fact because that was the answer I used to use. And it was effective.
But I have seen the light…
One only has to look at the United Auto Workers or grocery store cashiers as examples to see why this philosophy is antiquated and is quite frankly anti-capitalistic.
The UAW fought (and is still fighting) the use of machinery and computers to build cars. Their argument… “it takes jobs away from hard working red blooded Americans” or “ the pride and craftsmanship I put into each bolt that I turn cannot be matched by a machine”…you get the idea, right?
I, for years, would only buy American cars because I believed that we should do everything to keep the money into the hands of the American workers, even if it meant paying more for an equal or lesser product. Its American made and darn it I am an American!
Now flash over to Japan in the mid eighties. W Edward Deming’s went over to Japan after WWII and taught the principles of Quality Control. The Japanese embraced these concepts and took it to a whole new level. They realized that computers and machines could produce the same results more quickly, more consistently and at a cheaper price. The quality of their products was superior and they were able to produce the cars more efficiently, which turned into more profit for their companies.
The American car buying public realized that better quality (even if it was a few dollars more expensive) was more cost effective in the long run, and began buying Japanese cars as soon as they hit the coast. This forced the Big 3 to lay off workers (who were demanding higher wages, better health care, better grass on the kid’s soccer fields, etc…) and close plants. The Big 3 and the UAW were forced to embrace these concepts, change their thinking and the way they do business. I am proud to say that American cars are being produced much better now and that their quality is no longer even an issue.
Now I feel for the UAW workers and their families but this automation was inevitable and necessary, because consumers and their demands drive the market place. If a product can be made or delivered to them with equal or better quality, and is cheaper, then it doesn’t take a doctorate in economics to figure out what consumers are going to buy.
Go into any King Soopers or Safeway and you see this happening right before your eyes as well. The self checkout stands are always packed (I prefer to use them myself). The management realized that 1 clerk can run 6 checkout stands. This saves them tons of man-hours and helps them stay profitable even with less than 1% margins. The grocery buying public forced this to occur because the competition from Wal-Mart and Target caused them to deliver the same or better product, cheaper.
So how does this natural trend apply to Real Estate?
Smart listing agents should spend most of their time and effort marketing their listings intelligently (80% of all home buyers use the internet for research when buying a home, according to the NAR). This means using the internet for the bulk of your marketing, not running ads, for example, in home magazines that no one reads anymore.
Look. There is only one real reason a house sells…if it is priced right. Priced to high, the property sits. No matter whom you go with to list your home, no flashy yard sign, or fancy acronym after their name will really do anything to sell your house faster. Every agent will post your listing on the MLS, use a lock box, put up a yard sign, make fancy brochures, hold open houses (well most do) and tell other agents about your home.
But with the onset of the internet the second most important marketing tool after the right price, is the posting on the MLS. This opens up your listing to everyone in the world, but more importantly, your listing is exposed to the huge percentage of buyers who are going online to look for homes.
Now any additional internet marketing can be expensive, but with competition with online services being highly competitive, you can get more exposure per dollar than we used to be able to get through magazines.
The bottom line is that in the Denver Real Estate market, ReLogic can deliver the same services as the top 5% of real estate agents, but do it more efficiently, effectively, and for a lower price. So typical listing agents need to realize that there are companies out there that have changed their thinking, revamped their business model, and streamlined their costs to provide the consumer with a better product at a cheaper price (sound familiar to Detroit?).
So if we go back to the earlier argument about a boss asking you to cut your pay, what he (or the client) is saying is… “There are other companies out there that are delivering the same or similar types of services for a lot less money. So if you don’t change your business model or lower your costs then you will not have a job anymore”.
So don’t be offended. It is inevitability in any business, and real estate is no exception. If you don’t change, the world and the industry will change around you.
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