How Prestigious Art Thou?

This post is part 1 of 2 ‘alternatives to traditionalists’ posts

A popular Harris Interactive Poll has regularly asked the American public to rate occupations in terms of how prestigious they perceive them to be. The poll asks respondents to identify the level of prestige among 23 occupations.

And the survey says (pause for effect)… Real Estate Broker/Agent is ranked 23rd (dead last) by a wide margin year after year. How’s that?

Firefighters, scientists, doctors, and teachers are on top. Engineers, architects, lawyers, and business executives rank well. Ranked lower are entertainers and bankers. And then there are the real estate salespeople.

If I considered Exclusive Buyer Brokers LLC or the other alternative business model firms I believe in (I refer to us collectively as “the good guys”) to be anything like the traditional real estate firms and their agents, I wouldn’t be referencing these poll results. However, it is precisely because of the inability and unwillingness of this industry to improve upon itself that inspired us “good guys” to challenge them. The majority of our competitive advantages stem directly from the traditionalist’s shortcomings, but I’ll talk about that in part 2.

So why don’t people respect the real estate broker/agent profession? I’ll offer the following reasons, perhaps you can suggest others.

1) As a whole, too many real estate professionals are not professional. Education and training and licensing requirements are all very low hurdles relative to the other professions.

2) Real estate professionals work for their own interests ahead of their client’s interests. What do you really expect when dual agency (compromising client representation so as to work both sides of a deal) and high referral fees (between obviously aligned agents whenever horse trading benefits them) and high commission rates (I needn’t elaborate how most people feel about the very high cost of services compared to the true value of these services) all come together within a structure that only rewards dollar transactions (compete for deals or starve, especially today)? What do you expect when, given their sales training and at the insistence of their managing brokers, they use their listings for conducting public open houses primarily to cultivate additional clients for themselves, and they emphasize showing in-house company listings to buyers? It’s only natural to then see who’s interest are best served.

3) Many real estate professionals cannot be fully trusted. Again, as a whole, they share too much information with each other in order to close their deals. Too many people have too many experiences and stories involving the sharing of buyer or seller information.

4) Most people, when working with someone from any profession, can feel the difference between being a client versus merely being the customer. Buyer’s historically have been treated as customers who shop for and buy homes, while sellers are better served as the clients by all agents involved in the deal. It is funny how commission rates are negotiated between the seller and their listing agent, despite the (hidden or obvious?) fact that it is the buyer’s dollars that actually pay for all commissions.

All in all, it’s not much of a surprise to anyone that prestige is lacking, if not absent, in the real estate industry. So what will change going forward?

Nationally, the NAR (National Association of Realtors) and their lobbyists continue to aggressively defend industry practices that protect Realtors. It would be wrong for them if they did not. The NAR along with the State associations have been very effective at resisting unwanted changes. The “good guys”, who are also NAR members, are ready to serve educated consumers who demand something better (and thus it is they who actually foster the improvements).

In Illinois, the real estate licensing requirements are changing right now. Illinois real estate licensees are being asked to better serve the public, and so this could upgrade their image. What’s in a name? All ‘Agents’ must transition to ‘Brokers’ (after an couple of hours of review, they must pass a proficiency test that has a 96% pass rate) and all former ‘Brokers’ who wish to retain their higher license category (and be bosses who run firms) must transition to ‘Managing Brokers’ (after a few hours of review, they must pass a proficiency test that has a 98% pass rate). And just like that, similar to the banks, we’re all Vice Presidents. Perhaps, with slightly higher training requirements for future real estate salespeople (or ‘Vice Presidents’ if you prefer) going forward, an improvement will be achieved. Although I’d say the improvement will mostly stem from the ongoing shakeout of weaker licensees caused by the tough housing market.

Part 2 of this post, “A Rare Breed Indeed”, will explore alternative business model approaches to residential real estate, which introduces consumer-focused practices that will promote “the good guys” upwards on the prestige scale. Maybe someday this might even influence the larger real estate industry? One can hope…