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As real estate agents and consumers continue to react to NAR settlements, it is clear that a fundamental shift in mindset is occurring, and those who understand the psychology behind the shift and successfully adapt to the new reality will be the leaders.
Those of us who have been in this industry for many years have seen countless changes in the industry. Despite our best efforts to adapt and change, in many cases we change our methods and practices without fully recognizing what is happening in the culture around us.
Even though we know that change is inevitable, that doesn’t stop us from being able to understand them when they happen. Like the proverbial “frog in boiling water,” we sometimes discover new situations after damage has occurred.
Here are the issues that I think are generally being ignored – we’ve seen the effects but haven’t recognized the underlying issues beneath the surface. To succeed in the future, we must see these changes for what they are and adjust accordingly.
1. Evolution from customer to consumer
Customer loyalty used to be an issue. In the not-too-distant past, car buyers would buy the same brand that their parents and even grandparents traditionally drove.
Instead of doing extensive market research, they simply followed what they knew. Companies can rely on their customers to be brand loyal. This is no longer the case.
Historically, we bought what we needed. Henry Ford realized the need for a better alternative to the horse-drawn carriage and began producing the Model T. Its huge success underscores the perceived need it meets. However, as for what buyers might actually want, such as color choice, Ford famously said, “Any color the customer wants, as long as it’s black.”
However, over the years we have transformed from customers (buying what we need) to consumers (buying what we want). When I was a kid, Original Cheerios were the only option if I wanted baked whole-wheat oatmeal shaped like miniature donuts.
However, over the years, General Mills has expanded the selection from its original product line to its current 20 varieties, including oatmeal crisp berry, multigrain, honey nut, frosted, cinnamon and more. That’s just General Mills.
A quick walk down the cereal aisle will reveal competing brands in addition to the ubiquitous store-brand versions.There are 32 flavors Mountain Dew, but the all-time champion has to be Pringles Potato Chips, which has had approx. 166 flavors (Of course, that may change by the time you read this).
Another way to classify this change is to label it a shift from logical to impulsive. If you’ve ever ventured down the cereal aisle with a young child, you’ll immediately understand the principles I’m about to explain here.
Historically, if you needed shoes, you went to a shoe store. For groceries you go to the local supermarket, for hardware you go to the local hardware store, for clothing you get the idea.
You go in as a customer, buy only what you need, and then leave, in many cases heading to another specialized store to fill another need. It can be tedious, but in most cases you’ll end up buying only what you need.
However, big box stores like Walmart changed everything. With everything under one roof, you can meet your needs in a more convenient way. The problem has become, especially in a store like Costco or Sam’s Club, you’re no longer just going in to get what you need.
As you venture through a store, things end up in your shopping cart: you go in and buy a few key items, but depending on your surroundings, you transition from customer to consumer. You no longer just buy what you need; You went in to shop. This means you leave with more than you planned for when you went in, not because you need it, but because you want it. In many cases, you don’t even know you want it until you see it.
A significant drawback of the transition from client to consumer is the move away from relationships.
Decades ago, when you walked into a shoe store, you would be greeted by a clerk who would help you buy shoes and talk to you. The idea of working as a shoe clerk at Walmart is laughable these days.
In fact, try to find anyone who can help. Want to buy something at the big box store today? Forget about trying to ask someone – just open their app on your phone and enter the items you need. Its location in the store will pop up immediately.
Better yet, check the app before leaving to make sure your local store actually has it in stock. Yes, it’s faster but completely impersonal.
This mentality is also present in real estate.
In the evolution from client to consumer, the relationship has been lost because, at least in the consumer’s mind, much of the home-buying process can be completed online.
In addition, consumers no longer buy homes based on their actual needs; They are driven by their own needs.
So, to entice buyers to view our listings, we work with sellers to make possible upgrades, staging, etc. to enhance any given home so that it no longer only Meet your buyers’ needs, but stimulate their needs.
Since we are now a country where consumers are driven by impulse rather than logic, as the saying goes, “You have 7 to 10 seconds to sell your home” is truer than ever.
2. Transition from services to goods
December 2020, I wrote”, “To some extent, our society has shifted from being service-based to being commodity-based. With services no longer needed in most areas of our lives, we are focused on ensuring goods are in place. ”
I further explained, “In a commodity-based world, sellers now look for real estate agents who can sell their homes for the lowest commission possible. In listing presentations, I often hear this: ‘You’re all the same .You offer the same thing as everyone else I’ve talked to – why should I choose you?”
When a good or service is considered a commodity, buyers start thinking only about price. That’s why the lines at Costco gas stations are so long. It doesn’t matter that other brands may have different detergents or other additive packages – many people care about the cheapest price possible, so they’re willing to drive across town and wait in line to buy one.
Ludwig von MisesA member of the Austrian School of Economics warned of this trend as early as 1949, declaring: “Consumers patronize stores where they can buy what they want at the cheapest price. They are ruthless bosses, Full of whims, fickle and unpredictable. Nothing matters to them except their own satisfaction. They don’t care at all about past exploits and vested interests. If offered to them they would prefer it or it would be cheaper If they want something, they will abandon the original supplier. As buyers and consumers, they are hard-hearted, ruthless and inconsiderate.”
As it relates to real estate, especially in light of the current NAR settlement, buyers have begun looking for agents who can help them purchase a home at the lowest cost possible.
Sellers are also looking for ways to cut their listing costs, and with the proposal to decouple commissions, if they can find an agent with a lower commission structure than others, that agent’s past loyalty will be chosen regardless.
3. Transition from trustee to functional person
Nar echo this through statements“A real estate agent who intentionally becomes a seller or buyer’s agent by executing a written agreement or unintentionally through a course of conduct will be considered a fiduciary. Fiduciary duties are the highest obligations under the law. A typical example of a fiduciary is a fiduciary , executors and guardians. As a fiduciary, a real estate agent is required by law to owe certain specific duties to his or her principal, in addition to any duties or obligations set forth in the listing agreement or other employment contract. ”
These duties include loyalty, confidentiality, disclosure, obedience, reasonable care, diligence and accounting.
Unfortunately, in addition to the above transitions, real estate agents also undergo a transition as they transition from trustees to staff.
In fact, one of the complaints was filed by Consumer Federation of America The overabundance of part-time agents has led to widespread incompetence. “The residential real estate industry is truly a part-time industry, with most agents working part-time and holding another job, often full-time,” said Stephen Brobeck, senior fellow at the CFA. “There are no other financial services industries or professions where part-time, marginal workers are So common.”
Reading between the lines it is clear that some agents no longer act as fiduciaries; they also do a poor job as civil servants.
Gary Keller, at millionaire real estate agent (MREA) (pp. 94-98), states,
“For the best real estate agents, they provide a level of service that goes beyond even their purpose and value proposition. It’s their commitment to buyers and sellers to act as true fiduciaries – putting their clients’ interests first Above all others’ interests. Even their own.
Based on our observations, this commitment to fiduciary service appears to extend well beyond technical issues of institutional representation. While fiduciary agents adhere to the legal requirements placed upon them by their profession, they also treat all clients with the utmost fiduciary care.
In fact, this may be an appropriate place for us to distinguish between two types of services provided by the real estate industry: functional services and fiduciary services. An officer is someone who is in a task-specific relationship with a client – he gets the job done, whereas a trustee is someone who not only gets the job done, but develops a high-trust relationship with the client and feels full responsibility for the results. ”
Keller continued,
“Interestingly, trustees can easily do functional work, but functional people cannot easily do trust work. Top agents know this and work very hard to provide trust services to all buyers and sellers. In many ways Say, that’s the real difference between average service and excellent service. Trust service is the highest quality of service you can provide to any buyer or seller you work with.”
(To see a side-by-side comparison table of the differences between staff and trustees, see page 96 of the MREA book)
So, what’s the point of all this?
In short, due to the shift in clients to consumers and the accompanying shift in thinking from services to goods, some real estate agents, facing increasing pressure to remain financially viable, have been reducing fees and as a result Their standards also keep falling off the ground.
While many agents across the country are holding themselves to standards and taking full fiduciary responsibility, while increasing their range of services, the overall impact has been a worsening of public perception of our industry, which has subsequently contributed to our current crisis.
Where is the way out?
I believe this should be a full return to the importance of our fiduciary responsibilities and an aggressive campaign to demonstrate our value as advocates at the highest levels. As an industry, we have allowed our standards to deteriorate – now we must step up and plant the flag at the top again.
Carl Medford is Medford Team.
