Why Zillow’s ‘Instant Offers’ Pilot Program Doesn’t Matter

Zillow is testing a new program in a couple of markets.  They have a pool of investors who will generate an instant offer on your house, picking it up on the cheap without the time, hassel or expenses usually associated with an ordinary real estate transaction.

There’s nothing new about this. For more than a decade, investor groups have created marketing campaigns to help them identify home owners who will take significantly less for their properties to have a swift and hassel free transaction.  And there are people for whom such an offer has great appeal.

I think about my good friend who, at age 80, wanted to divest himself of a rental condo that was a mess.  He considered the value, and was about to list (with a Help-U-Sell broker!), when an investor group contacted him out of the blue.  They gave him about 80% of fair market value.  He took the offer because he wouldn’t have to clean the place, do extensive repairs, sweat out inspections and appraisals or pay many of the normal costs associated with a sale.  Yes, he lost money . . . or rather he exchanged some money for convenience and quickness.  For him, it made sense.

As the real estate industry continues to scramble and ‘innovate’ to re-establish an identity with consumers, some recent entries to the business have adoped a similar approach.  Open Door, now in Phoenix and a few other markets, is buying houses in much the same way.  They are marketing the program as a new approach to residential real estate, one that relieves many of the ‘pressure points’ that weigh so heavily on home sellers. (Translation:  they are buying low, paying cash, fixing and flipping).

The first time I encountered this kind of program was back in the 1970s, when ERA Real Estate built their whole marketing program around the notion, ‘If we don’t sell your house, we’ll buy it!’  It sounded pretty good.  But after a few years it became very obvious that they weren’t buying many (or any) houses!  The terms of ‘we’ll buy it’ included a sales price based on 70 – 80 % of value, and few sellers were willing to take that kind of hit!

The Zillow program – if it survives the pilot, which it should – will appeal to some home sellers;  but they are the same home sellers who are by-passing brokers to take a quick fix already.  It is competition for HomeVestors (the ‘We Buy Ugly Houses’ guys) and Open Door more than competition for us.

Listen:  we have the best program in the business for home sellers interested in making a move with minimum inconvenience while maximizing their hard earned equity.  While  40+ years old, it still looks wildly innovative compared to current alternatives.  Don’t get distracted!  Remember who you are:  you are in the Equity Preservation business!*  And nobody does it better than you!

*Everyone else is in the Equity Consumption business!  They are into taking as big a bite out of the seller’s equity as possible.  The ‘We’ll buy your house’ people are just taking an even bigger bite!

Who Is Your Customer?

I spent almost 20 years working with Century 21 Real Estate.  I was a salesperson, a broker, owned offices, sold them and then spent a dozen years working for the Franchisor, primarily developing training.

Working in the Century 21 Ivory Tower – International Headquarters, where the rubber meets the clouds – I heard the Executives who ‘ran’ the company say (on many occasions), ‘We’re not in the real estate business;  we’re in the franchising business.’

Being a real estate guy, this really bugged me.  I believed that my job was to help my broker members find more customers and sell as much real estate as possible. But that was an afterthought to the company brass. To them, the Century 21 Broker was the customer – and they wanted to get as many of THEM as possible.  AND they wanted to find as many ways to pull revenue from their existing franchisee base as they could.

It was the ultimate disconnect.  And that attitude of ‘an outlet on every corner,’ and ‘nickle and dime ’em to death’ is how that brand came to mean absolutely nothing in the modern real estate world. Think about it:  what does the brand Century 21 stand for? See, I toldja so:  the powerful identity they crafted 40 years ago is gone.

I’ve been thinking about this a lot lately – but not about Century 21.  I’ve been thinking about Help-U-Sell Real Estate and how subtly but completely different we are.  At franchise headquarters and in the minds of everyone who works for the company, there is no doubt who our customer is.  It is the same customer our franchise brokers have: the buyers and sellers of real estate.

We see the franchisee/franchisor relationship as a partnership.  We are working together to realize a goal we have in common:  to work with ever increasing numbers of buyers and sellers and to grow our presence and marketshare year after year.

At Century 21, questions about what the brokers were getting for all the money they paid the franchisor arose at every meeting. Brokers who entered the system full of hope quickly soured, often realizing they were paying the franchisor more than they were taking home themselves. The relationship became adversarial at its core:  us vs. them.

I’ve been hanging out with Help-U-Sell for 14 years now and in our latest incarnation – the one that began in 2009 – I have rarely heard any of that kind of talk. Because we view our brokers as partners (with corporate as the supporting cast), because we have the same bulls-eye, because we are all real estate people, there is a positive sense of participation and unity in the group.

We don’t look for ways to extract more revenue from our franchisees.  Instead we look for ways to help them do more business.  We don’t sit in a vacuum and dictate how things will be.  We ask our people in the street how they should be and how they could be better and then we go to work together to move in that direction. It is a refreshing approach!

And if you can’t tell it:  I’m proud as punch to be part of this company.  I love who we are, how we operate, what we stand for and how we collaborate.  We are on a mission to not only sell more real estate, but also to change the way real estate is sold; and there ain’t nothin’ better than that!

What a Trump Presidency Might Mean for Real Estate

The inauguration hasn’t happened yet, so all we can do is speculate but, based on what was said during the campaign, I won’t be surprised to see some of the following:

  1.  Reduction of regulation in Banking.  Dodd-Frank created a significant layer of bureaucratic reporting and procedure that banks had to follow.  The goal  was to ensure that nothing like the great melt-down of 2006 could happen again.  It has clearly been in Mr. Trumps sights as well as those of the Republican Congress.  Look for an easing of government regulation in the banking industry that may mean easier access to money.
  2. Reduction of regulation in Construction.  Trump has clearly singled this out for action.  In an address to the NAHB, the said upwards of 25% of the cost of new housing is compliance with government regulation.  His goal is to get that closer to 2%.  In addition to having home builders dancing in the street, this might mean more affordable housing.
  3. Easing of lending requirements on government backed mortgages.  Though not much has been said about Fannie Mae, Freddie Mac and FHA, it would stand to reason that, given the easing of regulations in other areas, a relaxing of guidelines here will happen as well.  It could put home ownership back into the realm of possibility for many.
  4. What about the mortgage interest deduction?  Some in Congress have had their sights set on this for years.  Mr. Trump said he wasn’t going to take it away – but that was a campaign promise. His plan to reduce corporate taxes and initiate new tax cuts for the wealthy may stimulate the economy, but the money to run the government is going to have to come from somewhere. I’m not suggesting we’re going to lose that deduction, but I am saying it might be vulnerable. That’s a very good reason to contribute to RPAC (The Realtor Political Action Fund). They have been successfully fighting for that deduction and for home ownership for decades.

So what does a Trump Presidency mean for those of us who work in real estate?  Based on what I’ve said above, the outlook could be good.  It could mean easier access to mortgage money and lower prices, which could mean more activity. Could.  It also could mean we have to be very careful not to get back into the kind of mess we had a decade ago.

By the way, let me just state what might not be obvious.  This is not a political post.  I’m not a Trump or Clinton supporter.  I’m not a Democrat or a Republican.  I don’t beat the drum or wave the banner for either side.  I’m a Help-U-Sell Real Estate Professional and I watch the market every day for clues as to what’s on the horizon.  As of today, being the positive person I am, this is what I see.

Get Off That Treadmill, You Hamster, You! (another message for ordinary real estate brokers)

How often have you heard it?  ‘Recruiting is the LIFEBLOOD of your real estate company!’ ‘Recruiting is the broker’s single most important job!’  ‘Recruit! Recruit! Recruit!’

Seems like we’re not even in the business of selling real estate anymore.  We’re in the business of providing a place where real estate agents can work.

If your business is driven by agents . . . that’s a definite case of the tail wagging the dog!

It wasn’t always that way.  Fifty years ago, real estate brokers were the business.  They worked hard to market themselves and become fixtures in the local community.  Sometimes, when they had more business than they could handle, they’d bring on an agent, to help.

But everything changed in the 70s when the franchises blossomed.  They showed brokers that every time they added an agent they increased the office’s reach into the community and expanded the office’s sphere of influence.  It was the birth of modern recruiting.

In the 80s, with success defined by the number of licenses held by the broker, recruiting warfare spread across the land.  Once someone figured out how to pay agents 100% of the commission on a sale, commission split became the only thing that mattered.  Splits rose higher and higher and company dollar fell lower and lower.

The contemporary residential real estate broker is little more than a beggar.  He begs agents to come to work for him and then begs them not to leave. He sweetens the deal with the only tool he has:  commission split.  With the lion’s share of the Gross going to pay agents . . . well, they don’t call ’em BROKErs fer nothin’!

It doesn’t have to be this way.  You can build your business on the power of your marketing rather than the number of bodies that occupy space under your roof.  But you must take control.

  1. Get back to reality with an attitude adjustment. It’s your business!  You took the risk, spent the money and you’re the one who squirms when it’s time to pay the bills.  Sure you love your agents, but they are the help. 
  2. Now that you’ve had an attitude adjustment, have a commission split adjustment. You are turning your office into a self-sustaining, lead generating machine.  Anyone who works for you will benefit from that and thus should be paid something unheard of today: a reasonable commission split!
  3. Take back control of your marketing. As commission splits rose to astounding heights, brokers in large measure shifted responsibility for marketing to agents.  Of course, very few agents actually invested in marketing and those who did marketed themselves, not your company.  You have to control the marketing to control the message and the leads that are created.  And you’re going to have to start spending serious money to market your company.
  4. Track and control your leads like the precious gems they are. A funny thing happens when real estate brokers take control of their marketing:  they become extremely fussy about their leads!  How many did we get?  What caused them to contact us?  What happened to them? It’s no wonder.  Today, most brokers spend more than $100 to generate a single inquiry! With that reality, you have to demand excellence in how they are handled.
  5. Never hire anyone until your business is generating so much buyer and seller traffic that you cannot handle it with your current staff. This probably means you’re going to have to let some of your existing staff go. It’s ok. Your future staff is going to feed you so much better than the commission split crew you have now.
  6. Come up with a consumer offer that is so compelling that people have to call you to find out how it works. It should be unique and should benefit the consumer.  Here is a hint:  if your consumer offer is 6%, MLS, Zillow, Sign, Open House, etc. – that’s not good enough.

IF you can execute those six steps, recruiting will stop being your reason to exist and become an essential activity, undertaken when necessary.  Armed with what every good agent wants, a steady flow of leads, you will be in a position to choose the agent you want to hire.  There is a big difference between choosing and begging and, as we all know, beggars can’t be choosers!

By now you are probably wondering what planet this happens on!  Understandably so.  The ordinary real estate world has been flowing in the same direction for so many years that, for it to right itself now would be about as difficult as having the Titanic maneuver around that iceberg!

Thankfully, the infrastructure for this real estate revolution is already in place.  It is a consumer focused, broker-centric business model called Help-U-Sell Real Estate.  For forty years we have been on the cutting edge of keeping brokers in control, and of delighting consumers in the process.  We build our businesses through careful marketing (and we market like nobody else), not by endless recruiting.  We deliver a full service experience that saves consumers thousands of dollars every day.

We organize our offices very differently than our ordinary counterparts.  A broker controlled environment operating on less revenue per transaction would have to.  Many brokers, struggling to make ends meet in their 6% offices, can’t imagine how Help-U-Sell Real Estate is able to charge less and keep going. But here’s the truth:  through proven systems and efficiencies, through careful control of leads and accountability, through staff specialization and division of tasks, our brokers usually return more dollars to the bottom line on a typical transaction than ordinary brokers do.  That’s right:  we charge less but make more.

If that sounds too good to be true, we’d love to talk with you and show you how it works!  Or have you talk with some of our current members.

Let’s be honest.  For forty years – probably less, depending on when you entered the business – you’ve watched us and thought we’d be gone like dust in the wind in a matter of months.  But we’re still here.  We’ve never gone anywhere.  Obviously, we have something that works.  Isn’t it time you found out what it was?