You Go Boy!

I’m not entirely sure why I feel this way, but reading Matthew Rathburn just tee off on a couple of people who emailed him unsolicited ‘advice’ was… just refreshing in so many ways. I can’t help the title of this post. 🙂 I urge you to go read the whole thing. It’s insightful and just plain old fun.

He does raise some really, really key challenges, however facing the brokerage industry:

Why do consumers think that they can beat up on agents?

The answers are simple. Agents have been catered to for far too long. Pre-licensing educational levels are too low, continuing education is a joke all most everywhere in the country and many Brokers will accept anyone with a license, regardless of capabilities. This is a very litigious industry and agents are handing their clients lawsuits, because they don’t know what they are doing. They begrudge having to take any training, even if it’s designed to save their own butts and to provide better service to their clients. I also will add that the education providers MUST increase their quality, so that agents will actually be educated in the courses being offered.

Clients are getting the information that agents have been controlling for a long time. You’re not the keep of the data, which is why many consumers came to you in the first place. For too many years agents access to controlled data was their only identity and customer service went by the way side. Agents need to improve their consumer advocacy and quality of service to show that this very complicated transaction is best handled by trained and capable hands – otherwise the agent should just turn in their license. For much of the country the days of going into floor duty time and stumbling on a commission are over.

The agents have failed to meet the challenge of angry consumers, like the one mentioned above, because they don’t know their own market place well enough; even though the information is readily available to them. Agents are taking overpriced and unsalable listings and not saying “no, you can’t reasonably sale for this price and in this market.” Instead, the listing is taken without disclosing the reality to the Seller and being “honest” because we are trying to save the seller’s feelings and/or because the agent simply doesn’t know the market.

All of these issues contribute to the lack of perceived “honesty” from the agent. It’s hurting the industry. Better education and a professional frankness with the consumer will go along way to repairing the perceptions held by some consumers. Industry Professionals should not be afraid or ashamed to tell a buyer or seller that their expectations are unreasonable and not care if that consumer finds another agent. That other agent won’t be able to help them either.

These are things I’ve been feeling personally for quite some time, and seeing as how I’m not a Realtor or a real estate agent or a broker, I think I can speak as the voice of the Consumer to some extent. But I am a lawyer, and have worked extensively in professional services (marketing agency work) and have some ideas on what constitutes professional services in the first place.

Real estate agents and lawyers share contempt by the public. Why do consumers think that they can beat up on lawyers?

This is not at all unusual, nor is it particularly cruel, as far as lawyer jokes go. Why do consumers feel that they can have such hatred for a profession?

One reason is that there are too many lawyers.

Justice Sandra Day O’Connor is said to have quipped: “There is no shortage of lawyers in Washington, DC. In fact, there may be more lawyers than people.”

And yet, when a man actually gets into a situation where he needs a lawyer, all of the hatred and contempt simply melt away, and he is divulging all sorts of personal information to the lawyer, paying enormous fees, and feeling grateful when the lawyer helps him out of a jam. This all while he maintains the low opinions of lawyers as a whole:

Now consider that at least, to become a lawyer, you have to first complete some sort of a college education with grades good enough to get admitted to law school. You also have to take the LSAT’s. Then you have to attend some sort of law school for approximately three years, the tuition to which is not exactly cheap (my alma mater is some $40K a year), and pass the Bar in the jurisdiction where you want to practice. Studying for the Bar Exam is a months-long process that I would not wish upon my worst enemy, and the exam itself is a multiple day grind of frustration and anxiety.

Even with those barriers to entry, there are apparently one million lawyers in the United States. Yours truly is one of them.

Lawyers are accused of all manner of unethical activities, from incompetence to sleazy marketing to defending the indefensible to rapacious greed. Sounds familiar, doesn’t it? At the same time, most of the lawyers I know personally (friends from school, etc.) are some of the straightest arrow squares out there, who wouldn’t drive over 55 MPH because that would be breaking the law. They are some of the most honorable, upstanding citizens of this Republic, oftentimes working extraordinarily long hours in an effort to see justice done.

In my ever-so-humble opinion, both industries suffer from the same problem: too many practitioners.

On matter how high your standards on paper, to have a million practitioners, you have to compromise them. Professional Ethics for an attorney is an amazing thing… on paper, and in theory. In real life, lawyers routinely violate canons of professional ethics left, right and center, and think nothing of it. Same with Realtors. Part of the problem is that competition is so fierce that lawyers (and Realtors) don’t want to turn paying clients away. Any opportunity for revenue is something that has to be grabbed, ethics be damned.

The solution to the problem is to reduce supply of real estate agents, whether through regulation or voluntary hiring standards. Not that it works all that well, but the legal profession does have mechanisms for ridding itself of bad attorneys: disbarment. What exists in real estate?

If there were only 100,000 lawyers in the United States, such that the public isn’t treated to the spectacle of lawyers agreeing to take on ridiculous cases just to earn a fee, the perception of the legal profession would change significantly. If becoming a lawyer were significantly more difficult — fewer accredited law schools, or higher requirements on the Bar Exam, or whatever — I do think that the public would perceive them in a much more positive light. I happen to know that lawyers in Korea, for example, enjoy a sumptuous reputation — word is, their Bar Exam passage rate is 10%.

Neither the legal industry nor the real estate industry will change towards a regulated system of limiting the number of people who can claim to be an attorney or a realtor. There’s too much money being made by ambulance chasers on the one hand and the sleazy, know-nothing agents on the other.

But in that environment, an opportunity does exist for the elite firms to separate themselves.

There is a fairly clear separation in the legal industry between those who practice so-called “gutter law” and those who practice at the high-end: typically corporate law, white collar criminal defense, and the like. David Boies may be thought of as many things, but sleazy isn’t one of them. Cravath, Swaine & Moore is nothing at all like these guys.

This is what does not exist in real estate: firms whose reputation for quality is beyond reproach, and who routinely turn down clients as being below their own standards. Firms who have invested in their brand, and enforces their brand ideals throughout the organization, with no exceptions and no excuses. Hiring practices at the top law firms are nothing whatsoever like hiring practices even at top real estate companies — in large part because the compensation structure is so different.

I think at least this level of separation can be achieved in real estate. It won’t be easy, and it won’t be quick, but it can be done. Venerable firms with decades of tradition and reputation can and should start to really separate themselves from their peers not through fancy websites but through quality of their professionals. If the regulations won’t enforce higher educational standards and professional education, then the firm should, by routinely firing agents who do not meet their standards (or refusing to hire them in the first place).

Better education and frank honesty will go a long way towards repairing consumer perceptions of real estate agents. But they alone can’t get it done. Those have to be combined with a more stringent set of standards for enforcement and professional standards by the industry and its participants themselves. And those things in turn have to generate enough revenues to allow the firms that have taken the ‘high road’ to turn down clients, turn down unrealistic sellers, and admonish irresponsible buyers, without having to worry about staying in business.

-rsh