One advantage of long road trips, particularly with say… one’s spouse, is the opportunity to talk without interruption. The car moving down the highway at 75 65 miles per hour (or whatever the legal speed limit is, officer) becomes a sort of isolation chamber without TV, without the kids demanding attention, and without any other distractions.
So it was on a recent trip to San Antonio. Having left the kids home with the grandparents (truth be told, we were sort of asked to leave so they can monopolize the time with The Spawns), Mrs. Notorious and I found ourselves with all this time to talk about things and catch up. Eventually, you run out of the domestic, immediately relevant, personal topics… so being that the Missus has a MBA and some twenty years experience in fashion retail, we got to talking about business.
She raised a complaint, and an ancillary point, that I thought was interesting enough to share, especially with the audience of this blog that tends to be almost all real estate people.
She thought that the retail industry needed to “go back to basics” in a profound and fundamental way.
I agree, but it’s worth understanding what “the basics” are.
The Basics of Retail
Mrs. Notorious’s complaint, being an executive at a retail company, is that she was having to manage, work with, and train the young people coming out of school with degrees in business, in fashion merchandising, and marketing who didn’t know the basics of retail. For example, she would complain about these young women (they’re all young women in her company, it seems) who graduate from a four-year college program with a degree in fashion merchandising who didn’t know how to do retail math. There were business majors who couldn’t figure out whether “buy-one-get-one-free” is a better deal or not than “50% off”. (For retailers, the former is better since it results in faster inventory turnover.)
These young people were full of the latest ideas about e-commerce, about social media marketing, about using QR codes, and spent their time looking at the latest fashion trends in the pages of Vogue, Elle, and WWD, but did not know the very basics of the business of retail.
My wife’s idea: she wanted to put all new employees on a 90-day probation period during which she would teach them the basics, test them, and fire the ones who didn’t pass her standards. As she put it:
The business of retail hasn’t changed in a hundred years. It’s still about buying inventory at one price, selling as much of it at full price, then working the markdowns to get to a margin number. Marketing is still about getting people to want to buy something they don’t really need, because it’s pretty, or cool, or whatever. And all this Internet stuff is great, and e-commerce might be the future, but the retail business is still about factory to warehouse to stores to customer.
I, of course, concurred.
Jumping To Advanced Too Soon?
The car-ride conversation brought to mind all of the hundreds of conversations I’ve had in the past few years about the real estate industry. All the countless hours spent talking about “raising the bar”, about professionalism, about quality service, about marketing, about social media, about everything real estate. Even all of the data chatter, all of the technology talk, all connected in some way to the supposed lack of core skills on the part of real estate brokers and agents. How many conversations with smart technology guys ended with, “Yeah, that’s all great… but you know the agents are just too lazy to implement any of that, right?”
I spoke recently with a friend who is in the coaching business. He told me that one of his clients, a newcomer to real estate with all of nine months under her belt, spent more than $50,000 on websites, SEO optimization, print advertising, and even TV spots. She didn’t get a single deal from any of that, and hadn’t done a single transaction, but was arguing with him about the value of branding and long-tail marketing.
As a strategist and a marketer, I immediately wondered what someone who hadn’t done a single deal yet was doing thinking about, and worse, investing in, long-tail marketing. That sort of thing represents one of the most advanced topics in marketing. It’s a specific phenomenon applicable to a fairly narrow segment of the economy, although Allah knows it’s been tortured to fit just about every conceivable arena — usually by consultants and vendors who make a living selling “long tail marketing” solutions to various people.
Not being a real estate broker or agent, I don’t know what the fundamentals of the real estate business are. But is it so unthinkable that the basics haven’t changed in a hundred years, as they haven’t in fashion retail? Some people want to sell property; others want to buy property; helping the first group find the second group, and making sure that deal gets done… is it really that much more complicated than that?
The Fundamentals: Consumer’s Perspective
I may not have ever worked as a real estate agent, but I have now been a real estate buyer and seller multiple times. Here are the fundamentals from my point of view.
The real estate transaction can be divided into three parts: Marketing, Pricing, and Legal.
The Marketing part is where we all spend most of our time thinking about: how to market a house for sale, how to find a home for sale, what channels are most effective, how to stage a house, etc. I think most consumers know about the MLS now; that’s not going to be enough. As a seller, the basics I’m looking for is some knowledge of what buyers are looking for and how the agent can advise me to make my property stand out in some way. As a buyer, I’m looking for knowledge of the neighborhood, and alternatives to that neighborhood. I’ve probably done a bunch of research into an area; I may not know about some other development or some other neighborhood that could fit my needs better.
The Finance part really boils down to one thing: pricing. As many top agents have told me over the years, pricing is part science (involving comp analysis, economic forecasting, and number crunching) and part art (involving gut feelings, buyer preference trends, location knowledge, etc.). I want to know that the price I’m paying/getting is a fair one. And this is where consumer distrust is the highest, since we all know that agents get paid a percentage of the final price. But assuming that I trust your integrity, the fundamental I want is the ability to price a property and justify that price with reasoned argument. Some basic knowledge of mortgages would be useful, but I expect that I’ll end up working with some mortgage banker or broker on that. Negotiations are important, of course, since concessions, timing, etc. all play a part in the final price. But above all of those is pricing.
The Legal part is all of the procedural hurdles that a real estate transaction has to go through. Various towns, developments, counties, and states have laws, regulations, and rules that I don’t know and have no business knowing. The fundamentals here are just knowing what steps have to be followed, in what order, what papers have to be filed with whom, what authorizations are needed, etc. etc. Yes, I know that many brokers and agent teams employ transaction managers who handle these procedural things. I understand why that would be useful for the experience agent who already knows how to do those things; I wonder if it’s such a great idea to provide such a thing to newbies who don’t know.
Fundamentals: Teaching and Evaluating
The question I have now is… who teaches these fundamentals? Who evaluates them? And what is the impact of evaluations? Do the real estate schools really teach these and test them to ensure that every agent with a license knows how to do a comp analysis, how to price a home, and what the procedural steps of a transaction are? If not… what’s the point of these schools?
Does the broker teach agents how to market a property, or how to find a property for sale? Does he test agents for pricing knowledge, or negotiation skills? If not, what’s the point of the broker?
Coaches abound in the business; from what I’ve seen and heard, they coach primarily one thing and one thing only: lead generation. How to get new clients. How to market yourself. How to work the “sphere of influence” so you can get more clients. Does any coach teach the fundamentals? If so, how do they test them? What happens, if anything, if an agent fails?
There’s much talk about raising requirements for a real estate license, to include things like mandating a 4-year degree. I have a 4-year degree; I don’t know that I learned one frikkin’ thing about how to do a comp analysis. My wife’s experience is that people graduate with 4-year degrees in seemingly applicable areas like business or fashion merchandising, yet these people have no clue about the basics of retail.
There are a number of people who think that mentoring programs and apprenticeships are the way forward. Maybe they are. But who tests the mentors to see if they know the basics.
And finally, who stands in the way of the newbie with nine months of experience who can spout off theories on long-tail marketing, and spends time and money on organic SEO, but hasn’t done a single deal to say, “Hey, listen, maybe you should make sure you know the basics before you start dropping thousands of dollars on advanced marketing techniques?”
Back to Basics
It’s an appealing notion, this idea of returning back to basics. In fashion retail, where my wife works, there are well-settled principles, time-tested techniques, that constitute the basics: retail math, inventory management, supply chain and distribution, pricing and markdowns, etc. An experienced person like my wife not only knows what to do, but knows how to teach it to newbies, and how to test them to make sure they know.
My question now is, even assuming that it would be a good idea for real estate to return to the basics… what are those basics? And who is/should be responsible for teaching them and testing on them?
Your thoughts, answers, questions, and critiques are welcome, as always.
-rsh
15 thoughts on “Back to Basics: A Conversation With Mrs. Notorious”
Firstly, thanks to Mrs. Notorious for giving you that red meat to chew on. Secondly, I challenge the notion that a four year degree should be viewed as purely vocational. That is, are colleges and Universities supposed to prepare the student for employment or to teach them how to think? Ever since I was an undergraduate myself, I thought it was the latter. Having spent time lurking around the halls of some graduate B’ schools, I was more convinced than ever, that most schools taught theory not practice and I have even written, in the distant past, that graduate degrees in Business should not be awarded until the candidate showed proficiency in the real world and worked successfully in their major field for, say, five years before being allowed to enroll. Among the various real estate interests that I have is teaching and instructing. Having taught hundreds (maybe thousands) of pre-license and post license students I can validate your point that real estate education (in general) does not teach the student how to practice the craft (any more than your pseudo-Socratic law professors, by having students grind those case studies till they “think like a lawyer” prepare them in any fashion for the practice of law.The states mandate, by statute, the content of real estate courses and they are indeed out of touch with the practice. Finally, I believe that going “back to the basics” is not the answer (as the basics have changed) is a generational cop out which translates into ” those whippersnappers don’t do it my way” argument. So, here’s the really dim view (hope you are ready to read something more depressing) is that I don’t think the US “system” of education or business is entrepreneurial any longer. We are shadows of our former inventors, political leaders, and business leaders of the past (with some exception) and I don’t think real estate is practiced much worse than most other professions around today. Do I have any answer…not really
Hi Paul – I thought I was gloomy, but man, you’re ramping it up a notch. 🙂
One interesting thing, at least with lawyers: the law schools do NOT teach the basics. No established attorney thinks that; all that law schools are supposed to do is exactly what you said: teach someone to think like a lawyer — IRAC (Issue, Rule, Application, Conclusion). The law firms (or in smaller firms, the partner) take the responsibility of teaching the fundamentals of legal practice, and “tests” associates. Those who don’t get the basics usually end up unemployed.
The other question is, you said that “back to basics” is not the answer, because the basics have changed. Really? What fundamental of real estate has changed since about 1935?
I agree as to the “instructional” partner in a law firm. It is really the apprenticeship of years past that makes for a good lawyer (I think)
Changes in real estate since 1935, really? Off the top of my head I would think the demise of the pocket listings by brokers and the creation of the Multiple Listing Service (which you so eloquently document it’s current demise, sign of another shifting basic).
And, what about the rise of Buyer Agents? That is a change from 1935 brokerage.
The rise of buyer’s agents is a good one; I know Ardell (see below) would gladly get rid of buyer agency altogether, and I’m not sure I disagree. I see her point.
But having said that, retail has changed quite a bit as well — just-in-time inventory, automated replenishment, etc. but the basics remain the same. I guess I’m just curious what, if anything, are those basics for real estate.
That’s why you should hire a CRS – A Certified Residential Specialist is a REALTOR who has earned certification from the Council of Residential Specialists by completing advanced training and my meeting significant experience requirements.
BTW Real Estate schools just teach you enough to pass the exam… In Colorado we are all required to Be Brokers and Pass the Broker’s exam
And who teaches the CRS agents these basics? Certification is utterly meaningless to a consumer — I don’t know that I’ve ever asked what certification a realtor holds before deciding to hire him/her, and have never heard of any consumer anywhere ever making a decision on certification.
Finally, would you confidently say that someone who is a CRS knows all of the “basics” of real estate and could pass an exam conducted by a top professional with decades of experience?
Your wife sounds like me. LOL! Loved this post! Love the Mrs. Notorious!
When we represent the seller of the home, “back to basics” is to teach what actually sells a house and the things the agent needs to do (besides marketing) to get the home from listed to sold. I have never been a huge fan of “it’s a numbers game”. My clients are not numbers to me. My goal is to sell every single last one because an agent is ABOUT what their clients are about…or they are about nothing at all.
All the cool marketing isn’t going to help if you don’t know a whole lot about pricing, condition and presentation. …and gentle persuasion of the seller client to move them to where they start out to where they end up to be successful at their task at hand. Virtually NO adequate classes exist on those topics for the newbie.
“WE”, the collective “old school WE” learned it from other brokers in the office by osmosis. By hearing them talk to clients on the phone. By hearing them bitch and moan at their desks about what needs to be done vs what the seller is willing to do.
Absent?? Anyone at a desk talking on a phone. 🙂 It’s true we NEVER had classes on those things. But we had active agents in very close proximity to “learn” from without talking to them and bothering them. I have done some one on one or small group “classes” inside homes on this, and it is amazing how quickly most learn. …and how sad they are when they realize how easy it IS to learn, and yet 2 to 5 years in the biz and no one ever took the time to even attempt to “teach” it to them. Sad really.
Putting on our other agent hat, the represent the buyer hat, there is no “old school” for that. In the “olden days”, buyers did not have separate and equal representation in a real estate transaction. Old School is that an agent and a seller had the same objective, fast as possible at the highest price possible. The marriage of the agent and seller was a natural success story. Theory was every buyer is a seller someday, so all are served by representing sellers well…eventually.
The lesson of representing a buyer well fails at “fiduciary”. It fails at one’s ability to “remove self interest”. Self interest for an agent and seller is on par. Same interests…sell the freakin’ house! It doesn’t translate when representing a buyer client.
Representing a buyer well will never have an adequate “teaching” to new agents…because the brokers cannot remove the self interest that translates into: “hit the streets, get them off the fence, sell them a damned house already!”. It fails at the top…and trickles down to the blood in the streets. 🙁
The lesson for buyer representation is to throw all the “old school” in the TRASH bin…not in the “recycle” bin, and the classroom needs to be full of Owners and Brokers…not agents. Good luck with that one.
Are you kidding? A four-year degree isn’t going to help anyone be a successful real estate agent! Every transaction is so different you can’t teach it in a classroom, out of a textbook, or a lecture. That’s what the broker is for, to guide when issues come up. An agent has to seek out training in the basics. MLS boards offer free classes on how to do CMAs, pricing, how to list homes on the MLS, etc. Brokers offer training on the purchase contract. Local REALTOR® boards also offer free (or for a nominal fee) training on various legal issues. From my experience, it’s up to the newbie agent to get the training and knowledge they need because it’s not handed on a silver platter.
As you know, I’m a fan of the apprenticeship idea. I think agents that have shown their competency by having strong practices themselves, would make great mentors. Whether they are willing to spend time away from their successful practice to support future competition may be another matter entirely. But, I think it’s fair to say that would be the place to start when looking for qualified mentors.
You mention ‘the basics’ from the consumer standpoint. But, the reality is that an agent lives and dies by their ability to generate business. And while the skills you mentioned are critical for an agent’s long term success and the ability to serve their clients at a high level, they are useless to an agent without any clients. An agent may be exceptional at marketing homes, pricing them effectively, and understand local laws, but without transactions, he’s out of business anyway.
Because of that challenge, agents are barraged with sales pitch after sales pitch, one lead gen opportunity after another. They are on the lookout for the easiest solution to generate a consistent flow of deals. And while they may intellectually understand that there is no magic bullet, it is so enticing.
Far few agents come into this understanding that they own a business. It requires money, systems, potentially staff, time management skills, the ability to assess return on activities and marketing, in additional to those basics you mentioned. Those that are really successful understand that reality and manage it as a business. I think there is value in coaching on these kinds of fundamentals. It’s not just lead gen.
It’s important to know that while understanding the basics you mentioned may make for a good agent, it doesn’t necessarily mean a successful real estate practice.
I see your point, Linsey, but… the business skills you’re mentioning are things that any small business owner needs to know, or go out of business. Law offices and medical offices also need to know how to generate business, keep costs down, and profit.
I agree 100% that many brokers and agents need to learn to be businesspeople first. But my question in this post is all about the “basics” of real estate. There are basics of medicine, basics of retail, basics of plumbing… long before any person is a good or bad businessman. So what are those basics? And who teaches them?
In terms of who teaches them, I still believe that it’s the agent that has a successful real estate practice. I think someone that has experience in growing a practice can support new agents in identifying the Basics.
As for what the basics actually are, I think there’s a mixed message in your post. Your wife is talking about the basics from an internal industry perspective. That’s what I’m referring to, I guess. What you are referring to is the expectation from the consumer’s perspective and experience. I’m not sure they are one in the same.
Your better half just summed up the reason why I have such disdain for the ReBoot-style workshops for agents (not just singling out ReBoot). The other day I had an agent sit down with me – new to the busines (6mos). She talked for 35 minutes about Video, Apps, FB pages, Blogs, Email Campaigns, 4 Square, Twitter, etc. Essentially vomiting “tech Tools” all over the conference room table.
I paused and looked at her… and asked her two questions:
1) Why should I buy/sell a house today?
2) What does the market look like/tell you about where prices/inventory are going in “X-neighborhood”?
I might as well have kicked a Golden Retriever puppy in the chest and then smoked a cigarette in the hospital. The blank look on her face mixed with, “Dude that is SOOO boring and 2000 – what the F**&* do YOU konw?” was obvious.
There are so many peddlers of “wares” out there today preying on the utter fear of agents not knowing what to do/how to survive (not even succeed) this market, that these “tools” have (as you/your wife say) replaced what is truly important to succeed – IMHO –
1) Market Knowledge – (Macro, Micro, Hyperlocal)
2) Transaction Management/Negotiations
3) Pricing and knowledge of home values
Who should teach this?
Personally (and yes this is my job) but the BEST case scenario is that it come from internal management. This doesn’t mean that all of the materials need to be created from management/brokers, but the overall curriculum needs to be screened, adapted, and facilitated by internal management. Leveraging outside sources (whether it be Steve Harney, Brian Buffini, Tom Ferry, whatever) in my mind is totally acceptable and should be endorsed.
However it comes down and falls on the shoulders of the broker/management team to meld this (and other trainings through local MLS, National Associations, Speakers, etc.) into a valuable curriculum based on the local market and your consumers.
Anyway, that’s my 2 cents and how I run this in our organization. I don’t think it’s so important as to “who teaches it” as it is “who sets the curriculum of what is taught.” Teaching it internally with internal instructors adds value to the brokerage, aids in retention, aids in recruiting, and essentially benefits the bottom line (in theory) as agents will be winning listings, securing buyers, negotiating closed deals, and most importantly pricing properties effectively that actually CAN sell.
’nuff said – Matt Dollinger
One of the best things I ever did was leave the fancy Liberal Arts College and get my degree in Hotel and Restaurant Management. I did not just get the book side of the education, I also got a great job learning the reality of a restaurant.
I signed on for minimum wage at a top restaurant as the owners lackey. I would take my classes in the morning and then work at the restaurant doing whatever he needed from noon to ten pm 6 days a week. I learned the book stuff in the morning and then learned reality in the afternoon. I essentially created my own apprenticeship. I would have paid to work at that restaurant too. The owners were industry leaders and great teachers.
I wonder how many of Mrs Notorious’s new employees worked in the retail trenches before they were hired? My guess, not many. They are indicative of today’s elite students who think formal education is all they need.
Instead the combination of book learning, passion, and getting dirty in the trenches is the key to success. My guess is most of the new hires possess 2 out of the 3 if they are lucky.
The same goes for most real estate agents. They may have the passion and the knowledge but they don’t want to get dirty doing the hard work. Or they work hard and have education but no passion.
Watch to great ones in the real estate world. They get dirty learning the nuts and bolts. They have the passion to create exceptional experiences for their clients. They have the lust for knowledge to learn the new things
The basics? These are the basics. Like restaurants, you can do the basics and still fail miserably if you do not do them consistently and with passion.
Rob, do you recall the conversation we had with Garry Wise in Austin last year? Garry basically commented that he could teach anyone to sell a house. But a much bigger challenge lay in teaching someone how to provide the best service to the customer and to maintain the integrity of the broker’s brand. In fact, he argued he could accomplish the latter much easier with an inexperienced agent than with a veteran “Lone Wolf” who wanted to do things their own way. Sure, the experienced agent might sell more, but potentially at the cost of unhappy clients or irreparable damage to the company’s image.
I think he was taking a back to basics approach to his business model in that the basics of customer service and proper branding were as much a part of a successful business as lead generation and listing presentations. He does turn your model around, as he cited many of the problems coming not from young entrants into the industry, but from experienced dogs who refused to learn new tricks. However, I think the concept is the same. Much as Matt D has done, it’s up to the management team to train their agents in the manner in which they want their business to be done. Maybe outside sources can be leveraged, but at the end of the day, the brokerage is accountable for shaping how his agents are trained and evaluated.
Your wife’s idea of a 90-day probationary trial period is solid, and I think applicable to the real estate industry. Once a brokerage has defined their curriculum, I think it’s perfectly reasonable to send packing those who cannot master it.
Hi Rob,
Enjoyed this post. It’s something my wife and I have discussed (since we’re both in the business)
However, I might have a different take on the basics that may conform more to the retail business background your wife has.
After leaving a wall street investment bank’s derivative trading ops, I’ve believe Pricing IS Marketing.
So the basics in the real estate business only differ slightly fashion retailing in that the retail price is the motivation driving consumer demand,
So the basics from my 9 year real estate career boil down to the following:
1. Valuation ( comparable sales / # of similar properties for sale / % of price reductions/increase )
2. Consumer Demand ( average # of open houses compared to # of similar properties for sale )
3. Property Condition ( assessing issues that decrease sales price value )
* Real Estate Schools don’t teach this, I had to develop a model based on my background with futures and option trading products
* New licensees are victims of Guru’s and Expert’s hawking the latest social media platform, technique or strategy without spending time employing what Dale Carnegie taught about how to win friends and influence people.
* Most broker owners only focus on lead generation as the primary business function and impart that same thinking to all licensee hires due to the nature of the business (agent’s are disposable commodities to brokers until they can prove their worth and value to the bottom line)
Measures for success in real estate brokerage operations have to take a more qualitative approach, in addition to it’s quantitative nature of focusing # of Listings, Inventory Value, Closed Sales and Commission Revenue.
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