Will Brokers Fight Transparency?
A: I've often been told that when I complete my vision for this site and the end product is launched, that brokers will hate me! That brokers will find a way to discredit me, find a way to ruin the brand of 'UrbanDigs' that was built from years of commentary on the markets, and find a way to run this site to the ground. As I get closer to releasing the product that took so long to put together and build, do I really have an uphill battle against me? Is a revolt soon to be at hand?
Sometimes I just don't get it. Why are brokers so against the release of information? Is the foundation of this industry really built upon obscurity? Will the release and publishing of accurate data really affect the way business is done here?
I know I am not alone in this fight for Transparency; Michael Smith, CEO of Streeteasy.com is one of the bigger believers in it and his efforts are now well known. It took me 3 years of efforts to get a direct connection to the Rolex broker sharing system and a specific user agreement on what we are allowed to publish and redistribute - something we will adhere strictly to when we launch. Of the firms that said no to me were OLR and PropertyShark; by the way propertyshark was just bought out at least telling me that the demand for information is reaching investors. Streeteasy listened to my pitch and I spilled my guts on what I wanted to build, but in the end an expanded partnership was just not meant to be. We continue to be on very good terms and I hope it stays that way.
I remember the battles that Streeteasy said they were fighting as brokers attempted to prevent their listings from being scraped and published. That is until the brokers realized that the target consumer was using Streeteasy to find their agent's exclusive listings and sending over tons of traffic; and traffic means more potential clients and deals. So, what started out as a fight against this information turned into an embracement of this engine of consumers.
Are brokers and brokerage firm executives so narrow minded to think that innovation and transparency will kill their business models? Or the commission structure of this industry? Or both?
Everywhere I look I see more innovative business models are entering this marketplace and looking ahead nothing is going to be able to stop this progress:
Clearly innovation is happening! So are we to believe that brokers are really afraid of transparency? The days of hiding listing histories and selecting only the comparable sales that support an argument for a higher offer are done! Over! Bye bye! Never to come back again. The consumer has too many resources at their disposal to find the truth, and it will get more and more difficult to 'pull a fast one' on the masses as time goes on.
If the fight against transparency is to protect a higher commission standard in the industry, I think that is a losing battle too. In the end, innovations tends to make markets more efficient and I see no reason why this market would be any different. Although discount models have tried and failed to infiltrate this market (Foxtons comes to mind), I doubt the innovations will stop there. More ideas will eventually come through and one will ultimately hit. Who knows what that model is and who knows when it hits the market, but I am yet to see a really intriguing model designed for sellers to make the marketing process more efficient and cost effective when compared to the full service brokerage model currently in place. Up until now, most of the innovation has been launched with the buyer and broker in mind.
In my view, its the consumer that drives the success or failure of the innovation. Its up to you guys! Plain and simple. You can have the best idea in the world, but if nobody uses it, what good is it in a market as fast paced as Manhattan real estate? Streeteasy happened to do it right and with the consumer user experience in mind; the users came first, the brokers followed. More will come.
Any brokers fighting transparency are fighting innovation and progress; and to me that is a losing battle. Why fight it? I mean, is providing real time data, improved data I should say that more accurately reflects what is really going on out there, a clear & present danger to individual broker business models? In my opinion, no way! In fact, I think it will help the broker service their client. Individual brokers run their own business and craft their own model; they are as successful as their model and networking/referral reach permits and usually is measured based on the quality of service provided to their clients. Higher quality of service, more repeat/referral business. There is a usually a close attachment between the relationship of any one buyer/seller and any one broker and the human element will always serve a purpose.
I really wonder if what some people tell me will prove true after I release this new platform. Will bad press start to come along to discredit my efforts? Will brokers start a legal battle to prevent the publication of the data I will present? Will firms do something more rash, like remove their listings from a private sharing system to boycott the progress of transparency in this market? To this I say, NOT IF THE CONSUMER DECIDES TO USE IT!!
Embrace innovation and accept that the old model is dying. If the world is changing, either you adapt or you slowly die out. I bet it will be the agents that are losing business to more cutting edge & successful brokers out there that will use 'transparency' as the cause. I can't tell you how many times I heard brokers say, 'ugh, this streeteasy is killing my business, why does a buyer need me'. To that I respond, oh really, is streeteasy really to blame or is it yourself? Buyers and sellers will always desire service, and innovation will make it easier for them to get. But nothing can replace good old fashioned advice from an active broker that is on top of their game, on top of this market, and has a good pulse on current conditions to which they can properly advise a buyer or seller.
Posted by David Ogden
Tue Apr 6th, 2010 12:39 PM
as always Noah you are right on target! This broker wont hate you! ;)
Posted by Doug Heddings
Tue Apr 6th, 2010 01:10 PM
That makes at least 2 brokers who don't and won't hate you! You know I love what you're doing!
Posted by Steve
Tue Apr 6th, 2010 01:19 PM
You're arguing for increased efficiency and more transactions without realizing that the current regime doesn't *want* that. It's counterintuitive, I know, but it's classic monopolistic price setting:
http://en.wikipedia.org/wiki/Monopoly#Monopoly_and_efficiency
Monopolies set prices higher, resulting in lower supply and lower demand, but higher personal profits (to the monopoly) when compared to the "natural" open-market pricing.
Even though there are a handful of brokerages, since they all engage in price fixing with each other, they're essentially a unified cartel with monopoly price setting powers.
But you're right - this will come toppling down. Some brokers will embrace the new world and do well. Some will go the way of the dinosaurs.
Posted by Doug Heddings
Tue Apr 6th, 2010 01:24 PM
I actually received an angry phone call from one of our colleagues a couple of months back. He works for one of the big 3 and was trying to convince me that I was destroying our industry by fighting for transparency. When I explained to him that he better change how he defines his job, he kept repeating that I was "f'ing things up for everyone" by suggesting that agents need to be much more than providers of data to earn their commissions. He really believes that his job is in jeopardy. I think that based on his call to me we can safely say that IT IS!!!
Posted by Noah
Tue Apr 6th, 2010 01:26 PM
Doug & Dave, thx guys!!
Steve - yes, I always thought the lack of transparency and lack of MLS (rather use of private broker sharing system) was all in an attempt to maintain a traditional brokerage firm model that was generally higher than the standard model used across the country for RE markets.
Manhattan, the town where wall street lives, it doesnt surprise me at all that an industry is run like this one is.
The price fixing issue is a touchy one, and I know the real deal is working on a piece about this to which I had to decline because of anti-monopolistic laws and rebny rules that forbid me to discuss commission rates. For me, I dont work for sellers anymore, only buyers. Strange, yes, but I love it.
Not sure any broker will agree to do that article in the real deal. But as I said, I think innovation will bring change, but its up to the consumers to embrace the new idea/model. That is the tough part, especially in this market. I know everyone wants change and transparency, but when it comes to using it, that sometimes is easier said than done!
Posted by SteveF
Tue Apr 6th, 2010 01:35 PM
Noah,
The broker is just afraid of losing that stranglehold on the market they have. More transparency sets the stage for the elimination of that 6% commission monopoly. People, if you are a buyer please listen up. If you are a buyer and you are using a broker to show you homes(listings) you are certainly paying for it, it's not a "FREE" service. How u ask? Well if I were to list my apt for sale I would have to ask a higher price then if no broker was involved. Higher to the tune of 6%. So buyers out there if you are searching for a 500k condo studio, it's costing you about 25k to be taken around and shown the available apartments. YES BUYERS YOU ARE PAYING 25K TO USE A BROKER TO SHOW YOU LISTINGS. Didn't think of it that way huh, well the brokers would like that to continue. If right now you came off the street you could get that 500k studio for 25k less. Just like that. But you think you're getting a broker for free, "it's free!!' well it's not. It's a big expense and it gets jacked onto the price. For you to pay. Now how's that feel? Think it's worth the 25k. I bet you don't. So just do it yourself with all the available information online. When you see something you like, call the number, see it, if you like it then make an offer. Then the seller will say "ok, we have an agreement on price, now have your lawyer call my lawyer. Done. No broker around to get in the way. But the best part is it costs 25k less. MMMM sweet.
Posted by SteveF
Tue Apr 6th, 2010 01:39 PM
sorry not 25k but 30K! for that 500k condo studio. It's costing the buyer 30 fre-ken k to use that "free" broker. That hurts.
Posted by Mike McGrath
Tue Apr 6th, 2010 01:55 PM
Transparency will ultimately "separate the wheat from the chaff." Monopolies thrive on lack of competition and stagnancy. My prediction is that open, real-time information will lead to less agents and more brokerages that can operate small and lean. Internet buyers find their home in 1/3 the time of traditional buyers, and the average agent response to a web request is over 70 hours!!! Anything that closes this time gap (real-time tools + hungry agents) will have the future real estate markets.
The brokers may hate you in the beginning, but they will have no choice but to use you down the road. Forward thinking agents will use these tools for a competitive advantage overlooked by name brands and end up owning Manhattan's future.
Posted by Steph Davis
Tue Apr 6th, 2010 02:02 PM
Noah - I am with you! It is tough but keep up the battle for transparency. It will only serve us all (both clients and industry) in the end. It may "hurt" the bigger brands in the beginning (you really can't deny that), but the more apartment and market info is exposed (one central location), the better the efficiency, customer service and the ability to garner top dollar. It does not "replace" the agent/broker and in my opinion, those that are against this are show horses not work horses. Skills will win and always do. We are needed more than ever and I love my job.
And frankly, having to utilize 4 databases to fact check apartment/building details, availability, history, etc. is quite labor intensive and inefficient. It can be quite enlightening to find many discrepancies.... Can't we just have one darn database?
Stephanie Davis
Advocate Group
Corcoran/Soho
Posted by Stephanie Davis
Tue Apr 6th, 2010 02:12 PM
PS I would like to add:
http://nakedapartments.com as an innovative, consumer-agent centric site for renters.
Innovate or die guys. Steph D
Posted by Noah
Tue Apr 6th, 2010 02:50 PM
Stevef - I think their is a misperception about the 'cost' of using a buy side broker. First off, many buyers tend to think they can simply negotiate 50% of the typical commission off the purchase price because they are not using a buy side broker and so both the seller broker and the seller benefit from the savings. Not true.
I cannot speak for how brokerage firms and brokers handle their business, but most of the time a listing agreement separates the owed commission into two elements: direct vs co-brokered. A direct would be slightly discounted. Therefore, the thinking that by not using a buy side broker automatically saves you 3%, is simply wrong and not applicable.
Second, there still has to be a meeting of the minds and during the course of negotiations, often you find that brokers may discount their commissions slightly to make a deal happen. I know I do when the situation calls for it. To lose a deal over a 1% difference in purchase price when both parties stopped dead in their tracks is to open up the situation to 'what can I do on my end to make this happen'!
Third, it is well known that most deals in Manhattan are co-brokered deals - who knows exact percentage but certainly majority. Therefore, more deals are done with buyers seeking representation than not. The reasons are clear to me. There are many services the buyer broker can offer to the client that they are looking for when it comes to buying their home. So, the listing should be properly marketed, and that means included in broker sharing systems where every broker has the means to find it and present to their client who may be too busy working to look on their own. Im not defending a private sharing system, just telling it like it is in todays world.
Finally, lets say most agreements are 6%/4% or 5%/4% or something to that effect with former rate for cobroke splits and latter rate for direct deal. So now you have a 2% and 1% discrepancy between the two scenarios. Only when you have multiple bidding situations, one buyer with broker and one without, and bids right near each other and direct bid is say 1% lower and stops there and cobroker bid is 1% higher and stops there and rate structure is a 6/4 structure so seller nets more money going with lower bid. And assume both buyers are exactly the same financially speaking. Lots of ifs here guys, and lots of things have to work together for this situation to come to fruition.
In the real world, commissions are negotiable and not always the standard people think they are. There is stiff competition out there and sellers likely get varying offers IF they bring in 3 or more agents from different firms. The point - most of my clients use my buy side services because they want my opinions on where the market is, where the market came from, where bids seem to be coming in, where a product is likely to trade, my thoughts on a products strength/weakness in regards to features and how it relates to valuation, bidding strategies, negotiation ideas, hand holding throughout process, education of the buying process, from procurement to closing. To them, these services outweigh any negative risks that may arise in that rare situation described above
Posted by Noah
Tue Apr 6th, 2010 03:00 PM
Mike (nelbee man) - thanks for visiting! Is this stat true from your reaearch?
"Internet buyers find their home in 1/3 the time of traditional buyers, and the average agent response to a web request is over 70 hours!!"
If so that is nuts! I can certainly attest to the fact that broker response to queries on their units are SLOW to say the least. Not all, but majority. I would say, 70% of the time the response is delayed by 1-3 days. Then about 30% of the time I get a timely response with the seller broker accommodating the request as they should.
You know, this post was originally going to be a simple discussion on a WISH LIST I would like to see for the Brokerage Industry. And the TOP 3 were going to be:
1. TIMELY RESPONSES - I mean same day!
2. UPDATE YOUR LISTINGS - I mean daily or at worst case, every few days! Get rid of stale old listings and properly set the status for each listing!
3) FAIR PLAYING FIELD FOR ALL BUYERS - Dont treat any buyers with more respect than another. Treat them all the same. Present ALL offers, give all buyers a chance, and guide the seller and let the seller choose. Too often I find a broker pushing a deal that is to the benefit of the agent, not the seller. And part of this is to downplay a brokers client simply because they may have to split their commission!
Posted by Noah
Tue Apr 6th, 2010 03:03 PM
Steph - RIGHT ON! I can tell you internal sharing systems have 300+ db's that are set up for each firm. When updates come in, they have to processed and resent out! Crazy. In public world, I agree, so many db's in so many venues. Streeteasy did a good job, but everything can be better. When I launch, it wont be the best, but it will be a great product and Ill very likely find that with time and resources, I can mesh more db's into the one venue for users.
Right now we have multiple db's interacting with each other to enhance accuracy and timeliness: rolex broker status feeds + ACRIS closing feeds + broker web feeds all in the attempt to filter out noise and flaws that are everywhere! Way too many redundancies! That much I can tell, over 20% I find.
Posted by Ana Maria
Tue Apr 6th, 2010 03:26 PM
I couldn't agree more with everyone's sentiment of increasing transparency.
It will happen whether people embrace it or fight it; it then becomes the matter of are you going to ride the wave, help define it, or get swallowed up by it.
Posted by Relax
Tue Apr 6th, 2010 04:35 PM
Transparency will come whether they like it or not, it's part of the technology age and how information is shared nowadays. It's inevitable. Hating you for it is ignorant, you might be one of the first, but it would have happened anyway. You'll face discrediting either way, from brokers or whoever because there's always 2 sides. It won't be perfect but if you believe in it, then stick with it. And fingers crossed no one buys you off! lol...don't worry about it!
Posted by Mike McGrath
Tue Apr 6th, 2010 05:31 PM
Noah -
Yes, but these are nationwide stats. The other key is that this new buyer looks at 11 homes in 1/3 time before buying, and traditional looked at 6. From this we know that the new buyers do a lot of web research before starting to physically look, and once they feel ready they jump into it and move quickly. I agree with the above post about show horses v. work horses.
The future is real-time information and services that act upon that model.
Posted by Noah
Tue Apr 6th, 2010 07:16 PM
Relax - couldnt agree more. Its coming. This post was from discussions with brokers and hearing what they had to say. Doug knows what Im talking about, he commented on what I experienced too in his 1:24pm comment.
But I agree with you! And I know for a fact some brokers out there hate me, especially between early 2008 and early 2009 PRIOR to our adjustment and DURING our adjustment. Some brokers even blamed me for the adjustment, saying I wished it and helped fuel it by the negative reporting 2 years ago. Unreal! No one person can move a market. And when I told them how the markets are bigger than any of us, by far, they disagreed and asked, 'well, then why do you have to talk about such negative stuff and make it hard for all of us'.
If those read this, you know who you are.
Posted by Matt at Buyfolio
Tue Apr 6th, 2010 07:30 PM
I've been impressed that Buyfolio (my company) could enter the NYC market and sign up hundreds of brokers in its first few months with no advertising. I think that speaks to the willingness of brokers to try new tools that will help them do their job better. Of course there are people that enjoy the "old way", but I don't see them putting together a united front to stave off the innovation that these fresh companies are bringing (UrbanDigs 2.0, Nelbee, NakedApartments, and Rentjuice outside NYC). I'm looking forward to more tools and more transparency & can't wait to see the new Digs tools.
Posted by Sechel
Tue Apr 6th, 2010 07:59 PM
I've often been told that when I complete my vision for this site and the end product is launched, that brokers will hate me!
Good ad copy
Posted by Noah
Tue Apr 6th, 2010 08:05 PM
nakedapartments is very interesting. I havent used it or signed up yet.
Has anyone here used the service? How is it?
Posted by Jeff Krantz
Wed Apr 7th, 2010 12:40 AM
I am excited by all of the movement towards transparency. I have been an agent for 10 years and I believe that the industry is moving towards an advisory based profession where insight, intelligence and cooperation will solidify the role of the broker/agent on both sides of the deal..at least for those who chose to operate by the "new rules" and offer expertise. Thanks for the great links Noah..I am excited to be part of this!
Posted by anonymous
Wed Apr 7th, 2010 01:46 PM
Noah, I hope your tools are well received. If there is alot of ire, though, I think this is a net positive. It will just bring more attention to your site ... free adverstising. Also, the more ire you create, the more of an impact your tools will likely make. So I would welcome the controversy because there are plenty of people already on your side.
Posted by Noah
Wed Apr 7th, 2010 04:28 PM
Thanks anon! Means a lot!
Posted by Keith Burkhardt
Thu Apr 8th, 2010 04:08 PM
We are winning the battle to provide alternatives and more and more transparency to the market. Don't forget about little ol' me and The Burkhardt Group, perhaps the first to offer discounted rentals over 2 years ago and the first to offer buyer rebates. My business is booming and to date have given over $75k in rebates along with most importantly competent,knowledgeable fully transparent service.
We need to have lunch again so I can catch you up, lots of changes since we first met. I applaud your efforts and am looking forward to seeing your site go live!
I don't think you, (I know I am not trying to put the big firms out of business), but we are offering the consumer alternatives when they buy, sell or rent property.
I have been at this almost 20 years and thank god things are finally changing. I too remember when SE was not exactly welcomed with open arms. Now the big firms hold classes on how to utilize it. Swim or die.
Lunch is on me brother when you have the time!!
Best of Luck!
Posted by anonymous
Thu Apr 8th, 2010 05:26 PM
The propblem is that most 'heads' of our companies (and yes, I'm a broker) are not true business people and are completely clueless and ignorant on technology at large. These days transparency and technology are directly related to each other.
Posted by anonymous
Thu Apr 8th, 2010 05:30 PM
To add to my comment right above: I cannot rely on the listing system at my own company, while paying anywhere between 30-40% from my commission, to obtain accurate comparables. In order to serve my clients properly, I'm paying propertyshark and streeteasy and also frequent acris. And this alone should tell you something. And where does my money go? To pay my desk?
Posted by Keith Burkhardt
Thu Apr 8th, 2010 05:56 PM
Anon. If your company can't provide the basics why would you give them 50% of your commission? Why not do what Doug has done or the other 320 Rutenberg agents or call me? For some, a large firm works, but I believe many others would do very well without them. There are options.
Posted by anonymous
Thu Apr 8th, 2010 07:34 PM
Keith, thanks and I am in the process of doing something about it. This was more of an opinion on the current state of events then what I personally am doing or not. If I were not doing anything about it, would not say much about me.
Posted by Keith Burkhardt
Thu Apr 8th, 2010 07:53 PM
Good luck! For me it was very liberating getting out from under...
Posted by Peter Campbell
Fri Apr 9th, 2010 03:09 PM
Steve F has lost the meaning of what a broker does:
Buying or selling, a REAL broker negotiates for, and
protects the client from the other side. If they represent
the seller they keep the price up as much as possible;
If they represent the buyer, they try to get the best deal-
and sometimes that involves none-monetary things as well.
For example:What's the building Management. like? Are they honest?
When you combine all that money with all that emotion,in buying a home, it's tough to negotiate for yourself, and the good broker will always earn that commission.
I worked for a broker who decided to sell his smallish apt.
in a very desired are; he is a very smart guy, but he was suprised to learn that after he got an offer, he found it hard to
continue the negotiation alone- he was put on the spot- so he hired one of his agents to continue the job.
Yeah, a lot of things are changing-and I think a lot of what
the above are complaining about will change, but people will
always need some kind "agent"
Human nature needs human
objectivity in difficult negotiations .
Posted by doreen courtright
Fri Apr 9th, 2010 08:41 PM
I think the more transparency, the better. My previous career was in the music industry and this argument reminds me of the people in the industry that thought that consumers wanted to read liner notes and have the album cover to look at -- they totally didn't see itunes coming! I give all my buyers the Streeteasy website...I also ask them to be loyal and most of them are because they realize that I am honest and work very hard -- in partnership with them to find that perfect apartment.
Posted by Noah
Sat Apr 10th, 2010 08:49 AM
Thanks Doreen for commenting here! Yes I agree and I do the same with my clients, streeteasy all the way. They browse SE, I setup searches on my account for them, watch markets and we both use same resource so are always on same page. In the end, most of the time (not all unfortunately) they are loyal!
I say not all because I just had a buyer client after a year of service buy a 2.8m unit that I actually found for them 6 months prior and registered them with selling agent. Turns out they bought it on their own. Doh!
Posted by Christian
Sat Apr 10th, 2010 12:46 PM
Hi Noah,
great post and accurate summary! I'm not a broker or in any way affiliated with the industry but it always strikes me how little value 90% of brokers add - they are basically looking for a free lunch and don't want to do real work. A broker needs to help by adding real value, knowledge, negotiation power and transparency - not just look up a database...
Posted by Noah
Thu Apr 15th, 2010 08:53 AM
couldnt agree more Christian!
Posted by Michael Corley
Sat Apr 17th, 2010 07:08 PM
I realize I'm the last to chime in on this post, but I'm only singing in the chorus in agreement for the need in transparency, especially in the Brooklyn real estate market.
But I muse out loud that the hate and outright disdain that will come your way has more to do with what gives the larger brokerage houses their prestige.
The air of "Exclusiveness" that they perceive their clients enjoy as a result of retaining their services.
Transparency will pull the veil back and perception will change forever.
An speed of execution (which is what principal stakeholders want) will reveal how effective some of the larger guys are (or are not)
Posted by Hallandale House
Tue May 4th, 2010 02:18 AM
Thanks for the great post. I'll be more than happy to answer any questions or feedback your readers might have
Posted by coach handbags
Thu Aug 12th, 2010 10:06 PM
But nothing can replace good old fashioned advice from an active broker that is on top of their game, on top of this market, and has a good pulse on current conditions to which they can properly advise a buyer or seller.