Inman San Francisco is Dead. Long Live Inman SF!

Inman SF is officially over and now I have had a week to gather my thoughts about the conference.

It’s complicated for me because I lived in San Francisco back when I was a musician and the word on the street is that after more than a decade of hosting Inman’s July meeting, San Francisco is finished as the location for Real Estate Connect.  I’ve heard a number of reasons why the conference may have been moved from attendees, though nothing official as yet.  Anecdotally, attendance looked down, and it was definitely short on MLS representation this year.  In the weeks prior to the conference, Facebook was full of chatter about how bad San Francisco has gotten and how people were literally afraid to attend Inman this year.

Let's Face It:  San Francisco Is In Decline

Like most things, it’s the perspective that counts – and also like most things, perception is reality for most people.  Most people are understandably uncomfortable with aggressive panhandlers, rampant homelessness, hardcore lunatics, and “eau de pisse,” to be found in most major cities.  No one enjoys these things, but residents of major cities understand that it’s just one of the things you deal with to live in a major metropolis.  Since many Inman attendees come from areas where they don’t see this kind of thing, it makes some attendees really, really uncomfortable.  The end result of these issues is that the quality of visit for tourists and the quality of life for home owners in San Francisco is unquestionably in decline.  Understanding whythe decline happened has a curious parallel to the real estate industry.

Basically, the City of San Francisco has had a long simmering feud with its police department.  While its reputation as a liberal city is well deserved, San Francisco’s police force has followed a much more aggressive, much less tolerant, much less diverse path to policing the city they “serve and protect.”  

Everyone Suffers When There Is No Shared Vision

The SFPD is not solely to blame for the city’s plight, however.  Deficient City planning, exploitation of the last earthquake’s damage, and the tech boom(s) brought opportunistic, short-sighted building policies and permitting that benefitted only the wealthy.  Seizing an opportunity, owners and investors have aggressively snapped up properties for renovation in the last twenty years, effectively denuding San Francisco of medium and low-income housing.  

As witnessed by Inman attendees, the result has been a perfect storm of unmet housing need caused by mismanagement of the City, unmet mental health needs caused by a combination of a citizen’s hyper-liberal legal right notto be hospitalized if they don’t present an immediate danger and a wholesale gutting of mental health services by the Federal and state governments.  Now, add a police force which has basically stopped enforcing quality of life crimes in the city and you have San Francisco today.

The Problems in San Francisco Might be a Metaphor for the Real Estate Industry

How this relates to real estate is that Inman SF attendees have been able to watch in real time how a gem of a city – despite desirable real estate and astronomical real estate prices – is decaying from within because the powers that are supposed to guide the City are divided.  In the absence of a unified vision, unfettered market forces (greed) has becomethe policy because increased revenues are the only thing everyone can seem to agree on.

Organized real estate is divided:  MLSs are divided from one another, Realtor Associations are divided both against one another and also over what their relevance is, Brokers are divided by size and business model, agents are divided by access to technology, and the public is increasingly divided over whether they even need a real estate professional in their transaction. 

Competitors will always disagree on some, perhaps many, things, but the fragmentation of the marketplace is less the result of competition than it is a wholesale lack of vision for what the marketplace should be.

Brokers are faced with unprecedented margin squeezes from the consumer, from teams, and from the tolls they have to pay to the portals to access consumers on the internet.  Realtor Associations, at one-time visionary think tanks driving organized real estate, increasingly are seen by their own members as impediments rather than facilitators.  Consumed with trying to squeeze the most out of antiquated technology for as little money as possible, MLSs are desperately seeking ways to keep their subscribers relevant in an arms race for consumer eyeballs.  In the face of overwhelming technical superiorityand a unified vision by those who would seek to disrupt this enterprise, organized real estate – like that beautiful, unique, City by the Bay – is decaying from within.

The good news is that if there is one thing that history teaches us, it’s that nothing is permanent.  We need leaders to remind us that we have more in common than we have to fight about.  We also have more to lose than anyone else.  

A final note of caution:  

What we don’t need are the kind of leaders who believe that they are the only ones who can save us.  Invariably, they prey on fear to attain their position of power and, once there, have little to offer except new and excitingly distracting ways to spend money.  It lookslike they’re doing something, but when you look closely there’s never much to show for it.  Classic hallmarks of this kind of personality is that they view everyone as either a tool or an enemy and they love to get large spending budgets approved without detailed accounting.  They often avoid conflict with the executive officer who is supposed to be guarding against this kind of abuse by co-opting them with large pay increases or through fear of losing their job.

True leaders remind us of our common cause, encourage our better selves, and lead by example.  They own mistakes because they know that there is no growth, no increase in knowledge, no improvement, without failure.  Like every successful movement, our path must be inclusive, it must be bold and it must have leaders at all levels united by a common vision.

Inman Las Vegas

This is the kind of conversation I would like to see at Inman next year.  Brad has every right to find the best possible location for his conference, so let’s talk about why the conference had to be moved and learn from the experience. I have always believed that lessons from seemingly unrelated sources have the strangest way of being relevant.

-      CP

How iBuyers Could Break MLS Data Quality

Zillow is probably breathing a huge sigh of relief that NAR's "Logogate," the dues increase, and DocuSign IPO shifted Realtor ire away from their Instant Offers product.  As I discussed in a prior article, I don't think Instant Offers is worthy of fear and, as I see it, the success or failure of products aimed at iBuyers point to a future where we'll have better insight on how much (like, what percentage of the sales price) consumers will actually pay for convenience.  Instant Offers is only one platform, of course, and it's got some catching up to do, but it got me thinking about what the net effect might be if even a few percent of listings go the iBuyer route.

Before I dig in on how iBuyers could affect MLS data, I have learned from working with MLSs around the country that unless you begin by defining what the MLS is supposed to be, all too often you wind up with differences in belief of what the purpose of the MLS is.  Not having a common understanding leads to different expectations, different goals, and different measurements of success.

The MLS is Nothing Without Quality Data

The express purpose of the MLS is to facilitate a unilateral offer of cooperation and compensation between real estate brokers.  But this definition is meaningless without listing information that the offer can be attached to.   And since poor quality listing information makes a blanket offer of compensation and cooperation nearly useless because it's being leveraged on garbage data, "listing information" requires the word quality as a conditional modifier.  For the purposes of this article, when applied to MLS listing information, "quality" means comprehensive, accurate, and timely.  These are the three legs of the stool that support the offer of cooperation and compensation, because without them the offer itself is meaningless.

iBuying Is a Simple Trade-off; Money for Convenience

iBuyers are a new, niche market that in my opinion will grow into a significant, though not dominant, maketshare.  Boiled down to its essential element, the iBuyer value proposition is simply trading dollars for convenience.  As I discussed above, the unknown is how many dollars consumers will pay for the convenience of a secure offer, not having to prepare the property for showings, being able to move quickly, etc.  Also unknown:  Can the model survive a downturn in the economy?  How many iBuyer products will consumers support?

How Much Will iBuyer Sales Push Prices Down?

How I think iBuying will affect MLS data is that the MLS currently has no means of tracking or measuring the tradeoff in dollars for convenience in the transaction.  If a seller accepts an offer from an iBuyer they are making a judgement that whatever they are paying in commission, fees, etc., is worth it for the convenience, speed, security, or whatever motivated them to sell.  That calculation of the difference between true market price and what the seller accepts for their home in the name of convenience can be estimated, but is not a data point currently captured by the MLS.  As a result, sales of iBuyer properties will show up in MLS comparative data with sale prices skewed lower than market value -  and with no explanation or understanding of why "X" property sold for "X" amount less than market value.  Initially, this issue will likely only affect local comps in the same area as the iBuyer sale, but significant numbers of iBuyer sales will cause a net effect of decreased home sale prices on a local, and possibly regional basis.

An Opportunity for CMLS to Lead

Without accurate measurement of the effect of iBuying on sales price the MLS will not have a real idea of how much data is being affected.  I see this as an opportunity for the Council of MLSs to display leadership by making concrete recommendations on how MLSs can create new fields to permit tracking of information related to iBuyer properties without stigmatizing the property.  In my mind, the only way to capture legitimate analytics and have a true picture of how iBuyer properties affect MLS data is to require the fields when reporting the sale of the listing.  

Remember that iBuyers are serving a need expressed by consumers so the MLS should be facilitating the ability of agents to meet the consumer's need - and also ensuring the continuity of their mission to provide comprehensive, accurate, and timely listing data.

Organized Real Estate is In Trouble. Own It.

A friend of mine saved a life over the weekend.  It wasn't spectacular in that her actions didn't involve any heroics.  She didn't leap off a pier to save a drowning man, or rush into a fire, but the point is -  she didn't need to be heroic to save a life; she just needed to be brave.  She identified that a man was in trouble, calculated that he needed help, acted by calling 9-1-1, then owned her action by staying in contact with the man until help came.

What do I mean by "she didn't need to be heroic...she just needed to be brave"?  Well, the fact is, she told me that there were other people watching the same man in trouble - some of them filming his distress - but none of which acted to assist him.  I think bravery comes into play when an individual is willing to buck what others are doing and run the risk of embarrassment or ridicule,  by intentionally choosing not to be a passive spectator.  Think about it:  Out of a crowd of people, no one would cast blame on any individual for not acting, so by making the decision not to be a passive spectator, a person takes ownership of the result of their action - succeed or fail.  It takes guts to act on your convictions - especially when surrounded by others who do not recognize the danger, are afraid to cause "a scene," or are content to remain passive observers, confident that someone else will take action and relieve them of the responsibility.

On any other, regular summer day swimming to shore or righting the canoe might have been plausible outcomes, but for the first Saturday in June with water temperatures somewhere in the 50's and a very strong off-shore wind, this boater was not getting back into his canoe, nor was he swimming back to shore.  Neither was he going to survive for long in 50 degree water, clinging to his swamped canoe.  It was the circumstances that made this an emergency, but only one person in the crowd on shore recognized it for what it was.   This got me thinking about organized real estate.

WE are the passive spectators to the swamped canoe that is organized real estate.  There are a few voices like Redfin's Glenn Kelman, and CRMLS' Art Carter, trying to raise awareness to the danger, but what seems to be working against them is the slow motion nature of the "accident."  Like the canoe being flooded, it takes a combination of events to make it fatal - and unless we understand what we're seeing, by the time its clear there's serious trouble it's too late.

I've been watching the Department of Justice workshop on competition in real estate all morning.  What I am hearing from the expert witnesses is that there are real fundamental changes taking place in the industry right now, and it isn't any single one, but the combination that is swamping organized real estate.  

I find the argument persuasive that Zillow's and Realtor.com's persistent efforts to monetize every aspect of the real estate transaction has materially harmed both Realtors and consumers.  There can be no other way to look at the portals' willingness to permit agents with no specific knowledge of a property to impersonate the listing agent and buy placement on a listing not their own.  The portals know it is confusing to consumers and they know that consumer's questions about a listing cannot be quickly met by an agent that has never visited the property.  If Luke Glass believes what he said in the DOJ meeting this morning about what Realtor.com knows about what consumers want, then Realtor.com has some explaining to do about why their business practices do not match their stated intent of serving the consumer.  

This is not to say that Zillow or Realtor.com are evil or that they don't have a real, valuable role in exposing listings to consumers - but it IS to say that some of their practices need revisiting.  To stretch the canoe metaphor a bit more, it's almost as if the portals don't understand that they're in the same canoe with everyone else in real estate.  Glenn Kelman's point about the portals' unequal value exchange with listings (portals do not reciprocate, they only consume listings) was absolutely on-point.  Zillow especially has created the ability for unscrupulous agents to hype exclusivity by putting listings in "corners of the internet" that never see exposure on the MLS.  By enabling pocket listings they undermine confidence in the quality of MLS data that is the very heart of what the entire industry relies on.  And if the portals take no action to address the concerns, they're no different from the spectators filming the poor canoeist instead of taking action to prevent his drowning.

While many brokers and agents are more than willing to blame Zillow for their problems, the bigger problem is looking back at them in the mirror.   The reason the industry is in the shape it's in is due to years of neglect, inefficiency, outsized egos, outdated policies, and lack of professionalism in the leadership and staff running some Associations and MLSs.  Despite having had the pleasure of working with the phenomenal, engaged, progressive leaders at MetroMLS,, ARMLS, and the Austin Association of Realtors, over the years I have experienced too much of the opposite.  The greatest of the sins, in my opinion, is the inability or unwillingness to face the reality of changing markets and new technologies by making difficult or unpopular changes to products or services.  Whether it's the President's vanity year (or ten) or the CEO being an industry naif or ill-suited for the job, the boat they are in is sinking.   The water is too cold to survive in for long without help, but by God they're going to keep ignoring the problem in the hopes that someone else will deal with it - preferably after they retire or move on.

It's complicated and simple at the same time; It's about ownership.   We need to own the problems facing our industry, both as individuals and also as brokerages, Associations and MLSs.  MLSs offer antiquated technology because agents lose their minds when forced to learn a new product and because MLS vendors have been starved of capital by overly aggressive contract negotiations.  Associations have been living off the MLS income for so long they've forgotten why they exist in the first place.  And Brokers... Brokers have it the hardest because they're being squeezed on both sides of the commission from consumers and their own agents.  But brokers need to get out of the mindset that the consumer has to come to them and start understanding that consumer choice means they better figure out a way to make consumers want to come to them.

I started this post with a story about a friend saving a life.  It's a true story - and luckily one that ended happy.  It took someone recognizing the danger, stepping away from passivity and owning the solution by calling for help.  As metaphors go, it seemed like a pretty good one for what needs to happen in organized real estate.

- CP

  

 

A Few Takeaways From the NAR Convention

I've been attending the NAR Convention in Washington for 15 years now.  Other than the weather being the worst has ever been, I was struck by two pervasive sentiments underlying the entire convention; deep concern with members over the future of NAR, and the role technology is playing in disintermediating the consumer from the real estate professional.

The DocuSign IPO has been the water cooler conversation for weeks now, but the staying power of the issue has a different source:  Uncertainty with the motives of the National Association of Realtors.

I honestly believe that the current leadership team of NAR has intentionally chosen a different path from the excesses of the Stinton years and I am sure that, for them, the change has felt both difficult and borderline extreme.  Let's face it, structurally, membership Associations are just not built to change quickly and there is significant, entrenched opposition to change from anyone who was a part of the status quo - which was pretty much everyone.  So, I admire the fact that Bob, Elizabeth, and the rest of the staff and volunteer leaders are pushing change, but as the continued fury over the dues increase attests, it may not be fast enough.

It's All About the Money

Membership discontent with decisions made by NAR has found a focus on the dues increase and the IPO because under Dale Stinton, NAR made so many really questionable financial decisions - so much so, that they were faced with an historic shortfall of no more than 4 months of operating reserves before approving the dues increase.  Mistakes like RPR, AMP, Upstream, the federal credit union, Realtor University and RAMCO, cannot be undone by simply waving the Realtor flag and demanding loyalty to the cause.  The legacy of their failure has a stranglehold on the capability of NAR because their failures caused a financial drain that has both critically limited funds and overwhelmed any other vision.  You know, just at the most important time in NAR's history.

 NAR must recognize, analyze, accept responsibility for, accept criticism about, and foster an open dialogue on the future of these programs or risk continued rebellions at every new vision or dues increase.  The fact is, for them to survive as a relevant feature of the real estate landscape it needs both a new vision and the resources necessary to capitalize on it.

Technology is Convenience in Wolf's Clothing

This might be my worst sub-heading to date, but my point is that while everyone's talking about technology as being so disruptive, they're not talking about what's driving the technology - convenience.  It's the single greatest consumer motivator and with a few exceptions like Redfin, OpenDoor, and a handful of others, we as an industry are so busy looking at the effects, we've neglected to look at the cause.

How did Amazon reach global dominance in such a short time when they were a humble book reseller not so long ago?  They recognized that consumers were relentlessly chasing convenience - and would pay for it. Want baby wipes, a lawn mower, and a plumber tomorrow?  Sure, we can do that.  

Realtors are concentrating so hard on what they think their role should be (i.e., the consumer needs to recognize that the Realtor is the expert and they should listen to our advice), that they're missing that consumer motivation has evolved.  The consumer's path to the Realtor used to be one of convenience because they couldn't get information anywhere else as quickly.  Now that this is no longer true, consumers will go wherever their convenience gets facilitated.  Brokerage models and agents that don't evolve to facilitate consumer convenience will find cold comfort in their ivory tower of "expertise."  Remember, this is not to say that Realtors aren't the experts they think they are, it's to say that, increasingly, consumers value convenience more.

- CP

Let's Face It: Dale Stinton Was a Terrible CEO for NAR. Now We're Paying the Price.

Discontent with poor decision making by the National Association of Realtors recently crystallized into sudden, stiff opposition to NAR's proposed dues increase.  Perhaps sparked by an open letter from the Bob Hale's Houston Association of Realtors contesting NAR's justification for the increase, then definitively fueled by an Inman News article by MLS Listings' CEO, Jim Harrison, NAR appears to be facing an insurrection of epic proportions.

This has been building for a long time.  In fact, if you were to ask me for exactly how long, I would say for Dale Stinton's entire tenure as CEO of NAR.  What the current leadership at NAR does not appear to understand is that they are reaping what Dale sowed over almost a decade at his post.  

This is a CEO who outright lost tens of millions of dollars in a variety of poorly planned, poorly executed schemes (the NAR credit union, Realtor University) and spent over $200 million of unrecoverable member dues dollars (RPR, RAMCO) on products that, based on my discussions with MLSs around the country, fewer than 5% of members use.  Think about that for a minute: 5% of 1,000,000 members is 50,000.  NAR spent $200,000,000 on RPR and RAMCO, which means they spent $4,000 per member to build and maintain a product that only 50,000 members use once a month (RPR's definition of a "super user" of their product is someone who logs in once a month).  Unlike what would have happened at a well-run corporation, instead of being fired, Dale rode off into the sunset on a golden horse with an "atta boy" from NAR.  To date, there has been no public admission of failure, no public acceptance of mistakes that will be fixed, and no public discussion of how it came to be that $200 million dollars got spent on products that only a tiny fraction of the membership uses a fraction of the time.   Is there really any question at NAR why people are so upset about having their dues raised again??

The problem NAR faces now isn't just the epic size of past failures, it is the legacy from an imperious style propagated by Dale and unchecked by the Executive Committee.  Intentional and consistent misdirection about product successes became commonplace.  Being utterly dismissive of member concerns became a corporate philosophy.   Aggressive disparagement of critics coupled with not-so-subtle encouragement to view them as enemies of the state became an accepted tactic, and the total inability or unwillingness to admit mistakes or failures became the first, last, and final rule.  

Let me be clear; these failures are not yet those of NAR's current CEO, Bob Goldberg, but they will become his if he does not come clean about the failures and fix the mess that Dale made.  This is a watershed moment for NAR and the Executive Committee would be wise to recognize that they will be far better off admitting to mistakes than they will trying to bluster their way through, defending the indefensible.

I have read HAR's letter, I have read MLS Listing's letter, and I have read NAR's response.  HAR and MLS Listings raise valid concerns that were left unaddressed by NAR's response.  Frankly, the tone of indignant, wounded surprise and the aspersions cast at Jim Harrison missed the mark.  There were some pretty serious questions asked in Jim's letter which were not addressed in NAR's response - but the point is that A LOT of people have the same questions that Jim had the courage to ask publicly.  If NAR wants to gain a measure of trust they will need to answer questions the membership has, they will need to be open and transparent, and they will need to accept responsibility for the fact that mismanagement has brought long-simmering issues to a head.

Leadership isn't just about making bold decisions.  If that's all it was, we would have a very different looking real estate industry.  Association leadership is actually about having the vision to ideate and build consensus, but also an ability recognize mistakes - even painful one - accept responsibility for them, then build success from the lessons learned from failures.  The fact that we have membership about to choose sides in a civil war over this proposed dues increase clearly shows that NAR has failed on multiple levels.  It is my hope that they will understand that this is an opportunity to accept responsibility for the failures that Dale never did, accept membership feedback on improvements that Dale never would, and bring the leadership to NAR that Dale never could.

- CP