In a previous post, I talked about pretty lies that brokerages tell themselves to feel better about things, even though they know deep in their hearts that none of those will actually solve their problems. If you read that post, you know that I’ve been telling myself pretty lies about my weight and physical condition for years, and those lies were a barrier to my actually getting in shape. (I’m not there yet, but now, at least I’m on my way.)
Well, I just found an example of pretty lies that real estate agents tell themselves to feel better in the midst of chaos and disruption. It happens all the time, but this article on Inman News (subscription required) is a particularly good example. It is uplifting, inspiring, and certainly will make real estate agents feel better about themselves and their future… and it is filled with platitudes, red herrings, and the kind of imprecision that leads to nowhere.
[Since I have never sold real estate, this post will undergo rigorous examination by someone who has: my wife Sunny, who has actually sold real estate, and is a recovering broker with experience in managing real estate agents. If you’re reading it, it means that my observations passed muster.]
Let’s get into it.
The Premise & the Pretty Lies
The author, Troy Palmquist, is a good writer. Vivid imagery, tight language. Maybe that’s why this article got me going whereas the hundreds of other similar sentiments have not, because it’s so well written.
He talks about Top Gun, about fighter pilots being potentially replaced by robots, and analogizes it to real estate today. He notes that the real estate transaction is getting commoditized, quoting at length from Tom Ferry from a recent podcast.
Then he tells a series of pretty lies. Let’s go through them, in order.
Pretty Lie #1: “No robot can replace human interaction”
The first Pretty Lie is a giant red herring that is rampant within the industry:
Will the fighter pilot always have a place? Does Maverick’s kind live on forever?
You bet we will! No robot, algorithm or flashy new platform can replace good, old-fashioned, human interaction. It’s that plain and simple. But it’s up to us to ensure we don’t get left behind.
This is a red herring because there is not a single company in proptech that is trying to replace “good old-fashioned human interaction” with algorithms or computers.
The best example, the most “terrifying” of the companies using technology to replace real estate agents, might be REX.
REX is a brokerage that breaks all the unwritten rules of real estate. They don’t belong to an MLS. They don’t do cooperating compensation. They do everything based on “Big Data and AI” and technology. If anyone is a poster child for robots replacing humans, it would be REX.
Well… (video should start at 2:10 mark; if not, go fast forward to that point)
Why… those are two human beings! Who are REX agents with a sense of humor!
And from REX’s own website:
With REX you get a dedicated licensed REX agent who will help price your home, provide a complimentary professional photoshoot, host showings and open houses, and everything else you need up through the sale of your house. Traditional agents are judged by how much they make. Our agents are judged by the service they provide. Because our agents are not paid on commission, their focus is on you, not chasing the next client.
Those are… human beings!
The red herring flaw is that technology will try to replace all agents with algorithms or computers. That is not what’s going on here. What technology will do is make an agent so productive that he or she can replace dozens and dozens of other agents. It isn’t that computers will try to replace good old-fashioned human interaction, but that computers and algorithms will allow one human agent to do good old-fashioned human interaction with dozens or even hundreds of human clients.
So just because a robot won’t hug your client doesn’t mean that an agent who has robots and algorithms taking care of the mundane drudgery work won’t hug your client, your friend’s client, and so on.
The truth is that robots and automation and algorithms and such do not replace all humans; it just replaces all humans who do mechanistic repetitive tasks. Look at a modern car manufacturing line:
There are billions of dollars in robotics, computers, and automation in that manufacturing line. Yet, there are dozens of human beings there! What there aren’t are thousands of human beings assembling a car by hand.
That is what is coming to the real estate agent. Automation, algorithms, platforms, computers, technology… all of these things mean that the economy won’t need 1.4 million REALTORS. It will get by with 140,000 REALTORS. Human interaction won’t be replaced, but it will be concentrated.
Which leads to…
Pretty Lie #2: “Be the best you can be!”
The second Pretty Lie is just a bundle of confusion mixed with platitudes:
The moral of the story — be the best you can be. It’s crucial to continually take the steps to become as highly skilled and highly trained as you can. Know your markets backward and forward.
Know your clients’ needs backwards and forwards. Be like a fighter pilot: You need to use your heightened situational awareness, knowledge, networking and multitasking skills at full throttle during every transaction.
What in the world does this mean?
What does it mean to “be the best you can be?” Seems like “highly skilled and highly trained” must be part of it… but that raises the question of skilled and trained at what?
“Know your markets backward and forward” sounds fantastic, but… what does that mean? Running CMAs off of MLS data is something that computers and algorithms can do and do better than a human being. Redfin and REX have already proven that. iBuyers are proving that every day. So what does it mean for a real estate agent to know his or her markets backward and forward?
“Be like a fighter pilot” sounds absolutely fantastic… until you think about what it takes to become a fighter pilot in the first place:
You know what that sounds like the opposite of? The requirements to get your real estate license, or even to be a REALTOR.
And then we get this:
Pilots make critical time-sensitive decisions and are entrusted to fly multimillion dollar machinery. In the same way, our clients trust us, the experts, to help them make what is arguably one of the largest, if not the largest financial decision they will ever make.
Yes, clients trust you, the experts, to help them make the largest financial decision they will ever make. But you know what? Clients trust morons, who are not experts, every single day to do the same thing. I know this because real estate brokers and agents tell me and the world every single day on social media about some horrible, uneducated, untrained, unqualified agent on the other side of a transaction.
So the natural question one needs to ask is, “How is this happening? Don’t clients know how to distinguish between experts and morons?”
Because it is absolutely crystal clear that there are no moron fighter pilots. There may be different levels of skill and expertise, but no one at the controls of a $80 million warplane is an untrained idiot on his first flight.
But then… we get to the real “best you can be”:
I am talking going beyond sales, relationships and results. I am saying, nurture your sphere of influence. Master your customer relationship management (CRM). Be ready to act courageously and decisively, negotiate ferociously, synthesize a lot of information quickly, take risks and think on your feet.
Continuously hone your strengths and work to strengthen your weaknesses. Focus on increasing your skills in these areas and real estate agents won’t be headed for extinction, nor will there be an end in sight for our kind.
It all makes sense now. There is a reason why 90+% of “real estate agent training” is on lead generation and lead conversion, and precious little (at least, training that is actually attended) training is on contracts, negotiation techniques, the law, housing stock, building codes, geology, economic development, local ordinances, etc. etc. etc.
The idea appears to be, you won’t go extinct as long as you’re a great lead generator and converter who can get the client to sign on the dotted line. The transaction itself might be automated, but sales will not be.
Here’s the problem: there are only 5.5 million homes sold every year. That’s a function of the economy, not a function of how trained or untrained a real estate agent is. The better salespeople (and by that I mean selling real estate services, not houses) get more market share. That market share has to come from other agents. So even if every real estate agent became the “best she can be” at lead-gen, the more talented ones will still get the lion’s share of the clients, and then using algorithms, computers, automation and robots, they will get even more productive and get even more market share.
At some point, there aren’t enough transactions for two million real estate agents in the U.S.
Getting great at lead generation could save you from extinction, but it won’t save the bulk of real estate agents working today.
Pretty Lie #3: “iBuyers have a place in the future, but only to an extent”
The third pretty lie holds up a strawman, the dreaded iBuyer, and tries to comfort the real estate agent:
Obviously iBuyers have a place in the future. Just like CarMax did for the automotive resale industry and drones did for modern military aviation, next-generation ideas are welcome. But only to an extent.
What does “only to an extent” mean exactly? What exactly does Troy think happens with an iBuyer transaction?
The three largest iBuyers today — Zillow, Opendoor, and Offerpad — all use real estate agents in their transactions. A consumer submits a request for an offer, a computer spits out an offer, there’s a human inspection (just like in a Lexus factory), the offer is adjusted, and then negotiated. By whom? Why, a human agent!
What does it matter that the human agent is an employee of Opendoor? Or an agent selected by Zillow to represent them as a client, like George Laughton in Phoenix? There is a human agent in there.
Should the seller want his or her own representation, guess what? He or she can get one easily.
CarMax, which Troy mentions, is an interesting example, since it wasn’t as if people were routinely selling their cars on Craigslist individually before CarMax came along; they were trading them into dealerships. There is a night and day difference between CarMax vs. dealership and iBuyer vs. what it takes to list and sell a home with a real estate agent today. The speed and convenience that the iBuyer offers over traditional transaction is not even in the same universe as Carmax vs. trading in a car to the dealership. So what extent are we talking about there?
Perhaps Troy is talking about the “you lose tens of thousands of dollars selling to an iBuyer!” thing? Two things about that.
One, the actual numbers suggest otherwise.
Two, it’s not like those companies aren’t trying their very best to drive the costs down. It’s still very early, so wait a few years and see if those guys can’t get the costs to sell to an iBuyer down to zero (that’s Eric Wu’s stated goal). What will all the pretty lies believing agents do if Opendoor’s service fee comes down to 1%?
That’s what makes this a Pretty Lie. It holds up a strawman in the form of today’s early iBuyer experiments, and tells real estate agents they have nothing to worry about. Actually, they have a lot to worry about, and they need to be thinking about their fundamental problems.
The Truth About Technology
So let’s start with what should be obvious. The real estate agent is not competing against computers, robots, algorithms, or websites. The agent is competing against another agent who has computers, robots, algorithms, or websites.
And the core feature of technology is that it makes things more efficient. It doesn’t put a human face on things. It doesn’t make things better, or worse. It just makes things more efficient.
That has been the case from the wheel (makes moving things more efficient) to windmills (makes grinding flour more efficient) to the steam engine to the computer to the Internet. All of it just makes things more efficient.
What that means for the real estate agent is that technology makes your human competitor more efficient at lead generation, more efficient at doing paperwork, more efficient at compiling market data, more efficient at a whole bunch of tasks (especially repetitive, mechanical tasks) which then frees her up to do the human touch thing, the relationship thing, the lead generation thing.
The real problem of the real estate agent in 2020 is not that technology is going to make them extinct. The real problem is that another agent with technology is going to make them extinct. And it doesn’t matter if that agent is a 1099 team leader at eXp or an employee of Opendoor. It is an agent, a human being, who is made far more efficient than you thanks to technology.
The answer, then, is not technology but… what do you bring to the table once technology has made everything far more efficient? If it’s sales and lead-gen, then great — that will keep you valuable. But recognize that you’re going to be competing with other agents who are also driven, great at sales, and have technology to make them more efficient. Recognize that all of that tech costs money. Go from there.
The other fundamental problem of the real estate agent is that they are working in a hypercompetitive environment with extremely low barriers to entry. Those newbies can pay for technology too.
Pretty Lie #4: The Technology Bogeyman
Which is why we end with the final Pretty Lie:
Technology is something to test out, embrace and use when it makes sense for you and your clients, not let it overrun your industry and allow it to eliminate your position. And like players in other industries, we might have to adjust our roles in the industry, but they’ll never go away.
Technology is not a self-aware predator. There is no “it” that will overrun the industry, or even seek to. Technology is just a set of tools and resources that other human beings in the industry will use to get more efficient and more productive. It is they who seek to overrun your industry. They are the ones looking to eliminate your position, not some computer algorithm in the cloud.
And frankly, you are quite likely part of the “they” who seeks to do that… because success means just that: dominate your competition and “overrun” the industry. The fact of competition makes it very very hard (if not impossible) for any one person or one company to do that… at least for long… but that’s what’s truly happening here.
There is no Skynet that is looking to make real estate agents extinct. There are only other agents looking to take your business away to grow their own.
Which is what has been going on since the dawn of time.
So, what should the real estate agent of 2020 take away from this exercise in logic and rationality?
- There is no technology bogeyman; technology is not out to get you.
- Your fellow human agents are out to get you, because they’ve always been out to get you, just like you’re out to get them. That’s what competition is.
- Technology makes your competitors (and you!) far more efficient at tasks. The mechanical, the repetitive, the boring — those are precisely the kinds of tasks that technology is really good at making more efficient. The artistic, the creative, the emotional… those are things that technology is not good at making more efficient.
- No one is looking to make human agents extinct. They are looking to make human agents far more productive, which will make other human agents who aren’t as productive extinct. This is not necessarily a bad thing.
- Lead generation and business development are fine things to focus on — just understand that in the years ahead, only the very best, armed with appropriate technology (which gives them more time to do lead-gen, lead conversion and bizdev), will survive. The numbers of agents will be reduced; the only question is by how much.
- Expertise and skill are meaningful only if they are meaningful to your customers. Are they? Would they even know how to tell the difference?
And finally, the biggest and most important takeaway of all has to be: don’t tell yourself pretty lies. They’ll make you feel better about yourself and your future prospects… and lead you right into extinction. To every extent possible, tell yourself the truth no matter how unpleasant, no matter how harsh, and then decide whether you want to do something about that or not.
The truth and your decision to act are separate from each other. Just because I forced myself to face the truth about my body does not mean that I had no choice but to start working out regularly and change my eating habits. I could have simply accepted being 30 pounds overweight and enjoyed the hell out of tonkotsu ramen. But at least, I would have done so knowing the truth, instead of misleading myself with pretty lies.
Observe. Orient. Decide. Act. Don’t lie to yourself.