How to gain a personal competitive advantage in an evolving job and business environment.
In this episode you’ll learn:
- How experts can become trusted authorities.
- What new graduates can do as they navigate their careers.
- How we can gain a personal competitive advantage in the market place.
Show Notes
National Association of Realtors Statistics
Auto Dealers Decide Cars Are Taking Up Too Much Prime Space – Wall Street Journal
The Thing About Bananas – Seth Godin
Stanford d.school’s Bernie Roth recommends a bias toward action – Stanford News
How Information Gives You Competitive Advantage – Michael Porter
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Summary Article
Why We Still Need Experts
I recently visited with a friend who is a real estate agent. I asked him how business was going. He said it was picking up now that the spring selling season has started.
Then I asked him what percentage of the transactions in his area involved “for sale by owners” where the home seller didn’t utilize a real estate agent to list the house for sale.
For Sale By Owner
I was shocked by his answer. He said that last year 30% of transactions involved a for sale by owner listing, and he expected it would be 40% this year.
The National Association of Realtors reports that 88% of U.S. home buyers purchased their homes through a real estate agent or broker in 2015. They indicate that percentage has steadily increased from 69% in 2001.
That number also surprised me, but what the organization didn’t say is what percentage of homes bought through a real estate agent were purchased from sellers who had listed the house as “for sale by owner.”
In the U.S., home buyers don’t pay real estate agents for their services. Rather, the commission payment comes from the home seller. A “for sale by owner” seller often agrees to pay 3% of the sales price to the buyer’s agent as a commission, but not always. My friend said many sellers refuse to pay a commission, or they will pay a flat fee that is much less than a 3% commission.
Home Discovery
In the late 1970s, my mother used to sell real estate. I remember going to her office and looking at thick Multiple Listing books with page after page of homes for sale in the Cincinnati area. Each home had one black and white photo with a brief description.
Until web browsers became common in the late 1990s, the easiest way to discover a house that was for sale was through a real estate agent that had access to the Multiple Listing Service.
Not anymore. In 2015, 51% of home buyers found the home they purchased through the Internet, 34% from a real estate agent and 8% from a yard sign according to the National Association of Realtors.
My real estate agent friend asked me what I would do if I was in his situation where 40% of home sellers and many buyers didn’t see any need for a real estate agent.
This friend is smart marketer. He was one of the first in the area to sell himself as a brand with his picture on yard signs, billboards and on trailers which he strategically parked around the city.
Yet, he and other real estate agents face the same threat that undermine travel agents. Their primary perceived value was their access to inventory. Now that the inventory of homes, airfares and hotels is readily available online, real estate and travel agents struggle to demonstrate their value added.
The last two houses we sold and the most recent one we bought didn’t involve a real estate agent on either side of the transaction. One buyer found our house on the internet site Zillow and the other on Facebook. We also found the house we recently bought on Zillow.
Life’s Biggest Financial Transaction
When I was a senior in high school, I worked in the evenings as a janitor cleaning a medical office building. As I worked, I carried a small radio with me and listened to the Bruce Williams Show.
This was a Q&A show, and the one thing I remember him saying over and over again was why would you enter into the largest financial transaction of your life without someone in your corner advising you.
He was specifically referring to having an attorney represent you when buying a home. The use of a real estate agent was a given.
Now home sellers and buyers download purchase contracts on the Internet and enter into financial transactions worth hundreds of thousands of dollars without expert help.
Of course, people do the same thing when it comes to investing, traveling and many other pursuits.
Deals Gone Bad
My friend told me some horror stories of deals gone bad when a real estate agent wasn’t involved such as potential buyers who weren’t able to get their escrow funds back when the seller backed out of the deal, or when the home closed and items that were supposed to be included in the sale were no longer in the home.
Some Still Want Expert Advice
I recently received an email from a member of my investment education site telling me he wasn’t going to renew. The site provides guidance to individuals who prefer to invest on their own without the help of a financial advisor.
He wrote, “Your work has been very helpful to me and I appreciated the value I received from the membership. However, you have helped me to realize that I do not have the time or energy to stay on top of this very important aspect [of] retirement planning, and as such I have decided to leverage an advisor.”
In other words, he realized he prefers the one-on-one guidance of an expert.
Not everyone wants to buy or sell a home on their own. Nor invest, book a cruise or plan a complex vacation. Many who think they want to do these things on their own, don’t realize what they don’t know.
Real estate agents no longer have a monopoly on home listing information, but they do have expertise, and they continue to be trusted advisors to those who want guidance about buying or selling a house.
If I were a real estate agent, I would focus more and more attention on earning trust by providing education to those who want to buy or sell a home on their own.
I’d use my website, YouTube channel or podcast to teach how to market and stage a home, the intricacies of the purchase contract, how escrow works and what pitfalls to look out for when buying or selling a home.
The real estate agent that does this becomes the trusted authority. Many of course will use that information to buy and sell a house on their own. But there will also be those who realize how difficult it is and want the help of a real estate agent.
And who will they turn to when they want that help? The agent who they trust because he or she took the time to teach them the complexities of buying and selling real estate.
