Real (estate) disruption

Last week I visited an old watering hole with a former real estate client. He’d been one of the first to give our fledgling online business a go back in our first year (1999/2000), when it was far from certain that we had a valuable service, or that we’d even survive.

[Our early clients gave us a ‘fair go ‘in that wonderful, open Aussie way. There’s something refreshing about this positive quality of Australian culture. It’s deep rooted. It explains why voters turn on governments that go early to the polls (Carpenter 2008) and why they backed the same sex marriage even though most would not get direct, personal benefit. It just seemed fair.]

Over a cool pint of Squires we reminisced over what has become of the real estate industry over the ensuing 17 years, and how it has adapted to digital disruption.

In many ways, the day to day job of the agent has not changed much. The essential ‘list and sell’ activities are much the same as they were in 1999. But a few things have changed forever.

We used to drive buyers around properties”, my agent friend recalled, “We’d have to arrange to get the keys of the various properties and then pick up the buyer and visit them all. We don’t do that anymore as these days everyone has the information to hand on their phones. Who’d have thought that back in the late 90s?

Another major change is more obvious – the shift from print advertising to online.

Back in 1999, the real estate lift out of the Saturday paper used to be 120 pages thick with row upon row of property ads. Last week’s lift out (if you call it that, as it took little effort to “lift”) was 20 pages thin, and most of this was taken up by one page display ad fillers. There were barely 4 pages of classified (lineage) ads. Back in the late 1990s, this lift out was the real estate bible. If it was not advertised in there, the listing was invisible. Agents would crawl over hot coals to get mentioned in the editorial section.

My real estate remembered a story of that time.

The newspaper salesman visited our offices every year to “negotiate” the annual price increases with us,” he told me, “One day he was acting so arrogant, it really got on my nerves. He knew he had me over a barrel. What choice did I have? I got so annoyed I almost kicked him out of my office, to which he said ‘But I can get you tickets to the footy!’

“‘I don’t want to go to the footy with you!’ was my reply.”

How the power has shifted since.

A quick back of an envelope calculation suggests that the local Saturday paper used to rake in $1million a week in classified real estate ads at the turn of the millennium. $50M a year. And they would have done similar numbers in car, boat and job ads.

Nearly all of that revenue has gone online since, lost forever. It’s a salutary lesson for anyone thinking they are impermeable to change.

If the mega-profitable price-making monopolist newspaper business sitting pretty in a secure, isolated market can be taken down like that, then who is safe?

Back in 2000, the relatively small real estate website business, realestate.com.au (now called the REA Group) was worth barely $6M, was running out of cash and close to folding. It had had 3 CEOS in 4 years. In WA, less than 30 (of the 1000 or so) real estate agency offices listed properties on its website. The business did not put sales boots on the ground until 2002. In 2000/2001, the same newspapers REA would later disrupt were publishing articles crowing over its imminent demise post dotcom crash.

Yet slowly and surely realestate.com.au took hold, and today, 17 years on, is worth $10Billion. Yes, ten billion. That means its value has risen 1,600 times over the ensuing years, and is far more valuable than the various print media empires it disrupted. Imagine betting a lazy $10K on that – it would be worth over $16M today.

REA’s growth in value was not some fast unsustainable bubble; it was a slow, inexorable growth borne from the strong underlying shift of real estate marketing dollars from print to online. It’s the kind of growth in value that sticks.

Fundamentally, online platforms offered better value than print (for advertisers and users), 24 hours a day service, and agents could update the ads themselves whenever they liked (rather than phone them in by Thursday lunchtime as they used to do). The web offered agents the ability to build their own virtual shopfront (website) and have databases emailing out new listings to potential buyers automatically (alerts). The web offered ease of comparison, mapping, calculators, access anywhere anytime, and the ink did not come off on your fingers either.

It was fairly obvious that the web would replace print over time, and the leading website would make the lion’s share of the money. Instead of dominating one local market, the #1  website would dominate an entire country, and that’s what REA Group did and why they are worth $10B.

The irony, not lost on my real estate mate, is that the internet did not save agents from paying exorbitant advertising fees, it just shifted them from print to online.

We went from the frying pan into the fire!” said my mate.

But here’s what I want to know,” asked my former agent friend, “When will we be disrupted? Will we be ultimately be replaced by AI or some new technology?

Now that’s a good question,” I replied, “You have to think it will happen in the next 5, 10 or 20 years. My guess is it will happen slowly, over time. While it’s happening, it will be easy to ignore. Many will scoff at the suggestion that real estate agents will be replaced by new technology like AI or an app. There  will be disbelief, laughter and scorn, just as the rug is being pulled out from under them. It’s exactly how print behaved just as they were losing the battle unknowingly.

“But what happened to print media, Blockbuster, Kodak, Nokia and the postal service… will happen to you someday. It might arrive with little fanfare. It might take years to take hold. But you can bet some well backed tech business will reinvent how property is bought, sold and rented. If they make the experience far better than an agent, and their system becomes trusted and feels secure while saving loads of money, you can be sure people will give it a go.”

That’s digital disruption, in a nutshell.

Advertisements

Videos so easy with iMovie

A new toy. A rainy Saturday afternoon.

My daughter was eager to learn how to make videos from her iPod Touch, so we downloaded the iMovie app ($5) and we were away. She making funny videos of her friends, and me making some of our recent holiday and an overview of the RE BarCamp held recently in Perth.

Talk about easy to use technology, making you look WAY better than you are actually are.

REBarCamp raises the bar

Images from Perth REBarCamp 2012

[tweetmeme source=”ChazGunningham” only_single=false]RE BarCamp Perth 2012 was a distinct improvement on last year. Not to say the last year’s was not good, but this year (perhaps because some of us had done it before?) involved more sharing amongst attendees. And the more you gave, the more you took away.

For those of you not familiar with the rebarcamp concept, it started in the tech industry in the States where programmers would come together and exchange code on projects they were collaborating on.

The concept switched over to real estate about five years ago when some real estate agents in San Francisco came together to try and share practices and ideas amongst themselves. A novel concept, the older and wiser heads would think this was sacrilege in what is traditionally a dog eat dog industry.

The REBarCamp concept has now gone around the world with the first one in Australia being held in Sydney last year shortly followed by our first one in Perth last October.

REBarCamp group in action

So there was a bit of nervous tension and excitement around the second annual one held at the Balmoral Hotel in East Vic Park last Friday – coincidently the same day another REBarCamp was going on in Tucson Arizona (#rebctuc).

Given the time difference we were up first, with agents sharing their ideas and experiences on such diverse subjects as vendor paid advertising, using video, breaking into a new areas, using Facebook and blogging, using your website, search engine optimization among others. Basically the idea was that if everyone could go away with sum knowledge of the 60 people present then everyone would be better off for the day. And that is how it proved.

I felt this year was better than last years as about half the crowd had been to one before, so this set the tone from the outset. There was more sharing and giving going on, and we have more sponsorship which allowed the attendees to have lunch, morning and afternoon tea and even a sundowner paid for along with the excellent venue, the venerable old lady that is the Balmoral pub.

How did we fare in comparison to Tucson? Well the Perth tweeters got up 98-38 in the (not serious) hashtag battle, and everyone seemed to go away buzzing. One participant was heard to say “I have learned so much from today, now it’s up to me to go away and implement it!”.

Hats off to the volunteers who organized it notably Peter Fletcher, Natalie Hoye, Lee Baston and Bill Atkinson, plus all the sponsors who were so numerous we had to print off two banners to capture them all. I got a tremendous amount out of it persoanlly and came away learning more about how agents use databases and CRM’s, what some are doing with video and some new things I’d not heard of before. Thanks to everyone involved, and roll on REBarCamp 2013.

Making money in a tough market

So, dear reader, as per the last post about my recent trip to Brisbane and my random musings on how similar real estate markets are around the globe, I thought I’d share my notes from Richard Rawlings’ main talk about making money in tough times. It is mainly about selling real estate, but I think there are lessons for all people who are selling in a period of downturn …

Only motivated sellers are coming to market. You don’t actually want to deal with ‘stupid sellers’, because not only do they have unrealistic expectations on the price of their homes, even if you did find a buyer stupid enough to buy the stupid price from the stupid seller, the stupid seller is so stupid they won’t even take the stupid price from the stupid buyer! So work with motivated sellers. You can’t sell a $10 bill for $11, in fact you can’t even sell it for $10, but make it $8 or $9 and you’ll get interest… so get the market going.

Rents are rising fast, naturally enough, as people are finding it difficult, if not impossible to get loans, and prices of houses (although lower than they were) are still quite high.

Despite all this, don’t  be hopeful, be proactive! Don’t worry about the market, worry about your marketing. If you have 15% share of a local market, so what? Go out and get the other 85%.

How can you influence your market share? In 3 ways:

1. What you do (action)
2. Who you are (integrity) and,
3. How you argue your case (persuasion)

If you ask sellers, they will say they judge real estate agents on how high a price they can get and how low you charge – both are bad reasons  for choosing an agent! Higher the price is probably the worst reason to choose, as stats show a well priced property sells quicker (and in the end for a better price) than one that comes on too high, hangs around and gets stale, and then you have to lower it right down to shift it. And as for lower commissions, well if you can’t defend that, how are you going to get the best price for your clients? Don’t get distracted or concerned by low commission agencies – defending your commission requires same skills that will grow your market share.

Some agents rush to social media, and blast all their listings on twitter. That’s like walking up to random people in supermarkets and shouting at them: “Wanna buy this house?!!!” The chances are you will only annoy people. What you want to happen is getting others to talk about YOU on twitter and the like. So, what are you doing that is remarkable? That will go viral on social media. Personal recommendations are what matters now.

Do you hold keys for buyers in case they are locked out? and turn up at 2 in the morning when they have locked themselveas out? Do you water their garden when they are on holiday? These are the things that will WOW your clients, get you talked about, and will win you new business.

It’s not the number of ‘for sale’ signs, it’s speed of sale, sale price vs asking price, number of cancelled sales, inspections, and fewer price reductions that actually matter and should be your yardsticks.

Don’t ask your clients what they want, think what they will LOVE! Be in the business of FUN! Virgin has Indian head massages and is investigating putting pool tables in planes (seriously). They did not ask clients whether they wanted these, the clients had no idea. Just think what will wow them. We didn’t ask mobile phone companies to put cameras in them, have them synch with outlook, install tetris and demand video conferencings … but someone at Apple thought phones could do this, and when we saw it, we loved it. As Henry Ford once said, “if I’d asked my customers what they wanted, they’d have said: a faster horse!”

The fundamentals are truth, beauty, humour, attractiveness, integrity – build these into your brand.

What does your service DO for your clients? How does it make them FEEL? The #1 reason for choosing agent is personal recommendation; how well you presented; location of office; … one of the lowest reasons is fees.

You only need to win by a nose to get the business, so go the extra mile.

====

Inspirational stuff eh? For more on Richard Rawlings, he is speaking at REIWA Learning this week, and also see his web site

The interconnected (real estate) world


On a visit to Brisbane last week, I heard two real estate experts deliver their take on the current state of the market in their home countries. Steve Goddard, is a National Association of Realtors representative from California, and 40 year veteran of the real estate industry. Richard Rawlings is one of the UK’s most popular real estate trainers and speakers.

What struck me was that while the swings were more pronounced in their regions than in Western Australia or Queensland, the experiences were remarkably similar.

In both the UK and US, from the peak of the boom to the trough, the real estate market suffered a 40% drop in activity and a 40-60% drop in prices. Activity was still well down and had been for four years, but in the New Year of 2012 activity had suddenly picked up.

Sam reported that the US market was “going well at the moment” but with 4mn sales per year in the last few years (compared to a peak of  7mn annually) realtors had been doing it very tough, with prices having fallen 59% in some places.
 
Over in the UK, Richard reported that overall “volume was down 50%, values down 10%” yet with national interest rates held at all time lows of 0.5% (which translated into mortgage rates of between 2.3-7%), it was “extremely difficult to get loans post the GFC“.

Interest rates had also dropped to “near zero” levels in the States too, yet had not really had much impact and could not go any lower. Richard pointed to the experiences in Japan who had lowered and lowered interest rates until almost zero and then had “no more medicine left in the cabinet“.

What had contributed to the improvements in the market in 2012? In both countries it was modest improvements in the economy, a feeling the worst was behind them (finally) with more certainty returning.

Back in Western Australia, we saw real estate transactions fall to their lowest levels on record in 2011, with 2012 already seeing a strong start with January 2012 reporting 28% rise in property sales as compared to the same month a year earlier. February 2012 saw a further 15% rise. Too soon to call recovery perhaps, but what struck me was how similar real estate markets from across the globe act, almost independently, but of course in a related manner. In our globally connected world, ‘separate’ real estate markets are swayed by similar events, news and consumer confidence these days. Interest rates move up and down matching each other around the world, we all listen to the same news about the Chinese economy, or Eurozone problems, or the latest Greek debt woes or US employment figures. We are, of course, one connected planet.