BOUGHT CAR ON INTERNET IN MINUTES – IN 1999 (BUT NOT NOW)
In 1999, I needed a new car and a friend of mine (a “car guy”) suggested I buy a Lexus GS400 – and he gave me all of the specs.
I typed all of the specs into a car-buying website that was available at the time, and within minutes I had a half dozen offers with the numbers laid out as clear as a bell.
I chose the lowest priced offer and the car showed up at my door a few days later.
It seemed way too good to be true; the entire process took me less than an hour (if that), and DEALERS EVERYWHERE PANICKED!!
Dealers panicked b/c the simplicity and competitiveness of an open internet marketplace threatened their margins.
So, dealers immediately lobbied for regulations to “protect” consumers by forcing them to buy cars only through dealers – even when shopping online.
In other words, buyers can still shop online, but they still end up negotiating through all of the dealer-nonsense just like they did prior to internet days.
I told this story in a previous blog and am sharing it again b/c it relates to reason #1 why I think the current broker/agent/commission model will have much more staying power than so many industry observers think.
REASON #1: LOBBYING POWER & GOVERNMENT INFLUENCE
The internet is littered with articles about “real estate agents becoming obsolete.”
Commission structures may change, fees may come down, and there will be more reliance on tech – but I suspect the basic broker/agent/commission model will remain intact.
And reason #1 involves NAR and BlackRock.
NAR alone is probably a far more powerful lobbying force than the car dealers I mention above, and NAR of course has a strong interest in preserving the current model.
But, BlackRock is even more powerful, as they now have almost $10 trillion of assets under management (equal to almost 50% of the size of our entire economy) and a direct line to many of the most powerful forces in our government (very few firms exact the kind of influence that BlackRock does).
And – BlackRock owns roughly 16% of Realogy (Century 21, Better Homes and Gardens, Sotheby’s, Corcoran, Coldwell Banker), and more than 2.6 million RE/MAX shares (roughly 15% of the company). (Thank you Leonard Steinberg for this info).
I could be wrong of course, but I just don’t see a firm with BlackRock’s clout letting investments of that size get hammered by internet competition.
It is probably worth mentioning here too that Warren Buffet is also heavily invested in the traditional Realtor model, with Berkshire Hathaway, and Buffet is no wallflower either.
REASON #2: LOSS AVERSION AND EMPATHY
I stole this reason from a HousingWire Podcast I listened to with LoanMonkey’s President (Ashwin Dayal).
Dayal explained that “Loss Aversion” is one of the most powerful motivators we all have.
And – it is b/c the fear of loss is so strong that homebuyers (especially first-time buyers) want “certainty” that they will avoid losses.
And – a lot of that certainty comes from the empathy of a perceived expert, e.g. a licensed real estate agent.
This was both an excellent observation (that I had never thought of) and a great reminder for all of us in sales.
ASIDE: Why would I share a podcast that features an “evil competitor” of JVM’s? 😊 B/c our models are similar; b/c we can do everything they can do – but better; and b/c they have vastly less purchase experience. This will be a future blog b/c the “refi hounds” are now coming out of the woodwork, looking for purchase business. This is a not-so-subtle reminder that refi transactions are night and day different from purchase transactions, and “refi hounds” screw up purchases far more often than most people realize (we know this b/c we salvage those transactions so often).
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