Of all the trends and issues facing the contemporary real estate industry perhaps none has been as elusive to some REALTORS® as the concept of transparency.
Whether applied to transactional processes or agent experience and credentials the idea that everyone (spelled c-o-n-s-u-m-e-r) should have access to what used to be “insider” information is a mighty hard pill to swallow. As a result of this reticence a whole new group of Internet based entities has taken an early lead in meeting the contemporary consumer’s demand for transparency in the field of agent credentials, or as it is known on the street; “Agent Rating.”
In fairness it must be pointed out that in the world of change that is currently impacting the real estate industry few trends fly in the face of conventional practice as much as the idea of transparency. The whole universe of post World War II American professionalism has largely been based upon the idea that one of the reasons to become a professional was to enjoy the benefits of insider knowledge; the secret grail as it were.
The Way It Was
For decades practitioners in all professions shared the insider secrets. Clients paid full “partner” rates to law firms without knowledge of what functions were performed by junior associates and paralegals. Insurance companies were billed physician charges for procedures performed by nurses. In fact the entire health care system was a labyrinth of secrets and insider information. Licensees within the dental, psychology, engineering and even religious orders all enjoyed the benefits and perks of insider information.
But over the past ten years the cults of the professional secret have one by one been banished to history. Managed care spelled the end of the medical secret. Court TV and the Internet had the same effect on the legal profession. Third party rating systems like Consumer Reports, Zagat, AAA, Standard and Poors, J.D. Powers and even newcomer angieslist.com have shredded years of secrecy in favor of consumer knowledge.
Yet no influence has been as significant in marking the course of transparency as the emergence of the “X’er” and Millennia generation consumer. These groups view professional secrets with an amazing level of contempt and disdain. Some experts suggest that this may be because so many of them were the children of professionals and spent their early years hearing about the tales of the secret systems. Others point out that these groups have been fed a steady diet of television programs that featured both the villains and the victims of the old system.
The Internet era has been creating an environment in which total information is, or will soon be, available on almost every profession, process, procedure and/or transaction. So what about the real estate transaction? Given the Generation Y and X consumer’s dedication to Internet use and concepts it should come as no surprise that they are going to expect and demand total transparency in their real estate experience and transaction. In the same vein it should be equally clear that, should they discover that they have been the victims of the professional secret, they are going to be very combative and quite litigious.
The Way It Is
For those who still doubt the power of transparency the recent events surrounding Saddam Hussein’s last moments provided a striking example. Consider the fact that a single security guard, probably earning less than five dollars a day, used a thirty five dollar cell phone camera to take forty five seconds of video that impacted the minds and opinions of millions of people around the world. While this was obviously a case of transparency taken to the extreme it nevertheless establishes the point that transparency can be used to establish a standard or expose incompetence. That event seems less bizarre considering that Google recently paid $1.6 billion for YouTube.com, a collection considered by some to be just a worthless collection of home videos.
Given the potential of this movement it seems prudent for every broker and agent to understand:
(1) What transparency in the real estate transaction really means.
(2) How transparency can be used to positively impact their value proposition, and
(3) How they might limit their vulnerability to transparency by developing their own transparency initiatives.
Consider the agent rating war. A major area of transparency that is being taken over by the third party sector is real estate agent rating. Consumers simply want to know which agents have experience and success in marketing properties they are interested in buying or selling. Despite overwhelming evidence that this information is of great interest to consumers (2005 and 2006 Real Trends surveys), brokerages and REALTOR® associations decline to provide it.
Even more relevant to this discussion is the fact that this refusal to play has not caused consumer demands for the information to dissipate. Quite the opposite, as a direct result of the industry’s refusal to meet this consumer demand a whole range of commercial websites have stepped into the void. Agentline.com, Brokerate.com, Angie’slist.com, Agentevaluator.com and Realtybaron.com are all working to take advantage of the proprietary benefits created by this void.
Which Way Will It Be?
The long-term loss to the industry, as a result of this trend, will be incalculable. By giving this precious high ground to third parties with less than pure motivations the industry may forever lose the ability to ensure that only relevant and fair criterion are used to judge and rate REALTORS®.
It is essential that brokerage firms and REALTOR® associations join, and positively impact, the emerging transparency movement. Unless this happens the trend of defaulting these critical powers to third parties will continue. As each new rating competitor appears brokers and agents fall further behind. Each lost opportunity places the consumer one step further from the brokerage and one step closer to a real estate solution that marginalizes brokerages and their agents.
On the other hand if REALTORS® seize the initiative with transparency these trends will work in the opposite direction. It has always been within the power of the REALTOR® community to win both the short term and long range Internet game and transparency hasn’t changed that.
It is time for the industry to reconsider its position on this matter. The first item of business ought to be a discussion that focuses on the positive benefits of providing consumers with relevant and truthful information about their REALTOR®. Certainly the second must be to measure the real price being paid for the refusal to meet this consumer expectation and demand. A little pain now will provide the industry with long-term influence and the ability to support its members in the critical times that lie ahead.
