An excerpt from a conversation between Michael Tuff, CEO of Racaria Capital Financial Solutions and Myself
MT: Why has it been so difficult for the process of buying real estate to make the jump onto the internet?
TV: Because the MLS was designed to make it impossible. To buy a house or a car, you need to see it, right? So the MLS system evolved to make real estate agents indispensable. We have traditionally paid tens or hundreds of thousands of dollars to get the key, get in, look around, get the "feel" of the place. However, more and more people are now coming to realize it's not really worth $50,000 to get a key and take a look around.
I was on the phone the other day with the President, EVP, Corporate Counsel and Chief Marketing Officer of a well-known luxury real estate brand. These corporate types were jockeying around the familiar mantra of why real estate could not be bought and sold online - especially not at "auction."
The President of the company went so far as to say that the RealEstock Auctions Model "isn't really an Auction - a true auction can only happen off-line." Quite a statement! Watch out e-Bay - it's really not going to work!
This conversation gave me a serious case of deja -vu. It was reminiscent of the now extinct defenders of the traditional way of doing things, for example, the stock market retailer when buying and selling stock required a retail broker (enter e-Trade - retail agents history); or how about travel agency brands and agents (I can't remember one that's not online - can anyone remember having to go through a travel agent to buy an airline ticket?); and who can forget the bank teller (those ATM machines will never stick!)?
I felt like I was listening to the famous quote by Charles Duell who wanted to close the patent office in 1899:
"Everything that can be invented has been invented."
The President of this world-famous brand said something to me that made it very clear that the way things are, are on their way out: "...that is very disruptive to our business model, Tim". Uh, Hello?! That's the point isn't it? How technology and access to information and transactions online changes things - for the better!
Buying books or stocks online, finding a phone number on YellowPages.com, GPS's - technology makes life and commerce in particular more easy and efficient the more sophisticated it gets.
The other day my Son and a group of friends went to a themed benefit party at a local pub - the theme was to come as an Endangered Species. They all wore T-Shirts of GM Brand Automobiles. What a brilliant statement from some university students on the life span of an outdated industry.
The real estate brands of old, think they are in the business of making commissions - when what today's market demands are to bring people back into homes they can afford - and that means cutting out unnecessary commissions and distributing real estate between sellers (a lot of them banks) and buyers - in the most efficient manner possible.
The dinosaur, the "buggy whip manufacturer," the real estate brokerage agency: All extinct or endangered species. A great article from USA Today talks more about how to avoid the pitfalls of running a business that's running into the ground in a changing world "Don't fall into the buggy-whip mentality"
Perhaps our executives missed reading this article? Maybe they'll find it online...