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Michael Schaller's Blog

By Michael Schaller | Broker in Agoura Hills, CA
  • Real estate's impending crisis

    Posted Under: Agent2Agent in Agoura Hills  |  July 24, 2009 12:32 PM  |  1,641 views  |  No comments

    It'd be rather more than cliche to state that times and practices are changing rapidly in our modern era. Computers grow exponentially more powerful and impossibly small, iPods grow unbelievably even more sleek and elegant, and technology has shrunk the world to the point where it becomes more efficient to process fast food orders in call centers hundreds of miles away (http://www.nytimes.com/2006/04/11/technology/11fast.html) and soon, in India.

    All the hubbub, hullaballoo, and hooplah will certainly overwhelm and confuse most of the world's population but luckily, Jeff Jarvis' book What Would Google Do? provides an informative and succinct manual to the new age and more importanly, what you can do for yourself or your company. While it contains a hearty pat on the back for internet companies springing up to take advantage of the new digital age, many industry's will find its writing more like the book of Revelations, as it proclaims ominous doom for the middleman, including newspapers, car dealers, and most relevantly, real estate agents.

    The new era of openness, Jarvis declares, will sweep aside all old businesses based on controlling a product or service. For real estate, that is the MLS monopoly we hold exclusive access to. In time though, he predicts that will open up a crack in our last line of defense to all open and free sharing of property transactions, advertising, and information on the new internet's boundless networks.

    In the worst-case scenario for our industry, MLS would be freed up or obsolete in the light of new and more open databases and buyers and sellers would all directly connect through the internet without the service of agents. That vision is incredibly grim and slightly realistic but rather akin to a future in which we have moved completely beyond fossil fuels: technologically possible, but extraordinarily difficult due to established practices and societal inertia.

    In the meantime, what can real estate agents do to ensure they remain unique and unreplaceable by a cold, inhuman database or online service? Agents must remember that in the new age, the days of owning a product or monopolizing a service like MLS are numbered and to not rely on customers coming to them for a commodity, but for a complete helpful, enjoyable, and efficient service. Even if buyers and sellers could snap and find their perfect match immediately, there remains a massive labyrinth of financial and legal barriers to cross. That's where experts with years of training and experience in the industry can best offer their services, guiding customers honestly and proactively through all the headaches of title, escrow, disclosure, and such, rather than just unloading a home and moving on.

    In the new age, "stuff, things, atoms" as Jarvis derogatorily calls it, will become much less valuable and more of a hassle while information will be the new standard of value. If agents can remain masters of information and not just stuff, they will weather this new paradigm shift like many before.

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  • Edit: the new weapons of business

    Posted Under: Agent2Agent in Agoura Hills  |  July 13, 2009 10:38 AM  |  1,696 views  |  No comments
    I first want to say that I'm not contradicting my earlier post about the advantages of a brick-and-mortar foundation and all of the security and reliability it entails. What I mean to do is qualify what could be seen as a flippant disregard for the new modern business with an elaboration of the additional value of technology.

    RIS Media, the "leader" of real estate information systems recently released an innovation guide demanding self-examination from any company wishing to not be scathingly labelled a "dinosaur" (http://rismedia.com/2009-07-05/become-the-real-estate-firm-of-the-future-today/) It touts the importance of new marketing on new medias: texting, blogging, and facebook, once the casual playtoys of savvy teenagers is now suddenly a very serious imperative for companies hoping to stay ahead of the curve, ride the wave of change, reconfigure their whole paradigm, etc.

    The powers of this new media are undeniable. According to the statistics, reaching a market of 50 million people would take 38 years by radio, 13 years by television, four years on the Internet, and three on iPod-but only two years via Facebook. Popular real estate website Zillow.com reported over 67% year-over-year growth in the first half of 2009, showing just where our new generation of customers is shopping for houses. New weapons have just been thrown into the mix and those who don't exploit them in the never-ending business arms race will no doubt be destroyed.

    There's no reason a well-founded brick-and-mortar establishment can't also maintain and thrive in the new web environment, which is what we at Century 21 Adobe have made a top priority. As it turns out, old seasoned veteran dogs can learn new tricks.

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  • Why a Website and a Prayer Can't Compete With Brick and Mortar

    Posted Under: Agent2Agent in Agoura Hills  |  July 10, 2009 10:35 AM  |  1,684 views  |  No comments

    The internet is surely changing our world too fast for even our nimble Blackberry fingers to keep up. So many traditionally physical connections and transactions are now taking the virtual leap and as even real estate properties have started appearing on eBay, the online world is spreading its silicon tentacles into the real estate business.

    This transition presents itself as VOW's (virtual office websites) have begun sprouting up to try to muscle their share of the real estate industry. Like virtual operations in other industries, they tout the nimbleness of their lack of a building anchoring them down and their flight by the seat of their pants.

    An article about the debate between these two competing cultures supports this advantage with the conflict between two ice cream stores, one of the traditional kind and the other operating online. "Which would you rather have Brick and Mortar Business with $200,00 in start up cost's and $4,000 to $6,000 a month in Expenses and a 70 Hour Work Week or an Online Home Based Business with no start up cost's and $120 a Month in Expenses and a 10 Hour or less Work Week?" (http://ezinearticles.com/?Quick-Comparison-Conventional-Brick-and-Mortar-VS-an-Online-Business&id=62833)

    While it makes a convincing case for ice cream, the real estate business is unfortunately much more complex. As the newcomer to the scene, VOW's unfortunately inevitably take the position of the scrappy underdog. Well-established companies, which all remain entrenched in brick and mortar, hold the upper hand in advertising, paying millions of dollars to sites like Google or Realtor.com to ensure that their listings are featured prominently. Also, VOW's, as small businesses, tend to offer the bare-bone services, merely unloading houses and snapping up the cash; hapless buyers and sellers are left to fend for themselves in the Gordian knot of Escrow, title, and legal proceedings.

    The number one cause of lawsuit in California remains real estate non-disclosure, that is the failure of sellers to disclose all legally recognized conditions of a property. Most of these are obvious, earthquake zones, fires, etc., but there are over forty conditions, covering things as obscure as methamphetamine contamination, red frog habitats, and underground asbestos deposits. Traditional well-established businesses pore over these esoteric laws so their customers don't have to while most VOW's leave their customers out in the cold, naked, above an underground asbestos deposit.

    While hype has no doubt created a buzz over new innovative online businesses, in the real estate industry the traditional strong foundations of brick and mortar still reign supreme.

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  • Why some of us are still in business!

    Posted Under: Agent2Agent in Agoura Hills  |  July 7, 2009 11:01 AM  |  362 views  |  No comments
    Years ago when I bought a Century 21 franchise they sent us off to school to learn how to run a business. One of the first concepts that all of us were taught is about having enough company dollars at the end of the month to keep the doors open. Now that is one heck of a concept! A quarter of a century later some folks still don’t get it.

    The reason I bring this up is that another local discount broker just shut down. Also, two of the major headlines grabbing discount brokers have filed for bankruptcy in the last year, while another one has “changed their business model,” and others have faded away. It turns out that some business models for selling real estate only work when there is a huge volume of sales. As one of my former mentors said, “Volume cures a multitude of sins.”

    There has also been an exodus of agents out of the business, kinda like rats leaving a sinking ship. Except that the ship is not sinking! We did have way too many new agents in the business who did not know how to do a market analysis on a home or qualify a buyer. Many of them started in the business during the overheated market and had no reserves or way to stick it out during a down market. Goodbye, please do not let the door hit you in the backside on the way out!

    That leaves a lot of us who have been in a slower market before. This is not the same market that we have ever seen before due to the huge number of foreclosed and short sale properties on the market and a drop in values that is not expected to fully recover for several years.

    This means that proper pricing, staging and marketing of homes is paramount again. In the overheated market of 2004-2006 most any idiot could put a property on the market and it would sell. Many of them did. That no longer works.

    Good news, we have much better tools for exposing properties to buyers than we did the last time we were in a slower market during the 90’s. The internet explosion has created new opportunities for marketing homes. We now have web sites, blogs, virtual tours, automated searches and email capacity that we never had before. All of this allows us to do a better job marketing properties and keeping in touch with our clients. That is the goal, to be high tech so we can also be high touch.

    All of the technology costs money as does all of the advertising we do. My Grandmother used to tell me “There is no such thing as a free lunch.” Turns out she was right! When there is several months’ worth of unsold inventory on the market in the valley it takes an average of three to four months to sell a well priced property with good marketing. With this many homes on the market, overpriced homes do not sell.

    With a continuing shift in the market you will see more real estate agents and companies go out of the business. The ones who do survive will be the strong. Companies and agents who give good service and value to their clients will still be around when the dust settles. I plan to be around for a while longer.

    Michael Schaller,
    Century 21 Adobe Realty
    Our blog: http://century21adoberealty.blogspot.com/
    Our website: http://century21adobe.com
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