About Bob Bemis

Founder, Procuring Cause Advisors -- consulting with leading MLSs, Associations, Brokers, Agents on strategic issues facing the real estate community.

• Formerly VP Partner Relations – Zillow (February 2012 to July 2013)
• Named by Inman News as "100 Most Influential Leaders in Real Estate" for 2011 and 2013
• CEO - Arizona Regional MLS, Tempe, AZ (October 2007 to February 2012)
• Representative on the NAR’s MLS Issues and Policy Committee; served on Presidential Advisory Group studying IDX use in Social Media
• Formerly a Director on the board of the Council of Multiple Listing Services, a national association of MLSs
• Formerly Interim president of the MLS Domains Association, an organization seeking to acquire the Dot.MLS top level domain for exclusive use by MLS systems
• Vice President of Customer Care for MRIS, in Washington DC/Baltimore (2001-2007)

The $4 Billion Dollar Company

It’s been an exciting fortnight since Errol Samuelson shook up the online portal competitive picture by hanging up his hat and cleats at Move/Realtor.com and accepting a senior management position at Zillow. Much has been reported, and even more speculated, about the motives for the change, both from Errol’s perspective and from Zillow’s.$4 Billion Company

Then, when things started to settle down a bit, Curt Beardsley added salt to Move’s wounds by doing the same thing. Then the lawsuit, more reporting, more speculation, and a substantial rumbling of “what’s next” and “what is the unspoken conspiracy?”

So who won and who lost and what’s next? I’ve been working on a response to Rob Hahn’s proposal that NAR pony up some substantial cash and buy Move, essentially taking a public corporation private and thereby recapturing total control over their corporate brand and flagship banner website. I think Rob’s idea has some entertainment value, but would not work for a couple of reasons. First (and foremost), it would rely on NAR levying a special assessment of $250 per member and borrowing another $200 million to have enough cash for a buyout, including a nice premium to current shareholders. Would NAR members, half of whom did not close one real estate deal last year, actually agree to such a levy or would many of them walk?

Second, the payback of the loan depends on continuing to operate Realtor.com as a profit making venture. That’s the biggest flaw I continue to see in the current business model. I continue to believe Realtor.com can be a huge asset to NAR and its million members but only if it’s a core service paid for by dues dollars (or perhaps be RPR revenue or NAR’s investment in Second Century initiatives, if any of them eventually starts to make money) and not an advertising medium that sells ad services to members. That is the singular loudest complaint from Realtors about Realtor.com – “It’s our website. They shouldn’t sell us advertising. It should be FREE, because it’s our website.”

So I began to look at how possible it might be to convince the current Move board of directors they needed to take my advice and give back Realtor.com to NAR and make Move.com their lead portal. These are reasonable people, experienced business people with a roster of companies they have either served, helped, or directed that would be enviable for any company. Four of the directors (a majority of the seven member board) are independent, so they would/should have no conflicts of interest in voting for a proposal, however radical, that was in the best interests of the shareholders. Three are a little biased toward NAR and therefore might oppose such a change – current CEO Steve Berkowitz, former REALTOR (Grubb/Ellis, Coldwell Banker) current Chairman Joe Hanauer, and former NAR President Cathy Whatley.

Alternatively, if no one was able to convince the board to make that change, what were the chances someone could raise enough interest and money to make a run at the company – a hostile takeover in true Carl Icahn style. Perhaps a large franchise (Berkshire-Hathaway or Realogy might have enough cash) would buy it and use it as a basis for changing their online presence. The Realty Alliance is already looking for proposals to create a large national infrastructure for their cooperating brokers – perhaps they could buy Move and save themselves a lot of development time. I even looked at the possibility of a grass-roots movement starting with a couple of progressive, pro-active Realtors who want to raise the bar of professionalism by raising money on Kickstarter. But alas, I doubt that a national real estate portal would qualify under Kickstarter’s Guidelines (seems they have a prohibition against funding websites focused on e-commerce and business).

So then the thought struck me that perhaps a couple of the current major shareholders might be interested in increasing their holdings, perhaps even demanding a couple of seats on the board. So I started digging around for the current list of institutional shareholders (who, it seems, hold over 95% of the stock in Move) and aside from FMC, LLC (Fidelity Investments) that owns about 15% of the company (as of 12/31) there were no other major players with more than 3.5%. (FMC’s 15% represents about $93 million in stock holdings, but when you compare that to the $4.2 Trillion — with a capital T — in assets they manage, their Move stock represents about .00221% of their portfolio. Something to sneeze at?)

“Achoo!!”  “Gesundheit!”

I was getting a little discouraged trying to think of other options, so I started fooling around with the stock reports and looked at the changing positions of Zillow and Move on the NASDAQ since the chair shuffling began back on March 5. Here’s what I found.

Z vs Move

First, Zillow closed above $100 last Friday (3/21) for only the second or third time in their history. They hit $100 last September and have drifted below the century mark since.

The chart above tracks the percent of change in stock price for Move (red) and Zillow (blue) since March 5. They stay reasonably close from the time Errol announced his move until March 13 when Curt followed. Then stuff happened. Zillow started upward on a near 45 degree slope while Move held steady for about a week and then dropped off. The net effect, Zillow is up about 20% and Move down about 10%.

Details (text for those who hate charts):

Date

Event

Zillow

Move

3/5/14 Errol made “the move” (after market close)

$83.20

$13.12

3/14/14 Friday before Curt made “the other move”

$87.10

$12.30

Net effect of Errol’s move

UP $3.90
(4.7%)

DN $0.82 (6.25%)

3/17/14 Day of Curt’s “other move” and Move/NAR lawsuit filed against Zillow

$91.68

$12.37

3/21/14 End of week of turmoil

$100.24

$11.84

Net change from 3/17 to 3/21

UP $8.56 (9.33%)

DN $0.53 (4.25%)

Net effect of turmoil, since 3/5

UP $17.04 (20.5%)

DN $1.28 (9.75%)

3/21/14 Market Cap as of 3/21/14

$3.96 Billion

$465 Million

Whoa! Stop for a minute and take a look at that bottom line. That’s really what this whole process has been about. These are publicly held companies, companies in which people (and institutions, which we know because Mitt Romney told us so, are people too) invest their money in order to make more money. Investors in Zillow earned 20% on their investment in less than 30 days. Investors in Move lost 10% of their money in the same period.

By my calculation, Zillow is just one dollar and eight cents short in its share price of being a Four Billion Dollar Company.

But even more telling is this figure. In the seventeen days between March 5 and 21, while the real estate blog-o-sphere was fixated on why Errol and Curt moved and what Zillow would do next, Zillow stock gained $691 million in value. That’s 50% more than the entire Move corporation is worth ($465 million).

I hate to keep being the guy pounding nails in the Realtor.com coffin, but the more I look at this situation the fewer reasons I can find for anyone to want to buy Move.  Even NAR – at least not right now. The sinister plot may not be one spun by either Zillow or Trulia but rather by NAR itself. Their continuing shackles on how Move can operate R.com might just be the smartest play in the game. They could soon buy back control of their website, and a company of people to operate it, for pennies on the dollar.

Much as I hate to admit it, I think Rob’s advice is right: NAR should take Move private. But I would advise NAR to hold off on that special assessment. It just might not be needed after all.

For this post:
Cause: If you can’t see the mark in the poker game, then it’s you.
Effect: The card sharp may be the player you least expect. 

The other shoe . . .

other_shoe_drops on MOVE The biggest rumble in California Monday was not just the 4.4 Richter strength earthquakes that hit between Westwood and Encino and were felt in four surrounding counties despite being five miles underground.

No!

Rather it was the explosion, the eruption in the halls of Move, Inc. headquarters when it was announced that Curt Beardsley, recently promoted to fill one of the two shoes left empty by the departure two weeks ago of president Errol Samuelson, was joining his former boss at Zillow in the same department and with nearly the same job description.

The tremor you thought was an earthquake was actually the sound of the other shoe dropping. (It actually could have been the fourth shoe since both of these relocations were preceded by the resignation of ListHub Industry Relations VP John Whitney and Move Chief Product Officer Scott Boecker some weeks earlier. Shoe-wise, compared to Samuelson-Beardsley, the Boecker-Whitney moves were more like bunny slippers than combat boots. Collectively, however, they are approaching a medium sized Zappos order being dropped on your doorstep by UPS. The “Thud Factor” is formidable. )

When Samuelson departed, I opined that this could be the beginning of the end for Realtor.com in the form we have always known it – that of a split personality website trying to serve two masters: the shareholders of public corporation Move, Inc and the stakeholders of the private organization NAR, Inc. I have previously suggested that the smartest move for Move (sorry, couldn’t resist) was to increase the value of the corporation in a rather non-intuitive way – by giving back their biggest asset, the Realtor.com URL, to its trademark owner NAR.

Move, of course, ignored my suggestions (wouldn’t you?) and after Samuelson left issued statements hoping to minimize the impact of that loss. ‘Move won’t miss a beat,’ said CEO Steve Berkowitz, seemingly unperturbed by the abruptness of Samuelson’s departure or the lack of notice that preceded it. Later Berkowitz admitted to a high degree of pique in his interview with Rob Hahn, but held to the company line that other product leads acquired with recently purchased companies were more than capable of continuing the work without oversight from Samuelson. He even admitted that he missed being in the product trenches himself and would be taking over the strategic responsibilities (the second big shoe to fill) abandoned by Samuelson. NAR confirmed that position reiterating their staunch support of Move and its management of their trademarked brand’s site.

NAR leaders said the association’s relationship with realtor.com is deeper than any one person and expressed excitement for the opportunity the change creates for Beardsley, who has been with realtor.com for seven years, most recently as their vice president of product marketing, and has a strong track record of being proactive and getting things done.

Now with Beardsley’s departure, Mr. Berkowitz may be spreading himself a bit too thinly if he tries to cover all those open bases without acquiring senior leadership reinforcements. Losing four major officers, three with “Chief” in their title, all within a month, is not just the sign of a leaky boat, it’s an indication that torpedoes have been launched, the sonar warning signals are sounding, and the battleship is about to be broadsided.

Lani Rosales, COO AGBeat, in an editorial the day after Samuelson resigned said, “Losing Samuelson to Zillow and Whitney to Trulia is being praised as wins for realtor.com competitors, but this could actually be a huge win if realtor.com takes advantage of the opportunity to bring in new blood.” If losing two senior executives is an opportunity for a transfusion, then losing four is more like a bloodbath of Texas Chainsaw Massacre proportions.

So, now what? Surely as adept as Steve Berkowitz is at multi-tasking (or he would not be CEO), he can only do so much in a 24-hour day. With vacancies in strategic management, senior product management, revenue management, executive leadership (of its major subsidiary) and technical oversight (some of Curt’s lesser known involvements included Move’s ongoing campaign against data scrapers, and if you have ever seen his presentation on this topic you know how formidable that campaign is), it would be folly to think that one person could fill all of those slots with anything approaching proficiency let alone expertise.

So it’s time for the new blood. Here’s the problem. There are no donors.

Anyone who applies for the job, any of the jobs, has to ask the questions about what caused Errol, Curt, John, and Scott to leave, and all within 30 days of each other. What is the underlying problem that keeps Realtor.com from making progress and is apparently so serious that major leadership personnel are defecting to the competition? And if the interviewees at Move can’t/won’t answer it, the applicant will surely ask one or more of the defectors.

I’ll save all of you the time and trouble. The answer, as I have stated before, is not traffic, not product, not website design, not user interface, not even good or bad listing data. It’s politics! It’s the irreconcilable discrepancy between two opposite and competing goals: Move strives for profits to serve its shareholders, and NAR strives for influence to serve its members. Those two goals cannot both be met, By dividing resources, constraining the website, and spreading muddled messaging in lukewarm support of both, unfortunately neither is clearly articulated.

There is a parallel story being covered in the press simultaneously with the investigation of the continuing staff migration northward from Silicon Valley to Emerald City. That story is the lawsuit filed March 17 by Move (and NAR) against Zillow and Samuelson. [Disclaimer: I am not an attorney, have no degree in law, and my layman’s understanding of this subject comes from five minutes of research on Google. Caveat lector.] Charges in the suit include breach of contract, breach of fiduciary duty, and misappropriation of trade secrets. I’ll leave the legal analysis of the merits of each charge to those better able to discuss such nuances. Instead, let me comment on the second item – fiduciary duty.

Fiduciary duty, defined as the duty of trust, from the Latin fiducia, “trust,” most often relates to the management of property or money. The Cornell University law school defines it as follows:

A fiduciary duty is a legal duty to act solely in another party’s interests. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals. Fiduciaries may not profit from their relationship with their principals unless they have the principals’ express informed consent. A fiduciary duty is the strictest duty of care recognized by the US legal system.

Examples of fiduciary relationships include those between a lawyer and her client, a guardian and her ward, and a director and her shareholders.

Nuance aside, officers and directors of corporations are required to act solely in the interest of the shareholders of that corporation. In the case of most for-profit corporations, “the interest of the shareholders” is usually profits. It could also be dividends, depending on corporate policy. But profit comes almost immediately to mind when one is asked why they bought a given stock.

The Move lawsuit claims, “Mr. Samuelson’s breaches of fiduciary duty have harmed and will continue to harm because they provide Zillow with a competitive advantage it would not have had in the absence of the breaches. This advantage damages Move’s reputation, goodwill, relationships with customers and vendors, and damages Move financially.” (Emphasis mine.)

The financial damage to Move claimed by the suit is mentioned in the recitation about breach of fiduciary duty almost as an afterthought. “He did all these bad things and made us look bad and OH, yeah, and we almost forgot – he cost us money.”

Let me humbly suggest that Move and its remaining officers are likewise charged with a fiduciary responsibility to the shareholders. Let me further suggest that long term interests of the corporation and its shareholders will not be best served by filing lawsuits against competitors who make your employees a better offer than the deal they are getting from you. Nor will they be well served by the pending and continuing expense of the legal representation needed to adequately pursue such lawsuits.

Instead, the fiduciary duty of the directors and officers of Move would be met and the stockholders better served by seizing this opportunity to rid the corporation of the boat anchor that keeps it from attracting larger audiences, making more money, generating more profits and thus producing a sound return on shareholders’ investments. THAT’s what Move should be doing. And now is the time.

It’s time to get rid of the relationship with NAR, time to dump the Realtor.com name because Move can’t decide if that name should mean “salesperson” or “information cache” to the consumer.

Inman News reported in late February that “Realtor.com operator Move Inc. announced plans to launch its first-ever national TV ad campaign later this month to raise the portal’s visibility. (Emphasis mine.) Take a look at these latest Realtor.com ads. There is one called “Hesitation.” (There are a couple of 15-second versions called “Haircut” and “Prom” but they’re just shorter versions of the same message.)

Here’s the entire script:   There are things in life that cause us to hesitate. But once we do them, we’re overjoyed that we did. Markets are changing. Interest rates are still low. If you’re thinking of getting into the real estate market, now may be the time to make your move. Every market’s different. Call a REALTOR today and visit Realtor.com. (Emphasis mine.)

Much like the section on fiduciary breach in the Move lawsuit mentions financial loss as an afterthought, it seems that visiting Realtor.com is a similar afterthought in the television commercials supposedly promoting that very website, commercials that are being paid for by Realtor.com, not by the REALTOR association that seems to benefit more from the airtime than does the sponsor.

Meeting ones fiduciary responsibility to ones’ shareholders is a primary responsibility of the all officers and directors of every corporation. Move has an opportunity to do just that by cutting the final strings that tie it to the NAR, changing the name at the top of the homepage of its flagship website to the corporate name, and pursuing the competition with vigor, enthusiasm, and freedom that had they existed earlier might have retained the talents of Errol Samuelson and Curt Beardsley.

The bottom line here is Move needs to make money. They cannot do it with their current business plan. They don’t need the direct relationships with 800 MLSs to get listing data. Zillow and Trulia have proven that and have been eating Move’s lunch for the past couple of years despite not having such a benefit. (Rob Hahn posted a great article today speculating that Zillow does not need organized real estate [i.e. MLS or NAR] to succeed. Well, if Zillow doesn’t need MLS/NAR, certainly neither do Trulia or Move.)

If Move wants to compete directly and with full force and vigor of a half-billion dollar corporation, they need to recognize that continuing the affiliation with NAR and the REALTOR organizations isn’t going to work. As Sherlock Holmes once said, “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.”

The truth for Move, however improbable, is that in order to succeed it must cut the ties with NAR, launch Move.com as the flagship and start doing what they have long claimed they could do best – regain the number one position in the battle of the real estate portals.

It’s time for Move to take advice from their own advertising:  There are things in life that cause us to hesitate. But once we do them, we’re overjoyed that we did.

Or they can sit back and wait for the next Zappos shipment to drop.

For this post only:
Cause: The plot thickens as shoes start dropping.
Effect: The road not taken may well be the only way out. 

The start of the end for Realtor.com?

Well, if you haven’t seen the late afternoon news wires yet, let me be the first to tell you Zillow just hired Errol Samuelson, president of Realtor.com and chief strategy officer for parent company Move, Inc.  Errol will take on the role of Chief Industry Development Officer and will report to Zillow CEO Spencer Rascoff.

A Mask Sounds the Death Knell - To Edgar Poe 1882

A Mask Sounds the Death Knell – To Edgar Poe 1882

Some of you may recall that I once held a similar industry relations position at Zillow. Some of you may recall that I was charged with improving the business to business ties between MLSs and Zillow, particularly the effort to secure direct data feeds from MLSs to improve the quality and timeliness of the listing content on Zillow. Still others may reflect on the disappointment I expressed in being unable to accomplish that mission when I left last summer. So now some of you are likely drooling in anticipation of my advice to Errol upon taking up a similar charge. Dream on, dreamers. The road ahead will still be challenging, and will still require compromises from both sides of the MLS/Data/Zillow equation. But there isn’t a smarter strategist in the industry than Errol Samuelson. If anyone can navigate those treacherous waters, he can. And I wish him nothing but success in his efforts. (And my compliments to Spencer Rascoff and Greg Schwartz at Zillow for pulling off this coup. Well played, gentlemen. Well played.)

If this executive switch doesn’t sound the death knell for Realtor.com, I can’t imagine what it would take. Rcom has been slipping in the traffic totals for months and in some measurement services is now fourth behind Zillow, Trulia, and Homes. But traffic isn’t the problem at Realtor.com. It’s politics. Errol has been an ardent champion and exemplary spokesperson for the Rcom effort. Errol has now seen the light and made the decision to change allegiances.  That cannot portend well for Move’s chances for success if it stays on the current path with the current fence-straddling strategies guided by mother NAR.

As I pointed out in a previous post back in December, it really is time for both Move and NAR to reconsider the purpose of Realtor.com and the ongoing strained relationship between the two. If NAR isn’t ready to take back Rcom and operate it as a member service and public relations website supporting its political activities, then maybe Move should force the decision by just giving the website back to NAR and going its own way with Move.com as the lead URL and without all the continuing restraints that keep it from being truly competitive with the top players.

I’ve got a few other thoughts on some things Move might try. But I think I’ll keep them in reserve just in case Steve Berkowitz calls and wants to invite me in for a chat.

For this post:
Cause: Sometimes a man’s got to do what a man’s got to do.
Effect: Holy ship jumping, Batman

This post also appears on Notorious R.O.B.

Facebook is dead. Twitter is dying. Bitcoin needs to be shot.

I remember about five years ago back when I was CEO of the Arizona Regional MLS in Phoenix and was building a communications department from scratch. The recently hired communications director was pitching me on new staff positions in preparation for our annual budget cycle. “We need a social media person.” We called it “person” because we did not have a good handle on a descriptive job title – manager, communicator, guru, pundit, mini-blogger – none seemed to click.

R.I.P.

R.I.P.

I was hesitant. I honestly didn’t think Facebook was all that big a deal for a business entity and Twitter was nothing but an instant message service that had no semblance of privacy. A mini-blog? Who wanted to read 140 character blog posts? “Bah, humbug. It won’t last. Facebook is a flash in the pan. It’s a social toy at best, not a business tool.” So said I, and I was sticking to my guns. But on the outside possibility that I was wrong, we hired a social content manager anyway.

Twitter is wounded

Code Blue – Crash Cart – STAT

Fast forward to Facebook’s IPO and star status. Twitter became the vehicle for not just social interaction but societal uprising and in some cases revolution. But Twitter may be signing it’s own 140-character death warrant if it can’t convince people it’s safe, secure and unhackable. “It won’t last,” said my redundant self.

Then came the growing litany of privacy concerns, the security breaches, the disclosures, shameful backroom practices and ad-revenue fueled by bad management decisions (like initiating “Likes” on behalf of users or paid Tweet placements). And the legions of imitators.

Finally, research caught up with prognostication.  According to Pew Research, millennials have been abandoning Facebook by the millions and new post-millennials have not taking their place. They moved on. Facebook was no longer the newest, shiniest thing to appease their short attention spans. And I was right. Finally.

In looking at Facebook today, I can see why it has not worked from a business perspective either.  I have 204 friends on Facebook. There are a lot of them who are not really friends, just acquaintances, but I haven’t found the “Acquaint me” button yet so I have not differentiated the two.

Of those friends, 155 are professionals in the real estate industry; 87 of those are either brokers or agents (licensed and practicing), the rest are supporting (MLS staff, vendors, consultants, etc). Fourteen are classmates from my high school/hometown; five are family members; one is an acquaintance from my former life in television dating back to 1976 in Indianapolis; two are deceased (and no, neither is still posting); and the remaining 27 are unknown (names that don’t register with me as being an acquaintance of any kind). How they got there, I have no idea. Probably an inadvertent mouse click on the “OK” button.

I am not a heavy Facebook user and only look at my timeline a couple times each week, Even though 75% of my “friends” are business associates, 99% of the postings on my newsfeed have nothing to do with business. I‘m not seeing new investment ideas or houses for sale (despite the considerable time and wasted energy expended by MLS Managers everywhere trying to write rules to regulate such advertising – it never materialized). I don’t see new business models being floated for feedback or new product/service ideas being tested for reaction.  Instead I see postings of kittens, cute cuddly kittens, doing cute cuddly kitteney things like playing with yarn or hiding in the laundry basket. I see family pictures, birthdays, anniversaries, bar mitzvahs, bat mitzvahs, weddings, an occasional funeral, and vacation slide shows galore. Frankly, “friends”, I could care less. What a waste of time. Two visits per week to my home page may be too many.

Granted there are some corners in Facebook-land that are actually business oriented and interesting (mostly). The “Raise the Bar” discussion group often has some worthwhile dialog on a burning issue of the day. But it has equal amounts of trivial bovine-caca. The group of classmates from my high school is useful for keeping track of who is still alive and who isn’t. (Last one out of study hall, turn off the lights.)

But for the most part the postings of “Hey, remember when we were young and stupid decided to see if we could fly from the hayloft using trash can lids as wings?” fall into the classification of “don’t remember, don’t care.” As the promised ultimate business communications tool and magic lead generating machine, Facebook has failed miserably. Apparently the younger generations are catching on to this much quicker than the rest of us. For many over 40’s it’s still “Oooooo, shiney!” but for the 39 and under crowd it’s become “Meh!?!”

And just when I started to lean back on my haunches, resting on my prodigious future-predicting laurels, along comes the next bright shiny new thing – Bitcoin.

Facebook at least had some utility for some portion of the population for some period of time. Bitcoin has reached a new level of worthlessness in far less time and with much bigger potential consequences for early adopters and potential investors. Those who think they can strike it rich by getting in on the ground floor of Bitcoin should read any Wikipedia entry that contains the phrase “gold rush” and learn from history. The scary part of the Bitcoin story is it has gone from the obscurity of an internet underground hacker hobby to mainstream in a matter of a few short months.

Bitcoin Bubble

Bitcoin Bubble??

This raging Bitcoin mania has been sustained despite warnings from well placed and knowledgeable internet veterans such as Robert X. Cringely, who has been writing for InfoWorld since I bought my first TRS-80-III back in 1981, who recently wrote, “Bitcoin is an overrated techno-bubble. Bitcoin works fine for now (sort of), but if you’re thinking about retiring on a big bag of Bitcoins, you can look forward to living out your golden years in a sparsely furnished refrigerator box on the corner of Broke and Why Me.”

And it is already touching our business. One brokerage has announced that it is accepting Bitcoin as payment for real estate transactions. It’s unclear how the seller of said house will react. I suspect the press release was more an opportunistic grab of a brief headline than a real business altering early adoption.

Bitcoin Mag Cover - Anonymous

Vol. 1 Issue 1 of Bitcoin Magazine

I looked around for some supporting evidence for my theory that Bitcoin is not to be trusted, not to be considered a viable currency, and has no intrinsic value – real or otherwise. I found a number of usable references, but perhaps none more telling than the cover of the first issue of Bitcoin magazine. For those not up to speed on your local terrorist organizations, the masked character and the mantra he holds are the trademarks of Anonymous.  Yes, Anonymous, the cyber-terrorists responsible for Occupy Wall Street and coconspirators with Wikileaks.

My plea to any and all who read this is this: HOLD ON TO YOUR WALLET. Don’t get sucked in to what is a going to be a nuclear sized implosion. Bitcoin is not just a hypothetical asset or tradable commodity (like buying a futures contract or selling stock short). Bitcoin is an illusion, created by unknown people in mysterious, spontaneous ways using computer algorithms that no one understands and has value only so long as some other sucker thinks it does.

Bitcoin’s “value” can, and will, evaporate in a heartbeat as soon as the next shiny thing appears on the horizon (or the SEC steps in to regulate Bitcoin exchanges, whichever comes first).

There have been many “virtual currencies,” from Dutch tulip bulbs to the collectable cards used in popular games. Without exception, they have all peaked and collapsed, leaving their owners with worthless inventories.

~~Charles Gray, GlobalTimes.cn

Please don’t let it last as long as Facebook.

For this post:
Cause: I finally got one prediction right
Effect: Going out on a limb for the next one

I can’t compete with Rob Hahn on predictions, so this one is only posted on Procuring-Cause.com. But please read Rob’s take on what’s unlikely to happen in 2014. We’ll compare notes later.

 

The Doctor is in, please be seated

Over the holidays after weeks of badgering from the next generation members of our household, my wife and I downloaded and devoured the entire five season, 62 episode run of Breaking Bad. And the son person was right. It was one of the best TV series ever.

That got me to thinking about other long running, highly acclaimed shows I missed over the years of being way too engrossed by career pursuits to stop and smell the

G-G Mafia video roses along the way. The Sopranos came immediately to mind. I had seen a few of the later episodes and I enjoyed them despite not knowing the full back story or character motivations. I promised myself I would go back some day and catch up. We just finished season one’s 13 episodes and we’re hooked again. The Sopranos isn’t just another gangster story in the shadow of Godfather or Goodfellas. It’s more of a study in the human psyche told through the revealing conversations between protagonist Tony Soprano and his psychiatrist Dr. Jennifer Melfi.

Sopranos[Spoiler Alert – if you haven’t seen the entire Sopranos series, stop reading now. Go turn on your HBO On Demand service wherever you subscribe to it and watch it now. All of it. Then come back here. Go ahead, I’ll wait for you.]            [OK, welcome back!]

Tony is torn by sometimes conflicting requirements in trying to take care of two families: his home family (wife, two kids) and his crime family (a collection of neer-do-wells with their own agendas). Tony has a deep-seated sense of right and wrong, good and evil (using his definitions of both, which may or may not coincide with either religious scripture or criminal law) but it is unfortunately offset by a misguided sense of when to pick which and a sociopath’s need for consistent overachievement. Add in an abusive mother and an uncle who wants him whacked (a move that may or may not have been condoned by the mother) and you can see why he spends a good portion of each episode talking to a shrink.

Tony operates under a code of conduct that has not evolved over the decades to address more contemporary dilemmas. Justice, vengeance, and vendetta are all black-and-white issues, with no room for any shades of gray. Often the retribution delivered today in a cloud of self-righteousness is merely the foreshadowing of a misunderstood or unintentional misstep by the victim some time before. Then the guilt sets in and the cycle continues.

What’s this got to do with us, Bob?

Well, glad you asked. I see some strong parallels between the moral mental tug-of-war of Tony Soprano and the current debates facing the real estate industry. (No, I’m not implying a connection to the Mafia. We’re talking about the man here, not the crimes of the man.)

Organized real estate, our catch-all term for the collective of participants in the business of, or the support of the business of, real estate is facing some deeply divisive issues, issues where not just the outcome but even the debate generates derisive commentary.

What is good for brokers may not be good for agents. That which helps the MLS stay solvent may conflict with the business practices of the brokers that the MLS serves. When an Association sucks money from the MLS operation rather than raise dues to cover its own program costs, is this treating the membership respectfully, honestly, and transparently? And will they resent the MLS or the Association for doing it – or both?

We have already heard or read (here, here, and here) many predictions about what lies ahead in 2014 and beyond. There are more on the way. Each prediction has multiple permutations and each of those a cause and effect relationship with multiple alternative outcomes.

Since starting Procuring-Cause.com I have had the pleasure of addressing various organizations on some of these issues, pointing out the pro and con arguments on each and helping them grapple with the local implications of any of their possible decisions. My presentations are not directive. I offer insights, but I don’t advocate a specific course of action because, honestly, if the local leadership doesn’t create its own long term strategy and embrace a tactical blueprint that the field generals can execute on, any direction I might offer would fall on deaf ears.  I offer options, facilitate conversation and debate, and help them create a plan they can own. For many, a single plan isn’t enough. What do we do if Plan A doesn’t work – what is Plan B?

In the course of these engagements I see similarities between these group leaders and the aforementioned Mr. Soprano. Many MLS CEOs stumble when trying to serve two masters with different agendas. Many MLS boards of directors, composed of both agents and brokers, fail to look out for the best interests of not only the shareholders but all stakeholders. The realty version of Omertà prevents the industry from policing or measuring itself internally and at the same time rejects any outside efforts to do the same. There’s only so much hair one can pull out before the psychiatrist’s couch starts looking like the better alternative.

LucyboothI’m no doctor, especially no shrink. I don’t even play one on TV. But I can help you grapple with the pressing questions and develop answers that will shape the future of your organization. Once again, industry leaders will be gathering next week in New York for the winter Inman Connect conference. If you feel like you need a psych evaluation, look me up or shoot me an email. Taking a page from the Lucy rate card, the first office visit is just 5-cents.

I hope to see you there.

For this post:
Cause: the Prozac quit working
Effect: I want a new drug

Maybe it’s time for MOVE to move on

Move-Realtor-BrokenHeartIf you have been living under your real estate the past few weeks instead of inside it, there has been a verbal war raging in the REweb over the testing by Realtor.com of a new creation called AgentMatch, ever since Realtor.com (RdC) president Errol Samuelson first announced the “experiment” at the NAR Convention in San Francisco in November.

As sometimes happens in such debates, clear and concise points of logic are overshadowed by ad hominem arguments toward the speaker. Witness what happened to Allison Schwartz, Communications VP at RdC parent corporation Move, Inc. when she engaged the madding crowd in comments following the first webcast of the AgentMatch advisory board meeting in early December. Alison commented on the resignation of board member Jack Attridge (an agent with Massachusetts based William Raveis realty) by questioning whether Mr. Attridge was right for the job in the first place:

I can’t help but wonder if you weren’t committed to helping shape the product development process from the beginning. Your quitting of the board in such a premature and public manner without discussing your displeasure with us first leads me to conclude that you might not be the best person to help shape the product on behalf of our industry.”

That little jab resulted in a deluge of barbs being thrown at Ms. Schwartz, some deserved, many not, that merely exacerbated the problem and diverted attention from the real issues.

More positions were staked and more opinions followed. Keller Williams, the largest real estate franchise in North America, condemned the effort and advised agents not to participate, then followed later with a revised semi-condemnation.

Ernie Graham, product management leader for AgentMatch, did a podcast with Rob Hahn on the Notorious POD and later a Goggle+ video chat in with Lani Rosales, COO of AGBeat.com. In his resignation letter, Mr. Attridge took Ms. Rosales to task for having “just written an article belittling agents and who had only included AgentMatch’s lead person in a biased article supporting the product.”

What a mess.

Despite the deluge of disassociated complaints included in the comments posted after every new news story on AgentMatch, there were a number of valid points made about the service that would give one pause before moving forward. It is based primarily on listings taken, managed, and sold and measures such basic parameters as list to sale price ratio, days on market, volume of listings, etc. The loudest cry from the Realtors who object was two-fold: (a) numbers alone do not a story tell, and (b) NAR should not be in the business of rating its members or comparing one member to another by any measure or mean.

Enough has been said, and said, and said about the first objection. So much so that barely a month after announcing the project Realtor.com published a letter from President Errol Samuelson stating that the pilot test of AgentMatch was concluded, but that the effort “to create the most accurate and complete resource for consumers looking for a Realtor online, and to continue moving the industry forward with innovative solutions” would continue. The REWeb can now breathe a collective sigh of relief, pat each other on the back for a job well done in bringing down the program, and concentrate on the holiday festivities that will surely fill their calendars for the next few weeks.

While Realtors are pleased that they overcame the first objection (data does not tell the whole story) It’s their second objection that deserves closer scrutiny, because it goes to the core of a larger conversation being had in the halls and on panels at real estate conferences, a conversation that will continue for the next year or longer.  Underlying all of this superficial debate over whether ratings are good or bad, whether they should be accompanied by reviews, and how to keep Trulia and Zillow from doing it first (even if everyone agreed it was a bad idea), underlying all of that is the real core issue. Once one dispenses with the myriad of complaints about how it’s done, one is left with the underlying question, “Should it be done?” and if so by whom.  What is the role of NAR in all of this? And what should it be?

NAR has tried to avoid this conversation. It rebuffed attempts to link NAR to its AOR-MLSs in the context of The Realty Alliance’s general protestations about MLS behavior. (We at NAR don’t tell the MLSs or the brokers how to do business.) It tried again to dodge the bullet aimed at them because of the actions of the website that shares the Realtor name. (We don’t tell Realtor.com what they can and cannot do with their website.)

I would contend that not only does NAR tell Move what they can and cannot do with the RdC website they bill as the “official website of the National Association of REALTORS” they should either own up to that authority and responsibility or abstain from the conversation and abdicate the throne.

Most commentators presumed that in the wake of this past summer’s history making special meeting of the NAR board of directors in Chicago there was a direct causal relationship and significant oversight by NAR in the development of AgentMatch. Barely a month earlier, NAR CEO Dale Stinton reconfirmed for the zillionth time that Realtor.com is the official consumer website of the NAR and detailed many of the changes that had been made or were about to be made as a result of the loosening of the reins guiding RdC.  To quote the Inman News article, “He said NAR’s relationship with Move had vastly improved. ‘We’re in constant communication now,’ he said.” [Emphasis mine.]

Agents were now puzzled to see a new controversial service emerge, one which presumably NAR had communicated constantly about with RdC.  A common theme heard throughout was NAR exists to promote all agents, not promote one over another, which is what such ratings systems do. To make that a viable issue, one needs to clearly understand the origins of RdC and to dispel many of the false premises that have been repeated so frequently as to become, if not fact, certainly accepted lore.

A brief history of Realtor.com

Realtor.com was originally created to be an extension of the Realtor brand. It was to be an advertising medium, operated by the Realtor Information Network (RIN, the NAR subsidiary created to run RdC). Originally, it was free. The plan looked good on paper. And it didn’t work.

So in 1996 RIN hired a startup company called RealSelect to operate it. In exchange RealSelect got listings from the MLSs, paid the MLSs for listings, paid NAR for the license to use ‘Realtor’ and sold data feeds to other websites (AOL being the most notorious) and advertising.

That didn’t work either. Real Select reorganized into Homestore, went public. It didn’t work. A bunch of people went to jail. To give you a flavor of the times back then, and a better understanding of how long the war over listing data syndication has been waged, here’s a quote from Brad Inman, then publisher of Inman News, in a November 2004 (yes, ten years ago) article. See if this sounds familiar.

In real estate, MLS data sits at the apex of the change, specifically the MLS information that is pushed to the Internet every minute of the day. In most cases, this data migration ironically is endorsed by the industry, but it also has ignited distrust and deep angst in a business that was congenial for decades.

The industry has made strategic mistakes in the mad scramble to quickly publish the data on the one hand, but at the same time try and control it. The Internet inherently frowns on the idea of control.

The Homestore saga was partly due to a confusing strategy of both keeping control of the data while letting go of the information. Despite an assertive and ethical new management team, the company is still struggling with its past. NAR’s restrictions on the control of the data contributes to the quandary for Homestore.

Source: http://www.inman.com/2004/11/12/changing-real-estate-industry

Homestore became Move in 2006, and now it’s working pretty well, but many of the issues Mr. Inman identified a decade earlier still plague the relationship between Move and NAR.

Let’s get our facts straight before we begin the debate.

NAR owns the trademark on the term REALTOR® and they will (and have) defend it to the death against continuing misuse and inadvertent usage that threatens to devolve the term into common usage like Kleenex® or Plexiglas® despite the preemptory addition of the registered trademark ® after each.

NAR has a subsidiary corporation called RIN (Realtors Information Network), a remnant from an earlier attempt by NAR to run their own national portal. RIN contracts with Move to operate the Realtor portal on behalf of NAR. RIN licenses the right to use the Realtor name in their agreements with Move. For this privilege, Move pays RIN about $2 million each year in license fees.

Move, not NAR, owns the domain name “Realtor.com” as confirmed by Whois.org.  To make things even more confusing, Move has created a d.b.a. operating entity name for its RealSelect subsidiary called (coincidently) Realtor.com to actually operate the website. To differentiate the two, I’m going to call the website RdC (for realtor-dot-com) and the company R.corp.

NAR does not own the website (i.e. all the code that runs the website, the servers upon which it sits, or the content created by R.corp). Nor does NAR have a say in product development by R.corp other than the restrictions placed upon Move by the operating agreement.  NAR holds one seat on Move’s board of directors, a seat occupied by Cathy Whatley, past NAR president in 2003 and NAR holds less than 2% of its outstanding stock.

So what is the real issue here?

The original mission of RdC – “To connect real estate professionals with consumers in order to increase the number of home sales transactions.” – the one that most Realtors remember and that they hang their argumentative hats on is no longer viable, because there’s competition out there. If you operate a website with your name on it and you want people to come to it so you can reap the free leads from it, you need traffic. RdC is losing the traffic race, slipping to fourth place in the October Experian report with less than half the traffic of Zillow (not counting Yahoo! which Zillow powers).

All this noise about AgentMatch, while there is some validity to the arguments, disguises the underlying problems:

  1. RdC has a new mission – to make money for Move, Inc – and agents don’t like it.
  2. NAR has control of the brand and to the extent defined in the operating agreement can tell Move what they cannot do with the brand. But they don’t want to get too close because they don’t want to be blamed for all the stuff Move does that agents don’t like.
  3. NAR still receives payments from Move, only $2 million per year in related-party transactions, enough to make it interesting.
  4. NAR does have editorial control over some parts of the content (i.e. no FSBOs unless listed by a broker), and bully pulpit control over others. But they don’t want to use the veto power too often or they’ll be painted with the failure brush again and we’ll be back in Chicago for another board meeting.
  5. Despite calls from agents to “Take back Realtor.com” NAR can’t fire the operator of the website. According to NAR CEO Dale Stinton at the May 2013 mid-year meetings in DC, “…there ain’t no getting anybody else. It’s an evergreen agreement (with Move) that goes on forever. If you didn’t know that before, you know it now.” So NAR couldn’t pull the website from Move as long as Move is performing to the dictates of the agreement.

And right there is the opportunity.

NAR might like to end the relationship with Move if they could. But it’s kind of nice to have a whipping boy around when you need to divert attention away from other failures.  It’s even better when you can disown ownership of the problem or the ability to solve it. NAR may want a national website devoted exclusively to promoting the Realtor brand, but they have proven once before they couldn’t make it competitive.  Even their latest efforts with Housevalues.com are nothing short of unremarkable.

But reverse the roles and look at this question from the other side of the table.

It may be time for Move to tell NAR they don’t want to operate RdC anymore.

Why? Because the brand is more of a liability than an asset. It’s closely associated with the trademark and the national association. It comes with restrictions (still) that prevent it from being fully competitive. And it’s not a name Move can advertise to promote the website without promoting the people designated by that mark as well. And therein lays the real problem.

The name means too many things, so many that it really means nothing at all. It’s worse than Kleenex, which everyone recognizes as meaning only one thing – nose blowing, tear absorbing, make-up removing tissues. Realtor means lots of things in many contexts, and not all are clear or good.

One cannot overlook the tacit acceptance of this premise embodied in the latest redesign of the RdC website.  Gone is the Big Blue R logo from its prominent position, top-most left-most on the homepage, along with the tag line about being the ‘official site’ of NAR.  It’s now “Where Home Happens.” But clearly it’s not where NAR happens, and that’s apparently OK with NAR.New_RDC_Logo

By stepping away from the Realtor.com name entirely, Move would have a chance to show what they can really do with a national website, how they could compete on a level playing field with Z, T, H, and W (‘w’ for whatever is next).

There are plenty of breach provisions in the agreement that would give Move an opportunity to exit, even if NAR didn’t want them to. They could breach for non-payment or for adding content not approved by NAR.

In this case, NAR could benefit as well. They would get back their brand-named website. Some might say they have not proven in the past that they could run a national website. But a couple things have changed for NAR in the past few years, not the least of which was the creation of the Realtors Property Resource (RPR), and with it the elevation of two nationally prominent and industry respected leaders who DO know how to run a website: Dale Ross and Marty Frame. Dale started what would become at the time the largest MLS in the country, MRIS, and Marty was operating national listing portal Cyberhomes.com before the agreement with LPS that created the RPR product and the team to manage it.

Exposing selected portions of the accumulation of property information that is RPR could become the basis for a new and improved RdC. They wouldn’t even need active listings. The content on RPR is unrivaled anywhere and would definitely separate and differentiate RdC from the current portal competition. By making RdC the showcase for REALTORS® rather than just one more website with listing data, NAR could put the sheen back on their brand. NAR could recapture the respect and support that has long been missing from its membership be creating a flagship website that truly offers unique content and value to consumers and at the same time guides buyers and sellers toward Realtors to help in their transaction when the time is right, all without competing advertising, three-headed monsters, or “selling us back our own leads.” And all without dues dollar support if the RPR revenue plans are still intact and on track.

The current operating agreement actually contemplates such a possibility in the terms for termination.  In section 7.3 (b) entitled “Transition” It states:

If deemed reasonably necessary by RIN in order to facilitate the Transition, RIN shall have the right to enter the facilities where the personnel and equipment related to the operation of the Domain Site and the RPA Business are located for the purposes of (i) observing such operations, (ii) directing such operations and retaining personnel, if felt to be necessary to the continued operation of the Domain Site and the RPA Business, and (iii) obtaining copies of Data Content Provider Agreement, copies of agreements with advertisers and copies of any and all related records. In addition, Operator shall provide to RIN copies of all source codes and related documentation for the Software without charge. [Emphasis mine]

So MOVE could keep the same website system and simply change the name from Realtor.com to Move.com. All the license agreements with AOR’s and MLSs are with RealSelect (dba Realtor.com, the corporation not the website) and would carry over to successors and assigns, so the data flow wouldn’t be interrupted. If some MLSs objected to that assignment, remember Move owns ListHub, the largest aggregator and syndicator of listing data anywhere. Move could just make themselves a new publisher in the ListHub network.

Then with ALL the shackles off, Move would truly be able to compete head to head with Zillow, Trulia and Homes in a no-holds-barred race for the hearts, minds, and wallets of not just Realtors but all licensed agents, without the need for any more special NAR board approvals.

WOPR

from War Games

By making this change, Move would actually be helping NAR and for Realtors as well.  Breaking the ties with Move would give NAR a second chance to build the national website that most Realtors thought they were getting 15 years ago – a national showcase for Realtors as a core service of membership with all of their properties displayed in full splendor, unencumbered by any advertising for anyone or anything other than the listing broker and agent. Just think of this Realtopia. No FSBO’s, no Non-Realtor listings, no builder listings, no foreclosures, no REOs, no AVMs, no three-headed monsters – just plain simple Realtor supplied property information on a website that doesn’t try to compete with ZTH because it doesn’t have to. If New RdC chose to display active listings, they would do so knowing behind the listing info is the deep library of proprietary RPR information that is available ONLY to Realtors and only through them to their clients. NAR would follow the advice of the WOPR – the only  winning move in this traffic war may be not to play.

There are enough benefits on both sides of this equation to make this divorce a no-contest event. NAR can’t be having fun trying to decide where to focus their attention or make their next defensive stand. After the divorce, they can say with a clear conscience that they don’t have a dog in the AgentMatch fight, or any fight involving the new Move.com. And they would finally be right.

Now, how about a nice game of chess?

For this post:
Cause:  The latest uproar over agent ratings
Effect: A solution for the syndication arms race

This post is also published on Notorious R.O.B.
Contact Bob Bemis at www.bobbemis.com

Raise the Bar across the Industry

There’s an active group on Facebook called Raise the Bar which discusses (for the most part) ways that agents can improve the overall service levels in the real estate industry and thereby raise the professionalism practiced by each individual agent or broker. The goal is admirable and the efforts sincere even if they do get off track from time to time. But they seldom discuss items outside of their limited purview, i.e. the brokerage of real property.keys-title-insurance

Perhaps it’s time to expand that horizon because it’s clear from the following article that something needs to be done with bad players in other sectors of the business, in this case one major player in the title insurance industry.

In an article entitled A Trusting Couple Now Thrown for Two Loops published in Sunday’s New York Times (12/1/2013, Business Section, page 1) and written by assistant business and financial editor Gretchen Morgenson, Stewart Title is pressing a lawsuit against a retired Florida couple who were swindled out of millions of dollars by an employee of Stewart Title itself.

If the story is accurate, and considering the source is The New York Times I have no reason to believe otherwise, Stewart Title should not only be ashamed of its collective corporate self, but real estate agents everywhere should know what this behemoth is capable of and ask themselves if they want to expose and entrust their future escrow closings to a company that would behave as egregiously as has Stewart. (Remember, you have not only an ethical requirement but also a legal fiduciary responsibility to advise your clients in the best way possible, lest you, too, become the target of litigation should things go south.)

Here are the details:

Ivor Rose and Rita Starr have been married for 38 years.

They lived modestly in Miami Beach, buying and renting commercial and residential properties there. Mr. Rose, 79, a child the Depression, had a strong distaste for debt, so. The couple never borrowed money but was able to buy the six warehouses and eight homes with cash. Those properties were worth around $15 million in 2006.

Miami businessman Michael Stern rented space from Rose/Staff for a shoe store. He became friends with the couple to gain their trust and then started investing with them in other commercial properties. What they didn’t know was that Stern was busy mortgaging their other properties without their knowledge by falsifying signatures and forging documents with the help of Stewart employee Arlene Raijman. Ms. Raijman issued title policies on all of the Stern mortgages despite having improper documentation to back up the insurance because the documents were forgeries.

Here’s where the irony comes in.

Stern stopped paying on the mortgages and skipped to South America. The lenders started foreclosing on the properties and when Rose/Starr received delinquency notices the alarms started sounding. Lenders looked to Stewart to make good on their policies and return all of the loan capital. From the article:

“Stewart Title, the company that insured the fraudulent mortgage loans — and whose policies require it to cover all the losses on the loans arising from forgeries and other defects — has refused to make a settlement on most of the properties.

“And Stewart Title is doing this at the same time it is asserting, in another court venue, that one of its agents helped Mr. Stern secure bogus loans. It is suing that agent.

“According to a lawsuit that Stewart filed against her, Ms. Raijman breached her duties at more than two dozen loan closings, issuing title insurance even though loan documentation was improper. Fifteen of those closings were for properties belonging to Mr. Rose and Ms. Starr.

“Chief among the improprieties, the documents show, was her disbursement of loan proceeds to Mr. Stern rather than to the couple, as the loan documents required.”

As I said at the top, if these allegations are true, this could turn out to be a huge black eye for Stewart and a red flag to agents or brokers thinking of using them in the future. John Arcidiacono, chief marketing officer for Stewart who was contacted by the reporter, declined to comment on specifics, citing the litigation. On the Stewart Information Services website, among the duties ascribed to Mr. Arcidiacono is “crisis management” so it would appear he is the right person to address this situation.

But Stewart is managing this crisis out of both sides of its mouth. In the Florida case against Rose/Starr, Stewart contends Ms. Raijman was not one of its agents or employees and that the company, therefore, should not be held responsible for her dealings.

But in Texas Stewart has sued the Great American Insurance Company, a reinsurer from which Stewart bought a $15 million insurance bond. Stewart bought the bond in April 2009 to protect against losses resulting “directly from dishonest or fraudulent acts committed by an employee acting alone or in collusion with others,” its lawsuit says. Stewart says Ms. Raijman was indeed its agent. As such, it hopes to collect on the bond and to recoup roughly $10 million in losses it has incurred so far over her work.

So which way is it? Was she an employee in Texas, but not in Florida? Doubtful! Is Stewart walking a fine line between the cases in hopes of minimizing their financial exposure? For sure! But how much is that exposure? According to the article it’s in the vicinity of $10 to 15 million.

To put that into perspective, Stewart Information Services (STC: NYSE parent of Stewart Title) racked up over $2 billion in revenue last year, up 17% from the year before. Stewart carries a loss contingency fund on its balance sheet of $140 million. They could easily pay in full on these policies and tap that fund for less than 10% of its allocation, so they would not materially affect the balance sheet (or the shareholders).

And they would be off the hook in the arena of public opinion, and in the minds of the real estate agents and brokers upon whom they depend for a great majority of their revenues. As it stands now, Stewart looks like the greedy corporate giant stepping on the “little guy” or in this case, considering the age and stamina of the victims of this fraud, just waiting for them to give up.

That’s not a pretty picture, and certainly not one that Stewart Title officers would like to promote. Perhaps they’re hopeful that real estate professionals don’t read The New York Times. That would be misplaced optimism since Times articles are syndicated in hundreds of local papers across the country. Surely more industry observers than just I have seen the article somewhere.

Which leads me back to my original conjecture that by pursuing this case Stewart stands to make more enemies than friends, particularly among the thousand or more agents who funnel closing and title service business to them. I ask the Raise the Bar group, again – Would you want to expose your real estate clients to this kind of potential abuse? If not, Stewart customers, instead of raising the bar perhaps it’s time to lower the boom and take your next closing elsewhere.

For this post:
Cause: You’re never too small to be crushed.
Effect: You’re never too big to be scolded.

Put the Deck Chairs here, please!

Am I the only one, while watching Leonardo DiCaprio and Kate Winslet in the titanic blockbuster movie Titanic, who thought “All these people are about to drown and they don’t know it yet?”DeckChairTitanic

That’s kind of what it felt like during the MLS Issues and Policies Committee meeting this past Saturday in San Francisco. Assembled before the standing room only audience was an august panel of industry thought leaders discussing the crumbling relationships between the brokers of The Realty Alliance (and other large firms) and their Realtor Association MLSs. After about a half hour of listening to repeated platitudes heard ad nauseam in the past I was eagerly anticipating the announcement of Peace in Our Time! Would there be a breakthrough in the shuttle diplomacy that must surely have been going on in the back rooms? Would NAR CEO Dale Stinton tip his hand and let us know that mother NAR was riding to the rescue with a new MLS model of inclusion in governance and a noncompetitive product/service policy?

Alas, it wasn’t to be. Instead we heard, ‘Yes, we talk to large brokerages regularly, but they haven’t told us what they’re planning,’ and ‘No, it isn’t NAR’s place to get involved in the local issues between brokers and their MLS(s).’ (Both of those are paraphrases as I heard them, not direct quotes.)

<Sigh!!!>

I could almost hear the arctic waves washing over the feet of the band members accompanying the frenzied hustle of the ship’s mates as they rearranged the deck chairs on the doomed ocean liner.

Everyone in the room either heard firsthand or read accounts of the presentation by Realty Alliance CEO Craig Cheatham at the CMLS meeting in October. Everyone knew the deadline (imaginary as it turned out to be) ten days later when TRA was to meet and decide what to do next and with whom. Everyone in this room expected something to happen or to be discussed at this meeting. Nothing happened.

The general forum ended and the official committee meeting began. Surely now the sparks would fly. Someone from the major broker contingent must have prepared the motion to rescind the policy adopted in May that allowed MLSs to decide whether to treat their public facing website as a basic service, paid for by general funds rather than individually based on usage. In what may have been the fastest and shortest meeting in recorded NAR history, the matter was dealt with in a matter of seconds, referring the question back to a task force for more study, with nary a comment from the floor for or against before a rather lopsided voice vote.

<Double Sigh!!!>

Admittedly NAR is between a rock and a hard place in this drama. They have the most to lose if either of the two most popular guesses about TRA’s ultimate detection proves to be true. If (a) TRA brokers opt out of IDX and syndication by mounting their own web portal, thereby undermining one of the most productive tools for both listing and selling brokers, or (b) go all the way and withdraw from MLS altogether, the cornerstone of NAR’s local associations, the singular most attractive value proposition that associations have – access to and participation by all in MLS services – goes away, and with it any reason to belong to a Realtor board.

Without MLS, and all the benefits attendant to it, NAR stands to lose a significant portion of its membership and with that goes a similar portion of dues dollars and political clout. By my rough count, the five largest brokerage firms account for nearly half of NAR’s million members. Without the big brokers, NAR becomes a second tier lobbyist with small, disorganized members who are focused more on day-to-day survival than on the long-term prosperity of the industry as a whole. I cannot imagine that they are deferring responsibility to their local MLSs with just advice to “Talk to your brokers and see what they want.”

Yet, NAR walks a thin line in the aftermath of the DOJ settlement, being constantly careful not to be seen as trying to dictate business practices that might be anti-competitive or guiding the MLSs to do so. Still, I have to believe some conversations with some of the major players are happening somewhere, sometime, leading hopefully to something.

If not, then we might indeed have witnessed the rearrangement of the deck chairs on a sinking ship. I, for one, certainly hope not, because I know how that movie ends.

For this post
Cause – Invisible iceberg!
Effect – Glub, glub, glub.

 

The Impossible Dream or a Glorious Quest?

This “thought” by Steve Murray of RealTrends appeared in his October 31 email newsletter and was posted on his website the next day.

State of Unrest

Why is there so much angst between Realtor associations, MLSs and brokerage firms?

By Steve Murray

“The whole is festering with unhappy souls. The French hate the Germans, the Germans hate the Poles. Italians hate Yugoslavs and South Africans hate the Dutch. And I don’t like anybody very much.” -Kingston Trio “They’re Rioting in Africa” lyrics

Sounds like the current state of our industry, doesn’t it? The level of angst between local, state and national Realtor associations, MLSs, brokerage firms and national realty chains has risen to new heights. Everyone is unhappy with everyone else in some fashion. Of course, there are exceptions (though hard to find).

It occurs to us that this is what happens when the pie shrinks (revenues generated by the industry and the lack of growth in membership). The fight becomes one where everyone invades someone else’s turf (mission creep). It happens in other industries as well.

What is needed is a group of wise people from the various constituencies to gather and come up with a way to co-exist. A new road map is needed. A map that lays out how the market place can be made clearer and more efficient. That would be a worthy goal. It behooves these leaders to find some solutions before external forces develop their own path (pocket listings anyone?).

We may be wrong, but it seems like we are creating fixes on the run when what is needed is a full examination of how we are organized, whether that still works as intended and are there new structures and rules that are needed that reflect today’s reality.

Just a thought.

quixote-windmillI agree with Steve that left unaddressed these problems will merely create an environment ripe for invasion by yet other “external forces” that can send the industry in directions no one wants to see it go.

I was reaching for the phone to call Steve and offer my assistance in assembling the right people in the right room at the right time to try to solve these issues. But then I stopped.

My pitch to Steve was going to be, “You bring the brokers. I’ll bring the MLSs.  We both know a couple of influential association executives who could bring the Realtor organizations at all levels. Let’s get everyone in the same room at a large round table (think either King Arthur or Paris Peace Talks – no “sides” so everyone is equal) and hash this thing out. Sounds easy. But the doubts crept in as I put down the phone.

What would we talk about? Well, for starters, there’s the list of grievances prepared by The Realty Alliance and aimed at the MLSs and their Realtor Association owners. Many are superficial or apply to only a few isolated situations and could easily be fixed by taking a couple of people out to the wood shed. Others are but the tip of the iceberg and the most recent artifact of a much deeper malaise.

There’s an underlying current of doubt, mistrust, and apprehension that courses through these discussions. It sits like a mastodon in the room, ancient is his repose and invisible to any and all who choose to look around or through the hulking question that challenges every professional in the business: “How do we make this industry better?”

How do we elevate the practice of real estate to a level of professionalism that will foster trust from our clientele and confidence from our fellow practitioners?

How do we reform our trade associations into support organizations that work to the benefit of ALL parties in the transaction – buyer, seller, agent, broker – and not just two or three of the participants?

How do we construct a matrix of interrelationships where all of the pieces not only connect but support all the others and through those connections make the whole of the structure stronger?

How do we build a platform from which to lobby for laws, policies and regulations that promote and sustain the concept of home ownership as a cornerstone of economic prosperity where one’s home is one’s castle and in most cases the basis of one’s family wealth? Could such a platform be supported by both red and blue ends of the spectrum, left and right wings of the parties, and all shades and wings in between?

How do we stop the bickering between the parties which seems to be consuming far more energy and effort than could possibly be justified by the results? There seem to be no results – just continuing misunderstanding, finger-pointing, and ill feelings.

Could any of this be done at a level (national, state, local) and with enough support from all quarters to truly make a difference in how real estate brokerage framework is structured? Or are we too far gone, too deeply mired in our current morass to come up for air long enough to have civil discourse about these problems?

What is needed here is far more than just another real estate conference with panel discussions and break-out sessions where lots of platitudes are spoken but nothing is accomplished. We need something more akin to a constitutional convention with delegations from each of the constituent “states.”

we-the-people-9The assembly would need more than just a couple of days, but certainly less than the nearly four months it took the founding fathers to draft, debate, and adopt the new structure of an entire nation.

But the next step would be the trickier one. How do we ratify such a new structure? In 1787 it was fairly easy, even with 13 independent minded states joining together for the common good. On a simple yes or no vote, each state decided could it go it alone or would it be better off joining with its confederates to become stronger through union and common purpose. This time it’s trickier. One no vote by one vital “state” would/could undermine the entire effort. This truly needs to be all for one and one for all.

In the end, all the states joined. They joined for purposes similar to those which the real estate convention would be asked to address: to form a more perfect industry union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the benefits of home ownership to ourselves and our posterity.

Is this the impossible dream? Or are we as an industry up to the task? And if so, when can we start the quest?

For this post:
The Cause: an impossible dream?
The Effect: a glorious quest!

Question #21

NAREP StopSignRob Hahn published a detailed and most entertaining analysis of Texas broker Ben Caballero and the National Association of Real Estate Professionals (narep.NET – not .org or .com) that Ben founded about a year ago. In the post, Rob poses 20 questions to Ben about his real estate business, his business practices, and the current status of the NAREP non-profit organization. But he missed the biggest question that has been in my mind since I first heard about NAREP.

Why?

NAREP was created with the express purpose of stopping “syndication abuse.” Toward that end they created the Real Estate Professional’s Bill of Rights. The document “aims to ensure that proprietary real estate listing data are used in a manner that serve the interests of consumers, real estate professionals, and publishers. This Bill of Rights shall apply to all online and print media that publish listing information, including desktop and mobile applications.”

After a quick read of the ten major bullet points, it becomes evident that the doctrine is aimed squarely at the major national publishers. All but three of the “rights” not only demand changes in display practices by the publishers but actually require that the publishers change or abandon many of the business practices, not just display practices, that made them so successful. Seven out of the ten points contain requirements that if followed by many of the publishers would insure their self-destruction. It’s pretty clear that NAREP isn’t so much concerned about fair display of listing information as it is bent on the elimination of the national portals.

Back to the question of “why”? I don’t ask “why” because I don’t know what the motivation is behind this organization. That is pretty obvious. I ask “why” they chose to use this tack when they know for absolute certainty that no national publisher who wants to stay in business would, or even could, agree to all of the points in the Bill of Rights.

I am reminded of the recent kerfuffle in Washington, the government shutdown of 2013, caused by a small group of elected radical extremists hell bent on destroying the Affordable Care Act of 2010. They launched this crusade and brought the government to a screeching halt while knowing full well (because they were told by the more rational branches of the their own party) that this kind of blackmail or extortion not only wouldn’t work but it would, in the long run, damage the reputation of the party and undermine their attempts to regain the Senate in the 2014 elections.

Yet they persisted. And in the end they lost. Their futile attempts to usurp the authority of the Senate and the executive branch of the government and single-handedly repeal a law, approved by both houses of congress, signed by the president, and that withstood Supreme Court scrutiny was, in the end, a “tale . . . full of sound and fury. Signifying nothing.”

I see the same sort of mentality at play in the NAREP philosophy. Any real estate practitioner with more than a few years experience and some broad exposure to the issues and debates of the day could, if asked, advised NAREP that their demands were impossible for publishers to meet. Indeed, the advice from long-time esteemed advisers at Clareity Consulting, whose similar draft of a Syndication Bill of Rights was used as a basis for the NAREP rewrite, would certainly have been moderation had they been asked.

NAREP published a list of constraints that no publisher could possibly agree to without at the same time throwing in the towel and giving up on their current business model. So if it is that obvious that the Bill of Rights couldn’t succeed, one must question the intent of the organization. Surely it isn’t just to stir the pot and generate a ton of publicity for the organizers. The most successful real estate broker in the nation with over 2,200 closed deals worth $668 million in 2012 doesn’t need the free publicity. Even at a 1% commission rate, that’s nearly $7 million in revenue. If I were drawing down that kind of coin, I’d be sipping umbrella garnished beverages on my sailboat in Margaritaville rather than trying to reform an industry that had been very generous to me.

So my question, #21, is Why?

for this post:
Cause: Obfuscated intent
Effect: Bearding authority

This post appears on Notorious R.O.B. as well.