Many of our industry’s leading professionals and real estate pundits are now sharing their 20-plus-year pronounced obsession over imminent, industry-wide disruption, with a frenzied focus on the impact of artificial intelligence.
My take on the use of artificial intelligence is that we should first encourage our industry to achieve the more remedial level of basic intelligence—specifically, in terms of how we perceive and promulgate our value propositions in both the B2B and B2C environments.
Let me get right to my point: Every industry leader, broker, coach and respected textbook I have been exposed to has astonishingly asserted one or both of the following premises:
- That the market determines the price in real estate, or
- That the buyer determines the price
This numbingly incorrect belief inadvertently, yet dangerously, reduces virtually everything a REALTOR® does to market a home to irrelevant or superfluous. Because if the market determines the price—as it does with stocks or commodities—then this places us in the category of merely facilitating market-determined transactional outcomes.
Amazingly, we seem to be volunteering to be compared to other professionals in industries where the market does indeed determine the pricing outcome, such as stockbrokers. Stock sales professionals with certain discount houses charge an approximate $20 fee for a million-dollar sale. Why, then, are real estate marketing agents paid tens of thousands of dollars, in many cases, for significantly participating in a million-dollar home sale?
Certainly not because only the market or buyer influences the final price.
The professional who facilitated the stock sale only gets paid a pittance in comparison, for good reason. Discount stockbrokers do not negotiate the price; they do not stage the stock and they do not network the stock to influence the final price. Instead, the market determines the price.
In real estate, the buyer, the buyer’s agent, the seller, the seller’s agent, the lender and the appraiser, in most cases, are all stakeholders in the final price. For their part, the marketing agent (still referred to by some as the “listing agent“) influences the final price based upon their marketing, networking, negotiating, nurturing, administration, staging, human-relation and sales skills…and flat-out endurance. Regrettably, this one, poorly conceived and ill-advised declaration—”the market determines the price”—inadvertently sabotages all of that real and perceived value.
While it may seem like it makes sense to mimic the other asset classes, like stocks and commodities, declaring that the market determines the price is a massive misunderstanding that would be disastrous. Thanks to their intuition, even the consumer does not believe the market determines the price, and is willing to compensate real estate professionals commensurately.
In a time when the threat of fees (all of which are negotiable) being diminished is far more worrisome than disruption, we must be careful that we do not unwittingly convince consumers that we are merely a necessary evil…facilitating market-determined transactional outcomes. If we do, the consumer’s greater intelligence and belief regarding our indispensable role in determining the ultimate sales price of a home may be shaken.
As the former CEO of realtor.com®, I devoted several years to encouraging 1 million REALTORS® to spend significant and hard-earned dollars to enhance the marketing of their properties showcased on the site. Were I to think that the ultimate sales price was perfunctorily predetermined by the market, I would have never so passionately advocated for enhanced marketing, nor would I now be so committed to debunking the aforementioned myth.
REALTORS® need to be more respected for the money they invest on behalf of their clients and the outcome they seek to influence. If consumers end up thinking, as our industry often does, that the market determines price, then artificial intelligence will not be our chief concern—our perceived artificial role and value will be!
Allan Dalton is CEO of Real Living Real Estate and senior vice president, Research & Development of HSF Affiliates. For more information, please visit www.realliving.com.