Broker Obsolescence? - The Growth of Auctions.
The new cry from constituents and customers alike is for transparency. No more backroom deals or preferred treatment. The White House is being held to a new standard of transparency, Wall Street is being dragged into an era of transparency (abet kicking and screaming) and in the age of Google and communication at the speed of light, why not?
Shouldn’t we all understand why something happened or why it didn’t. Haven’t we outgrown the ambiguous answer of “Just because?” The world is asking why and how and how does it work and why did that happen and what caused it? We are learning that there is usually a simple, obvious and truthful answer, even if insiders try to make it complicated, cloudy and ambiguous.
Why isn’t the sales model in Real Estate transparent?
There are so many new tools available to the consumer. In many cases, the research we can do ourselves is better than the research the professionals in their respective fields can assemble. What’s more, we have a direct/integral role in the validity and source of the data. Generally we are not looking for data to support our position, or to close a sale, we are educating ourselves.
It’s part of the evolution of business and business culture. Travel Agents are rare today, but the good ones are very helpful for complicated travel plans. But if I just want the best deal on a flight to Vegas and hotel room that I can chose from a list of options, I’ll book it myself on one of dozens of online sites. I can do my own research on the best locations, rooms, itinerary and prices. As much we take that for granted, just 10 years ago, you couldn’t gain access to the booking systems and therefore the available options without being a member of the travel industry (A Travel Industry Professional).
Interested in buying and trading stocks, bonds, options and equity positions? Before online services, you called your stock broker and placed the trade. Today true day-traders and those with the time and patience can research positions and companies while reacting to streaming news and moment by moment to changes in the markets all from the comfort of their kitchen table. Of course, there are still positions not open to the general public like IPO’s, some forms of shorts and propriety stock class offerings. But, that’s all probably going to change.
Why is it that one needs to hire a Real Estate Agent to find, view and offer on real estate? Our we really so short sighted to think by restricting access to a “Listing Service” we are protecting the consumer? Does a confidentiality agreement protect the seller? No, we are protecting the business model.
I’m going to step on some toes here, but this is the question consumers (buyers) and the sellers (mostly bank asset managers) are asking.
There’s no surprise we’ve seen the growth of the Auction market in Real Estate. HUD has done it for years for residential sales… generally HUD listing agents simply act as a concierge to assist HUD. Any buyer can find, research and in many states bid on homes themselves. Other lenders are starting to catch on too. Why manage 100 sales through 100 platforms with 100 different brokers when they can market all of their inventory themselves, on-line, see every offer, question and feel confident they reached as many possible buyers as they could. (Achieving the highest possible price.)
Nearly every Asset Manager has said the same thing to me in different ways..”We trust and need the local expertise of the local broker, but we just don’t trust the execution..”
Why are lenders selling their assets on auction sites? They want to be sure everyone had access to make an offer who is qualified to make an offer and they got the highest and best price. That’s why HUD does it. Transparency and accountability. All offers are submitted and managed through their on-line bidding site. It’s a blind, best price take all approach we all hoped the traditional sales process was supposed to be. (Ever wonder why the house or building you offered more for was purchased by another buyer at a lower price? Consumers do..)
The world is shrinking. We are all asking for the accountability and transparency that a free market should produce. If we don’t like that our roles are changing, it’s too late. They’ve already changed. (Gone the way of the wheel-right, cooper, mule skinner, lamp-lighter). Auctions are here to stay.
As always, open to your comments and suggestions.