Blog : Business Model

Chicago

Chicago

One of the reasons I’m bad at this business is that I tend to give people too much credit. I can’t market gimmicks. I’m incapable. Stop in to my open house and win a gift card! I can’t do this. It’s fine for other people, but not for me. I refuse to think that a gift card will draw in a buyer. If you’re a buyer lured in by a gift card, how can we even be friends? How can you look yourself in the mirror?

Do you want a secret behind the scenes guide to something? Well then type in your email address here! You’ll get that thing, and I’ll get your email address, which is all I really wanted anyway. I can’t tell you to Enter Now! I just can’t. I respect myself too much. I respect you too much, and we haven’t even met. This is why I’m bad at business. I can’t pretend a gimmick is anything but a gimmick. I also hope you’ll know the difference, which may be why my clients and customers tend to be the smartest, but now I’m just bragging.

There’s a new rumor in the market. A new play. A new gimmick. It started a few years ago, but as it should be dying out it is, instead, gaining momentum. It’s a movement, really. Devoted followers, intent on spreading the good word. No, maybe it’s not a movement, maybe it’s a religion. The followers are evangelizing and I’m just sitting here calling the tenements of the faith into question.

The issue here is that of some mythical “Chicago connection” Some spoken or unspoken connection to a geographic area, from this area to that area. This connection is, of course, real. It’s obvious. This market is full of buyers from that market. In this, there is a serious connection. Like Chicago and Naples, like Manhattan and the Hamptons. Like peanut butter and jelly. Connections.

This, in and of itself, is not a gimmick. It’s not a sales ploy. It’s the truth. But the gimmick comes in when we go about 2019 pretending like the internet doesn’t exist. If you were looking to buy real estate on the private island of some reclusive billionaire, you would indeed need a connection. Who knows this billionaire? Where exactly is this island? Are there houses to buy? Do I have to join a cult to gain access? Will I have to eat human flesh? These are important questions when considering access to a private island nation, and I admit that I cannot help you with this questions. You need an inside, a connection. Something more. Your life depends on it.

But we are in Lake Geneva and Chicago is about 90 miles away, down a large and wide highway. Several of them, in fact. Our market is not gated. Our information, once proprietary and secretive, is now published on global real estate inventory websites. If those websites are closed, there are others. Your phone has them on it. You can download apps and maps and look up the sales on a particular street in this town. And you can do it from that town, the Chicago town, the big one where the people are from. If the websites are all broken, you can drive here. There is no requirement to obtain the insider’s guide first (this blog is the best guide you can ever find, and it’s free). You can just get in your car and drive.

Marketing around the lake these days is focused on the connection to Chicago. It supposes that one group has more access to the thoughts and hearts of that great city. It supposes that somehow, knowing some people in some other place, gets someone more access to the people who might buy or sell. It suggests that this is an advantage, but beyond that, it suggests the this advantage is unique to one company or many others. The truth is, all of this also supposes that the internet doesn’t exist. It supposes that our geography isn’t as remarkably convenient as it is. If the market was still closed and secretive, as it was in the days before the MLS and the internet, this connection would matter. But it’s 2019 and I’m connected to you and you’re connected to me, and we haven’t even met. Want to avoid the gimmicks? Work with me. I’m here to help. But if you think I’m giving you a gift card for attending a showing, you’ve read this all wrong.

(Want to know about a new listing on the lakefront in Indian Hills/ Glenwood Springs I’m bringing to market today? Email me.)

The New Game

The New Game

There’s something changing in the Lake Geneva real estate market. The change is mostly involving the lakefront market, but there’s little doubt that this change will make its way through the different segments, eventually engulfing everything, everyone.  The change is subtle to the casual onlookers, but it’s game changing for the players in the market, both buyers, sellers, and agents, alike. When something is described as game-changing, that usually reflects positive change. Like, this new phone/device/tablet/thing is game changing! But in this case, it’s game changing in the way that it makes losers out of us all.

The new rules of real estate are not at all like the old rules. The old rules involved some decorum, some particular process that was generally respected by those in the business. Real estate has always been cutthroat, as is most commission based business where the barrier to entry is the skill that is a continuous but methodical pulse. The business will never cease to be that way. Even as Redfin, Opendoor, and others have tried to change the old commission method with new technology, it’s obvious now that the model preferred by the consumer and agents alike is the old format of commission for results.

In this hunt for results, the new model has taken sellers and agents to extreme levels. Sellers, under the old model, would interview the agents that they thought gave them the best chance at selling. Sometimes, this agent was their sister’s hairdresser, or the lady who they know from the PTA. This wasn’t generally the best way to find an agent, but it worked and it worked for decades, for generations. Today, sellers in competitive markets interview agents, but mum is no longer the word.

Sellers interview, then sellers play hard to get. This is fun for the seller. The result of playing hard to get is a bidding process by the agents who know of the property.  The first time in the door, for that initial meeting, the agent told the seller the home was worth $3MM. The agent knew it would be easier to sell at $2.65MM, but she came in high, because the business is important. The seller fields these initial numbers, then goes quiet. Then, after some quiet, he tells the agents that he’d consider selling if he was able to get $3.4MM. The agents think, ponder, call back. They have someone interested.

Because they always have someone interested. I have someone interested, usually. At $3.4MM it’s no longer any representative of market value, but it’s a price and it’s a lakefront and that’s the game.  Agents looking to make a name for themselves, or further a name they already own, will pounce at the opportunity to list high and sell, maybe someday much, much later.  But the seller won’t list, and so the calls resume, and the agents tell the seller that it’s time to sell, for $3.5MM, maybe. Or perhaps it’s $3.6MM that will make this deal happen. The negotiations are between the seller and the agent, and in a market that some incorrectly perceive to be torrid, the price is always driven higher.

Without committing to an agent, the seller thinks he has many agents working for him, when in fact, the agents are working only for themselves. If they have a buyer, one that might think $3.5MM is a reasonable ransom for a $2.65MM house, they’ll bring the buyer to the door. They’ll show the house, and they’ll try like crazy to tell the buyer it’s the right house at the right time, because hurry! If they don’t buy it someone else will. This is the refrain of the ignorant, unless it is employed only when the case dictates such a sensationalized phrase. If your agent tells you this every time, you need a new agent.

The seller is at a disadvantage in this scenario, because he truly has no one representing his best interests in the sales process. He is flying blind, and by the time he does ultimately list, the bloom is off the rose and the market has already heard of his property, and they’ve already dismissed it as being overpriced, ugly, and bad. The traditional model would have better served this seller, if he had only chosen an agent, listed the home, and marketed effectively without first crying wolf at those artificially, agent-inflated numbers.

While the seller is making a mistake, because he thinks, erroneously, that he’ll be saving money, it truly is the buyer who is making the worst decision here. Buyers put their trust in agents, and the idea is that the agent is serving the buyer’s best interests in all of their advice. I effort daily to follow this, and I’ve talked myself out of far more deals than I’ve ever talked anyone into. But if the agent has the goal of selling the house quickly and quietly, before the market can even know of the property, has the buyer been receiving the sort of objective information that she should be entitled to? Highly doubtful. But this is the new game, and the new game isn’t engineered to serve the buyer or the seller, it’s engineered to serve the agent. In that, there should be concern, because the game has changed and it’s changed at the expense of the consumer.

For now, this: Merry Christmas. I’ll be back on this small keyboard on Monday, though I’ll be working this weekend should you require some assistance. Ideally, you won’t require assistance on Christmas Eve or Christmas Day, but Boxing Day is an embarrassing Canadian Holiday and I take pleasure in working while Canadians rest.