In this episode we are breaking down the trends of the week and showing how they impact brokers and agents. Steve Murray, President of REAL Trends discusses the impact of tariffs on the cost of new home construction, the myth of technology, and the whole thinking about values before profitability.
Let's Jump In!
Yesterday, the head of the National Association of Home Builders came out with a public statement that criticized the Trump administration for their tariffs, particularly those tariffs being levied on Chinese products which will directly impact the cost of home building materials. The head of NAHB also was critical of the prior tariff loaded on Canadian softwood imports which raises the cost, of course, directly of new home construction. We don't disagree whatsoever that these tariffs are a somewhat frightening tool to be used against trading partners like Canada, Europe, and China. We also understand that in many regards, it's going to raise the cost of certain materials, products, toys, and other goods coming into the United States of America.
Whether you agree with the administration or not, you have to agree, however, particularly in regards to China that not only is a $400 billion dollar persistent trade deficit harmful to the interest of Americans generally, but the stated theft of intellectual property from United States companies and the requirements of US based corporations if they wish to do business in China, makes it a very uneven playing field. We don't agree that tariffs are necessarily the right way to accomplish a more fair and level playing field in so far as China, Europe and Canada are concerned, and we don't proclaim to be experts whatsoever in what the imbalances really are and how best to fix them. It's clear in the case, again, particularly with China, that not only is the imbalance in trade not good for America long-term, but the unfairness of the actual playing field between our two nations is way out of hand. Lastly, years and years of diplomatic efforts and meetings have resulted in no change whatsoever. We pray that the tariffs have some effect on creating a more fair and balanced trading system, and that does come out to be a positive. We do understand, that in the meantime, not just home builders and people buying new homes, but a lot of American farmers and manufacturers are going to be harmed by the tariffs that the Canadians, Europeans and Chinese are proposing to counter our tariffs with, and we wish there was another way.
I spoke to a group of leading brokerage firms hosted by the Alabama Association of Realtors recently, and I was asked about technology and the use of brokers or use within the brokerage company. Look, let's state for the record that technology developments for all of us, not just in the residential brokerage industry, have been an amazing thing, and in particularly, in the last 20 years.One doesn't even imagine what life would be like without cell phones, wireless laptops, CRMs, transaction management, digital signatures, and we could go on and on. Mostly all of these developments have been very beneficial in helping particularly agents and teams become much more efficient at helping their buyers and sellers. Certainly access to the abundance of housing information online has been a blessing for buyers, sellers and real estate professionals all at the same time.
It just seems to me we've got this myth of technology is going to solve the challenges of the brokerage industry. One thing we can state with some certainty is that over the last 15 to 20 years, and after all of the billions of dollars that have been spent by brokerage companies and technologies, it has not favorably impacted agent productivity, it has not favored agent recruiting and development very much. And as I shared with those brokers in Alabama last week, I know of at least one great company, one of the fastest growing companies in a major metropolitan area over the last 12 years, having gone from 50 agents to over 600 agents, and have above average productivity, and don't have a tech platform. At all. None, no tech platform.
They have a lot invested in training and development for the agents that they recruit and develop, but no tech platform, don't even have a tech department. I asked the owner how that could be. He said, "Well, the truth is whether it's a CRM, or transaction management, or digital signatures, or the myriad of other technologies agents may want or need, they are generally available from a wide variety of sources", and he said, "I've never thought that having one transaction management platform versus another was a sustainable competitive advantage, or at least it wasn't nearly as much as a sustainable competitive advantage as was a great training and development program in-house, or a great marketing services department in-house."
He said simply that brokers spend to buy customized, state-of-the-art platforms, only to find that their two major competitors also bought others, and now we're in a standoff as to who's got a better one. Meanwhile, most agents with smaller firms can get those same platforms either through their board of realtors, or their MLS, or direct from a provider.
The myth of technology is not that you don't need technology, because certainly agents have to have technology. The myth of technology isn't that brokers don't need to have it because brokers do, their accounting systems, operating systems, sales management processes, email systems, communication systems, and data systems. We're not saying at all that technology isn't needed by all levels of our business,
The myth is that technology in and of itself is going to cause your firm to grow faster than you otherwise would have, or that you'll be more profitable because you have a better tech platform, or that you will grow faster than the market because you have a better tech platform.
None of those are necessarily true. I have a standing wager with any broker in the industry that can show me that because only of their technology, they grew faster and had better profit margins than anybody else, then I will feature them on this broadcast.
I'm quoting from a recent article we saw in the business section of the Denver Post. It was a story about a guy named Michael Weisman, founder and CEO of the Values Institute, a research and consulting company that stresses the importance of trust and values in corporate culture. Now we've heard from such eminent leadership, coaches and trainers like Patrick Lencioni and Mike Staver of our industry, tremendous Jim Collins and others, but I think what Weisman has to share as timely even today as we enter a far more competitive marketplace than we have in the past.
We are thinking about this in light of many conversations with brokers in this hugely competitive marketplace right now. We'll remember back to a white paper research we did in 2006 about what were the components of great brokerage companies from 1996 to 2005, interviewed almost 170 agents with 15 top companies. What they told us about what they valued about their companies were things like vision, transparency, communication, accountability, and community. As we go into what might be a tougher market place, it's important to value your culture and your relationships, and profits will take care of themselves.
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