Friday, February 21, 2014

Can Real Estate Brokers be Ranked?

There's a movement afoot led by the big box franchise brokers to rank the agents they employ. Be concerned. First off, be concerned about any afoot movements. Second, big box brokerages haven't had many good ideas since Eisenhower was president.

Third, I say "employees" euphemistically at best. Real estate brokers are all independent contractors, receiving no benefits, workman's comp, nor anything else from their putative employers. But still, here's what's right with said afoot movement: Brokerages claim they want to give consumers an idea of whom they're (consumers) doing business with. Fair enough, on the face of it.

But here's what's wrong with said afoot movement: Nearly everything else. Brokerages make money one way--taking part of their agents' commissions. If a company ranks its own product, how can the ranking be objective? If Nordstrom, say, claims its shoes are better than Macys', who cares? It's self-serving.

The brokerages use individual agent sales volume to rank the agent. What does that tell a consumer? Pretty much that the broker so ranked is making a lot of money. Is someone who does a ton of volume the best fit for you, ipso facto? Probably not, just using simple probability.

The not-so-subliminal message to lower-volume brokers is "Hey, get with the program or we'll give you crappy rankings." What if the broker is a new licensee learning the ropes? What if the broker is, say, a CPA who only sells properties for trusts? What if the broker is newly retired and just wants to stay a bit active?

In the Captain's view, top-down definition of ranking terms is anti-consumer. Redfin, Yelp, Google, and many others have shown that bottom-up ranking--user reviews--are more useful. The big firms need to get off this wagon and if they want reviews, seek them from the public. Present and former clients are a good source, but so are ex-clients who may have dumped the agent for whatever reason. Moreover, the brokerage itself needs to be reviewed, not just the agent.

I hope agents rebel and don't allow this to happen. It's neither in their best interest, nor in the consumers'. his afoot movement needs a big, fat boot.