Rules for CORE Agents #21: No News is Still News

You know what the weather is like right now in San Diego? It’s 85 degrees and sunny.  You know what it’s going to be like tomorrow?  85 degrees and sunny.  Next week?  85 degrees and sunny.

The funny thing is, they still do the weather report every day.  Turn on the news, and at some point the San Diego meteorologist is going to come on to tell you that it’s 85 degrees and sunny.  Every day, even thought it never changes.

You know why?  Because no news is still news.

That’s the approach you need to take when setting up contact systems for your active clients: no news is still news.  Even if you have nothing to report, you still have to give them a call with the update. Clients who don’t hear from their agents get nervous that they’ve been forgotten.  It’s important to keep them informed, even if you have nothing new to tell them.

This can become tough to do, particularly with a seller who has been on the market for a while. It’s not easy to pick up the phone each week to tell the seller, “Yup, we had another week without any showings or offers.” The challenge, of course, is to find some way to dress it up, to find SOMETHING new to talk about each week.  But that’s the job!

Think about it from your own perspective. Let’s say that you have a buyer who is in contract, waiting to hear back about her mortgage commitment.  A week goes by. No news. Another week goes by. No news.  You’re wondering what’s going on.  Would it be helpful if the loan officer gave you a call to update you that, in fact, he was still waiting to hear back from underwriting?  Of course it would.  Even if his update was only to tell you that he’d made no progress, that’s still an update.

All those people in San Diego, they want that weather report.  They don’t want to watch a newscast where the attitude is, “we’ll let you know when the weather changes, in the meantime, just hold tight.”  What kind of weather report is that?

Same idea.  Give your clients regular updates, even if you have nothing new to tell them.

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Rules for CORE Agents #20: If a Client Calls You With a Question, You’ve Probably Already Failed

Your phone rings.  It’s a seller whose home you’ve listed, and they want to know if that buyer over the weekend had any feedback. Or it’s a buyer you’re working with, wondering if anything new came on the market this week.

Guess what? You just failed.  Why?  Because they felt that they had to call you. They had a problem, or a concern, or a question, and they did not feel confident that you would be calling them. By definition, they had needs that you were not meeting.

That’s not the way it’s supposed to work. In the ideal agent-client relationship, they don’t have to call you, because they know you’re going to call them.

That’s the expectation you should always set with your clients: first, that you’re going to contact them on a consistent and regular basis; and second, that you’re going to contact them anytime you have something to report.  They don’t need to ever call you, because you’ve established a system that ensures that you’re contacting them with regularity.

For example, what if when you first met with your clients, you told them the following:

“I think my most important job is to make sure we communicate regularly, so I want you to know I’m going to call you every Monday with an update about what’s going on.  And if anything comes up during the week, I’m also going to call you whenever I have some news.”

Let’s say that after making that commitment, you keep it. You call them every Monday to update them, and call them during the week if you have anything important to tell them.  What does that do?  First, it establishes that you’re going to have a regular phone conversation with your client on Monday.  Thus, if they have any non-urgent issues during the week, they know that they can just bring them up to your on your weekly update call.  Second, they also know that if anything DOES come up during the week, you’re going to reach out to them, so they don’t have to worry about calling you.

This is better for everyone.  The biggest complaint most clients have is that they don’t hear from their agent, which really means that they don’t have a settled expectation on when their agent is going to call them. And from your perspective, this ensures that you’ll always be calling them on your terms, when you’re prepared.  You won’t be fielding (or ducking) random calls during the week when you’re with other clients, or taking time off, or in a meeting, or whatever.

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Rules for CORE Agents #19: Never Argue With a Client, Or, Really, Anyone.

I deal with angry clients all the time.  I’m the lawyer for my company, and if I’m talking to a real estate client, it’s usually because they’re so unhappy that they want to break a contract or sue me or something.  I don’t get to talk to the happy clients.

So I talk to these angry people, who sometimes have legitimate complaints but more often are just unhappy for some reason, and they’re taken a patchwork of relatively mild problems and stitched into a colorful quilt of discontent.  And I’ve found one simple way to soothe them: I hear them out, I apologize, and I ask them what I can do to make it better. More often than not, it works.

I don’t argue with them, because it’s pointless to argue with anyone, particularly someone who is angry. You know what happens when two people get into an argument?  They both become increasingly convinced that they’re right.  The more they argue their points, the more committed they become to their position.

Think about it.  Have you ever been in an argument with someone that ultimately sincerely agreed with your position?  Someone who ended the argument by simply saying something like, “You know what?  I have heard what you said, and you’ve convinced me!”   Usually, most arguments end with one person just giving up and, at best, sarcastically saying in a huff, “fine, you win. I give up.”

What’s the lesson?  Don’t argue. It’s pointless.  In particular, don’t argue with a client. It’s worse than pointless.  It’s expensive.  That’s the whole point of the saying, “the client is always right.”  Of course, the client is not always right.  The client is often very, very wrong.  But it doesn’t matter, because there’s no advantage in arguing with her.

Let’s say that your client is upset about something that’s really not your fault.  The “for sale” sign fell down and no one fixed it, some website screwed up your listing feed, a buyer didn’t show up to see the house when she was supposed to. Whatever.  The client is upset, and is taking it out on you. And of course you want to argue, because it’s unfair.  Maybe the client is being unreasonable, or rude, or even abusive.  But what is arguing going to accomplish? Are you going to convince her that she’s wrong?  Are you going to “win” the argument?  Of course not!

Be the bigger (and smarter!) person. Apologizing does not make you weak.  Taking responsibility for problems that are really outside your control doesn’t mean you lose face.  It means that you’re smart and secure.

Now, I’m not saying that you should routinely put up with abusive clients. You have to use your judgment as to whether putting up with some crazy person is worth your time and energy.  But if they’re that tough to work with, then you should just fire them.  You shouldn’t waste all that time and energy arguing with them.

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Rules for CORE Agents #17: Never Tell Anyone You’re ALWAYS Available For Them, Because You’re Not

So you’re sitting down with a client for the first time, and you’re trying to impress upon them your dedication to a great service experience. You take them through your value presentation, answer all their questions, and you can tell that you’re thisclose to locking them in.

It’s all going so well, so you decide to close them with the one thing you know they absolutely will love to hear:

“When you hire me, I will always be available for you anytime you need me.”

You see their eyes light up.  They’re sold.  Enjoy the moment, because it’s the very last time your clients will ever be happy with you. Why?  Because promising that you’re “always available” is the single dumbest thing you could ever say to a client.

First of all, it’s a lie.  You’re not always available.  In fact, as you sit there with that client, you’re almost certainly NOT available to all your other clients, since your phone is turned off during your client meeting. And next week, when you’re meeting with another new client, you’re not going to be available to the one you’re sitting with today.

Second, you’ve made the tragic mistake of setting unrealistic expectations that you will never, ever be able to meet. You’ve set yourself up to fail.

It’s like training a dog.  You need to establish boundaries: firm expectations for behavior that you want to encourage and discourage unless you want to spend your life picking up poop from your living room.

You have to do the same thing with your clients: set firm boundaries about what they can expect of you. Make sure they know when you’re available, when you’re going to regularly contact them, the kind of information you’ll be sending them.  Tell them what they can realistically expect from the sales experience – the amount of time it will take, what it will cost, what they should look out for.

If you fail to set boundaries and expectations, they will just keep demanding more and more of you until they exceed your ability to satisfy them.  Then they’ll complain that you let them down.  Most clients are reasonable people, and will respond well to reasonable expectations for your performance.

Your job is to establish and then manage those expectations.  Or else your clients will poop all over your living room, at least metaphorically…

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Rules for CORE Agents #15: Great Service is in the Eye of the Beholder

Let’s say you’re shopping for a new jacket, and you pop into a clothing store.  Immediately, a salesperson comes up to assist you, asking if you need any help and what you’re looking for.  Usually, that’s a great thing, so much better than those times you go into a store and you can’t find anyone to help you because the sales clerks are all in chatting in the back or sneaking outside for s smoke break.

Sometimes, though, a sales clerk coming up to help you is just annoying.  Maybe because you’re just browsing and you’d rather just look on your own.  If you start talking to the clerk, you’re going to start feeling sales pressure – the more time she spends with you, telling you how great everything looks, the more likely you are to buy something that you don’t really need.  Or it might just be that you don’t want to waste the clerk’s time and effort when you’re not really in the mood to buy.

That is, your service experience did not depend on what the clerk did.  The clerk did the same thing BOTH TIMES.  The difference was you, and what you wanted.

Real estate clients are like that: their service experience depends not just on what you do, but what they want at the time.  The key is to figure out how your client wants to be serviced.

Now, of course, some aspects of delivering a good service experience are foundational and universal: a good attitude, product knowledge, communication, etc.  I can’t think of anyone who would want to work with an agent who doesn’t care about doing a good job, doesn’t know her stuff, or drops completely out of touch.  Even a sales clerk who jumps to assist you is useless if she doesn’t know her inventory.

But how you deliver that service experience depends on what your client is looking for.  Some clients want constant attention, and some take a “don’t call me, I’ll call you” approach.  Some want you to do all the work, and some want to look for homes on their own and send you the ones they like.  Some want to talk to you on the phone, and some would rather you just email or text them.  They’re all different, and they all have different needs.

So how do you figure out what they want?  It’s simple: ask them.  Ask them about how they want you to communicate with them.  Ask them how often they want to go out.  Ask them about what their expectations are for their sales experience. Basically, ask them what they want, and then do that.

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Rules for CORE Agents #14: Happy Clients Are Better Than Any Marketing Program Ever Invented

Real estate agents are always coming up with creative places to put their faces.  It used to be that you’d see real estate agent faces just in the pages of newspapers and magazines, but now you see them on park benches, billboards, shopping carts – really, anywhere there’s a flat surface and someone willing to sell you space on that flat surface for an “affordable” (i.e., very, very large) monthly fee.

That’s all fine, I guess. Brand marketing is important.  I’m not so sure that a face and a slogan like “Let me bring you home” on a shopping cart is a great use of your money, but it probably doesn’t hurt.

But don’t kid yourself.  Brand marketing is an expensive and inefficient way to build your business.  It takes a lot of money and time to build that brand presence, and even then you’re not really likely to generate direct leads from it.  The best you can hope for is that you establish some degree of name recognition in your market.

Here’s a better way: create really happy clients.  Happy clients are the best marketing you could ever have.  Happy clients become referral sources.  They become testimonials and references that help you secure new listings.

And, of course, they create word of mouth. People buy a house, invite their friends and family over to see it, and people ALWAYS ask them about how they found it.  They want to hear the story, and that story is generally going to include the buyers’ impressions of the experience they had buying the house.  If they’re happy, they’re going to tell everyone.  And, of course, if they’re NOT happy, they’re going to tell everyone.  Either way, the word is going to get out.

Now, multiply that experience by everyone who buys or sells a house with you, and THAT, my friends, is a marketing program: happy clients running around the county talking about how great you are.  No amount of money can buy that.

Indeed, in the internet age, happy clients are more important than ever, because instead of just sharing their experiences with their friends and family, they’re actually writing stuff on the internet and sharing it with anyone who Googles your name.  The scary part is that the unhappy clients are even more motivated to find some online review site to talk about how much they hate you.

Bottom line: create happy clients. Instead of writing checks to create a brand presence, put your back into giving great client service experiences to the people who buy and sell with you.  It’s hard, it takes a lot of work, it requires a lot of dedication.  But it’s the best marketing you could ever do for yourself.

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Rules for CORE Agents #13: Be Good at Your Job

Take a look at a list of the most successful agents in your market and try to figure out what they have in common.  How did they all become top agents?

It’s not easy, because successful agents don’t conform to the superficial stereotypes that we all have of the dynamic “superstars” out of central casting.  Some are charming, others are boring.  Some are loud, others are quiet.  Some are glad-handers, others are back-benchers.  Some are likeable, others are abrasive. Some are neat, others are sloppy. Some prospect like crazy, others never pick up the phone.  They’re all over the map.

So what do they all have in common?  It’s simple. They’re all really good at their jobs.

It’s really that easy. They’re good at pricing homes, they’re good at learning inventory, they’re good at negotiating, they’re good at counseling clients, they’re good at facilitating a transaction. That’s why they are so successful, because being good at helping people by and sell homes is obviously the most important driver of your business. If you’re good at pricing listings, then you’ll sell more of them.  If you’re good at counseling buyers, you’ll get more of them into contract. If you’re good at facilitating a transaction, you’ll close more of them.

Most importantly, of course, if you’re good at your job, your satisfied clients will work with you the next time they need to buy or sell a home.  And they’ll tell their friends to use you. And they’ll write great testimonials that will provide ironclad validation whenever you’re trying to win over a new client.

Conversely, you’ll never be a top-producer if you’re bad at your job. Your overpriced listings will expire.  Your neglected buyers will find another agent.  Your complicated deals will fall apart.  And eventually, regardless of how charismatic and dynamic you are, regardless of how much prospecting you do, you’ll be out of the business.

So take a look at that list again.  What you’ll find is a group of agents who don’t look the same, act the same, or generate business in the same way.  But most of them are agents that you would personally probably hire if you weren’t a real estate agent and needed someone to sell or buy a home.

That’s why they’re top agents.  They’re good at their job.

 

This post is part of a series of what I call the “36-1/2 Rules for Client-Oriented Real Estate Agents,” a collection of short takes on the CORE concept that I’ve developed over the years of discussing and teaching the system.  We’ll count up to the 36th rule over the next few months, and then the 1/2 rule.  You can get the full list of rules by clicking on the “36-1/2 Rules for CORE Agents” category on the blog – scroll from the bottom if you want to read them in order.

Who are your clients? Ummm, your clients, dummy!

Whenever I am at an industry conference, I’ll hear a real estate broker make the observation that a broker’s real “client” is the “agent.”  That is, although individual real estate agents have buyers or sellers who are clients, a broker’s clients are actually the agents: the broker provides services to the agents, who then treat the clients, but the broker’s main role is maintaining that client relationship with the agents. The theory is that the broker does not actually have a relationship with the buyers and sellers, but only with the agent.

This is one of those observations that always seems clever when people say it, kind of a counter-intuitive perspective that is presented as a flash of insight.  Except, of course, that it’s become pretty much of  a cliche, given that I hear it at every conference.

More importantly, it’s wrong.  If you’re a real estate broker, your agents are not your clients. Your clients are your clients.  Your agents are your agents.  That’s why we call some of those people “clients” and some of them “agents.”  

And even more importantly, I think that it’s gone from counter-intuitive clever insight all the way through to cliche and now all the way to a pernicious system of real estate brokerage that elevates the agent above the client in the broker’s perspective.

Put it this way: a great real estate broker provides outstanding client service to buyers and sellers.  The main delivery system for those services is through the individual agents, so the broker does have a significant obligation to empower those agents with tools, technology, and training to provide that client service. And, of course, the broker has to provide a reasonable compensation system to incentivize agents to stay with the broker and do lots and lots of deals.  

But you cannot always serve two masters.  Too many brokers, I think, including me, sometimes elevate the agent at the expense of the client. Here’s an easy example: do you provide dedicated parking at your offices to your agents, or your buyers and sellers?  At our offices, where possible, we have dedicated parking spots in front of the entrance for clients. Why? Because we want to make it easy for clients to be able to park at the offices.  That’s a good client service.  But I know lots of brokers who leave those spots open for agents to park in, because the “agent is the client.”

Of course, this is sort of a cross-industry standard, because you can go to most businesses in the country and find dedicated parking for staff or important employees, but not for clients.  And if you go to any mall in the country at 9AM, you’ll find the first ten rows of parking taken up by employees of stores in the mall, who will squat on those choice parking spots all day long.  

But it’s not just simple things like parking spots.  For example, many brokers, including ours, provides for “call coordinating” of sign calls and online inquiries, which go first to the listing agent.  This can be considered a good client service for the seller, who is probably best served if an inquiry is delivered to a listing agent who has a tremendous incentive to try to sell that listing.  It also can be considered good customer (not yet client) service to the potential buyer making the inquiry, since the inquiry is directed to an agent who really knows the property.

But in a lot of cases, this is actually bad customer service for the potential buyer, made in the spirit of the listing agent being the client of the broker.  Although sometimes online inquiries are made about a particular property, at other times the inquiry is spurred by that property, but the customer would be better served by talking to an agent who is sitting in front of a computer and can dedicate as much time as necessary to fielding that call.  Instead, the inquiry goes to a listing agent, who is likely out in the field, with clients, or otherwise distracted and occupied.  It’s a good service to the listing agent, good for the seller, not necessarily good for the person making the call.

This is not to criticize call coordinating, but simply to give an example that treating the agent as a client is not always in the best interests of the buyer or seller who are the actual clients of the company. This one’s a close call, but only if you actually think that people who call into your company deserve the best treatment possible. If you actually think that your agents are your clients, then it’s an easy call.

Finally, while I understand the impulse to treat agents, particularly productive agents that drive the bottom line, as the clients of the broker, I don’t see why service to agents should come at the expense of the client.  The idea that you have to choose between treating your agents/employees as clients, or your buyers/sellers as clients, is a false choice that sends us down the wrong path.  I don’t think you can have a great client service company without providing great tools, training, and technology for your employees (or in real estate, your agents).  

Inded, other industries do just fine in adopting client-centric approaches that actually empower employees and treat employees fairly without adopting a “employees are the client” standard that we hear bandied about in real estate. For example, Zappos is one of the gold standard companies in providing great client service, but Zappos also has a legendarily empowering employee culture. In fact, the great client experience wouldn’t exist without that employee culture.

A great real estate company should be able to recognize that the buyers and sellers are the clients, and provide amazing services to those clients through an empowered, trained, and motivated workforce.

Are Real Estate Agents Worth It? Yes!

NOTE: This is a reprint of a post I made in early February on the Market Intelligence blog that I write for my company in New York.  Since it has some universal application to the industry, I thought I would share it here.  The bottom line: good real estate agents are, and always have been, worth the money they’re paid.

 

The New York Times ran an article on the front page of its real estate section last week describing how some home sellers are starting to consider whether it makes sense to sell a home on their own, or otherwise try to sell without paying a full brokerage commission.  For example, the Times pointed out:

  • · For sellers who have watched the prices on their houses slide in recent months, the idea of eliminating the middleman — a real estate agent and his or her 6 percent commission — can be alluring.

Oh, wait! Sorry, that was actually a quote from an article in the Times from June 2008, which made basically the same point.  Actually, what the Times said was:

  • · This is subversive stuff. Homeowners across the United States are figuring out that they do not need to pay what agents demand and they may not need an agent at all. At the same time, technology is giving consumers tools to nearly circumvent the agent.

Oops.  Sorry, my mistake again!  That was actually from an article in the Times in September 2005, which again made basically the same point.  Let me try again.  Here’s what the Times said:

  • · Highly competitive marketplace conditions coupled with concerns about inflation are encouraging a number of sellers and brokers to look for alternative ways to market homes without paying a full brokerage fee.

Darn it, I keep quoting from the wrong Times article!  That was actually from the Times from 1981 (!) the first of what turns out to be many, many articles from the Times over the past 30 years that keeps forecasting the end of the real estate brokerage industry as we know it.

Indeed, in just fifteen minutes or so of searching, I found that the Times basically has written the same article over and over again for the last 30 years, making the same points that sellers are just about to turn their backs on the industry and turn to the internet, or discount brokers, or selling homes on their own:

And yet, year after year, about 95% of home sales are conducted through brokers.  I daresay that the real estate industry model seems to be in better shape, even after a bunch of down economic years, than the newspaper industry model. (Not to mention the deep irony of the Times writing year after year about how the real estate industry is essentially doomed in a section of the newspaper that would not exist if not for real estate broker advertising….)

So it occurred to me that it might be helpful to set out why I think that the brokerage compensation model has survived relatively unchanged after all these years, even with all the challenges of media hostility, technological change, and alternative business models.  I started putting it together, and it took longer than I thought, so here’s a basic outline of what’s coming:

  • · First, some stipulations to guide the discussion.
  • · Second, a fundamental guide to how the real estate industry works.
  • · Third, an explanation as to why most sellers still choose full-service brokers.
  • · Fourth, a review of what you need to know if you’re going to sell on your own.
  • · Fifth, some conclusions.

If you have any comments you’d like to make directly to me, you can email me. I look forward to substantive comments below, but would ask people to avoid incivility.

I.  STIPULATIONS

Now, it’s always a little dangerous for a real estate broker, which is what I am, to defend the brokerage industry online, because all it does is invite message board “trolls” to swam the post with various diatribes about the industry, their brokerage experience, the massive success they had selling their home on their own, etc.  I fully expect to hear from all of them, which is a wearying prospect.

So let me stipulate to a few points:

First, not all brokers are worth the money.

I agree that many of the players in the industry don’t deserve the commission they charge.  Let’s stipulate that any argument I make below is really only in defense of brokers and agents that actually provide top-notch marketing services, great communication and information services to their clients, and professional assistance in marketing, staging, negotiating, and facilitating a sale.  (But can we also stipulate that if most brokers didn’t do that, at some point the buyer and seller community would have vindicated the Times’s 30 years of doomsday forecasts?)

Second, all commissions are indeed negotiable.

Before I get in trouble with the Justice Department, let me also stipulate that all commissions are indeed negotiable, and sellers are free to try to negotiate the commission on the sale of their home.  It’s just that an individual broker can set his or her fees for the services provided, just like doctors, lawyers, plumbers, hair stylists, or anyone else that provides a service.  The cost of coffee at Starbucks is technically negotiable, and may not be worth what they ask you to pay it, but Starbucks also has the right to set the fee on the services it provides.

Third, sellers can indeed sell their homes on their own.

People often think that real estate brokers are insulted by people who try to sell on their own.  That’s not really the case.  I don’t see FSBO’s as invalidating the industry and what it provides. I understand what they’re doing.  If you really think that you can sell your home and net more in your pocket than you could by hiring a broker, then I certainly don’t begrudge you that choice.  (More on that below).

II.  UNDERSTANDING HOW THE INDUSTRY WORKS

Getting past those stipulations, I wanted to make sure that we understand the basic structure of the real estate brokerage. When I read those articles in the Times, the main thing that strikes me is how little these journalists, one after another, actually understand the industry. They don’t seem to understand how brokerage commissions are split between two sides (the list side and the buy side), they don’t appreciate how much work agents do in a real estate transaction, and they never consider how agents do all that work without a guarantee of getting paid.

First, commissions don’t just go to the listing broker.

The first thing you need to know is that the legendary “6% commission” (and let me stipulate again for the good folks at the Justice Department that I am simply using the figure from the Times) does not mean that your individual real estate agent collects 6% of the sale of the home.

Rather, that 6% commission is usually split between a listing broker and a buyer broker,the brokerage and agent who represent the buyer in the transaction. Hiring a listing broker who is part of a multiple listing system means that the listing broker will make an offer of cooperation to all the other members of the MLS, which usually includes all the other brokers in the county.  You don’t hire a listing broker and only get the services of that broker to sell your home.  Instead, listing with that broker gives you access to all the other brokers and agents working in the county. But those other brokers and agents aren’t going to work for free, which is why the listing broker splits that commission with the successful buyer broker.  You need to incentivize buyer agents to want to show your home.

Second, agents need to get paid for the work that they do.

We can argue all day long as to what the appropriate compensation should be overall, but I don’t think that anyone disputes the basic idea that real estate professionals need to be properly compensated for the work that they do:

The listing side needs to be compensated for the time, energy, and money required to help the seller analyze prevailing market conditions, consult with the seller on setting a sales price given the market, identify priority selling points, prepare the home for sale, ensure compliance with legal requirements for selling your home, document the relevant property data, take pictures of the home, write up descriptions, upload the property to MLS and various internet sites, prepare flyers, put up a sign, prepare a lockbox, coordinate showings, answer questions from potential buyers and other agents, hold public open houses, obtain feedback after showings, communicate with the seller, monitor online traffic for the home, field offers, negotiate offers, schedule inspections, handle remediation requests following inspections, prepare documents for attorneys, coordinate a walkthrough, and help facilitate the closing.

The buyer side needs to be compensated for the time, energy, and money required to consult with the buyer about their needs, help them ascertain their price range, get them pre-qualified by a mortgage lender, do comprehensive searches to determine what properties to see, track down answers to questions that buyers might have about properties, stay on top of the market as new properties come up, schedule showings, preview properties to be showing, prepare show sheets and buyer tours, attend showings, provide feedback to listing agents, prepare, present, and negotiate offers, schedule and attend inspections, handle inspection issues, coordinate with the mortgage lender, provide documentation to attorneys, schedule and attend the walkthrough, and facilitate the closing.

Moreover, all that is just what brokers do in a “clean deal,” not factoring all the work that goes into more difficult situations.   Some listing agents will end up doing a lot more when the home needs significant remediation work, when the home takes longer to sell and requires multiple open houses, or when offers and deals require significant handholding and care. Just think of the time spent doing four or five open houses on a home (not unusual if a home is for sale for six months or more, which is the average time in this market), at four hours per open house.

And we’re glossing over the amount of work buyer agents do in preparing showings, particularly for buyers who often see dozens of properties before they settle on something. The rule of thumb is that the showing of a single home takes about an hour, factoring in the previewing, preparation, travel time, showing time, etc., so a buyer seeing dozens of homes racks up significant agent time.
Third, don’t forget that brokers only get paid a commission on an actual sale.

On top of that, remember the fundamental trade-off in a commission environment – after all that work, a real estate broker doesn’t get paid if the deal doesn’t go through. The listing broker gets nothing if that home does not successfully sell, and the buyer agent gets nothing if the buyer never finds the right place to purchase.  In other words, you get the benefit of the services provided by a real estate broker, and you get that benefit for free if you ultimately do not sell or buy a home.

Now, of course, none of that matters to a seller who actually sells and pays a commission – the successful seller shouldn’t have to think of herself as subsidizing all the work that the agent did for the seller who never actually sold.  And I don’t think that she does. I think that the agent gets fairly compensated for the work done on the deal that actually happened.  But it’s worth remembering that anyone who hires a broker gets those services regardless of whether the home actually sells.

III.  WHY MOST SELLERS AND BUYERS USE AGENTS

With all that in mind, I just want to explain why I think most homeowners make a fully rational choice when they use a broker to sell their home.  Indeed, I think that the industry itself generally does a poor job of explaining its value to clients, which is why the industry is not generally held in high regard and is prone to unremitting attacks on its value.

Here’s why I think most home sellers use a broker to sell their home.

1.  The real estate brokerage industry creates a great market for homes.

The most misunderstood part of the industry is how the brokerage industry cooperates to create a very fluid market for the sale of homes.  Because listing brokers split their commission with buyer brokers, the industry creates an open market in which you can go to any broker in an area to get help to buy virtually any home for sale in the area.

Think of it this way: it’s actually easier to buy a home than it is to buy a car.  When you want to buy a car, you have to go visit dozens of dealerships to find the right car. Yes, you can do some searching online, but if you actually want to go see cars you have to go to individual dealerships, because the dealer can only show you the cars that particular dealer is selling.  So let’s say you’re looking to buy a $30,000 sedan – you have to visit the Chrysler dealer, the Chevy dealer, the Ford dealer, the Hyundai dealer, the Honda dealer, the Nissan dealer, the Toyota dealer, the Acura dealer, the Lexus dealer, the Infiniti dealer, the Mercedes dealer, the Audi dealer, the BMW dealer, and all the rest (I’m sure I’m missing some).  Also, you have to visit multiple dealers for the same brand, since one particular Chrysler dealership won’t sell you a car offered by a different Chrysler dealer.

And you have to do all that without any representation. No one is setting up tours for you, or giving you advice on recent sales, or counseling you on your offer. There’s no “car representation agent” service available to help you choose among the various options, help you weigh those options, or help you negotiate your deal. (If any burgeoning entrepreneurs out there want to start a company like that, I’d like to be your first client, and I’d probably invest!).

Buying a home is different. You go to any broker in the area, and that broker can show you virtually any property for sale by any other broker. You don’t have to go from broker to broker to find out what that particular broker has listed, because brokers cooperate.  But cooperation requires incentives to both sides, which you won’t get if both sides are not cooperated.  If you think that brokers are overpaid, that’s fine, but then you’re really arguing that the real estate industry should behave more like the auto industry, which I don’t think anyone wants.

So that’s one reason why most sellers use a broker, and why virtually all buyers use a broker.  Because the industry creates a fluid open market in which every seller has access to all buyers in the area, and all buyers have access to all properties for sale (including information on other sales for comparison).

2.  Good real estate brokers provide a comparatively good value for their fee.

So now let’s look at the fee itself, and whether it is disproportionate for the services provided.  Let’s say that a broker charges 6% (just an example, for all your fine people at the Justice Department!), and offers out 3% to cooperating brokers.  That means that the listing broker collects 3% for the listing side work, and the buyer broker collects 3% for the buyer side work.

Is that really disproportionate?  Let’s compare that commission to what some other service-providers who are paid by percentages charge:

  • · Attorneys on contingency: Attorneys charge about a 35% contingency fee, not including their expenses, for most personal liability claims.  That’s essentially a 35% fee, but only if they are successful, much like brokers charge their fee only if they are successful.  Unlike brokers, though, attorneys also take their expenses off the top.

  • · Asset Managers: If you hire someone to manage your assets, either in high net worth situation (i.e., a hedge fund) or even in a simple mutual fund, the normal charge is a small percentage (say 1%) of the amount of the assets, but it’s charged every year.

  • · Interior designers: interior designers usually get paid in two ways: a basic fee per hour, and then a percentage of everything they help you buy (which is essentially offset by discounts that designers get you).  So that might be, say, $100/hour plus 30% of the furniture you buy.

You may object that real estate agents do not have the training or expertise of attorneys or asset managers, which is a fair point (although my experience with the performance of most asset managers does not inspire me with faith in their abilities).  But I’m not comparing what brokers do to what these professionals do.

My point is more that a 6% (just an example for all the fine people at the Department of Justice) as a commission, split between the listing side and the buyer side, is not an outsize compensation structure given some of these other services.  Attorneys take 35% of your recovery if they represent you in personal liability issue, or probably $200-500-1,000/hour for their services.  Asset managers keep roughly 1% of everything you invest with them, regardless of whether their investments go up or down, just for the service they provide in managing your account.  And they collect it every year you’re invested in them.  And interior designers routinely get 30% when they advise you about furnishings to buy.

I’m not complaining about any of that. I am an attorney myself, but I hire attorneys all the time to represent me (I don’t trust myself…). I have someone managing my assets.  I have a great interior designer who did a wonderful job when I bought a new place last year.  They all do wonderful work (not so much the asset manager, but at least I have something left), and they’re all entitled to be paid.

But given those structures, I’m not so sure what’s so bad about a real estate industry commission structure that charges 6% (or whatever the number is) for services provided, especially given that:

  • · The commission doesn’t even get collected if the deal doesn’t go though.
  • · The commission is paid one time, regardless of how long you own the home.
  • · The commission is split between a listing broker and a buyer broker, to create incentives for both sides.

If you don’t like those comparisons, let’s then just compare what real estate agents make versus the other professionals involved in a real estate transaction.  Essentially, if you compare the revenue generated by full-time professionals involved in a real estate transaction, the revenue earned by agents participating in the real estate industry is not out of line.

  • · Real estate attorneys.  In real estate situations, attorneys usually charge a set fee for handling everything involved in the transaction.  The fee varies, but generally runs in this area between $500 and $2,000.  How much work is involved? It depends. It could be just a few hours for a simple deal to prepare a contract, review title, and set up and conduct a closing.  But let’s say that an attorney charges $1,000 for a closing and spends five hours on the transaction (an hour on the contract, an hour on negotiation, three hours on the closing).  That’s $200 per hour of work.

  • · Engineering Inspection. Companies that do physical inspections of homes generally get paid about $400-$500 for a service that takes two or three hours, including the physical inspection itself and the report that gets completed.

  • · Lenders. Regardless of whether you use a mortgage broker or a banker, you generally pay about 1.5% to 3% of the mortgage amount for the bank’s services (and of course, for the bank’s money).  The amount of time the lender’s employees have to spend on the file varies widely, but at minimum it takes 20-30 hours to properly process a loan, including consultation, documentation generation and review, underwriting, and clearance.

Although comparisons are difficult if we don’t actually know what the particular charge is or how much time it takes, we can make some assumptions that will help us.  An attorney who does mostly real estate transactions will generally close about 200 transactions a year, and could do quite a few more (or less in a difficult market).  That sounds like a lot, but it means about four closings a week, which is not a ridiculous schedule for a real estate attorney.  An engineer probably does about 300 or 400 inspections a year. And a really good individual mortgage loan originator might close 50-75 loans in year (most close a lot less, that would be a pretty good year for most).

So how does that work out:

  • · An attorney charging, say, $750 for a closing and doing 200 closings a year would generate $150,000 in closing revenue in a year.
  • · An engineer charging $450 for an inspection and doing 250 inspections in a year would generate $112,500 in revenue per year.
  • · A mortgage originator making 1.5% on an average loan of $300,000, and 75 loans for the year would generate $225,000 in revenue per year.

Let me again stipulate that I don’t have a problem with any of that.  Attorneys, engineers, and mortgage professionals provide a great service to clients, and they deserve to get paid.  Indeed, I think that attorneys, for example, are underpaid for the work they often have to do on a real estate closing.

But I also think it’s instructive to compare the revenue generated by the participants in that industry compared to real estate agents.  So let’s compare the revenue generation at the current compensation models.

What do agents get paid?  Really good real estate agent will close about 12 transaction sides a year.  Some agents close a lot more, most close significantly less. Indeed, the average agent in the local MLS participated in about 3.5 sales last year (but that includes a lot of non-full time agents).  As a comparison point, I can tell you that most real estate systems have award programs that start to kick in when an agent closes about 7 or 8 transactions. So 12 transactions is a very good year for a real estate agent, akin to a full-time real estate attorney, experienced engineer, or good loan officer.

So what is that agent making?  Well, if the agent closes 12 transaction sides in a year, with an average sales price of, say, $300,000, and an average commission side of (for example) 3%, that agent would generate revenue of $108,000.  (Note that this revenue gets split between the agent and the broker, much like the revenue earned by a mortgage broker.)

So if we compare what a good real estate agent generates for yearly revenue against an attorney, engineer, or mortgage originator, it doesn’t seem out of line.  Note that we’re just talking revenue, without considering expenses or anything like that.  We’re just comparing the revenue streams generated by the various industries involved in a real estate transaction.  And if you look at it that way, even a 6% commission does not seem out of line with the compensation structures set up for attorneys, inspection engineers, or mortgage professionals, particularly when you consider that the commission is again only collected on a successful transaction.

3.  It takes a lot of work to sell a home.

People who complain about broker’s fees often underestimate the work that goes into selling a home. They take a superficial view that all they have to do is put up a sign, write up an ad for the paper, and handle the transaction yourself.

I’ve already articulated the various services that both a listing agent and a buyer agent provide for the commission paid by a seller. I think that most sellers appreciate the time and energy those services require, which is why most sellers hire a broker.  But if you are considering selling your home without a broker, I can just itemize some of the things that you need to do on your own:

  • · You need to properly price your home. Properly pricing a home requires access not just to properties that are on the market – in fact, pricing your home to the unsold properties on the market is a good way to ensure that your house joins them.  What you need is access to what has actually SOLD on the market, which is not as easy to find.  You also need to know how to read the market.  You could, of course, ask agents to come in and help you, but it requires a certain intestinal fortitude to bring in agents to help you price your home with the intent of using their advice and then selling on your own.

  • · You need to be able to watch the market. Even if you get an agent’s unpaid advice on the initial price of your home, you have to be able to watch the market so you can adjust your price. Again, this requires you to have access to information on homes that have sold, which is not easy to access.

  • · You need to do the fundamental marketing: sign, pictures, descriptions. Assuming you’re going to get your home online, either on your own website or through some FSBO-oriented website, you’ll have to take your own pictures and write descriptions.  That’s not impossible, and some agents do a relatively poor job of it, but really good agents get that way because they know how to write engaging descriptions and take evocative pictures.  Also, if you’re going to put up a sign, put some money into it and get it done professionally. Nothing looks worse than getting one of those hardware store “for sale” signs and stapling it to a stick in your hard.  That’s not going to impress a buyer with the care and dedication with which you’ve maintained your home.

  • · You need to market your home online. When you list with most brokers, you’ll not only be on their website, but all cooperating broker websites, major real estate websites like Realtor.com, Trulia, Zillow, and others, and also media sites like NYTimes.com, lohud.com, and recordonline. Not all brokers are on all the sites like we are, but most brokers provide some online marketing. You can get access to some of those sites as a FSBO, and there are dedicated FSBO sites, but it takes some work and money to upload everything.  But if you’re going to sell your home, you need to be online.

  • · You need to be able to negotiate your own deal. Most people think they are good negotiators, and a lot of them are. Maybe you’ve done negotiating as part of your own job, so you’re confident that you can negotiate a good deal.  That’s very possible, although don’t discount the difficulty of negotiating directly with a counterparty, rather than through an intermediary. It’s sometimes tough to negotiate something on your own without having someone to act as a buffer, if only because having someone negotiate for you can remove some of the “personal” aspects of the transaction.  It’s also tough, by the way, to get good feedback from buyers directly, who might be uncomfortable talking directly to you the way they would to an agent.

  • · You need to have some free time available. Selling a home requires a lot of availability for showings and open houses.  Realize that an open house generally requires four hours of time, and you might need to do multiple open houses.  That kills a bunch of Sundays.  And you need to be available to show the home, something that brokers do for you either personally or with a lockbox that makes the home available to other brokers. In a market like this, the home needs to be available to show as much as possible.

All that said, it is indeed possible to replicate the work that a good listing agent does on your own.  It takes a bit of research, a little money, and quite a bit of time, but it’s possible.

IV.  SELLING YOUR HOME ON YOUR OWN – THE MARKET CHALLENGES

Even if you have the time, energy, and money to do all the listing work yourself, though, you still are going to have some challenges in selling your home on your own.  Remember that even doing all these things yourself, and doing them well, you’re only replacing the services of a listing agent.  You’re not doing anything that replaces the work of the buyer agent.

Which brings us to the fundamental problem sellers have if they try to sell on their own, above and beyond the work that they have to do if they are acting as their own listing agent — the size and nature of the buyer market that you reach.  Here are the problems:

1.  You’ve got a much smaller buyer base.

If you list with an MLS broker, you get access to all the buyer agents in your market, and all the buyers they represent. If you’re not listed, those brokers might not know you’re even on the market, and the buyers working with them won’t be aware that your home is for sale.

The problem is basic economics.  If you want to sell your home for the highest price possible, you need the biggest buyer market possible.  That means making your home available to every potential buyer in the marketplace.  But you don’t get that if you sell on your own.  You’re limiting yourself just to the group of buyers who are looking for homes on their own, which is a very small group. You don’t incentivize buyer agents and all the buyers they represent, you don’t reach buyers unless they’re looking specifically for FSBOs, and you thereby don’t reach the largest number of brokers possible.

2.  You’ve got a skewed buyer base

Not only is your buyer base smaller, but it skews to precisely the kind of buyers you don’t want.  Most legitimate buyers are working with agents.  Why wouldn’t they, when buyer agents will do all the work for them and get paid by the seller?  The buyers who are not working with agents are doing so for a reason – they’re bargain hunters looking for a deal, and they believe that if they find a FSBO they can save money.

How?  Because they know you’re not paying a commission, so you’ll take less.  Indeed, the buyer will use your FSBO status in negotiation: “well, you’re listed for $400,000, but if you had a broker you’d only net $374,000 after a broker’s fee, so I’ll offer you $350,000.” Show me a buyer who is trolling the classified ads or the FSBO sites for homes, and I’ll show you someone who is looking to get a house on the cheap.  Think of it this way: you’re working without a broker to save money, but so is he!  You think that you’re saving on the commission, except the buyer is going to try to save that money, too, by taking it out of the purchase price.

All that said, you don’t have to accept any offer you don’t want, so you don’t have to let the buyer use your FSBO status against you. But the bottom line is that if you sell your home yourself, you’re attracting the wrong kind of buyers: bargain-hunting buyers who are willing, like you, to do the work themselves to save some money.

3.  Even if you are willing to pay buyer agents to enlarge your buyer base, you cut into your commission savings.

Some sellers who are going FSBO recognize that they still need the services of buyer agents, so they either indicate their willingness to compensate buyer agents or find a low-cost entry into MLS.  Those are viable options, but in both cases it does require giving up some of the savings you were trying to make on the commission, and still doesn’t create quite the same market as listing the property with a broker.

Some FSBO sellers advertise they’ll pay a fee to a buyer agent if the agent finds them a buyer.  That’s fine if that buyer agent finds out your home is for sale, becomes aware of your offer, is willing to work for that fee, has the perfect buyer for your home, and is willing to do the extra work required when a seller doesn’t have an agent (more difficulty setting up showings, handling all transactional details alone).  But you’re not really generating a market for your home, since you’re not attracting the attention of the full buyer brokerage community.  And remember that you’ve now cut your savings quite a bit: you’re only now saving the, say, 3% that the listing agent was going to charge you, since you’re paying the buyer agent (and a fee to the service getting you on MLS).  Maybe you’re still saving money, but not as much, and you’re spending quite a bit of time to do all the listing agent work.

Alternatively, some people selling their own home list their home with an MLS through a discount broker that does not provide seller service but can get you on MLS.  In those cases, at least you do have access to buyer agents, and if you are listed with MLS your home will be available to the brokerage community on some online sites.  But now you’re again cutting your savings, since you’re now paying a fee to the buyer agent, a fee to the discount service, and you’re still doing all the work of the listing agent. And although you will be in MLS, you don’t necessarily get all the internet distribution that most brokers provide.

V.  CONCLUSIONS

This post obviously grew to be a lot longer than a simple response to yet another Times article about the coming demise of the real estate brokerage industry and its compensation model.  My point was to try to explain how the industry works, and in particular how the smooth functioning of the industry and the housing market depends on the compensation model inherent in the industry.

I realize that no one likes to pay fees, and that the brokers and agents in the industry don’t always provide the quality of service that justifies those fees.  The quality of the services brokers and agents provide their clients is something that I’ve written, talked, and worked on a great deal in the last few years, and we’re constantly trying to improve it for the agents in our company.

If you’re currently working with someone at Better Homes and Gardens Rand Realty, and you’re not happy with the level of service you’re receiving, just email me and let me know and I’ll look into what we can do for you.  And if you’re not working with a Rand agent, and would like help in finding someone who does justify that fee, just email me and I’ll set you up with someone who will earn any money he or she is paid.

 

Book Review: Atul Gawande’s The Checklist Manifesto: How to Get Things Right — Achieving Operational Excellence in the Real Estate Industry

Atul Gawande’s The Checklist Manifesto is a  powerful book, one of the best and simplest articulations of how to achieve operational excellence that I have ever read.  Gawande’s message is simple: the world has become increasingly complex, and we need to actively create systems and processes that will simplify the tasks that we have to complete in our everyday lives.  His deceptively modest proposal: use a checklist.

Now, I know that seems almost stupid and simplistic at first glance.  We’re all familiar with checklists, and generally associate them with rote tasks, not with complicated procedures.  And we resist the idea that our professional performance could be improved by something so jejune as a checklist, almost as if a checklist would trivialize the important work we do.

As Gawande points out, though, that’s exactly the way a bunch of doctors felt the first time that a hospital administration tried to incorporate a checklist into one of the most common of medical functions — putting in a central line.  He recounts how a critical care specialist at Johns Hopkins Hospital devised a checklist to try to avoid incidences of infenctions in the placing of a central line.  Doctors all knew the basic steps for central lines: (1) wash hands with soap; (2) clean the patient’s skin for the placement; (3) put sterile drapes over the patient, (4) put on a mask, hat, sterile gown, and gloves; and (5) put a sterile line over the insertion site after placing the line.  Gawande called these steps “no-brainers,” the type of things that doctors know they are supposed to.  But the hospital found that in one third of cases, doctors were skipping at least one of the steps.

So the hospital initiated a simple checklist procedure to ensure that all the steps were taken.   Since the doctors were resistant to the intrusion, nurses were enlisted to ensure compliance with the checklist.  What were the results?  According to Gawande, they “were so dramatic that [the administrators] weren’t sure whether to believe them.”  The ten-day line infenction rate went from 11% to 0%.  Over a fifteen month period, the administrators projected that the checklist had prevented 43 infections and 8 deaths, saving over $2 million in hospital costs.

This was not an isolated result.  After the success at Johns Hopkins, Gawande recounts how hospitals in Michigan initiated a project to use a central-line checklist in intensive care units (ICUs) in hospitals throughout the state.  Here are the results:

Within the first three months of the project, the central line infection rate in Michigan’s ICUs decreased by 66%.  Most ICUs . . . cut their quarterly infection rate to zero.  Michigan’s infenction rates fell so low that its average ICU outperformed 90% of ICUs nationwide.  In the …. first eighteen months, the hospitals saved an estimated $175 million in costs and more than fifteen hundred lives.  The successes have been sustained for several years now — all because of a stupid little checklist.

These are among the powerful illustrations of the effect of checklists on operational performance included in The Checklist Manifesto.  In addition to the medical field, Gawande shows how pilots use checklists to ensure safe operation of aircraft (including an engaging description of how checklists impacted the famous “Sully Sullenberger” flight that landed in the Hudson River in 2009).  And he demonstrates how hedge fund investors use versions of the checklists to protect against making poor investments, including one vivid illustration of an investor turning down an opportunity when a checklist item turned up that the company’s owners had been divesting their personal holdings.

So how does this impact the real estate industry?  I think that our industry could learn a lot from The Checklist Manifesto about operational excellence.  The role of the real estate agent is significantly task driven, but those tasks can sometimes be overwhelming.  Just getting a listing on the market can require dozens of discrete operations: taking pictures, uploading pictures, writing descriptions, checking paperwork, ordering signs, inputting property data, double-checking taxes, etc.  We need to do these things every single time, but rarely do we see a company articulate a simple checklist to ensure that every listing gets that quality service.  The same holds for the far more complicated but necessary task of maintaining ongoing listings, when agents tend to get lost in the frenzy of daily activity and neglect the day-to-day communication and updating responsibilities they have to existing clients, leading to poor client experiences.

For the last year, my company has been working on identifying the “best practices” in the industry — the practices that ensure a quality client experience for both buyers and sellers,  with the idea of coordinating those practices into a series of checklists and a comprehensive  “Project Plans” that cover particular aspects of the real estate transaction.  The goals is to provide with a set of plans that can guide them through the transaction.  The point is not to limit them — people can always do more than is on the plan.  Neither is the point to demean their professionalism– it’s not that we think they’re NOT doing some of these things, but we believe that in a given case they might not be doing ALL of these things because of the overwhelming complexity of the entire task.

Most importantly, we think that these kinds of checklists make a job easier, by simplifying our lives.  Just like computers, we have only a certain amount of “RAM” in our heads.  Computers gain efficiency if they can move information from “RAM” to hard drive memory.  Similarly, most of us become more efficient if we don’t have to store tasks in our memory, but can reduce them to a hard copy that we can refer to anytime we need them.  An agent with a 30-item checklist for getting a listing on the market is going to be more efficient than an agent who has to remember all 30 tasks and whether she’s already done them.  (And it’s definitely more efficient for the agent sitting at the desk next door, who keeps getting a tap on the shoulder asking, “hey, what am I supposed to do next?”)

Finally, real estate professionals should recognize that if checklists can improve execution and performance in life-and-death situations involving surgery and airline flight, and in million or billion-dollar financial investing decisions, then they certainly can be used in the much less urgent field of real estate.  A real estate agent who feels that checklists are “beneath” her should be at least a little chagrined that pilots and doctors are using them to great effect.

Essentially, I think that The Checklist Manifesto should be required reading for real estate professionals; indeed, I would recommend the book for anyone who cares about achieving operational excellence in his or her field.  If you need proof, I’ve already purchased 50 copies of the book at my company’s expense for distribution to our management team, and have saved others as gifts for colleagues in the industry.  It’s a great book.  You should read it.

If you’re interested in some other information about the book, here are some links:

Atul Gawande’s home page for The Checklist Manifesto

144 Reviews (average 4.5 stars out of 5) on Amazon.

Steven Levitt, the author of Freakonomics

Malcolm Gladwell, author of The Tipping Point, Blink and Outlier.

New York Times review

Washington Post review.

Interview in Time Magazine.

Gawande interviewed on the Daily Show with Jon Stewart.

The Safe Surgery Checklist illustrated in a terrific clip from NBC’s ER.