I noticed that an open letter to Minnesota REALTORS has been making its way around the blogosphere recently. I first saw it on the Inman Blog, and then Greg Swann had something to say about it. It has been talked about in the Charlottesville area, and again in Arizona. I think the reason that the letter is noteworthy because it appears that the Minnesota Association of REALTORS is doing something contrary to what people might expect. Namely, they are telling many REALTORS to get out of the business. Of course, they expect us to believe that isn’t what they are saying; but if you read the letter, it is difficult to come to any other conclusion.
Personally, I don’t like it. I fully recognize that the real estate industry has plenty of issues that need to be addressed. One of the issues, brought up in the Minnesota letter, is the issue of more REALTORS working for fewer sales. I also recognize that one of these issues is the actual structure of the industry, and the fact that REALTORS are independent contractors who are, in many cases, indentured servants who exist at the will and whim of their broker/master. What I don’t like about the letter is that it is claiming that the cure for these problems is simply to thin the heard, separate the wheat from the chaff, etc.
I am willing to bet that the Minnesota Association of REALTORS (MNAR) wasn’t espousing this same opinion two years ago, when every REALTOR was living in the land of milk and honey, real estate prices were soaring, and all was right with the world. Something tells me that back then, their tune was quite different. REALTOR associations all around the country were touting the money to be made in real estate, and imploring people to get their real estate license. I distinctly remember being sent a pin by the National Association of REALTORS that celebrated the association’s one-millionth member. So now we are expected to believe that more members is a bad thing? Look, either it is or it isn’t. The industry cannot be actively recruiting members on one hand, and then telling them to get out of the business on the other. The various associations around the country are partly responsible for the number of REALTORS in the business. The creation of this monster is partly their responsibility. Now, the MNAR is coming to its membership and essentially saying, “Hey, we really wanted your help and your dues payments a few years ago. Now, however, your existence is getting to be a burden on ‘the industry,’ so if you could, it would be better for both of us if you find something else to do.” Which, if you ask me, is pretty messed up.
One of the things that I love most about the real estate industry is that it is a free, open market. In fact, it is one of the truly free-market industries that America still has left. The industry experiences very little government interference, and the barriers to entry are very low. Any market that shares these two characteristics is going to experience high participation and high turnover. This turnover is natural. Believe me, MNAR doesn’t have to tell people to get out of the business, the market is going to force people out of the business, if they simply let the market run its course. If there are those that fear they will be the ones forced out of the business, the solution is simple– compete better. There are no guarantees, but competing will at least give you a chance. It will make you an active participant in your future, which is a good thing. I’m not sure how many times I can say this, but I will say it as many times as is necessary.
It would appear that perhaps the MNAR doesn’t share my view of competition and free markets. The letter from MNAR states the following:
As a “Trade Association” we must defend and look out for the general welfare of the industry. This means helping members understand that it may be time for them to make a career adjustment so as not to harm the structure of the industry for those pursuing it as a career.
The point is reiterated later:
Even if 10 percent of the MLS were non-salespeople, there are still a significant number of members who are not pursuing the business as a business.
My opinion is this– if those people who are “pursuing the business as a business” cannot compete because of those who are pursuing it for some other reason, those are the people that should find a new career. Think about it like this, if Derek Jeter was beaten-out for his starting spot in the Yankees lineup by Joe Schmo who plays church-league softball on the weekends, who would be the one who needs to find a new career?
The MNAR could tell its members that innovation and competition is more important now than ever before, that its members need to work harder to increase their professional aptitude in order to survive and thrive in the current market. Instead, they took the easy way out. It’s always easier to tell people to leave than it is to help them try and stay. Whatever happened to perseverance and adaptation for survival? What ever happened to the idea that it is better to have tried and failed than not to have tried at all? In a way, the letter from MNAR is a sad and pathetic statement on the psyche of real estate professionals.
To make matters worse, MNAR gives its member a list of reasons that people need to get out of the business:
Glenn Dorfman, Chief Operating Officer of the Minnesota Association of REALTORS® put together the following piece to help illustrate the industries current dilemma: Regardless of the agents who are making money, there are four absolutes:
- There are too many agents in the business chasing a declining number of deals which has two implications (a) compensation dilution for many real estate professionals (b) the public face of real estate professionals is not near the best it could be if brokers terminated non-productive agents now – keeping them will have a negative impact on the dollar value the public will put on our services as homes sit on the market longer
- There are no examples in the history of business where productivity went down during times of economic downturn (a) every business that survives economic downturns reduces employment when sales shrink (we have yet to do this).
- As gross compensation to brokers declines, they will be forced to squeeze agents (if they do not shed the dead weight soon).
- Finally and significantly, the wealth effects of housing that REALTORS® help create employed an enormous number of high paid employees (tradesman, cement, lumber, landscaping, furniture, etc., etc….) will, in reverse drag the economy into recession despite the current protestations of the industry and others.
Allow me to address these points one at a time:
- How many is too many? What is the threshold for the acceptable number of agents in the market? Eliminating non-productive agents is the decision of the broker. The broker is at least partially responsible for their lack of productivity, so the consequences are on them. Agents who are not productive, by definition, don’t really have a negative impact on the public face of the industry, since they obviously aren’t out in the public. If they were, they would be productive. These are the aforementioned people who will be forced out by the market.
- This is a pretty bold assertion that seems difficult to prove. That aside, reduction in the workforce isn’t a guarantee of success. Just ask Ford and GM. Both of those corporations are cutting jobs and getting their butts kicked.
- How nice of MNAR to tell broker members what they are going to do before they have even done it. Perhaps brokers will instead try to help their agents innovate and compete in the marketplace and . . .oh never mind, I already covered that.
- The grammar in this one is so convoluted that I’m not really sure how to approach it. I think what they mean is that the real estate boom expanded the job market and now that the boom is over, many people in industries ancillary to real estate will find themselves out of a job. This may or may not come to fruition, but either way, I fail to see how reducing the number of agents is going to help construction workers keep their jobs.
All four of these points are dubious, and far from being “absolutes.” If I were on the fence, I hardly think that they would convince me to leave the industry. I know that the letter explicitly states that MNAR is not telling REALTORS to quit the industry, but the rest of the letter seems to be to the contrary.
If I were a REALTOR in Minnesota, then my attitude would be to tell MNAR to stick it. If they think they are going to scare me out of the business, they are wrong. If they think they are going to guilt me out of the business, they are wrong. And if they think they are going to fool me out of the business, the joke is on them.
As for me, I use as my inspiration the words of one of my favorite poets, Dylan Thomas.
But hey, that’s just me– and I don’t live in Minnesota.
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