Here’s a question that’s certain to be avoided by the real estate industry: What are you planning to do on the day that “taking a listing” becomes totally irrelevant? It’s coming, of course, and it’s not just because of a “housing recession” or any such calamity. Real estate based upon consumer needs, not actual “listings” will be the focus of the Next Generation of Real Estate.

And clearly nobody is prepared.

Look at the design of the real estate industry today. Everything is based upon listings:

• The commissions is based upon the listing price
• The broker’s revenue is based upon their local listing averages
• We hire “listing agents”
• A Multiple “Listing” service dominates our data management
• Our websites all put “listings” front-and-center, not services
• We award “top listing agents”
• We build business plans around the “number of listings” we’ll take

And so on. The entire industry revolves around an inhuman item: the house. And every activity we conduct is based upon that item - not the consumer - because it’s the listing which determines the revenue. And revenue is the bedrock of business (as it rightfully should be).

The trouble is that an entire new generation of real estate consumers isn’t listing-focused. In fact, they are afraid of listings being the focus because it distorts the process. First, there is the pricing problem: Moving a market based upon the “listings” that are currently represented by brokers, in the MLS and appearing online is ineffective. It has more negative than positive effects. For sellers, the potential price of their home becomes determined by the so-called market forces of “what other comparable homes are priced for” by other agents in the local guild. Except that we all know agents are mostly terrible and usually awful at pricing. They either overprice it - which provides a false-value picture of the home and causes it to sit and not sell - or they underprice it because they just go with the “flow” rather than use other techniques that might cause “above market” offers to come in. Nobody tries *not* pricing homes and simply marketing them and seeing what people are willing to pay. Auctions are rarely used - even frowned upon. Pricing solely upon solds is rarely done, even when the property is an expired - which clearly indicates the previous agent had no idea how to price (or market) it. And lastly, most REALTORS simply ignore the 20-30% of the market that is “for sale” right now but “not in MLS” - the For-Sale-By-Owner whose property is WELL KNOWN to the buyers, and therefore affects their concept of market value.

Listing-focused real estate is also challenging the entire “commission” structure of the business. For example, why does the guy with the home valued at $2 million dollars pay more for the same laundry list of services that the guy whose house costs $200,000 pay? None of the answers has to do with the property: In fact, luxury real estate is selling at a better clip than lower-priced-properties right now because the wealthy recognize it’s already a good time to buy! But beyond that, the challenge for REALTORS is the perception of the cost of the commission as determined by the cost of their home. Today’s sellers are not just Baby Boomers any more - they are GEN X’ers . And no matter how you slice it, he’s going to wonder why it takes $60,000 worth of equity to sell his $2M home. Today’s seller is smart! They know they are subsidizing a lot of broken practices and bad habits of the broker and agents. He’s subsidizing the other poorly priced and marketed listings in the broker’s inventory. He’s even subsidizing a portion of the entire local REALTOR industry’s inefficiencies in finding buyers. And explaining all of that is going to become increasingly difficult to the next generation of consumers.

Operating a brokerage based upon listings-determined value might also be a loser in the future. Already it completely distorts the recruiting efforts at a company. Brokers hunt for listing agents - because they think you have to list to survive. Except that the last three years have proven the folly of a listing-based revenue model: ANY person can list a home if they have a license and simply agree to spend the broker’s money on the price and marketing strategy set by the seller. (Read that last sentence carefully.) But that’s just a formula for creating brokerage expenses - advertising, for example. Recruiting should focus on finding agents who can find buyers, just as well. And not those re still doing postcard mailings, unattended open houses and newspaper ads.

Even if you wanted more listing agents, how about finding those who can simply find good “deals” - such as properly-pricable, quickly-sellable, buyer-attracting inventory? Not just those who bring home all sorts of bad listing deals and expect the broker to sign on.

A cost analysis of operations based upon listings is equally scary. One of the most significant costs for a broker is the increasing costs of operation based upon the increasing inventory of homes listed. This starts with the “MLS membership” fees that are incurred for every agent. The more agents, the higher the membership costs. Add in more listings, the higher the MLS entry-fees. So if a broker is “successful” according to today’s standards - recruiting more agents and getting more listings - his costs go up simply to provide access to a database whose only changing values are usually one data element: the price. To add insult to injury, the broker oftentimes has to pay for access to a database of inaccurate property descriptions, poor marketing information and cockeyed photos - created mostly by his ill-trained competitors. And then he’s supposed to agree to place their less-than-stellar information on his well-designed website because he’s agreed to “be friends” with everyone in the guild. Everything about today’s MLS driven, listing-oriented operational model is expensive, old-fashioned and bankrupt.

It can’t even be argued that these fees create more revenue opportunities, because the systems are so restrictive. Countless agents tell me they “can’t put more photos online because their MLS only accepts X number of photos.” Who’s setting the standard of performance - MLS or the consumer? So we have another a cost that the future consumer will no longer be willing to subsidize. To them, putting listing data and photos online is FREE because they can do it themselves at Yahoo or Craigslist or on a personal blog. They can’t understand why brokers actually pay to have such a system - and they most certainly don’t buy the argument that it’s “more accurate” because buyers see the same (awful) content that comes from so many MLS systems into REALTOR.COM every day.

Let’s take one more stab at the listing-focused folly of our industry. It’s a conceptual one now - so get ready.

There is no such thing as a seller.

Ok, deep breaths. Think about it. Home owners are only sellers for about one minute. During that minute, they make the emotional decision to move from their present location to a new one. Then, they instantly transform into buyers. Their entire focus shifts from their present home to the one they will live in next. That’s why they are so irrational about pricing their homes - they want the most amount of money to spend on their next home, new furniture, etc. They resist improving their current home by painting or landscaping or de-cluttering it because they aren’t focused on selling - they are buying!

And then along comes the listing agent, who spouts off a list of listing services and selling activities. But the seller-really-buyer’s attention is already elsewhere. Visions of their future home already dominate their imaginations. Showings, open houses, cleaning, staging - they don’t want to pay attention to these things because they have already mentally moved out. Yes, they understand they may need to “sell before they can buy” but their focus is definitely on the buying stage.

It’s no different than trading your car for a new one; a quick car wash and vacuum the rugs is all you’re willing to put into the existing car. But you’ll haggle for the highest trade in value because you want to apply it to the snazzy new one you’re already mentally buying in your mind.

An industry focused on the listing of homes is psychologically disconnected from the consumer. As such, its value proposition wanes and its operational model breaks. And that’s why today’s real estate brokerage models aren’t working even with historically low mortgage rates. Not because lending is more stringent or inflation is rising - they are always factors to deal with. Some brokers sold record numbers of homes at a time when there was virtually no credit and mortgage rates were in the 20% range. So that can’t really be the only excuse today.

There are lots of people who extract revenue from real estate transactions - and earn fees. These are non-listing-focused businesses. For example, flat-fee buyer’s agents. Attorneys. Marketing firms. Management companies. None of these charge according to the “price” of the actual listing that is purchased.

But “buyer agency” isn’t the turn-key solution. It’s about seriously asking what is of value to the person who is buying or selling? Because there will still be homes to be sold. And we have to determine whether the consumer wants that value directly related to the price of the “listing” involved - or something else. Ironically, we might even be able to charge more than what we’re charging today, if we disconnect the value of our services from the value of the listing.

Two hundred years ago, when textile factories replaced the cottage industry of hand-sewn clothing manufacture, the market “focus” when from the “item” produced to the “consumer” purchasing it. Once that happened, more people made more money more efficiently. It’s time for that to happen in real estate, too.

I’m willing to agree that we don’t have all the answers. But perhaps all we need to do is at least ask the questions. Because nobody else is. And the consumer is reaching a turning point - in demographics, economics and perception - that is about to throw the entire listing-centric system right out the window.