In 2015, the real estate industry was warned about looming challenges in a study known as the D.A.N.G.E.R. Report by Stefan Swanepoel, founder of T3 Sixty. Nearly a decade later, Swanepoel assessed just how accurate his 10 warnings proved to be—and whether the industry has learned anything.
Last Friday, on the Knowledge Brokers Podcast, current T3 Sixty CEO Jack Miller joined Byron Lazine and Tom Toole to discuss Swanepoel and T3 Sixty’s Opportunity Report, which confronts uncomfortable truths about the industry and provides a path forward through 20 opportunities.
As Miller, Lazine, and Toole discuss both reports, it’s clear the real challenge wasn’t just identifying the risks facing the industry in 2015—but also understanding why the industry as a whole failed to act on them.
The renewed examination raises questions about how real estate can evolve to meet consumer needs while leveraging the opportunities in today’s market.
Read on for some of the highlights. Then make time to enjoy the full conversation.
Unanswered Questions from the DANGER Report
Thanks to the D.A.N.G.E.R. Report, the industry had a list of 10 warnings to heed, which proved uncannily accurate. As Lazine put it, “We knew what was coming. So, do you believe the industry has learned any lessons?”
Miller began his response by referencing the research involved. As one of the industry experts interviewed by Swanepoel for the new report, Lazine knows these interviews lasted 2-3.5 hours each. And they often (if not always) ran over the time originally allotted.
What was gleaned from those interviews shed light on the real opportunities in today’s post-NAR-settlement industry, as well as the fallout of the industry’s collective disregard for the warnings in the 2015 D.A.N.G.E.R. report.
Just as mentioned in the About section of the new Opportunity Report, Miller discussed using AI to analyze the D.A.N.G.E.R. Report findings 10 years after its publication. It found that the report had an 83% overall accuracy rate when predicting industry risks.
One of those risks was “Masses of marginal agents destroy the reputation of the industry,” which ChatGPT rated as 85% accurate based on negative media coverage and the lawsuits filed in recent years. On a related note, AI rated “commission compression” as 95% accurate.
As to whether the industry had learned anything, Miller said, “That’s really what we’re hoping to make happen with things like this, where we get in front of more people and say, ‘Hey, we had this report. It was published about a decade ago.’”
“By the way,” he added, “Our opinion, the industry didn’t do anything.”
Yes, the industry read it, he acknowledged, “but we did not take action as an industry.”
Byron then brought up the issue of the “marginal agent,” asking, “Is there a clear fix for that? Is it system-based? Is it more broker-leadership based? Is it more training-based? Where would the marginal agent consensus go away?”
There’s been a very low barrier to entry to get into real estate. And part of the trouble is we have models that are built around head count, and it doesn’t matter whether the agents are good… So, it’s a challenging problem. In the newer report, we address it in a bunch of different areas. One of them is licensing itself. One of our takeaways from our last report, we didn’t address the regulatory agents. In this report, we did…We need to improve the licensing requirements so that it is more rigorous and that it requires more study and more expertise to get a license and to maintain it…
In the Opportunity Report, we talk about that. Brokers need to up the requirements for who they allow to do the business in their company. Associations need to focus on professionalism training. There’s no one source we can go to and say, ‘You’re responsible for letting all these folks in.’ We’re all going to have to work at it as professionals. And the good news is some of these practice changes that have happened I think are going to help with that.
Toole then brought up how much training it takes for a variety of other professions and pressed the point that real estate professionals should be held to a higher standard than they currently are. That’s not to say they need college degrees (they don’t), but the licensing standards should match the value committed professionals provide.
Miller agreed and suggested a shift toward hands-on mentorship or apprenticeship as a sustainable model for new agents entering the industry.
Navigating Politics and Policy for a Stronger Future
Politics and NAR policy came up, starting with the question of whether regulatory agencies at the state and federal levels are likely to support more robust standards for obtaining a real estate license.
Most of our legislatures do not understand real estate. They don’t understand how real estate works. They don’t understand the industry. So, how can we expect them to understand the necessity of having more requirements for licensure to create a safer, better, more high-quality marketplace for the consumer? …The problem is one bad agent in your brokerage that does some things with a few customers can ruin the reputation of the brokerage—and the industry. That’s what we’re seeing.
Lazine then asked whether real estate agents should engage more in political efforts to generate changes beneficial to the industry and consumers. In connection with this, he brought up the issue of small independent brokers complaining to their state governments about teams, resulting in many of these states imposing a tax on teams that doesn’t apply to brokerages.
Miller tied this to the need for NAR to focus on its fundamental functions as a Realtor association, with advocacy ranking high on that list.
There are things the industry really needs to focus on, and this is one of them. And all the way up to NAR, our messaging in the second half of the report about what organized real estate should do is that it needs to focus on advocacy. And this falls under advocacy.
A lot of the professionals, the busy brokers, have kind of turned a blind eye to what’s going on over there at the association…It’s easy to do. You go, ‘Look I’m busy running a business. I don’t have time to get involved.’ But I would say, ‘Why are we letting the lunatics run the asylum?’ We need to have qualified people. We need to have better people that are advocating for good business changes.
Miller went on to explain the risks involved with not effecting good changes for the industry: more lawsuits, resulting in further damage to the industry’s reputation, with far-reaching consequences. So, whereas the responsibility for rehabilitating the industry wouldn’t ordinarily fall on the shoulders of busy business leaders, it’s become necessary for more real estate professionals to step up and get more involved.
Because, as Miller puts it, real estate is “an ecosystem, and we need to keep the ecosystem healthy.”
I’m not saying give up all your time to [your association], but check and see how you can help because this is now a bigger issue. This is something where the consumer is involved, and you might be surprised if you start showing up at who’s making the decisions…
Lazine asked Miller whether there was a consensus, during the interviews they conducted, as to whether NAR was the right organization to take on the opportunities spelled out in their new report.
The consensus was that NAR is the right vehicle for doing these things, simply because of the amount of assets it has in place…including the relationships that their lobbying team already has and that the organization has developed over the past, you know, 100 years. It would be very, very hard, based on the opinions of leaders we talked to, to replace it with something that had as much muscle as NAR does have…It would take decades to grow a new professional organization that would have that level of strength…
It’s really about refocusing the National Association of Realtors, the state associations, the local associations on more important missions…
Another question to come had to do with the U.S. Department of Justice (DOJ) and whether a change in administration could temper the department’s aggressive stance toward NAR, potentially allowing the industry more operational flexibility.
Miller prefaced his answer with “It doesn’t matter.”
And I’ll tell you why. The lawsuits and the DOJ interest in our industry came from consumers not understanding how our industry worked—and some practices that, candidly, are outdated… Buyer agency really became prevalent in the 90s. I believe what we’re seeing right now, this set of practice changes, they’re just evolving to the next thing that our industry needs to do anyway. So, it’s sort of like we’re already there. Just run with it…
By the way, if you run with it sooner and better than everybody else, you’re going to pick up market share. And in a year from now, guys, we’re not even gonna be talking about this.
Another hot topic for the industry is NAR’s Clear Cooperation policy (CCP). Lazine asked Miller his thoughts: “is it going away, staying the same, or being amended?”
We talked to people on both sides of that issue, and it had lots of pros and cons. I have a personal opinion. There’s some people at T3 Sixty who have different opinions. I think, at a minimum, CCP needs to be changed…
Embracing Opportunities Amid Market Compression and Shifts
The conversation turned to a recent Tweet by Lazine (October 23): “2024 harder than 2008 (for agents)”
2024 harder than 2008 (for agents) pic.twitter.com/QUXZcmyYDF
— Byron Lazine (@ByronLazine) October 23, 2024
The reason why I say 2024 was harder was because when you take the worst year on home sales since 1995 (potentially), then, on top of that, you put all the lawsuits, all the new changes, when you combine those two forces, I give the edge to ‘24. What do you think?
Miller agreed with the statement 100%, using his own brokerage, which he started at the end of 2008, as an example.
I think this is more difficult because we’ve got the economics, the mortgage financing, the affordability problems, and the practice changes—and potentially other lawsuits that are still out there. We’re not done with these lawsuits yet. All those things add up to what is a more challenging year. But here’s what I would tell your listeners: the core of the Opportunity Report is about the opportunity right now. Because the time to build something that is legacy, generational, game-changing is in the toughest market conditions. And that’s right now.
He added that the current market conditions make now the perfect time to redesign your business—to “blow it up and rewrite it the way you want it to be going forward.” That’s much more difficult, if not impossible, to do when market conditions are optimal.
This is also a great time for educated and committed agents to stand out. As Miller pointed out, the current climate could push out unprepared agents who don’t prioritize communicating their value to clients.
Even with commission compression among the validated risks outlined in the D.A.N.G.E.R. report, agents can still succeed by showing consumers exactly what they do for them—exactly how they will get them the best possible results.
The goal of making homeownership “affordable again” is something real estate professionals can unite around, highlighting opportunities for consumers to become homeowners in a sustainable way no matter who ends up in the White House in January.
Part of that is being aware of the pitfalls facing consumers, including exploitative practices by national homebuilder salespeople. Agents committed to serving consumers can eventually repair the industry’s reputation by being the trustworthy guides buyers and sellers need.
That’s why I say read that section for agents and brokers on opportunities…get sharp with your buyer proposition, get your systems in place to do buyer transactions better. You know, there’s some awesome tools coming out right now; there’s some people really focusing on this, on making that whole side work great. And then you’ll be ready as the market comes back and you’ll get the rewards.
Watch the full conversation for more.
