Greg Charlop: What are your thoughts about Bitcoin and real estate? Will Bitcoin play a major role in the market, or do you think that will remain more of a niche interest?
Nick Bailey: Cryptocurrencies are certainly gaining a lot of attention, but right now there are many risk factors that could impact the success and security of a transaction, for example, the volatility of Bitcoin and the current timing associated with the various steps in the real estate transaction. That said, new processes always come with ‘pros and cons’ and we’ll definitely be watching to see if cryptocurrencies become a viable solution for more buyers and sellers.
Greg Charlop: Years ago, consumers were almost entirely dependent on their real estate salesperson for information. Now the MLS is essentially public, and consumers can find practically any kind of data online themselves. How does the easy availability of data impact the role of the real estate agent? Will real estate agents become unnecessary?
Nick Bailey: Real estate agents who continue to provide value to the home buying and selling client will always be necessary. While there is a lot of information online today, the agent possesses the knowledge of the market, the ‘ins and outs’ of the transaction, and they have the negotiating skills to get the client from start to finish—something the Internet simply cannot do.
The irony is that the digital revolution has helped scale the importance of human knowledge and shared experiences, and consumers across generations are ‘pushing forward’ the value of working with a person. In fact, according to a CENTURY 21-commissioned study by Wakefield Research, Millennials—despite being incredibly tech-savvy—overwhelmingly (92 percent) believe it is important for a real estate sales professional to get to know them personally before choosing to work with them. An agent who is equipped with the tools and technologies that help them facilitate human-to-human connection, augment their abilities and serve to enhance the human involvement consumers demand and deserve from their real estate company will be a step ahead of the market, the industry and the competition.
Interview with Adam Gothelf, co-founder & CEO of Disclosures.io
Gregory Charlop: Tell me a bit about you. You obviously have a deep background in real estate, but how did you decide to start Disclosures IO?
Adam Gothelf: During my time in real estate I felt a lack of technology to support my clients and my own workflow. A key part of the transaction is managing disclosure documents: sharing, reviewing and interpreting them with your clients. So we decided to start there.
Gregory Charlop: So, before this, you were working directly as a real estate agent. And then you discovered a problem. And you decided to start a company to solve it?
Adam Gothelf: Correct.
Gregory Charlop: That's very inspirational. Did you have a background before, in either starting companies or creating technology?
Adam Gothelf: Not really much tech background. I had a few different companies that I started after college before I got into real estate. I just have the entrepreneurial bug, I guess.
Gregory Charlop: That's exciting that you would make a big leap like that. For our readers who aren't familiar with Disclosures.IO, can you tell us a bit about the company? What is it exactly that you do?
Adam Gothelf: We build software that helps real estate agents manage property disclosures. We provide one online location for agents to manage important info like documents, marketing materials and offers for their properties. We have all the crucial property info, whether for listings or buy sides, in one location.
Gregory Charlop: So, you help listing agents prepare disclosures and distribute them? How does a real estate agent use the product?
Adam Gothelf: Yeah. We help agents compile the disclosures, reports, basically whatever they want to share about the property. We make sharing really easy and insightful. We are also integrated with DocuSign, so signing is very easy.
Gregory Charlop: You have an ability to track when the disclosures are reviewed or sent out?
Adam Gothelf: That's correct. For example, imagine you share a property package to 10 different buyer parties that came to an open house. If you're just sending out a pdf or a DropBox link, you have some idea who's looking at the disclosures, but you don't have a sharp sense of how many of the 10 agents are really interested. With our product, you can see that two parties are very interested and they're highly likely to write an offer. Our product gives you that insight.
It’s also useful on the buyer’s side. Often, when your buyers request to see the disclosures, you send them and it's “crickets”. They have lost interest in the property and you don't hear from them. With our product, you get an insight into whether or not they are actually reading the disclosure documents.
Gregory Charlop: That sounds like a great tool. Most agents probably create a pdf. And then ultimately they use DocuSign. So, if you're comparing, say Disclosures IO to that traditional method, it sounds like you're getting a lot more information about who's looking at the disclosures and how popular it is. Plus, they're easier to prepare and keep organized.
Adam Gothelf: Correct.
Gregory Charlop: And does the agent on the receiving end need to be a Disclosures IO customer in order to review and use disclosure packets?
Adam Gothelf: No. There's no friction on the buyer’s side. They don't have to sign up or create an account.
Gregory Charlop: I'm a big fan of data. It seems like Disclosure IO offers a great way to measure and track engagement. How would agents use that information to their advantage?
Adam Gothelf: Let’s say you have fairly light interest on a listing. Maybe you only share three disclosure packages to interested buyer parties. With our product, you can see who's looking at what. You see who's actively reviewing the descriptors, which is the key next step in the process of writing an offer. If you just email a pdf, you don't know if the agents are engaging with the disclosures.
You’re having a hard time deciding whether to set an offer date. With our products, you can see that, "Wait a minute. I only have one party who's actively reviewing the disclosures." The other two have not looked at it at all! In that case, you may not want to set an offer date. You may want to just let that one buyer surface. You can continue marketing the property or do some more open houses.
If you have a lot of interest, go set an offer date. That's how the agents could use that data.
Gregory Charlop: In other words, it might be better sending out 3 packets and having those parties heavily reviewing them, rather than sending 10 offer packets that nobody is looking at. And knowing that information could help the seller’s agents tailor their strategy.
Adam Gothelf: Correct.
Gregory Charlop: That's a clever idea. Who typically purchases this product? Is it usually an individual agent, broker, or brokerage firm?
Adam Gothelf: We try to build for individual agents. There's a lot of bureaucracy in real estate. The agents are on the ground doing the hard work interacting with clients. They have a unique workflow and by building products for them, we think we can really provide a service that's highly valuable to them.
Gregory Charlop: So, most of your purchasers are individual agents, who want to improve their productivity?
Adam Gothelf: We have many brokerage-wide accounts, but the product is really more focused on the agent as opposed to the brokerage needs.
Gregory Charlop: Excellent. Now, Disclosure IO really seems like a great product. Adam, I’m curious: how were you able to transfer from selling real estate to Silicon Valley entrepreneur? Did you hire someone who knew how to program? How did you even go about that?
Adam Gothelf: All of the above. It's been a long road for me. The companies that I started before getting into real estate were not really tech companies. This has been a long road.
About 5 years ago I had an idea for a real estate app. So, I raised a little bit of money, and I outsourced the development. I don't know how to code, but I know real estate. I spent all this money on building an app t
hat targeted a pain point that wasn’t really sharp. It was just sort of fuzzy pain. And it fell flat because nobody really wanted to use the product, the app broke, and I had no money left. The entire time I was trying to find co-founders, and it was really hard to get people to turn on to real estate tech. I went to all these meetups, events, etc. It really sucked.
Around that time, I linked up with an old friend, Brian, who’s mom happened to be a real estate agent. We started kicking around some ideas for a new real estate product. Brian was working as a product manager, leading a team of engineers at a company called Opower. So, Brian had great experience working with engineers. He and I came up with a product idea that was very different than disclosures. We went on the hunt together for an engineer.
We met with a bunch of people, but this time the conversations were a bit different. We met our third co-founder Paul, who at the time, was working on Transaction Rooms at DocuSign. We put out a beta version to about 10 or 15 agents in San Francisco, and we crafted the product a little bit more and had really strong positive signals from those early users. We all went full time after that. The key was finding a really sharp pain point and building the right team.
Gregory Charlop: That's a great story. And excellent advice. Now, we probably have a number of people reading this book—either real estate agents, or brokers, or perhaps even executives—who also have an entrepreneurial interest. What advice would you give to a real estate agent or broker if they came up to you and said, "Hey, I'm thinking about starting a company or developing a product, as well." What advice would you give that person? What next steps should they take?
Adam Gothelf: I'd say a couple of things. One, test it without building any product. I really wish that I had understood this and knew this when I was first starting because you don't really need to build anything. You can catch a lot of problems with tools that are available to you today, such as a Google form and email.
Two, talk to your potential customers. Just go and ask them, " Is this a pain point for you? How sharp is it?" And dig into that. The two key things for that is, is it something people want? And number two is, what is the minimum viable thing or experience they need?
Chapter 2: Brokers and Executives
How to survive and thrive in the marketplace of the future
Top real estate companies and brokers are great at nurturing talent. You know how it works. You hire young associates right out of training and pair them up with your more seasoned salespeople. The newbies learn the ropes from the experienced folks in exchange for running open houses and shuffling papers. Throw in some classes from the brokers and a nice library of resources and, after a while, you have a great farm team! Everybody wins.
It was a great deal for you. The inexperienced associates didn’t really cost you anything. They provided cheap labor for stuff nobody wanted to do, like filing and phone calls. The experienced agents didn’t mind giving up a fraction of their commission for the team. And you built a great bullpen as your senior agents retired or left.
Sure, a lot of the newbie associates would fail, leave, or quit, but that was no problem. They were practically free, and new ones are banging down your door every day to replace them.
This apprenticeship model, as I call it, sustained large real estate firms throughout the generations. In fact, this system of cultivating talent was a huge benefit to the large firms. After all, the largest brokerages would have a vast pool of experienced salespeople and huge libraries. The top shops had the most inbound calls during floor time. And there was an endless supply of new grads ready to work for next to nothing.
It was a dream! The system perpetuated itself.
Senior associates jumped ship or retired? No big deal! They could easily be replaced. You could either promote the top of your bullpen or hire another experienced associate drawn to your firm’s prestigious reputation. Turnover among the trainees? Not to worry! New folks were lining up around the block for a chance to work under your tutelage.
All the while, you'd collect a nice cut of the commission from all the action! Buying or selling, senior associate or junior apprentice, complex transaction or routine business. It didn’t matter. Either way, you'd get paid. And, paid quite handsomely!
The whole system depended on your brokerage. The junior people required access to your senior salespeople to learn the ropes and for a cut of their deals. The senior people liked your constant supply of newly minted associate worker bees. Everyone loved your grand conference rooms, prestigious addresses, and fancy photocopiers. The whole team benefited from your firm’s advertising, which was far too complex and expensive for individual associates to arrange on their own. And, of course, everyone was legally required to work under the supervision of a designated broker.
You held all the cards.
All you had to do was keep up the office, monitor compliance, and maintain the corporate advertising. Throw in a little teaching here and there, and you were done. If you kept up your part of the bargain, you were nearly assured of a steady flow of willing associates and a flood of effortless commissions. You were the Don.
Now, the rules have changed. The successful senior associates aren’t playing ball.
The marketplace is more transparent now. The general public has access to MLS portals like Zillow, realtor.com, and Redfin. As a result, homebuyers and sellers know the top agents. The public knows who made the killer deal on the house down the street. They know who’s racked up sale after sale in their neighborhood. And, thanks to review sites like Yelp and Trulia, folks know the most popular associates in town. The ratings are out there for the world to see.
Everyone wants a real estate salesperson who’s successful and well-liked. Thanks to the internet, potential clients can hunt those unicorns down on their own.
The general public cares that their agent has a proven track record of success and happy clients. They do NOT care about that salesperson’s brokerage or real estate firm. I repeat. They care about the salesperson, not the company.
Moreover, most of the public doesn’t care about your magnificent offices. Tamir Poleg, the founder of internet-based brokerage Real, said in an interview, “If you ask brokers about their expenses, about 50 percent of the expenses go to either rent or maintaining the physical space. It doesn't make sense to spend so much money on physical locations because customers do not need it anymore. Nobody wants to drive to visit your fancy or not-so-fancy office.”
Your senior associates know all this.
Top agents are more empowered than ever, and that has huge consequences for your brokerage. The Agents and Future Agents & the Elite Agents chapters supply more information about this critical concept.
Winner takes all
When you do a web search, you Google it. Looking to buy a book or sunscreen online? You visit amazon.com. Seeking an original edition of the first Star Wars videotape? Time for Ebay. Remember Myspace or Friendster? Neither do I. Facebook toppled them. The winner takes all.
A small fraction of salespeople generate most of the sales (the 80/20 rule), a small number of countries produce most of the world’s GDP, a tiny fraction of software bugs saddle us with most of the errors. We see this over and over again.
Winner takes all, and the 80/20 rule will increasingly dominate real estate. In fact, you can already see it now….
Look around your sales floor. Your new agents earn less than $10K a year from real estate.[16] In fact, most of them will exit the business without renewing their license. Your top agents, on the other hand, are cleaning up. They close deals and vacuum up referrals. They are your Thoroughbreds.
Radical transparency consolidates sales at the top, and everyone else will be left in the dust.
Consider this scenario. It’s the year 2000 and someone wants to sell their home. They need to pick a salesperson. Other than through referrals, how did they choose?
You already know.
They went with the first person they found. Perhaps that was the associate
who answered the phone at your real estate agency when they called. Or, it was the guy holding the open house down the street. Maybe it was nice lady they bumped into in the cereal aisle at the grocery store! The point is, folks chose their agent largely by chance, not by merit!
Fast-forward to today. Folks do everything online, from buying shoes to selecting their real estate agent.[17] Within minutes, the public will figure out the best agents in their neighborhood. It’s not a secret. Clever advertising, floor time, and extra visits to the cereal aisle won’t change that. Data is transparent, and the best agents are out there for all the world to see. After referrals, internet search is the leading way people find real estate agents. That trend will only increase.
Once the public finds out who the top agents are, they won’t go anywhere else! Why would they?
Real Estate at a Crossroads Page 9
