D.A.N.G.E.R. Report Outlines Threats To The Real Estate Industry

D.A.N.G.E.R. Report Outlines Threats To The Real Estate Industry

“The real estate industry is saddled with a large number of part-time, untrained, unethical, and/or incompetent agents. This knowledge gap threatens the credibility of the industry.”

“The delta between great real estate service and poor real estate service has simply become too large, due to the unacceptably low entry requirements to become a real estate agent. Professional, hardworking agents increasingly understand that the ‘not so good’ agents bringing the entire industry down.”

D.A.N.G.E.R. Report Outlines Threats To The Real Estate Industry

No, that’s not me talking. (Though I might agree.) I’m quoting. As a matter of fact, I’m quoting from a recently-released report that was commissioned by, of all people, the National Association of REALTORS® (NAR). The report is the D.A.N.G.E.R. Report. (D.A.N.G.E.R. from “definitive analysis of negative game changers emerging in real estate”. To be sure, a bit of a stretch just to create an acronym.) The report can be downloaded by anyone, for free, at dangerreport.com.

One might wonder: why would NAR commission a report that says things like that? Consider this explanation from NAR’s Strategic Thinking Advisory Committee. “…effectively planning for the future requires a thorough understanding of the threats and challenges that the real estate industry faces today and during the next few years… To help move the discussion forward…[the committee], along with Stefan Swanepoel, has created a report that seeks to describe as many of the threats and dangers as possible that may affect the real estate industry.”

Stefan Swanepoel is without a doubt one of the leading (perhaps the leading) consultant to the residential real estate industry in the United States. NAR commissioned him and his T3 group to “uncover, research, and index the potential threats facing the industry.” The goal was to “provide Organized Real Estate, as well as its members, a comprehensive report identifying the most significant threats, risks, and black swans facing the real estate industry without judging or discarding them, without placing blame or picking sides, and without attempting to solve them.”

Swanepoel’s group did this by researching over 200 reports, surveying more than 7,500 brokers and agents, and interviewing (by Swanepoel) 70 CEOs and other senior executives from the largest franchisors, the largest real estate brokerage companies, national, state and local REALTOR®Associations, and various MLS organizations. All the opinions hexpressed and comments made are given without attribution.

The research, survey, and interview results were categorized into 5 major sections of the industry: agents, brokers, NAR, State & Local Associations, and MLS organizations. Five dangers are listed for each category. Mr. Swanepoel adds his personal perspective to each danger. The danger’s “threat level” is then ranked according to a three-dimension index.

The dimensions are:

  1. The probability of the danger occurring;
  2. Timing (e.g. within 1 year, 2-3, years, etc.); and
  3. Impact (e.g. a Game Changer, Major Impact, Moderate Impact).

This then results in a composite score called the Danger Index (e.g. Critical, Severe, High). The authors clearly state that the index is not scientific, but is a combined and weighted representation of the research, surveys and interviews that took place.

An example of this ranking is the danger that “Masses of Marginal Agents Destroy [Industry] Reputation”, as represented by the comments we quoted at the beginning of this discussion. That had a Danger Index of 100 (Critical). Its probability was the highest at 5.0 (100% chance). The timing factor was 4.0 (within 1 to 3 years), and the Impact 5.0 (Game Changer).

Among the other dangers that the report found to be facing agents; Commissions Spiral Downwards (Danger Index 87.5) and that the IRS will force the end of Independent Contractor status (Danger Index 63).

Next week we will look more closely at dangers said by the report to be facing agents and to be facing brokers. Meanwhile, readers are encouraged to download the report at dangerreport.com. It could keep you up at night.