You’re Spending Too Much on Real Estate Software

Published by Brian E Adams on September 7, 2020September 7, 2020

Are you considering spending money on some real estate software?

Be mindful of some wise words from Anakin Skywalker:

I’m not sure I’d describe destroying a planet as insignificant in any context. Nevertheless, James Earl Jones’ deep timbered warning rings in my head often as I contemplate the oft imagined future of technology dominating residential real estate.

We tend to over-imagine the benefits of technology. We tend to look at it as a silver bullet, whether it’s defeating Rebel scum or fixing bad real estate followup.

You already know what works:

lead generation
follow up
a competently managed transaction

There’s nothing magical here. None of those things require very much technology, if any.

And if you can’t do that well, then technology isn’t going to solve it.

How Much are Agents Spending?

How much are agents really spending?

The NAR Member Profile for 2019 raises more questions than answers.

Its report shows that Realtors spend an average $540 on technology products and services.

This is nothing! That’s just $45/mo!

That strikes me as implausible. Am I missing something?

The monthly cost of a CRM is, on average, more than $45/mo. Not including e-signature software, a website, cloud storage like DropBox…. I am skeptical agents are spending only $45/mo on real estate software.

I don’t know if their numbers include licensed members of NAR who aren’t actually practicing real estate? Their expenses may be $0, but that isn’t a very helpful figure to determine what active agents are doing.

These numbers also come from surveys of Realtors. They are not authenticated. I find it very plausible that many agents are underestimating their technology expenses when sharing that data with NAR.

Lastly, many agents may be keeping their expenses down by relying on brokerage, MLS, or association provided tools. But in these cases, your expenses are coming from your commission split or MLS fees rather than out of your “technology budget”. You’re still paying for it in some way.

It’s like when you receive services from the government for “free”. Sure, you didn’t have to swipe a credit card. But you definitely paid for those services via taxes. Consequently, it’s impossible to tell how much those services actually cost you. How much better would your split be if your brokerage wasn’t paying for a CRM for you? ¯\_(ツ)_/¯

I’d love to see NAR’s reporting get more granular with questions like these and really dive into these numbers. Until then, I am confident that agents are spending quite a bit more on software, likely unknowingly, than is shown here.

Agents Overestimate the Benefits of Technology

I don’t mean to suggest that NAR’s surveys are not useful!

For example, consider the 2018 NAR technology survey.

“38% of respondents think that learning to use for-sale signs with embedded beacons could transform their business”.

Transform? Really? The difference between a middling brokerage and a superstar is a for-sale sign beacon?

I’m not even sure if beacons are still a thing. QR codes? Geofencing?

How does one explain this credulity?

I think part of what drives the forced embrace of software is fear. We’ve all lived long enough to see massive technological disruption. Tech giants have killed off long-lived American brands only to succumb themselves to newer, hipper upstarts. If high paid CEOs of legacy institutions can’t even see the disruption coming, how much more important is it for small business owners to aggressively adopt new technologies?

A close cousin of “fear” is “awe”. I believe a lot of agents, many of whom are not technophiles, are perhaps awed by technology. Technology has transformed our daily life for the better even in just the past 10 years. Why wouldn’t it make sense that technology can’t likewise transform our business?

Well, maybe it can. But technology changed our life by improving how we already did something, not changing whether we did something.

You weren’t “bad” at making phone calls or browsing the Internet prior to the smartphone. Smartphones just made it easier. You weren’t incapable of driving anywhere prior to GPS. GPS just made it easier. You weren’t struggling to watch movies prior to Netflix. Netflix just made it easier.

Don’t expect technology to suddenly make you do something you aren’t already doing. If you expect technology to fill a gap in your business, you’ve most likely turned a gap into a money pit.

Instead, you need to fill your gaps with good operations.

Operations > Technology

I’m perhaps biased because I have an operations background in the Army.

But from what I’ve seen in my various jobs, I am a firm believer that good operations is far more important than good technology.

Operations used to be sexy. Peter Drucker, Jack Welch, Taiichi Ohno – all were rock stars in operational management.

Now we idolize the Silicon startup and tech “unicorns“.

Real estate is still a highly heterogeneous asset and process that defies automation. New software is not going to be the difference-maker in your failure or success. Doing good work, aka “operations”, will be that difference-maker.

Achtung, Panzer!

A ready example of the limitations of technology comes from military history.

I think it’s probably fair to say that the tank, and specifically Panzer, is one of the defining icons of the German Wehrmacht, in combination with its guiding principle of blitzkrieg.

What many people may not know, however, is that the French and the Russians had more tanks than the Germans.

Each.

Not only that, but the French and Russian tanks were considered technologically superior to the German Panzer.

So why do we so closely associate Germany’s battlefield prowess with its armored divisions sweeping across the European plains? How was France bested, and the Soviet Union nearly so?

It wasn’t Germany’s technology that made its Panzerkorps superior. It was how they used it. The Germans concentrated their best troops at the decisive point, encouraged flexibility, kept their equipment well maintained, and were far better at communicating with one another during the operation.

These operational qualities allowed them to take relatively inferior tools and topple Poland in two weeks and France in six.

When the Germans invaded the Soviet Union, they had only 4000 tanks. The Soviets had 25,000. The Soviets would suffer nearly 5x the casualties as the Germans in Operation Barbarossa and lost 20,500 tanks to the German’s 2735.

It is better to do something well with poor tools than to do something poorly with great tools. In war, it’s the difference between victory and defeat.

Business is no different.

Technology Doesn’t Solve Problems

Technology doesn’t solve problems. It makes success more efficient.

I failed to heed this lesson. If my CRM were easier to use, I would use it!

If my CRM had better workflow tools, I would not forget transaction steps!

If my website had faster load time and better calls-to-action, I would boost my conversion and ROI to make it worth it!

If I wow clients with a high-speed listing presentation and CMA, I’ll close more listing presentations!

All of these are excuses that will result in money down the drain.

There is little about what agents do that can’t be done in Excel. It’s not pretty. But it can work.

If you can’t show that you can drive a clunker 1997 Toyota Honda then why should you trust yourself with a Ford F-150 Raptor? Or whatever your dream car is?

Your technology will not take you to the next level. Instead, you should achieve the next level and then level up your technology to keep pace.

You should be dragging your technology up the ladder of success behind you, not expecting your technology to drag you up.

Technology Isn’t Always a Game Changer

What some technophiles miss is how often technology has not changed in the past 100 years. Some commonly used tools and products have changed almost none. A medium-rare steak in 1920 probably tasted just as great as the same steak in 2020. The customer service that kept people coming back to the best steak restaurants probably hasn’t changed.

Another example is the gun.

The M2 machine gun is still used in the US Army today.

It was originally designed during World War I.

Similarly, the Colt 1911 is still one of the most popular pistol designs in America. Its original production year won’t surprise you given the name. Its design is still manufactured and sold today. Not coincidentally, it was designed by the same designer of the M2 machine gun. That Browning guy knew how to build a weapon.

Even modern super technologies like nuclear power still rely on the simple mechanics of Jame’s Watt’s steam engine to produce power. The original steam engine was developed in the 1700s. Nuclear energy is just a new way to boil water into steam that turns a turbine.

Lastly, and back to the Germany military, the new doctrines that the US Army first incorporated in 2011 were originally invented before Germany was even a country, in the mid-1800s under Helmuth von Moltke.

Good operations and execution are timeless.

The Solution: Minimum Viable Product + Path of Least Resistance

What?

Take the path of least resistance? Do the minimum?

These aren’t motivational messages that you’ll find shared on anyone’s Inspirational Quotes list.

But I’m a big believer in it.

The idea of the minimum viable product is to do the least you need to achieve a workable solution, and then implement it.

What is your end state? Where do you want your business to be?

Now, what is the quickest, easiest way to achieve it? And why wouldn’t you want to take that path? Of course, assuming it is ethical, legal, and consistent with your values.

What does that look like in real estate? It could mean using Excel as a CRM and transaction software management tool. Does it work? That’s all that matters.

It might mean not blogging on your website because it’s not necessary to your lead generation.

It might mean putting together a CMA in Google Sheets.

It might mean using your smartphone to produce marketing videos instead of buying camera equipment.

Get lean and just get it done!

Technology is Good

All that said, I obviously don’t mean to imply technology is meaningless. The Death Star was such a major threat to the Rebellion that they made 4 entire movies about it. And the Germans weren’t fighting the French with slingshots.

There are a few things you’ll need to get your business running.

But it doesn’t take a lot to get within striking distance of the tools that your market’s best agent is using. A computer. Excel. E-signature software. A lot of stuff you get for free from NAR or your local/state association. You likely have what you need.