As early as the 1970s, Sears envisioned a kiosk in their store where customers could buy inventory or even real estate. This is one of the world's largest retailers with a bold view of the future. All they have to do is let consumers come to their stores to do business. This is a considerable challenge for Wall Street and the US main street. Most of us may have never heard or remember this strategy, it never started. People just didn't equate Sears with stocks or real estate; they are a department store.
In order to treat Sears fairly, there is no technology and convenience to implement the plan. Sears may also think that he is too big to fail. This theme seems to be a constant.
Well, it seems that history has really been repeated, sometimes shorter and shorter. The irony is that historical lessons will disappear at a faster rate by accelerating the pace of change in processes and things. Does this make sense? If this is the case, you may be a bit like me - you have been warned.
In the 1980s, successful real estate agents became more independent and required fewer services from brokerage firms. As they claim that brokerage fees are getting higher and higher, real estate brokers' profit margins are starting to fall. Some very high interest rates have had a similar impact on the mortgage banking industry. If no buyers have no choice, they will not bear these exaggerated mortgages. The mortgage industry has shrunk as profit margins have fallen. We all know the real estate cycle; it rises and it falls. The curve is rarely smooth and is interrupted by a sharp turn in one direction or the other. Most of the characteristics of the real estate industry react quickly to the conditions affecting it in the market. Now we have the next attempt to create a commodity market from the real estate process.
In 1974, the amended Real Estate Settlement and Procedure Act [RESPA] was passed. It opens the door to integration within the industry. To promote competition, companies are regulated to prevent industry abuse and lower consumer prices. It is almost ironic that the door has been opened to some extent by preventing abuse. I don't know if it has been proven by experience that RESPA actually reduces costs or pretends to be abused. With HUD as the regulator, there is almost no real law enforcement. Although fines are imposed, industry practices are entirely governed by the states. It took several decades to solve this problem, and Wall Street only took a few months to solve the problem.
The reference to RESPA is that it allows for so-called "controlled commercial entities", which is later changed to "affiliated commercial entities". Home builders and real estate agents can now have exclusive mortgage and ownership businesses. The theory holds that this will create some efficiency, the economy reduces costs and improves service to consumers. It doesn't. With all these vertical integrations, each independently managed company is caught in the same financial strain.
What is not considered is the procyclical nature of the model. When a business goes bankrupt, so do other companies. The benefits are champagne and roses, but the downside is that the space for beer and carnations is small. There are other negligence. Risk models for companies that do not understand their core competencies rarely receive the attention they deserve. Few people also manage their business with their passion for the core model.
As a result, many of these affiliated arrangements have failed, and the industry model of transaction management has been roughly the same as the post-World War II era. Of course, technology has improved the system, but it has barely reached its level. The competitive nature of the various sectors of the real estate business makes the technology proprietary and therefore narrow. The 21st century industry model will come from somewhere outside the core real estate industry. Next is a more organized, more systematic attempt to create a commodity market in the real estate sector.
The boldest strategy for commercializing the residential real estate market comes from a company called the National Realty Trust [NRT]. NRT has undergone some name changes. In the mid to late 1990s, NRT was called Cendant [CD]. Cendant CEO Henry Silverman is a Wall Street dreamer who understands commodities. He has performed well in the car rental business [Avis] and a range of motel franchise hospitality. Mr. Silverman believes that real estate is a franchise commodity and has systematically acquired real estate trademarks such as Coldwell Banker [residential], Century 21, ERA and Sotheby. They then acquired a mature regional real estate company. They used to be and remain the largest single real estate company in the industry.
Cendant has experienced an accounting scandal and lost momentum in the past decade. It never recovered from the scandal, and the company divided its assets into four groups. The real estate company was sold to the Apollo Management Group. Apollo has been plagued by the soft real estate market and the debt exchange program lawsuit filed by Carl Icahn. Due to ongoing financial and legal issues, they stumbled as usual. They cannot lead the real estate industry into the 21st century. This strategy involves entering the upstream of the transaction by "owning" the gatekeeper function. It requires a lot of money and technology is constantly evolving to provide a more efficient, capital-intensive platform. The Internet makes any person with vision and ideas a potential participant.
Please allow me to introduce Soft Sell Solutions LLC, a creative concept for the 21st century real estate model. With decades of experience and in-house industry knowledge, this concept is supported by existing technologies, consumer practices and purchases. The vision and enthusiasm to provide a seamlessly integrated system is ready to connect different processes.
The third article in this series laid the groundwork for controlling the real estate process for the 21st century approach.
Orignal From: New Economic Real Estate Model - Soft Sales Concept
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