Start With A Win - Is Real Estate About To Get Disrupted?

Episode Date: July 10, 2019

This episode of the Start with a Win podcast is focused on a prevailing narrative in the market these days: disintermediation. Before you tune out and think that this episode is not relevant to you, you have undoubtedly heard of disintermediation when it comes to Netflix, Uber, and Airbnb. These companies disrupted their industries with their innovative takes on entertainment, transportation, and lodging, and many business owners live in fear that their own businesses are at risk of being disintermediated by some big new company. During a conversation with a titan in the business world recently, Adam was given these 5 questions to consider when wondering if you are at risk of being disintermediated:Is the transaction frequent? – For Netflix, Uber, and Airbnb, the answer is YES. For things like buying or selling a house, the answer is NO.Is the cost big? – Again, Netflix, Uber, and Airbnb are relatively inexpensive per transaction, but for real estate transactions, the answer is YES.Is there a risk? – Considering the financial, emotional, and legal ramifications of each real estate transaction, the answer is YES. Is it complicated or simple? – Compared to streaming a movie or booking a plane ticket, buying or selling a house is incredibly COMPLICATED, necessitating the utilization of an expert full-time real estate agent.Is this a unique product? – Many people seek “artisan” or “one-of-a-kind” products on a daily basis, but even the quirkiest Etsy site is not as UNIQUE as each and every house on the market.After bearing in mind the answers to these questions, real estate agents and brokers are not at very high risk of disintermediation. Perhaps these questions will be helpful for your own business endeavors in helping you adapt to new entrants into your market.Connect with Adam:https://www.startwithawin.com/ https://www.facebook.com/REMAXAdamContoshttps://twitter.com/REMAXAdamContos https://www.instagram.com/REMAXadamcontos/ 

Hey listeners, before we get started with today's episode, I wanted to say that we love making this show for you and the community that is growing around Start With A Win. To say thank you, we want to give a few lucky listeners an opportunity to win free swag. If you have an Apple account, please go on to Apple Podcasts and leave me a five-star rating and a written review. Here's the catch. When you leave your written review, sign it with your Twitter or Instagram username. Once a week, Mark and I will pick our favorite review, contact you on social media, and send you some free swag. It takes less than two minutes, so please leave your review today. And remember, start with a win.

Atop of the 12th floor of the Remax World Headquarters, you're listening to Start With A Win with CEO Adam Kantos. And top of the 12th floor of REMAX World Headquarters here in beautiful Denver, Colorado, Adam Kantos, CEO of REMAX with Start with a Win. I am here today for a solo cast with producer Mark. How you doing, buddy? A solo cast. Is that what we're calling it? Solo cast. You by yourself with me and Kayla.

And it's not a solo cast because there's three of us here though. It's a try cast. Yeah, that's right. But you're not here with a guest today. You have a profound idea that you want to share with our listening audience. I get to learn a lot. I go to a lot of events. I try to talk to as many wise people as I possibly can in this business. And I heard something the other day that I thought would be of great interest for our guests to ponder. So I am excited. What are we going to be talking about? You know, we've heard this phenomenon, so-called disintermediation, that has occurred through society over the past decade or so. And I think I want to dig into that a little bit. Every time you have a business discussion, you hear people go,

they're the Uber of hamburgers or whatever it is. Right. Yeah. Well, and too, it's a constant, I feel like in the real estate world, it's a constant fear. Like who's going to disrupt us and take our jobs? Yeah, exactly. It's, you're going to go the way of the travel agent. Right. Things like that. And there are businesses that in pretty much every space that that are attempting to do this type of thing, and you know, God love them, they push innovation. Yeah. And I think that's we need

that. It's healthy. There need to be industry pressures in every space. And really what it should do is it should make people better or make them decide that maybe it's not for them. But there are a series of questions that I have heard recently that are fascinating when it comes to this topic that I want to share with our listeners. Yeah, let's get right into it. Okay, so I was, just to kind of give the backstory of this whole thing, I was at a great industry event this past week. And in doing so, I get to

sit and talk to some amazing leaders in our space, not just not just in the real estate space, but business leaders. And if you ever get the chance to sit down with somebody who's a business leader, ask questions. So I mean, it's and this is what I came up with, I, I looked at this industry leader, this, this is an iconic industry leader in the real estate space, has built an amazing local firm, not REMAX, but I mean, just this is a great human being that's done great things and also teaches some amazing business principles that I completely agree with.

And I asked him, I said, so what do you think about our space? Are agents going to be disintermediated? Are they going to go the way of Uber disintermediating the quick ride, such as either a taxi cab or a rental car? The Airbnb route of hotels or short to medium term stays. Netflix. Everybody's on Netflix. Netflix is even like its own word. It's like Kleenex or Xerox or something like that or Google or whatever it is. Xerox. I used an old one there.

Xerox. Yeah, let's go Xerox this. Let's copy it, right? That's right, Kleenex. Yeah, Kleenex. I mean, that's still a good one. Yeah. Right, so-

Netflix disrupted Blockbuster. Totally, man. You know, and we have to ask ourselves, why? Why did these companies do what they did? And this industry leader said, hey, Adam, a good decade or so ago. So keep in mind, a decade or so ago. So none of these companies were really around at that point generally. There was a futurist that he was talking to. So keep in mind, a decade or so ago. So none of these companies were really around at that point generally.

There was a futurist that he was talking to, and this futurist told him five questions that he asks about a business as far as will it be disintermediated or will it be heavily disrupted and the customer base redistributed through a different type of value chain or delivery of resources. And we see this in our space because we see people coming in and saying, okay, we're going to take and capture the entire real estate transaction in one place, and you're going to be able to click it on your phone, and you're there. And I go through these series of questions, and I have to ask myself, is this really true? Or is this something that people want to be true? But we really can't answer these questions in the other way that we need to in

order to show that our space is going to be disintermediated. That being said, I don't want somebody to think that, you know, my feet are in concrete here and we're not willing to be agile and move in our space. But these questions will make you think about what you need to do with your business. So let's jump into these. Okay? Yeah, sounds good. All right. What's number one? All right, number one. And you look at all these different transactions that occur with these different companies, be it Netflix, Uber, Airbnb, Expedia, things like that. Is the transaction frequent? And for those, yes. I mean, how many times a month do you rent a movie? Well, I mean, I would say how many times a day do I watch something on Netflix?

Fair. That's fair. And, you know, when you travel, so you're buying plane tickets, obviously, and you're staying in hotels and whatever, and there are all these different events that people need to Airbnb, whatever it is, you are participating in all these different transactions relatively frequently, right? Yeah, totally.

How many times a year, well, how many times in their lifetime does somebody buy or sell a house? So what we know is roughly every eight years, you will buy or sell a house. So that's not a frequent transaction. Yeah, not at all. I mean, I've, in the past 15 years, I've bought two houses. Right. So there's not a frequent transaction. Yeah, not at all. I mean, I've in the past 15 years, I've bought two houses. Right. So there you go. You, you meet the averages there, Mark. Yeah. I'm an average guy. I disagree with that one. Thanks. You are far from it, my friend. So, all right. So first question is your transaction frequent? Uh, answer real estate? No, not at all. Not at all. All right. Second one, is the cost big?

I would call a real estate transaction a big cost. That is probably the largest purchase or transaction that occurs in your life. Yeah. They say it's like the largest investment someone makes. Yeah. It's roughly like 80 to 85% of your retirement savings as well. You know, for real estate, is the cost big? Oh heck yeah, it is. And in comparison, right, a Netflix or an Uber or an Airbnb, the cost is super low. Right, right. So that, I mean, that kind of leads us into the, the, the third question of, is there a risk? So, you know, obviously higher the cost, the higher the risk financially. And there's not just financial risk.

There's other risk as well. But let's talk about that. We look at, let's say, a movie rental. How much does a movie rental cost? $1.50. You get it from Redbox. Oh, yeah. $1.50. OK.

If that doesn't work, if you go to Redbox and you rent a movie and you get home and you open it up and the DVD or the Blu-ray won't play in your Blu-ray player or you go to Netflix and you go to play it and you get some frozen screen or something like that or your Wi-Fi goes out or whatever it is, are you going to go, oh my gosh, I just lost my life savings? Not at all. No. I'll try Prime Video or I'll try HBO Go. Yeah, exactly. You're just going to go somewhere else. And, you know, realistically, it's the same thing even with a plane ticket because everybody goes, you know, buying a house, buying a plane ticket.

I'm like, heck no, there's a big difference. What if your plane gets canceled? Are you going to go, oh, my life is over. I can't send my kids to college, stuff like that. No, you know what you do? You walk down to the customer service desk and they put you on a different airplane. So hello, big difference when it comes to cost and risk there. And by the way, if you're involved in one of these things, you're probably not going to sue somebody. Right? Yeah, not at all. I'm going to sue Netflix because my video wouldn't play and it's not going to sue somebody, right? Yeah, not at all. I'm going to sue Netflix because my video wouldn't play and it's not going to happen. So, um, you know, you look at cost and risk

overall there, uh, real estate transaction, huge, big difference, big difference. You know, it's, I almost look at it like, um, Hey're going to have a knee replacement next week. Does it happen much? No. Is it going to cost a lot? Yeah, it's like $100,000. Is there a big risk to it? I might not ever walk again.

Things like that. Are you just going to go down to the pharmacy on the street corner and go, hey, can I get a new knee, please? No. Not at all. No. And same thing with a real estate transaction, big deal. A lot of potential pain, a lot of litigation, you know, we're a pretty litigious society. And, and I'll tell you, being in this space, when you look at the risk, I hear so many horror stories about this. And I'm

not saying all real estate transactions are that way, because most real estate transactions are handled by a professional, a full-time professional. In fact, we know over 90% of them are. And their job is to uncover those situations so they don't turn into risk, so they don't turn into litigation, so they don't turn into massive loss. I saw one recently where these people, they had like a $300,000 home and they went to sell it. And the inspector came in and said, have you ever had this home inspected before? And they go, no, we bought it from a builder. We didn't have it inspected. And the inspector goes, well, you can't sell it because it doesn't meet code.

None of the beams are in the right place. The foundation wasn't created correctly. The walls were wrong. The electrical was wrong. So these people are going, well, what do we do? You're going to have to knock it over and rebuild it. That sucks. Oh, they're out a few $100,000 their life savings. When I heard to in some areas in the United States, you have to

have a lawyer do your transaction, don't you? Correct. Well, basically, you know, that's what real estate licensing is, for the most part is it, it is teaching and licensing somebody to be able to handle the legal documents, the legal process of the real estate transaction. Yeah, it's crazy. So it's a big deal. It is a big deal.

It really is a big deal. So the first three, is your transaction frequent? Real estate transaction? No. Is it a big cost? Yes. And is there a risk? Oh, heck yeah. Absolutely. So if you're, you know, if you're thinking about doing a real estate transaction, you don't want to use a real estate agent by now, you should. But fourth one, is it complicated or simple?

Complicated. Oh my gosh. Super complicated. Super. And you know what? Every year there's more regulation in it and there's more, um, there's more contract changes. There's all sorts of stuff that happens, right? Yeah, exactly. Or, or building code changes, uh, or even, you know, where, where the home is going to be built. There's, um,, there's different changes in how things are zoned, different ways, master community changes, things like that. There are so many different changes and regulation that go into this that it is a super complicated transaction, not to mention, we haven't even talked about lending yet.

It's a whole other ballgame. Yeah, I mean, we had Ward Morrison on from Motto Mortgage on an earlier episode. Those guys are pros. They get the regulation in the lending space. So is it complicated or simple? Let's compare this against our disintermediating companies. Netflix, is it complicated to get a movie? Pretty simple.

Pretty simple. All right, let's see. How about getting a ride? At Uber or Lyft or whatever. Yeah, one of those. I pretty much can get from my plane to the curb and into a car within like 15 minutes. Totally, totally. And, you know, they make it easy as possible, which is great.

We need that service. How about an Airbnb? Is that really all that complicated? No, I'm actually staying in an Airbnb soon in San Diego. Check you out. Easy peasy, chicken cheesy. There you go. And really, going online to buy a plane ticket, you go on, there you go.

I'm going from here to here on this date. And here's about what I want to pay. Here's how many times I'm willing to stop. And I want this kind of seat. And they go, bink, here you go. Here's your choices. Click here to check out yeah pretty simple simple buying a house not simple yeah real estate agent can help

smooth all that out uh you know an expert agent a remax agent in my opinion um you know in your professional my professional opinion you. My expert opinion here. And they take care of that stuff for you. Their job is to mitigate those things. And then number five. The fifth question that you need to ask yourself. Is this a unique product? Now this one is interesting.

This one is interesting. Because you can have unique products that are disintermediated. I mean, you look at Etsy, you know, things like that. All the stuff that's on Etsy is unique. It's all handmade or, you know, crafty, things like that. Artesian. Ooh, fancy. It's a buzzword. Yeah.

Kind of like disruption. Disruption. Artesian. This is an artesian industry. But, you know, here's a reality. If you're in seat 7A versus 11D on the airplane, is one unique over the other generally? No, I think I can get my ginger ale and snack to any one of those seats.

There you go. That's not unique. How about running a video? That's not unique. Yeah. And how about an Airbnb? Really, you know what Airbnb originally was designed for? I don't. You need an air mattress somewhere.

Oh, yeah. I think I heard that story. Yeah. You just need a place to lay your head that night. Yeah. And hopefully there's a shower or something nearby. Some college dudes that will open up their living room floor for you. Totally.

They're going to festivals or whatever. Hey, who has room on their floor? I do. Okay, I'm in. So, and, you know, we talked about plane tickets. So, real estate transaction, every house is different. It doesn't matter if it's a track home and there are five of the same model on that street. They're going to have different paint jobs. One might have had a pet versus one

that was a smoker versus one that was super careful about keeping it clean. How's the sewer line? Oh man. When was the roof replaced? Yeah. I mean. The construction worker that put the nails into the wood was a different person most likely in some of these and maybe they had different standards or maybe they had different craftsmanship style right yeah so completely unique transaction it is completely unique so i i think about this and i go all right um does this beg for professional advice that's the biggest question here does this beg for you to have an expert that can help you with it and you can benchmark this against you know I used the knee replacement as an example I had a I had a partial knee replacement several years ago and I I was pretty careful who I chose I wanted to make

sure that the guy who was gonna do my knee replacement this wasn't as you know this is like June or something like that this wasn't his first one so you know you you never want to be the first one, right? So I, you know, I checked him out. He's like, yeah, I do these like three or four a week and, you know, I've been doing it for this long. And you go, okay. You know, a little reference check there. What kind of problems am I going to have? That type of thing. Tell me about it. Did they know what they were doing? Because I mean, frankly, my life is in his hands. And my future, my ability to walk, whatever it is. So I was careful, just like I am with a real estate transaction.

Yeah. You got a lot at stake there. Yeah. Might as well make sure that these things are covered. And I'm comfortable knowing that I'm going to pay a little bit of money for expertise. And that's what you're buying, not just the product. You're buying peace of expertise. And that's what you're you're buying not just the product, you're buying peace of mind. And that's what you get, as opposed to Oh, my Netflix didn't fire up today. I forgot to update the app or Oh,

they're gonna, you know, charge me $12 instead of 11 for this. So big difference for five questions to ask yourself, are you going to be disintermediated? And also things that you need to understand you questions to ask yourself. Are you gonna be disintermediated? And also things that you need to understand, you need to make yourself extraordinarily valuable in these five concepts. Is your transaction frequent? Is the cost big?

Is there risk? Is it complicated or simple? And is it a unique product? And that's something too, that essentially you can kind of benchmark yourself against these things, right? Totally. You know, as an agent.

Totally. And if you're starting a business, put the checklist out there. Figure out, okay, is somebody going to walk in and pull this out from under me? So good questions to ask and a good way to figure out how valuable can you make yourself in your business? Thank you so much for listening to Start With A Win. We hope you enjoyed today's episode. Don't forget to go on to iTunes and subscribe, write a review, or rate the show. It helps us get the word out and reach more people. You can follow Adam on Instagram,

Facebook, and Twitter. And remember, start with a win. Bye.