Yet the Pilgrims almost starved to death. Why?

America has always been the land of “opportunity.” For centuries, people came here in search of a better life, one in which they could control their destiny. And for most of us, the early history of America is one of hard work, opportunity and success. It’s a story of achievement, made possible by hard work. And something else. Even after a century of “selflessness is best” altruism-training and today’s citizens think they have a lot to be thankful for. Like government health care; financial bail outs; unreliable air transportation and an FDA that only approves lifesaving drugs after thousands of patients needlessly die. Yet, thankful we must be, because most of us have a roof over our heads - even if it’s rented or borrowed from the bank.

Nowadays, we take it for granted that we should have a roof over our heads. Even those who don’t pay their mortgage to expect to own a home - property, more correctly - at some point in their lives. Property is at the center of the American dream. It is the basis of our wealth. It forms the foundation of our families, businesses and societies. Private property is the central concept around which the Constitution was written. Yet it wasn’t always that way. That’s the real story of Thanksgiving.

Owning your own land - and home - wasn’t part of the original plan for Pilgrim settlers in America. Their “communal” theology centralized ownership of the land in the community, managed by the political elders, who required every settler to work it as a group. Pilgrim communism predated Marx by nearly two hundred years, but its effects then were the same as they were throughout the Twentieth Century - and today.

The Pilgrims starved. By design.

A few years ago, Thomas DiLorenzo wrote How Capitalism Saved America. As a professor at the Sellinger School of Business and Management at Loyola College in Maryland, DiLorenzo has studied the Pilgrim period from an uncommon perspective: economic individualism. DiLorenzo forgoes the usual handwringing over Indian maltreatment by Pilgrims, and focuses instead on the Pilgrims societal organization as the source of their plight. Even without Indian raids on their towns, the Pilgrims would likely have starved to death if left to their own devices. The question rarely asked is, Why?

Most people today erroneously believe that the Pilgrims suffered from harsh weather or difficult-to-cultivate land in the Northeast. We are even led to believe that diseases and dangerous animals threatened their survival. But thriving Indian communities througout the same region - for centuries before the Mayflower landed - discount such explanations. Instead, Pilgrim records and journals tell of a clear policy problem that nearly destroyed their society.

Pilgrims believed in communal land ownership. They preached that all would work the land collectively; each would take from the total only what he needed. A family of six would therefore receive a greater share than the childless-couple expected to work the commons just the same. This property policy - a feudalism-remnant - seriously demoralized the Pilgrims and led to reluctant, if any, work ethic. The myth of the so-called Protestant work ethic - was yet to be born. Like everyday Americans today, Pilgrims came to begrudge their neighbors’ “mortgage” on their work simply because some neighbors were  more “needy” than others.

So the Pilgrims starved. On the same land that yielded bountiful crops for the Indians, Pilgrims could barely feed themselves. The difference wasn’t knowledge, but policy: Indian private property rights were the norm. It is hard for modern Americans to believe this, after so many Hollywood depictions of nature-loving-living-in-harmony portrayals of natives and wolves. Yet research as early as the turn of the last century uncovered the systematic organization of private property rights, rules and regulations amongst Indian tribes across the Continent (see http://www.perc.org/articles/article802.php for references). It was only the collectivist policy of Pilgrim leaders that advocated communal land management - not unlike the modern politician’s efforts to develop affordable public housing by mortgaging everyone’s tax money through Fannie Mae and Freddie Mac. Obviously, both were a failure.

Not until the 1620s - when the Pilgrim’s changed the land ownership law - did things turn around:

The 1623 Division of Land marked the end of the Pilgrims’ earliest system of land held in common by all. Governor Bradford explains it in this way:

“And so assigned to every family a parcel of land, according to the proportion of their number, for that end, only for present use (but made no division for inheritance) and ranged all boys and youth under some family. This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.”
William Bradford, Of Plymouth Plantation 1620-1647, ed. Samuel Eliot Morison (New York : Knopf, 1991), p. 120. (cf, http://www.pilgrimhall.org/eatonfrancisrecords.htm)

Unfortunately, there were few advocates of private property rights in Pilgrim America. Had there been a real estate agent present, perhaps fewer would have starved. Even after the Pilgrim leaders admitted philosophical defeat of communal land and allowed individual families to manage private plots of land - which quickly grew to surplus abundance creating trade opportunties with Indians - private property was tolerated as an “unavoidable, acceptable evil” at best.

It would take almost four more centuries before private property would become the norm - not the exception - in the mind of everyday Americans. And then, only barely. Not until the last century would serious private property advocacy be organized - into local societies and national associations. Mindless of private property’s success, it would sustain continued challenge - as neo-progressives - the modern Pilgrim leaders - would revive attacks on the evils of private property. The new high priests - Marx, Engels and even FDR - would take up the call for communal farming. Some countries would try it - mostly those without a professional class to advocate for individual economic freedoms. Like the Pilgrims before them, they would starve - as a United States President would have to secretly send the Soviet Union grain at the height of the Cold War.

Today’s REALTORS are the intellectual inheritors of the 1623 Division of Land. Real estate brokers every day must defend the “private property” grudgingly divided by government leaders. The recent Kelo case, defending the transfer of private homes from one owner to another, harkens minds back to the 19th century days of forced land re-settlements of Native private property owners. The inflationary devaluation of the dollar - by which private property is almost exclusively traded - has undermined land ownership quietly, insidiously. Even the proposed use of tax dollars to bailout squatters - speculators who no longer pay their loans but refuse to leave - erodes everything that Pilgrim farmers fought for in order not to starve. This political cartoon from Cox and Forkum sums it up best:

Four hundred years ago, colonial Americans learned that the road to prosperity - away from starvation, towards surplus - was rooted in the personal ability to own private land. Even the Pilgrims continued to be taxed as private landowners to support their neighbors: mandatory labor on the commons remained required even if you did not require public foodstuffs. History shows us that commons-farms are far less productive than private ones, private homes and businesses contribute more to the society than community housing, and the work ethic comes from the desire to own, not to work. Thankfully, it remains the job of the private property advocates - the professional real estate broker - to continue this fight, and honor the real meaning of Thanksgiving every day.

Maybe it’s just time for a collective postcard scream?

It’s been cited in many postings that I’m being ‘ageist’ because agents who use postcards tend to be older than not. I’ve been accused of being negative - as if it’s mandatory to be positive about an ineffective marketing method that isn’t helping the brokerage industry recover…

The problem with postcards isn’t it’s a generational-thing. It’s not even a cost-thing: Nobody needs me to tell them how cost in-effective the amount of postcards required to be profitable must be. Most REALTORS know, as a matter of common knowledge like that of the ineffective classified ad in the newspaper, that postcard responses rank less than 1% rate of return.

Any activity with a 99% failure rate is something I try to avoid right away.

Yet the postcard defense goes on. Just one card might lead to “a deal” worth “thousands!” I wonder just how accurate the post-card-sending REALTORS are at accounting for their hours spent building an address database, desktop-publishing postcards, printing, paper, labels, postage, ink, assistants, etc., etc., etc.

Nor does the defense care that most postcards violate the key principles of marketing. For example, the three most common things found on postcards are:

1. Just “Listed” announcements, sent to the same neighborhood. As if the neighbors of the listing needed “postal verification” that the leaning-over sign in the front yard means the home is for sale. It’s STATISTICALLY ZERO that the postcard will induce the neighbor to find the buyer for the REALTOR; because NOBODY wants their friends as neighbors! And it’s also NEAR ZERO that postcards lead to the selection of a listing agent. RESEARCH FACT: Sellers found their real esate agent in the following order:

• Referred by friend 41%
• Used agent previously 23%
• Visited an open house 5%
• Walked into office 4%
• Personal contact by agent (telephone, email) 4%
• Internet website 3%
• Direct mail (newsletter, flyer, postcard ) 3%

I know. Those damned facts.

2. The second most common postcard: Just “Sold” announcements. See Just Listed above.

3. The third most common postcard: Personal Promotion featuring the Agent’s High School Photo. Just what is the purpose of this kind of marketing? For example, does it lead to LISTINGS? No, see above. Does it lead to BUYERS? No, because Buyers start their journey online looking for HOMES 32% of the time, and agents only 4% of the time. As for information BUYERS use to find homes:

• Agent 84%
• Internet  84%
• Yard sign 59%
• Newspaper 50%
• Open House 48%
• DIRECT MAIL - NOT EVEN ON THE LIST

Sorry. More facts.

Yet NONE of that is REALLY what’s wrong with sending postcards. Ok, here’s the problem:

“I’ve been sending them for years and it’s always worked great for me in the past.”

That’s the problem!

Sending postcards nowadays isn’t just a bad “activity” because it fails to consistently create new business (compared to other methods). It’s a terrible activity because it represents a MINDSET to “keep on doing what has worked in the past” (though evidence shows it really didn’t).

It’s a business planning problem that represents the challenges of business evolution. Postcards are the poster-child for practitioners who still believe that, like their forefathers, the sub-30-something first time buyers will take action from junk postal mail.

Yeah. Sorry about that text-message-YouTube-internet-social-networking thing…

The problem with postcards is that doing them TODAY is no different than making the following claims about real estate:

• The internet is a fad; it will go away.
• The MLS Comparables book is going to make a comeback, I’m sure of it!
• If I bury this statue upside down on the northeast side of the lot, I’ll get divine intervention to sell this listing.
• The market is coming back. Just wait until 2010. Or 2012. Or 2020, darn it!

All of these represent irrational (might we say, stubborn) thinking. Nobody would be caught saying those things at a cocktail party, would they? They why, for goodness sake, do we hear so many REALTORS saying, “The Basics are Back! Let’s get out the POSTCARDS!”

Postcards represent stubborn thinking - the “do what we’ve always done and don’t THINK about it,” approach to marketing. Don’t measure it. Don’t believe the statistics. Keep chanting, “My market is different. My market is different. My market is different.” Pay no attention to the torches circling, circling, circling.

The basics may be back - but does that mean so is the abacus? How you prospect has changed - and it’s high time we stopped doing things that never worked! (Coming up: The Exceptions! But first…)

Email, blogging, social networking, text-messaging to cell phones and video conferencing are the prospecting TOOLS of today.I don’t make these rules - the consumer does. The research supports it; at the very least, it refutes the claim that direct mail worked. It made you busy - but not business.

Worse (if possible) going back into the postcard-mailing-mode supports the idea that “you’re an exception” to the rules of business. That somehow, a few successes override the glaring inefficiencies. That somehow, a few deals from postcards suddenly make them NOT ineffective. That’s the kind of dangerous thinking that makes you think: The downturn won’t come to my area. My listings aren’t overpriced. I’m invincible. Just ask the postman!

Even if you don’t like email or don’t know how to blog, you should know how to pick up the phone. Making phone calls to your past clients is measurabley more effective than postcards. And it’s immediately more sustainable and FAR more personable than a stale postcard. Of course, the younger buyers don’t have home phone numbers, and the Baby Boomers invented the Do Not Call List. So, i guess that only leaves us with postcards, huh?

I wonder how many brokers out there - in modern America - are recruiting for “skilled postcard mailers” for their struggling companies.

Alas. Business operations by “historical reaction” - by bringing out the postcards because they worked in the past - without stepping back, to observe the world of consumers, to research, to plan, and to obey the rules of marketing - is like putting rollerskates on an octapus. It may hit a few deals as it’s flailing about, but mostly, it’s a comedy of errors that ends up with red ink spilled all over the floor.

And all it takes is a good, old fashioned market crash?

So is the market’s crash this fall really good for selling real estate? Well, If you’re a true contrarian, and don’t just go with the knee-jerk reaction, you know the answer is ……. the Crash is good for real estate sales. Yes, that’s right: it’s GOOD!

Now, the reason:

What does it mean when the stock market loses 400 or 500 points in a day? It means somebody - a lot of somebodies, actually - is selling stock, right? That means they are turning STOCK into CASH.

Now, what are they going to do with that cash? Put it in:

a) the Bank?

b) more Stocks?

c) under their Pillow?

Answer: d) None of the Above!

It the economy is in worrisome times, and people are pulling out of Stocks, especially out of BANKING stocks (which are the big sell offs this week) they certainly aren’t just “depositing” the cash into accounts that could be at risk of disappearing with the bank itself. And they’re not buying more stock, because most stock is falling faster than inflation is devaluing the currency (yes, it’s hard to believe, considering our inflation is so high).

But savvy investors know exactly what they are doing. They are moving capital to safe havens. They are willing to take minimal growth - like fractional-interest Treasury bills - rather than continue to take a pounding in the stock markets. And they most certainly aren’t feeling “confident” in the FDIC, Treasury or Federal Reserve - so putting it in the bank is out, too.

Therefore, the ONLY sensible investment for the capital is …. drum roll, please….. real estate.

Here, I tore this off of the Wall Street Journal’s website:

And whomever is buying these homes is using CASH - since banks aren’t lending, right? Cash transferred from selling stock - which is exactly where REALTORS should be focused today to turn the industry (and the greater economy) around.

The key is to be in contact with past and current clients who have substantial stock holdings they are converting into cash. And to prospect for those people who are selling stock today, too. They are ripe for a SAFE investment - and real estate is second ONLY to gold in safety. Remember, the average 5 year return on real estate is 25% (for every five years since 1980) and if you look at it from a DOWNPAYMENT risk perspective, it’s 225% return every 5 years on most investments (Harvard Study, see NAR)

Every great fortune in history is based upon real estate. Most were started during recessions, too. In the last century, every boom has started with real estate - even the dot-com boom which relied upon rising real estate appreciations to create excess capital that could be diverted into other industries, notably technology).

Now, this poses some “challenges” to current thinking. It means that the industry REVIVAL will NOT be coming from Gen X - because they don’t have much stock holding, even though they are the move-up buyer at this point in their age-bracket. Rather, it means there’s likely to be a “second” wave of wealth re-investment from the Baby Boomers, who fuelled the last boomlet as well. They will provide the capital - because it’s their retirement investments that are being converted into cash right now. For example, check out this California news story…

BUT! They won’t be the “only pathway” to that capital. Instead, it could be their children - the Echo Boomers - who will have access to the cash. The “early” boomers (over 60) have already completed their “last home” purchase process in the last decade; but the “late” boomers (45 to 60) that were nearing retirement (or just a big segment of stock investors in the last twenty years) are the ones selling stocks, converting cash, and looking to reinvest it.

Take a look at what this REALLY SMART broker in Manhattan told the Wall Street Journal THREE MONTHS ago:

Boomers are creating the cash to revive the housing industry from their stock sales - to be used as “downpayment” assistance to their children. As vacation homes. As rental property to substitute for their 401ks which won’t be enough to retire on in the future.

So don’t get down as the market keeps falling. It’s actually a sign that the CASH people need to buy homes is being GENERATED through commodity/equity sales of stock. If the BANKS won’t LEND it, then the capital has to come from somewhere. The markets always keep moving; the proof is the 5 million transactions we will STILL have this year. That’s the historical norm for three decades; and it means the market is fine (really; just not able to support 1 million REALTORS, that’s all).

To summarize:

1. Falling stock markets mean CASH is flowing OUT of Wall Street and onto Main Street.

2. Poor options in stocks, banking, corporate bonds and currencies mean the cash has to seek other returns.

3. Smart investors know real estate is ALWAYS going to give a long-term return (sorry, flippers).

4. Now it’s the REALTORS’ job to find the people who are cashing out (Boomers) and start talking to them about the SAFE HAVEN of real estate investing today.

Oh, and look! No need for government money!

Funny how the market works!

1. If the National Association of REALTORS can only get 12-15,000 of its one-million-plus members to come together annually, there’s something much more wrong than just “the market.” If we take “attendance” as a “vote of confidence” in the National Association’s ability to put on an exciting, inspiring and useful event, it’s clear that about a million people didn’t think the event would be worth the $2000 investment in themselves (flight, hotel, registration and some Mouse ears). Not to mention that Florida is supposed to have some 90,000+ members (1/10th of the national total) who were within a few hours drive of Orlando - no flight or hotel needed - but somehow didn’t make the trip. Speaking as a vendor (you know, the ones who make the event possible with their booth fees and sponsorships) the NAR had better rethink the Convention for next year. For some ideas, see “Not Again!” next.

2. Ok. Not Again! If I see one more training session featuring the same old tired blather about postcards, sphere of influence, click-the-mouse-here-to-save and this is the off-button to your lockbox, I think I’ll become a plumber. Sure, there were sessions on social networking and SEO and other “high tech” topics - but they were there last year, and the year before. And while nobody knows better than us that it takes about five years before the majority of REALTORS think a technology isn’t “going to go away,” repeating these topics with not much new to say isn’t what the industry needs. If REALTORS take five years of education sessions to “accept” blogging and ten more to “design a recruiting plan” then somebody isn’t asking the right questions about what the membership wants. More hands-on classes on Word? Why not just put Advanced Solitaire on the schedule and we can all just forget about selling homes….?

3. The Councils have it going on! Specifically, the Council of Real Estate Brokerage Managers (CRB)and the Women’s Council of REALTORS (WCR). Not only did they have great attendance amongst their members (WCR told me they were UP from last year, which was packed!) but their courses were exciting, positive and topic-new. CRB continues to innovate in response to its members needs: While most local boards were spinning around aimlessly wondering why nobody showed up to their $20/seat training classes, CRB is taking their education online, worldwide, so that time-and-space no longer set the standards for filling classes - and meeting members’ needs. Maybe we should just let CRB/WCR run the next annual conference? Good idea!

4. If you walk through the trade show with your phone to your ear, pretending to talk to someone so you don’t have to talk to the vendors, your business is dead. Last year, we ran out of things to give away; we almost started tearing up the rug and handing out chunks with our website written on the back. This year, we shipped in 1000 FREE CD-ROMS filled with ideas on leads management, online marketing and other sales ideas. We shipped 500 back home. Why would an agent walk up and down 4000-plus booths in the trade hall and not bring a wheelbarrow to fill with every freebie offered to them?

Oh, I know - to make room for the bling-bling they were going to stuff into their pockets at the jewelry booths. Oh, sure, I’m shocked that not everyone wanted our stuff; but the cool-new-text-message-marketing vendors across from us had to call for reinforcements just to get people to stop. Obviously, next year we’ll be wearing mini-skirts and dying our hair blond, too.

5. Education directors are saints. Every company and association education director we talked to should be nominated for Sainthood in the Order of Patient and Hopeful Professionals. No matter how big or small the organization, the education directors were still pushing - still hopeful - that their members could get the message that the market isn’t going to “save them” all by itself. And they are trying everything - online, offline, even offering unlimited education for a flat annual fee - to get their members to upgrade skills and technology. They stopped at every booth, sat in the back of every educational session and took lots of notes; if we could just do a blood transfusion of their learning-enthusiasm to their members, the industry might recover faster. Somebody give these people a raise.

6. Every REALTOR owes Bank of America a big apology. In fact, we owe it to every bank and mortgage vendor who underwrote the bulk of the events, including the Bank of America night out at Universal Studios. We should be ashamed of ourselves for accepting their money after we just spent the better half of the last decade demonizing banks as “trying to put us out of business.” No wonder REALTORS have such a hard time rehabilitating their image in the public: we talk out of both sides of our mouth - taking their sponsorships while lobbying against them on Capital Hill. Certainly, Bank of America shocked me for even appearing at the trade show - considering how easy it is for banks to connect with consumers through their transaction management programs, while most REALTORS can’t even send a PDF-formatted copy of their P&S agreement by email. Still, someone should have stood up at the opening session and did an honest “mea culpa.” It’s easy to argue for protectionism when the market is lining your pocket with easy pickings; but REALTORS have some gall showing up with their hats out when it’s the other end of the market.

7. It’s not your daddy’s real estate business. One of the most striking assessments of the demographic transformation happening in the real estate industry doesn’t involve the changing consumer. Rather, it’s the changing REALTOR - and nowhere does that change show up more starkly than how the different generations of agents dressed up (or at all?) at the trade show. Younger agents wore sportcoats, shoes and combed their hair. They looked you right in the eye, shook your hand firmly and asked good questions about how we could help them. Older agents showed up in near-pool-wear, rolled their eyes at your conversation and generally acted as if they were heirs to a treasure pile that somebody had just temporarily misplaced. Younger agents got up from their seats on the bus to let other sit; older, coiffed but over-lipsticked agents took up two seats with their “important” packages and purses. And the biggest differences were at the international events and trade show floor, where both foreign dress and manners put the State-side veterans to shame. There is hope - perhaps audacity? - that the industry can become something much more than it is today, when the wheels of change finally grind over the “it’s all about me” generation of REALTORS.

8. Not only did the event break down on generational lines, but a definite schism appeared along technological lines. People showed up at our booth, saying they just received a text-message from us to stop by, or they were twittering with someone on their smartphone who was talking about one of our educational sessions. A fair amount of Blackberry Hunchbacks were seen walking the floor and bumping into people (and booths). And the usual number of Bluetooth Borg did the zombie shuffle down the convention halls, whispering (and yelling) to the voices in their heads. On the other side of the gap were the agents lined up at the cyber-cafe to check their Yahoo web mail or - gasp! - AOL using a free computer. How quaint! These uber-frugal agents were obviously representing the “classic model” professional, unencumbered by batteries or backaches, though none-the-less lost as they checked their printed programmes and convention hall maps to find out where the next photocopier session was being held. Screech! Sorry! Did I run over your walker with my Segway?

9. It was great to reconnect with friends. You might get the impression that my ten take-aways are mostly negative and that the Conference was a bust. Far from it! Rather, I haven’t had so many hugs and kisses in months. From past clients to people I’d only met online, there were just as many smiling- as there were head-shaking-moments at the conference. Of course, it got a little difficult to run down for morning coffee when stepping into the elevator unshaven still didn’t stop the, “Hey, I was in your class…” or “I love your blog!” Yet it just goes to show that “real” networking doesn’t stop just because we’ve been doing social networking “online” throughout the rest of the year.

10. There’s a LOT of work yet to be done in the industry. If you put together all of the different perspectives of the Conference – from attendance to classes to the trade show floor and the friends we caught up with – the sum is simple: The industry is at the Phoenix-flashpoint where a once-glorious bird has become run down and ratty; It clings to its perch, hoping for a few more days, a few more birdseeds, fearing what’s about to happen. One of these days it’s going to go up in smoke and flames. Quick, painless, complete combustion. What will arise from the ashes will be a young, new, healthy phoenix, ready to learn, grow and reach for the skies. For now, however, the real estate industry remains precariously perched – just waiting for someone to come along and set it on fire. Now, if I can only just find a match….

Your million dollar website now looks awful because the data from your friendly cooperating brokers sucks.

It’s not like we didn’t know that MLS data is pretty much useless anyway. Let’s be honest: If you’re using “current listings” to create a pricing report for a potential new seller, you’re perpetuating the “over-priced” market disaster because you’re using bad data - the prices set by other brokers who don’t know how to price inventory - to yet again overprice your next listing. Days on market is totally unreliable too, since many MLS systems have adopted practices to let brokers “trick” the system into only representing the “current” days on market - not the total days on market, since that little “two week off-market hiatus” a while back. Good stuff when it comes to using MLS for running your business…

But IDX is a really, really, really bad idea. We’ve been doing it for a while now. So why not step back and ask: How is it working out in the “real world”?

The first thing we might find is - contrary to popular belief - more listings on the website do not necessarily generate more leads. Especially when the plan is for brokers (with unknown websites) to share more data with other brokers (with equally unknown websites). So we’re all keeping the secrets now, is that the plan? Spreading the data amongst brokers does not necessarily mean it’s spread to the consumer. Why? Because brokers are broke these days - so they’re not putting too much extra money into online marketing and traffic generation. When cash is low, SEO and PPC goes right out the door.

The next thing we see is that the shared-display of listings between brokers has led to a substantial number of anti-competitive policies for the use of listing data. For example, some MLS systems have an absurd rule that no signs, logos or other brokerage-identifying information can appear in the photographs of the listing. The “reason” is because those photos are going to show up on a competing broker’s shared listing display. Of course, along with those photos will be - by another rule - a line indicating who is the actual listing brokerage (a “courtesy of” line) but otherwise no marketing content can appear in the photo. Just the front door, toilets and darkened bedrooms. Can anyone tell me why this is a good marketing move for brokers - any of them? Is the “benefit” of getting your stuff on someone else’s brokerage website really greater than the benefit of marketing your listings with the maximum amount of branding? You take a guess.

But the really, really, really, really bad effects of IDX aren’t even the silly, “it takes a village” restrictions of the MLS kibbutz system. The danger comes in a quieter, more insidious attack:

Putting other broker’s listing data on your website directly undermines your company’s image in the marketplace. Here’s how:

Let’s say you have built a website. If you’re a major franchisor, you’ve spent millions on it. If you’re a local broker, you’ve still spend tens of thousands. In fact, you may have spent tons of money your competitors aren’t spending - because they opt for the cheap, silly-looking “virtual office website templates” that can be had for free or a few hundred bucks from the MLS, too. In fact, there’s a disincentive for smaller, less-funded brokers to build websites when their bigger, more businesslike competitors are going to spend the money anyway: the smaller guys know that their inventory is going to show up on that website because of the “rule” that requires all listings to be shared by all participants. So IDX’s first destructive outcome is that it forces some of the companies in the market to make all of the website and marketing investments, while other freeloaders just go along for the ride. But that’s okay, right? I mean, we all “co-broke” each other’s listings - so can’t we all just get along?

But wait! There’s more damage to come. As we all know, not all agents are trained equally. Any quick look at REALTOR.COM’s poor inventory will show you that, in fact, the vast majority of agents have no idea how to take photos, write property descriptions or even completely fill in the data (like taxes, heating, etc). So, most listing inventory data sucks. It’s minimalist - just enough to fill in the required fields in MLS - but hardly anything that makes consumers swoon. The goal continues to be to force the consumer to contact the agent for “more information” - which is exactly what you’d expect from companies who don’t take internet marketing seriously enough to build their own websites. They’ll just put their junk-data into MLS, with a blurry front-door photo, and wait for the better websites to bring in the traffic for a “co-broke” offer.

Except for one small issue: Your million dollar website now looks like (fill in the blank) because you’ve been forced to post this (fill in another blank) listing data from your “cooperating competitor.”

On your website, you might require your agents to have a minimum number of photos - higher than the MLS’s minimum probably. You may even have managers review the listing comments to make sure they’re written in some recognizable language. Your website may accommodate (or even require) a minimum number of virtual tours and multimedia videos. Perhaps it automatically generates local town information and map, because your system accepts GIS coding that’s not required in the “MLS data feed.” In every conceivable way, you have spent the money, time and programming knowledge to create a powerful website with the features consumers want. You can even send listings to Blackberries and SMS text messages. You’re armed and ready to compete for consumers.

But, wait! What’s this? Listings on your site that say “Too New For Photo”? Property descriptions written in Latin abbreviations like “2 BR / 1 BA with a Lg Fm Rm nearby PubTrans.”

Wow - classy stuff there? Now it’s splattered all over your website. Your well-groomed website has been infected with graffiti marketing. And since the “rule” is all-or-nothing, your inventory may actually end up low in the search results because your competitors will take any listing, at any price, crowding out the key spots at the top of your inventory.

You’ve now become the pimp of poor performers. And you’re supposed to like it. Because REALTORS cooperate.

This is why IDX is a suicide pact. Much like the airline industry, IDX let’s the poorest performing companies set the public’s perception of the industry. Websites like Orbitz put the Cheap-O Airlines’ prices right alongside Top Quality Airlines, and the public is left to tell the difference. Like consumers know the difference…

IDX logic is faulty: It assumes that consumers are looking for the “most” amount of property inventory - not the “best” information. It assumes that having “more listings” automatically leads to having “more business” or at least, more leads. IDX logic actually assumes that inventory is irrelevant - because any policy that simply gives away the data to anybody who is in the REALTOR-Club means, by default, that the inventory itself is worthless. Which, by the way most REALTORS post their descriptions, photos and un-marketable pricing, it might likely be worthless.

There is a solution to the problem. But it’s one in which the “village” will need to accept “private property.” Here’s how to eliminate the dangerous outcomes of current IDX policies:

1. Let MLS only warehouse the data. Just create a centralized database with an open-sourced system for participants to pull data as they want (see #2 below). No rules. No forced displays. No limits on content. If a broker wants to add 100 photos, 20 videos and put their logo on every corner of their data, let them do it. It’s their data. It’s the product of their work. And it’s the way they make a living. Tell the rules-making committees to just shut up.
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2. Create a filtering system to pull data that each broker customizes according to THEIR standards of performance. Let’s say a luxury property broker doesn’t want their site to be filled with sub-million dollar listings. They could create a filter that only pulls the MLS data they wish to add to their site. A different broker might only want to show competing properties that have at least ten photos and twenty key fields filled out. They could set the filters to restrict the inventory according to those requirements. By permitting brokers to setup their own filters for “sharing” a part of their marketing tools and financial investments with other brokers, you will let the market determine the standards of performance. And it will let brokers ensure their websites don’t become polluted with trash from less-capable listing houses.
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3. Put the data into a universal data format. Any MLS system that is still running a “proprietary” data warehouse or data feed system should be fired. If I can post a Wall Street Journal article onto my Facebook page using my Blackberry, all for FREE, then it’s absurd that proprietary systems or formats continue to impede the full marketing deployment of listing data to web sites, social networking pages, cell phones and iPods. IDX and MLS policy must get out of the way. They should have NO SAY in how a broker uses their own data. (Hint: MLS systems need to remember who pays them, and start acting accordingly). (Another hint: Eliminate any MLS committees. Just warehouse the data and let creative brokers do (and pay for) whatever they want with their data.)

Most imporantly, get rid of the “all or nothing” rule. This policy is anti-competitive. It forces some brokers to accept the dumbing-down of their investments by other brokers’ ill-trained and no-standards marketing efforts.

IDX isn’t spreading the wealth. It is poisioning the well.

We think, however, that it only takes six words to make a huge difference in agent productivity.

What are these magic words - and why do they account for such a big difference in success-levels for agents (and their companies?) We think they are these:

“The customer never called me back.”

Take it from us - nobody has worked with more companies’ leads management systems worldwide than our consultants, trainers and help desk. We have literally written the book on the technology and management practices that will define the next generation of real estate sales and marketing. And while we have continuously maintained that most leads management suffers from Five Myths common to the companies who struggle to see better results, we have also discovered that these six words appear to be the most common denominator in agents whose productivity never improves.

Look at it another way. Most internet market actually works. Even the most awful presentation of listings - with horrible photos, or none at all - still hasn’t stopped REALTOR.COM and some of the larger real estate portals from driving thousands of buyer inquiries each month to their agents. Smarter sites - with photo minimums and a smattering of video tours - drive dozens of leads a day to agents. Despite the fact that almost 70% of agents still won’t buy a Smartphone to check email on the go, companies continue to get by with a paltry 4 or 5% of business driven from online.

Not all business comes from online, we know. There are still some traditional phone calls and walk-ins, depending upon the marketplace. No matter: offering them to agents doesn’t guarantee much better results. While the gripe is that “online” leads are bad, there’s little proof that most “offline” leads get better attention from agents. Sales figures still show the vast majority of all prospects are soundly ignored by agents.

And it’s all because of the six words.

No matter how a customer reaches an agent - phone, email or social networking (what’s that?) - low productivity dominates more than 75% of the agent population because the six words keeps them from turning customer interest into sales.

Because they’re all waiting for the customer to do their job for them.

Companies that track their leads will find that the six words are the number one reason potentially viable sales go down the drain. Take a look at some of the leads that agents throw away and you’ll see these words scrawled in the margins. The customer inquires on a property, the agent provides some information. Maybe the agent tries to follow up - once, maybe twice.

Then: nothing. The agent just “figures” that the customer isn’t interested any more (but they don’t know, because you’ll also find that most of the time they haven’t had a follow up conversation with the customers). And that’s where the six words come into play. If the customer doesn’t call the agent back, the business is abandoned.

Whose should be chasing whom? That’s the heart of the issue: Agents simply give up on business. Somehow their expectation is that the customer is supposed to come to them - like they are a lawyer or a banker, and not a sales person. It’s partly a by-product of the boom years (since 50% of agents today entered the business during a time when they didn’t have to prospect). But it’s also the by-product of bad recruiting practices with virtually no sales skills requirements, no mandated training, poor standards of performance and minimal oversight by management.

But let’s not blame it all on management, shall we? Students of Drucker know that all performance problems are ultimately the responsibility of management (who will likely be out of a job themselves if it persists). Yet agents are usually the first ones to blame someone else - the company’s lack of training, the manager’s lack of attention, even the customer’s lack of loyalty - before they consider the six words that they repeatedly cite for their lack of performance.

Is it really that simple? Could agents turn more leads into business if they simply did more follow up? Yes, it is that simple. Ask any productive agent their secret to success and they will say just do what they were trained to do in sales class. Prospect, follow up, follow up, follow up. Their “secret” is that they have more stamina than non-productive agents. And that stamina comes from avoiding the six words that keep agents from being more productive.

Top performing agents realize that it’s their job to pursue the customer. That 50% of customers may start the process “early” - reaching out to an agent for help, information, guidance - but not ready to pull the trigger for months. They also realize that, simply put: That’s the life of a sales person. Not every customer who inquires from your website (or by phone) is ready to buy today, or even next week. Residential sales agents actually have it “easy.” Even if it takes them a few months to incubate a prospect into a sale, the amount of stamina required pales in comparison to what’s needed by commercial real estate agents. Or pharmaceutical sales. Or computer sales.

In the end, it comes down to the six words. The biggest difference between top agents and the bottom 75% of non-producers isn’t a silver-bullet technology or super-savvy scripts. It’s a recognition that their job is to chase the consumer - to sell - and that they will never build a successful career if they sit around “waiting for the customer to call them back.”

- M

So let’s at least be fair and stop blaming it on the real estate and mortgage industry.

If - as nearly a century after the Great Depression reality-denying generations of Americans have taken us to the brink - it turns out that reality doesn’t actually exist, then maybe the credit market crisis doesn’t exist either? How can it be that I was the  tenth person in line at Starbucks this morning for $4 coffee when everyone is supposed to be broke? Why isn’t there a parking spot up front - or even in the first lot - at the mall? Who at Bank of America sent me the “PreQualified” application for an unsecured loan in the mail this morning? And why did this ad appear at the bottom of the same page on the Wall Street Journal website just moments ago when the DOW as down 400 points:

Of course, if there is no cause-and-effect, then lending to borrowers without doing a credit check is not related at all to their ability to repay - or their propensity to default. No different - in theory - than Barney Frank saying he’d “like to roll the dice a little more” with Fannie and Freddie’s scheme to lend to marginal borrowers having no connection to the destruction of Lehman or Merrill or Indy Mac. The prevailing theory of the crisis - that it was Wall Street “greed” - doesn’t make sense either. If Wall Street was really so greedy, wouldn’t it have been hoarding its money and not risking it by loaning to “Ma and Pa Main Street” that CNN so dutifully continues to show us crying on our television screens? Isn’t greed about making money, not going bankrupt?

If everything means nothing, then history is a useless guide to solving this crisis, too. The Treasury - in its series of range-of-the-moment thinking - doesn’t even realize it’s repeating the exact playbook of Herbert Hoover’s crisis exacerbation strategy from the 1930s. Since there is no connection between profits and risks, freezing short-sales for a couple of weeks shouldn’t have harmed the market - nor could it have been connected to the 500 point drop in the market on the day trading stolen authority was returned to the brokers. Hoover tried that - and nobody noticed that he got the very same results back then - because history is meaningless, not just unknown to today’s politicians.

With generations of citizens raised on political bombast and trite phrases substitute for thinking, it stands to (reason?) that, since we have “nothing to fear but fear itself,” we should have nothing to worry about than worry itself. That, certainly, is about the only lesson we can learn (passing through our short-term memories) when we watch a Presidential debate of fourth-grade caliber - filled with pithy maxims of short-range vote-grubbing cynicism. Yet there can be no fear or worry: Presidential elections are likewise meaningless to an electorate that knows more about the comedic-spoof of the debate than the actual event.

The alternate theory of everything - that nothing exists, that everything is “equally” good and we should all just get along (in our free housing units) until we are put on the Government feeding tubes in our old age - is being put to the test. America’s century of intellectual capriciousness - born a century earlier of Immanuel Kant, picked up and inculcated into our children by John Dewey and forced into our politics by FDR’s court-packing takeover of the Constitution - now demands payment. Decades of college professors deconstructing our history, our economy and our minds have left us with leaders with no thoughts: not even a fuzzy recollection of basic civics class where someone once mentioned personal responsibility.

Today’s economic crisis isn’t the cause of our civilization’s collapse; it’s just a symptom of it. People don’t just “lose confidence” in their institutions and neighbors overnight. Congressional approval ratings have been lower than support for death-row criminals for decades. Voter turnout is lower in the U.S. than it is in Iraq. Two generations - X and Y - openly expect never to see their Social Security dollars once their locust-parents suck dry the feeding tubes of Government waste. And everyone stands two-hundred deep in security lines at airport where nothing had run on time for fifty years.

In times of crisis, villains are always lurking everywhere. The perpetual criminal is always the businessman - the devious real estate broker, the greedy loan sharks, the multinational conglomerate. No word is ever mentioned of the willing customers who lined up at their offices, sent there by political patronage, funded by central bankers - who demanded their government-guaranteed right to a four bedroom, three bath home that was their birthright. Who could blame them?

What would Jefferson say?

After a century of intellectual corruption, where “nothing works” became the standard not the exception, can anyone really protest that the markets have finally broken down as well?

- M

Are you achieving the success you believe you deserve?

This question is much more than an academic exercise. Our belief systems determine not only how we perceive the world, but how we interact with it. And especially what rewards we get from it. We know - from training thousands of agents and coaching hundreds of brokers - that the single most important “change” people make is not their skills or habits - but their internal belief systems. No matter how many times you practice an activity, if you don’t believe it deep down inside, it won’t amount to a hill of beans. (Do beans still come in hills?)

Even in a “down market” our beliefs matter. If we think the market is slowly undermining our business, we’ll probably act in ways that reflect that belief - and our businesses will fail. If we think that our success is “beyond our control” - that it’s the government or banks who have to “save us” from further decline - we’ll probably think that anything we do is bound to fail - and either not do it at all, or at least do it so poorly that it will fail.

Extend this principle to the key decisions we make as sales organizations: Choosing our customers. Most agents still believe they have to (beg?) persuade customers to choose them. And certainly, in a competitive industry, we do have to compete for consumer’s attention and loyalty. Yet an honest observation of today’s market forces us to admit that many of us have “accepted” customers we “know” aren’t good for our business. We sit across from a table from a seller who insists his house is worth more; we know it isn’t and we try to explain how the market works; but he insists and we produce the contract and we still sign it. We take him on - knowing that we’re once again setting ourselves us for a long, hard fight - not only to sell his property, but with the seller who is going to be disappointed in “our” results from day one. Don’t we believe we can find a better client to work with? Apparently not.

Likewise, we work with buyers who refuse to make offers - insisting they’re going to chase the market to the bottom and get a “deal,” even though they are sacrificing their time, family life or cash paying rent rather than creating equity while they wait on the sidelines. We spend hours showing these buyers homes, going through the numbers and matching their amenities and desires - only to have them thwart the process because they aren’t really ready or serious about buying. In fact, they never were, but we felt we had to work with them - to serve them - because someone out might if we didn’t do it. Don’t we believe we deserve better results from our hard work? It doesn’t seem that we do.

Partly, our error comes from another belief we have - that we deserve to serve our clients, but we don’t deserve to be justly paid for our service. For proof, look at our irrational fear that “someone else” might work with the consumers if we don’t do it. If we truly believed we only deserved success, why would we do such a thing? Because we don’t believe we deserve our success - only a commission- since so often we accept payment while we’ve only achieved an operational loss.

The reason we end up with consumers “worse” than we might like is really an outcome of what we believe we deserve. If we believe we deserved only success, only to work with reasonable consumers, only to work in ways that help us earn a living, would we willingly accept untenable assignments with clients who will only lead us to another loss? If we believed our mortgage deserved payment more than we believed our sellers deserve being “serviced” would we take overpriced listings and go weeks - months - without the ability to close on them?

Our beliefs guide our actions into reality. If we believe the economy is a disaster, we will create that self-fulfilling prophecy. If we believe we can’t find good sellers or profitable buyers, we’ll make that happen, too, by accepting anyone who’s lucky enough to “choose” us as their REALTOR.

And it’s not only agent’s who believe they can’t get better consumers. Many brokers don’t believe they deserve to work with better agents. They often find themselves surrounded by non-performing agents not because the agents “randomly turned out” to be duds - but because they don’t fully believe they deserved to be surrounded by successful agents. Why else would we tolerate non-performance amongst those we choose to help build our companies?

Is your success simply a matter of luck cherry-picking customers or market timing or mortgaegs markets or buried statues in the yard?

Take the question to the extreme: Do you believe you deserve to be successful? If so, how does that belief affect the clients you select or the agents you recruit?

I’d really like to know!

- Matthew

PS: Need a little inspiration? Here’s one of my favorite movie moments. It should inspire you to seek what you deserve.

If at first you don’t succeed, try to destroy the economy again. That seems to be Congress’ motto these days, as they prepare to vote on the “revised” bailout bill.This, time, however, the proposed bill is so full of spending pork - from exempting children’s wooden arrows from excise taxes to increased cover of rum excise tax revenues - that proves Twain’s other saying that there was nothing a Congressman knows that couldn’t be taught to a flea.

What a scam!

Funny, though, how the world didn’t end now two days after the first bill was defeated. A trillion dollars was pulled from the stock market on that day, but almost 2/3rds of it was put right back in today - only in better investments and smarter companies. Contrary to popular belief, mortgages were still issued today and people still closed on their home sales and purchases.

Apparently, the end isn’t as near as we are supposed to believe.

Even Secretary of the Treasury Putin, I mean, Paulson, played the groundhog today, keeping out of the light lest he see his shadow and realize just how far out to the sides his twirling-mustaches have grown… He just kept cranking the Federal printing press and output some short-term liquidity - oh, how about a round number like $630 billion - the largest floating since the Great Depression - through its term facilities. How did markets respond? Not with thanks; The dollar fell against the Euro, Yen and Sterling. Nobody wants cheap paper.

Also putting the lie to the crisis claim that credit is frozen was the Sage of Omaha himself. Warren Buffet took out his wallet and threw $3 Billion at at GE. Maybe banks aren’t lending, but private investors most certainly are buying. Oil fell today (can anyone say that’s entirely a bad thin - except for my portfolio which prefers $150/barrel..)And even as a few more banks failed, others quickly used their PRIVATE equity and credit to buy them and keep them running.

There’s plenty of money to go around.

Of course, no ordinary American believes the bailout is really about saving the housing market any more. How could they, when the Senate’s new version is so full of pork that has NOTHING to do with the mortgage or credit crises, including:

• A whole bunch of tax breaks
• An increase in UNfunded FDIC insurance limits, with UNLIMITED authority to borrow taxpayer dollars to pay claims
• A provision to force employers to and health insurers to put mental health issues on par with physical illness (because we’re both confused and sick to our stomachs over Congress’s pandering?)
• Four HUNDRED pages of legislation, which most certainly every Congressman and Senator has thoroughly read in the last few hours

My subsequent blog on ActiveRain lit the match to initiate a nationwide flame in search of the Top 100 Most Influential Women in leadership roles in the Real Estate Industry.

The post attracted 11,000 views and resulted in 3,460 respondents casting 6,099 votes. Wow!!

Here are the Top 25 in alphabetical order:

Ann Defries
Avis Wukasch
Barbara Corcoran
Blanche Evans
Bonnie Mays
Danielle Kennedy
Dorcas Helfant-Browning
Ebby Halliday
Gail Liniger
Helen Hanna-Casey
Joeann Fossland
Judy Ladeur
Kelli Todd
Laurie Janick
Leslie Appleton-Young
Margaret Kelly
Mary Frances Burleson
Mary Tennant
Michael Saunders
Mo Anderson
Niki Rapattoni
Rita Santamaria
Sharon Millett
Susie Hale
Virginia Cook

The Top 50 (in alphabetical order) are:

Adorna Carroll
Amy Chorew
Andy Capelluto
Ann Bailey
Anne Randolph
Barb Schwarz
Bernice Ross
Carla Cross
Cathy Whatley
Darity Wesley
Dianna Kokoszka
Dottie Herman
Frances Flynn Thorsen
Kaira Sturdivant Rouda
Kim Ades
Laurie Moore-Moore
Lenn Harley
Marilyn Wilson
Pam O’Connor
Pat Vredevoogd Combs
Patti Kouri
Shari Chase
Sherry Chris
Terry Murphy
Vicki Cox

Though the survey was not billed as warranting scientific rigidity, the tremendous response rate and distribution of over 6,000 votes speaks to a strength in collective wisdom about the relative placement of the most influential women in the Top 100 list.

Bios and photos of the Top 50 can be viewed here

Congratulations to all.

Here’s an idea that should appeal to all REALTOR entrepreneurs: Rather than waiting for a pile of money to fall from the sky, why not grow your way out of these tough times? It’s decision time now - and I don’t mean the election: Are you going to just sit there and let your company go bust? You probably don’t have enough cash to keep waiting it out - so pull your head out of the sand, shake off the panic and go do what you do best: Sell homes. Help buyers. Grow your sales.

If you don’t know where all this growth is going to come from, maybe it’s time to look at the growing Hispanic market.

The Hispanic population of the United States is the second largest segment of the population, topping 45 million people this year. In the next five years, it’s estimated to grow by another 13.5% or 5 million people. For anyone - like real estate professionals - looking for new customers, there’s no question where you should be focused. And if you need a primer, purchase a copy of the Gonzalez Group’s research paper The New Economic Power Source: Increasing Profitability with Multicultural Homebuyers. It’s well worth the money.

Any growing population will need more housing: Hispanic households are already larger than the average, with four people per household compared to a median of three across all households. That’s great news for builders and brokers, for whom selling larger homes represents larger revenues. And since Hispanics are younger on average - about 27 compared to a national average of 36 years old - there will be a ready-made pool of buyers for the downsizing Baby Boomers. This also puts a lot of Hispanics in Generation Y - which means the “first time home buyer.”  Last year Hispanics constituted 40% of the first-time buyer population. With a growing population of such a low average age, it’s clear that Hispanics will remain a large segment of the business for decades. Maybe that’s why Hispanics and Latinos home ownership is set to grow by 17% by 2013.

As a whole, Hispanics also have higher percentage employment per population segment. The U.S. Bureau of Labor stats for August 2008 put the percentage of Hispanics employed (as a percentage of total Hispanic population) at 65.5% - six percentage points above African Americans and two above Caucasians. No wonder the segment’s purchasing power growth was two times the national - with nearly $870 billion spent in 2008, on track to break $1.3 trillion by 2015. Overall, nearly 12% of Hispanic households earned more than $93,000 (in 2006 figures).

That’s a lot of numbers which all add up to a serious segment of the housing market that could be just what you need to pull your real estate business out of crisis. Organizations like the National Association of Hispanic Real Estate Professionals (NAHREP) have been touting this opportunity for years - which is why they’re experiencing a record year for new members as REALTORS, mortgage bankers and others in the industry come to recognize the untapped potential of this market segment. And the growth potential still remains largely untapped. According to HispanicBusiness.com, advertising dollars across all industries aren’t keeping pace with the purchasing power and population growth amongst Hispanics. Last year the total advertising dollars spent in the U.S. Hispanic market was barely 2.3% of total expenditures - even though Hispanic purchasing power represented 9.3% nationwide. The most basic marketing campaigns to Hispanics - local advertising, networking and online marketing - will find the opportunity-space deep and wide. There’s even a field guide to marketing to Hispanics from the National Association of REALTORS website.

Ideally, this heavily Gen X and Gen Y population of consumers is ripe for internet- and tech-savvy marketing. The average Hispanic buyer was 24 years old last year: We’re talking web-surfer and text-messager, not print magazines or postcards. Already internet marketing outpaces by 200% the advertising spend to Hispanics - so REALTORS should waste no time licking stamps. comScore Media Metrix recently conducted a study that showed that 96% of Hispanic users spend at least an hour online weekly - compared to only 91% who spend an hour watching TV. A full 30% of Hispanics were online for more than 13 hours a week: Which makes it troubling that too many real estate websites are still mono-linguistic. Companies like Century 21 - with their fully translated website have a serious advantage over the vast majority of websites that are fueled by barely-abbreviated-English transferred from MLS feeds.

It seems like a no-brainer to me: A rapidly growing population, with a significant portion in the first-time and move-up buyer age range, representing 9-15% of the total national purchasing power in the next five years, 29.2% of which had household income greater than $59,000, spending more than a dozen hours a week online: The growth path REALTORS have been looking for is right outside their door.

- M

Why, then, does the real estate industry and average homeowner, not see the danger?

Set aside for a moment what “caused” the current financial crisis. Let’s assume there’s a lot of blame to go around: Stupid investment banks that didn’t assess the risk of securitized mortgages. Political shenanigans for “affordable” housing through two lending institutions that thought they didn’t have to actually check if borrowers could repay their loans. And a Federal Reserve that forgot to control inflation - and devalued the dollar - which is how homes, as commodities, are primarily priced.

The issue is what to do “now.” For starters, the only reason there’s a “rush” to do a bailout is because there’s a Presidential election coming up. In reality, private investment isn’t sitting too far off on the sidelines. Warren Buffet put $5 billion in to the market yesterday and today, even though Washington Mutual “failed” it didn’t “collapse.” Bank of America had plenty of private capital cash - and a willingness to spend it. Consider it a private bailout.

The danger lies in the rush to do the proposed Government bailout. Injecting a trillion dollars - the real cost of $700 billion - cannot have only good effects. And the most likely - and ironic - negative effect is that the bailout will ultimately destroy the housing industry.

If Fannie and Freddie’s business practices weren’t a stab in the heart of the concepts of “credit worthiness” and “equity” in the American financial system, then the “bailout” will simply twist the knife until the housing industry dies. What’s at stake here isn’t the banking system; it’s the fundamental basis of savings in our economy: home ownership.

Home ownership is the most common and primary “investment vehicle” for consumer savings. The bailout will destroy that investment for millions of Americans, today and tomorrow. Consider the “other investment” most Americans believed the Government was making on their behalf: Social Security. Essentially, it’s worthless because the “assets” used to create its value are declining, as the number of American workers paying for each retiree declines. The same will happen to the mortgage “assets” held by the Government: Just because they suddenly own them doesn’t mean they won’t continue to decline. In fact, most of the provisions of the bailout bill will hasten - not slow - the pace of falling home prices.

Since the bill will transfer control of millions of American’s basic investment vehicles - their home equity - to the Federal Treasurer, the result will be to ultimately push private lending out of the housing industry entirely. When that happens, the housing industry effectively becomes nationalized  - since the only lenders left will be Government-backed (through “equity” shares) banks. Without lending choices, sales will slow to a crawl and the housing industry - including REALTORS, inspectors, appraisers, builders and countless other associated industries - will likely shrink too. Without lending, the economy shrinks.

And just about everything in the bailout bill is designed to discourage - not expand - private lending. For example:

• Foreclosure Prevention is a major provision of the bill. While distressed “renters in homeowners’ clothing” may find this comforting, it should more properly be called “Contract Abrogation” authority. The provision would allow judges to - at their own whims - change the terms, conditions and value of a mortgage owed to a lender. If you want to kill lending entirely, then eliminate the law of contracts. Make lenders fear that their contracts might be abrogated or adjusted at any time by a judge who takes pity on a homeowner but never the lender who provided the means for their purchase - and the cost of mortgages will soar. Lenders might reasonably decide to stop lending to individuals at all. They have lots of other ways to make money, rather than risk a capricious legal system. Within the housing industry, builder financing will disappear, too. Why would a builder risk investing in new development, marketing it, and providing financing to the buyers  - when a court could decide at any time to lower the value or payment terms? Robin Hood would be proud.

• Executive Compensation oversight is not just vindictive, it will slow the pace of the mortgage industry’s growth. Limiting compensation simply pushes smart people out of the contention for the hard jobs of running a bank. Capping salaries in the finance industry means smart financiers will become executives in other industries. Lending will be left to political appointees. And we all know how well that worked out at Fannie Mae and Freddie Mac.

• Equity Stakes in exchange for Fed money sounds like a great idea. When Warren Buffet bought shares of Goldman this week, he ended up with “equity” in the company. If the Government buys mortgages from failing banks, shouldn’t it also get a stake? When a private individual invests in a company, it’s called equity. When a government uses taxpayer money, it’s called “nationalization.” If the Government has equity in the banking industry, it simply has more control. For any indications on how a nationalized lending system will work out, refer back to Fannie and Freddie.

• An Oversight Board to keep an eye on the Treasurer of the United States also sounds like a good idea. In fact, it has been tried for decades - in command-economies like North Korea and Communist China. Let one department of government - and some un-elected bureaucrats - start throwing around a trillion dollars, and you’ll be creating more bubbles than a Lawrence Welk show. The Fed already tried this once - by inflating the money supply. Now it will try again with a trillion taxpayer dollars injected into the economy. It’s still inflation of the money supply, which means devaluation of the housing industry. Rather than printing money or loose credit lending, the Fed will take it directly from taxpayers disposable income. It has to come from somewhere - which means more taxes - leaving only enough money left over for lower-cost housing. That’s called “renting.” And there’s no housing industry when nobody can afford to actually buy a house.

Home owners should be terrified of the bailout plan. By destroying the lending industry - or making mortgages too expensive. When contracts become tentative, lenders will dramatically increase the interest required to take the risk; which will decrease the number of people who will qualify to repay the loans; which will freeze home-ownership to it’s existing levels for years, if not decades. We have already seen frozen neighborhoods across America, where people can’t afford to sell and nobody willing to buy.

REALTORS should be panicked: As a the new major equity partner in the lending business - Government will be involved in even more real estate transactions (if not the majority) bringing with them a vast array of government provisions for closing. Perhaps one provision will be capped commissions for REALTORS? Why not cap those along with executive pay? Already today FHA is flexing its muscle, setting standards for inspection and appraisal that the average homeowner cannot meet with enough money remaining for a down-payment on their next home.

Builders - who are essentially financiers who make a profit through housing investment and sales - will simply shift their capital to other markets, like commodities or overseas development where their property rights will be respected under the law, not judicial discretion.

The bailout plan is the exact opposite of what has to happen to correct the economic downturn. Adding more money to an inflation-weakened economy is no worse than devaluing the dollar or printing more of it. Buying distressed mortgages can only be called buying “assets” by Government accounting standards; if they were really worth something, more private equity would be out there snapping it up. Undermining contract law and abrogating lenders’ rights to repayment on behalf of “distressed” homeowners will only mean more bank failures - as banks will be unable to recover the money due to them, with which they create jobs and pay employees. The cycle will only accellerate, eviscerating the lending industry, scaring the sidelined-buyers into waiting even further, discouraging foreign investment in what was once considered the safest place to invest: a country of (contract) laws, not of (judicial or political) men.

Now is that any way to bail out the housing industry?

- M