Parting Wisdom from Terry McDermott
As Terry McDermott closed in on his final months as NAR’s chief executive, he sat down with RAE magazine to share his thoughts on how association executives, association management, and the REALTOR® organization can be more successful in reaching out to members and improving the real estate industry.
During his tenure, McDermott has dealt with many of the same issues that local and state AEs handle every day. Since he joined NAR eight years ago, membership has grown by more than 490,000 to upward of 1.2 million, and the housing market experienced the largest sustained boom in U.S. history. McDermott also oversaw construction of the $46 million Washington, D.C., office building that opened in October 2004, and helped NAR achieve substantial legislative victories. NAR CFO/CIO Dale Stinton has been named McDermott’s successor, effective Nov. 1.
What’s the most important skill for an AE to have?
To be successful, or even just survive, in today’s ever-changing world of association activity, AEs have to have a good skill base in administrative management and program management. That’s not a goal they should aspire to reach—it’s something they should already have, or else they shouldn’t be the executive officer. That’s a core requirement of the job.
On top of that, AEs of today and tomorrow will have to be on top of what Realtors® are doing in the local community to ensure a positive environment for homeowners. The more aggressive AEs are already making a difference in smart growth, housing affordability, and workforce housing. I believe that boards and executive officers have to get the public thinking about how Realtors® are a very positive force for solving housing issues.
How can associations be more effective in getting their legislative agendas passed?
The key is creating strong member involvement in public policy issues and activities. The most effective way to do this is to create ownership of the issues among members so they’ll go out and do the work.
In addition to having a highly involved AE, every association needs a local GAD. The NAR GAD-sharing program goes in that direction. I think we need to continue to push resources from the national, state, and local levels toward creating a full-time GAD position at most of our boards.
What’s the biggest challenge facing REALTOR® associations today?
Responding to the continued attack on the MLS and REALTOR® data. The MLS is not a public utility; it’s a private contractual agreement between voluntary participants. The one criterion for participating is that you have to be in the real estate brokerage business. Otherwise, why should you be there at all?
There are people in the free market who have bet hundreds of millions of dollars on business models that require open and free access to data in the MLS. They’re going to continue to fight relentlessly to protect their investment and to try to use proprietary information contained in the MLS to drive their business models.
How can associations respond to the MLS challenge?
They have to make sure their members fully understand the MLS system and how it operates—that it’s not just a collection of electronic listings. At its core, it is a contract between participants that guarantees compensation for cooperation in the marketing of the property. One of the end results is electronic listings. If we keep cheapening the MLS system and commoditizing the MLS by saying it’s just an aggregation of listings, we’re going to inherit a very negative end result.
What common mistake should REALTOR® AEs seek to avoid in running their associations?
If there’s anything that concerns me, it’s making sure that the balance between being a member-driven and a staff-driven organization is maintained. This may sound blasphemous, but I think that it’s just as negative for an association to be totally member-driven as it is to be totally staff-driven. The imbalance is just as critical in both directions.
What’s one initiative you started at NAR that you hope will continue after your retirement?
We’ve worked very hard to create involvement from the broker community. With the past nine presidents of NAR, we’ve really reached out to the large brokers and the franchise groups and said, “You’re a critical part of the future of organized real estate, and you’re a critical part of the REALTOR® organization.”
If brokers don’t find a home in the Realtor® tent, they’ll find it somewhere else—and that’s something we can’t afford to have happen. We need the people who are the most successful. We need the largest brokers and the biggest franchises to feel that organized real estate is an extremely important part of their business, and they have to know they have an opportunity to speak and be heard.
How are today’s members different from when you started at NAR in 1997?
In the nine years that I’ve been here, members have gotten younger. They’re more likely to be in real estate for their first or second career rather than their third or fourth, and they have become much more astute when it comes to technology.
Even the longer-term REALTORS®—those who’ve got tenure in the business—have had to adopt a high level of technology. If they haven’t, they’ve at least added people who have a lot of technology expertise to their teams. But I don’t believe that there are many people left out in the REALTOR® world who are heavily involved in transactions that don’t have fairly significant technology expertise.
What insights have you’ve gained into NAR that other AEs could benefit from knowing?
It’s interesting, because REALTORS® feel that the three-way agreement is totally unique to the National Association of REALTORS®. In truth, it isn’t. It’s a somewhat common form of governance structure among individual membership organizations—like the American Institute of Architects, which is where I was before NAR.
But from my direct experience, the three-way agreement is much more visible in terms of a cultural icon within the REALTOR® organization than anyplace else. We are focused on it, we care about it, and we want to make it work because it’s our greatest strength.
The ability, or the need, to create consensus and organizational affirmation of the direction you’re taking is a very positive process. If you can sell 1,500 boards, 50 state organizations, and NAR on a concept, you’ve pretty much passed a very important litmus test, right?
It’s nice to be successful as a board, but it’s better to be a successful board that participates actively in the state organization, that provides state leadership, that gets involved with legislation, and that has strong members on the NAR board of directors. It’s important to be a successful board on all levels of the REALTOR® organization rather than simply being a successful board at home.
You led NAR during a period of historic home sales, price appreciation, and membership growth. What challenges came along with that growth?
The biggest thing is the management of expectations. REALTORS® who were around for the ’86 through ’93 downturn, the ’74 to ’76 downturn, or the Regan recession of ’82, know that this market isn’t the norm.
However, it’s totally unrealistic to think that this market is ever going to go back to 3 million or 3.5 million in existing home sales. Our forecast for next year is still 6 million-plus. In the time I’ve been here, we’ve gone from 3.5 million to 6.7 million, and the annual base has almost doubled.
I think it would be more than a little hopeful to think that this market will be the norm for the next 10 years, but I agree with David Lereah. I believe that with the economic and demographic forces that are affecting the housing market, we’re going to have a strong market through this decade.
Certainly there will be adjustments, particularly in areas that have become overheated in terms of affordability. Part of the market is a little artificial, in terms of investment real estate. But I don’t see any of the Wall Street Journal-inspired bubble and overheating in the ‘real’ housing market, the housing that’s being purchased for personal use—family homes or vacation homes.
We don’t think bubbles are going to burst, we think that over a period of two, three, four years we’re going to see adjustments in certain markets to bring them back to reality.
What was your proudest moment as NAR’s chief executive?
A lot of people might expect me to say the opening of the new building in Washington, D.C., but the thing I’m really most proud of is helping change NAR from an internally focused to an externally focused organization. Long-term, that to me is the treasure that will keep the REALTOR® movement growing and having more of an impact.
But my personal proudest moment was the first HOPE Awards dinner. That visibly said to the membership and to people in the homeownership field that NAR and REALTORS® are committed to making a difference in cultural diversity and affordable housing.
What are your plans for retirement?
I intend to spend half the year in Florida, down in Sanibel Island, and half the year in Chicago. I have some involvement with organizations here that I want to maintain, and I hope to stay on a couple of nonprofit boards in Washington that I’ve enjoyed a lot.
But I don’t intend to ever work full-time again. I always tell people that if I had any desire to work full-time, I wouldn’t be giving up the best job in the United States to do something else.
I’m looking forward to controlling my own schedule, of being able to say to someone, ‘Yes, I will be there in November,’ and really mean it. It’ll be great to not have to call back and say, ‘Well, you know, I can’t make it. I’ve got to go to California.’
But you really have to think long and hard about retirement. You can’t call back 6 months later and say, ‘I changed my mind. This is boring.’ You need to ask yourself, ‘Am I ready? Is it timely?’
It’s not a question of age–I’m happy to say it will be a few years before I can get social security. You have to sit back and ask, ‘Am I ready to capture that time for myself? Am I going to be happy self-directing my activity and not having all this structure around and all this support to make the days go by?’
I think two or three years ago I would have said, ‘No, I’m not ready.’ But now I really am ready and I’m anxiously looking forward to it.
What will you miss most about your job?
I will absolutely miss the members and the REALTOR® staff around the country. REALTORS® are great people; I have an enormous amount of respect and affection for them. They’re fun to be with and they care a lot about things that I also care a lot about.
To me, I look at it as losing contact with friends. That’s definitely true of the state executive officers and the board executive officers that I’ve gotten to know well over the past years. I’ll miss seeing them. This is a relationship business and I’ll miss the relationships.
I intend to come back for conventions and I have a commitment to NAR to be available on a project basis over the next few years. I’m looking forward to that. I’d hate to think that on Dec. 31, 2005, the umbilical gets cut and I’m gone.
What will you miss the least?
The 125 days of travel on airplanes. If that sounds like a lot, let me tell you this: the elected leadership of NAR travels more than I do. The advantage they have is that they don’t have to do it for 9 or 10 years in a row.
Travel is getting to be logistically more difficult, and it takes more out of you. I’ll be much happier staying in touch with people by e-mail and telephone. I’ve been traveling for 40 years and there’s nothing particularly enjoyable about it.
Terry McDermott talks about . . .
What he’ll miss most about his job: This is a relationship business and I’ll miss the relationships. I look at it as losing contact with friends—that’s definitely true of the state executive officers and the board executive officers I’ve gotten
to know well over the years.
What he’ll miss the least: The 125 days of travel on airplanes. If that sounds like a lot, let me tell you this: The elected leadership of NAR travels more than I do. The advantage they have is that they don’t have to do it for 9 or 10 years in a row.
The biggest perk of retirement: Controlling my own schedule . . . being able to say to someone, “Yes, I will be there in November,” and mean it, and not have to call back and say, “Well, you know, I can’t make it. I’ve got to go to California.”
Whether he’s really ready: You have to think long and hard about retirement. You can’t call back six months later and say, “I changed my mind. This is boring.” I think two or three years ago I would have said, “No, I’m not ready.” But now I really am ready and I’m anxiously looking forward to it.
Keeping ties with NAR: I have a commitment to NAR to be available on a project basis over the next few years. I’m looking forward to that. I’d hate to think that on Nov. 1 the umbilical gets cut and I’m gone.