2019

2018

2017

  • Why Acquire A Brokerage?

    Businessman holding suitcase looking up at a very tall ladder


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    VALUATIONS / MERGERS & ACQUISITIONS

    Acquisitions can be tedious and difficult.
    So, why do it? Simple: To grow.

    The recent publication of our popular e-book Valuing Small- to Medium-Sized Brokerage Companies has prompted several questions. Mainly, why do firms go through the undertaking of acquiring other firms? Since acquisitions tend to not be for the meek, this is a valid question.

    Achieving growth for a residential real estate brokerage firm is not a complicated endeavor. You either grow organically via effective recruiting and agent development, you grow via acquisitions, or you do both. Though the solution for growth is simple, the execution can be difficult.

    Organic Growth

    The organic path is not an either/or option for successful brokerage firms. Broker-owners should be targeting various means to attract agents to their company. Equally important, they should be striving to improve agent productivity. Interestingly, success on this path allows firms to be more successful should they also choose the acquisitive route.

    In our valuation and M&A work, we’ve seen every reason imaginable when it comes to why firms choose to acquire. Regardless of the reason, the process of a brokerage acquisition is not for the faint-hearted. Besides the undeniable fact that most acquisitions require upfront capital, they demand a tremendous amount of time, and when the primary asset being acquired is an independent contractor who can walk out the door at any time, the execution must be flawless.

    M&A Activity

    Lately, we’ve seen a lot of activity from medium- to large-sized firms as they endeavor to acquire smaller firms, which was a big impetus for penning our e-book. A softer housing market is undoubtedly whetting the appetites of some of these buyers as smaller firms struggle to compete. Thus, there are bargains to be had, but most buyers are intentional in their acquisitions as it serves their growth strategies.

    When it comes to why? in many cases, it’s merely a matter of buyers seeking to expand their footprint. In some situations, the buyer has already tried to expand but has had trouble penetrating the market. In other cases, all it took was a simple cost/benefit analysis to determine that it would be cheaper to acquire than to set up shop from scratch. Acquisitions can be challenging; however, so is finding a suitable office space, retrofitting the office, hiring staff, and recruiting agents.

    In other cases, the why? is to take out and join forces with a pesky competitor. If you can’t beat them, join them, or in this case, compel them to join you. Interestingly, we find that many smaller firms are owned by folks who continue to list and sell, and as the landscape for operating a brokerage firm grows more challenging, these owners lose their passion for owning. As mentioned, if your firm is doing an excellent job on the organic side of things, then it will be a lot more enticing for a competitor to join forces. A seller will feel a lot better about a deal if they know their agents will find a good place to land.

    There are, of course, many other whys? and for both buyers and sellers the why ought to be well defined and thoroughly vetted.

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    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • Great Variation In 2019 Cost Of Living

    Singapore skyline

    Image: Central Singapore Skyline


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    GLOBAL TRENDS / GLOBAL CITIES

    Interesting economic trends in cities around the world.

    In real estate markets around the world, one of the many factors affecting supply and demand is the cost of living in that market, and the changing components of living costs—compensation packages, house rentals, schooling costs, recreational costs, etc.

    Trends In Global City Economics

    Some exciting trends are revealed in the 2019 Worldwide Cost of Living survey conducted by The Economist Intelligence Unit, a research division of The Economist Group. For the first time in the survey’s history, the title of the world’s most expensive city goes to three cities—Singapore, Hong Kong, and Paris. Also appearing in the Top 10 most expensive cities are Zürich, Geneva, and Copenhagen in Europe, Osaka, and Seoul in Asia, New York and Los Angeles in North America and Tel Aviv in Israel.

    With the strong U.S. economic growth in 2018 and corresponding appreciation of the U.S. dollar, most cities rose in rankings in 2018. San Francisco was up 12 places to 25, Houston up 11 places to 30, Seattle up eight places to 38, and Cleveland and Detroit up eight places to 67. In addition to New York and Los Angeles, only Minneapolis achieved the top 20 rankings.

    What Makes A City Expensive Or Inexpensive?

    If one looks at cities by category, Copenhagen owes its ranking to high transport and recreation costs. Asian cities are expensive due to general shopping and consumables spending. European cities are ranked high due to household, recreation, and entertainment categories.

    At the lower end of the scale, the least expensive cities in the world have also seen changes. Asia, with some of the most expensive cities, also has many of the world’s least expensive cities, particularly those in India and Pakistan.

    Bangalore, Chennai, New Delhi and Karachi feature among the 10 cheapest cities surveyed. In those countries, wages and spending growth remains low, and this limits household spending. Rural producers can supply cities with retail goods cheaply, and when you add government subsidies, prices are well below those in Western countries.

    Emerging markets had a lot of currency volatility in 2018 due to the strong U.S. dollar and also encountered political instability and corruption. Istanbul in Turkey had the most significant decline in its ranking, falling from 48th place to 120th. Buenos Aires in Argentina also fell sharply in its ranking to 125th place—in the bottom 10 cities ranked. Other cities in the bottom 10 were Caracas in Venezuela, Lagos in Nigeria and Damascus in Syria.

    Cost of living in places around the world is always fluctuating. Slowing global growth in the next two years will continue to affect the rankings of many cities. Oil prices will also affect economies that rely heavily on oil revenue and oil imports. The relative cost of living in the U.K. and Europe, due to Brexit, is still to emerge as supply chains become more complex and new import duties are imposed. A slowdown in growth in China could have consequences for the rest of the world, and the lasting impact of the U.S.-China trade war is still to be judged.

    To view the report online, visit Worldwide Cost of Living 2019

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    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • Data Standards

    data standards

    “Data is the new oil.” For some, this phrase rings true with data as an extremely valuable resource to be captured and protected. To others, tired of the ad nauseam conversations about data, it may sound like another shiny substance that greases every industry speaker’s presentation.

    Why does it actually matter to the average practitioner? As I wade through the industry’s technology conversations, it’s clear that many have gotten so lofty that they seem removed from the concrete value we’re providing via technology to brokers, agents, and their consumer customers.


    Why should brokers and agents care about data standards?

    Brokers simply ask: “How can we provide more value to our customers, and build more profitable businesses?“

    “When we spend this much money and time focused on data, why does a consumer still have better tools than the average industry professional?”

    Your apps, websites, and MLS interfaces have been band-aided together. Consumers have better technology in their hands than the professionals do because technology companies have spent billions of dollars normalizing disorganized industry data for them.

    Meanwhile, the foundation of internal professional technology across the real estate industry is like a scene from the Tower of Babel. Thousands of MLSs and brokers who all speak different languages internally struggle to communicate with one another clearly.

    It’s a mess. It doesn’t have to be.

    If we want better technology that provides more value to your customers, all of your tools need to speak a common language. Your technology vendors need to know it’s a priority. They support data standards, but they need their customers to tell them it’s a priority.

    This is why the Real Estate Standards Organization (RESO) was created. Industry collaborators from MLS to broker, agent, and consumer software providers have come together to provide that common language standard. This is the Rosetta Stone for technology that allows your apps and systems to be smarter, faster, and less expensive.

    Standards don’t remove the unique, local flavor in any marketplace. Rather, they use a common data language to ensure that a seller in Seattle can list a property and the buyers in Charlotte and Chicago can receive accurate data about it. The “bonus room” in Seattle might be a “great room” in Chicago and a “FROG” (finished room over garage) in Charlotte. The locals can call it what they want. The technology knows what it is when a common data standard is used to define it.

    Similarly, a broker in Kansas City should be able to hire a technology company in San Francisco to create an app that works across every market in the nation. When data standards are used across all of these markets, the technology is built faster, more robustly, and at a lower cost. When there are no standards, it can take months to normalize the disparate data from different markets.

    If you’ve been frustrated with the time it takes for new technology to come to your brokerage or marketplace, there’s a good chance your technology partners are struggling with non-standardized data. When your apps and transaction management platforms and CRMs can’t talk to each other, it’s likely there hasn’t been a standard adopted to make that happen.

    Open data standards are the basis for the World Wide Web. A common language is used by astronauts to fly to the International Space Station. The common standard model is used by the smartest and most successful people and companies in the world.

    So the next time you hear RESO, you’ll understand why real estate standards are so important to raising the technology foundation of the industry. We’re all competitors in this business, and will continue to be. By agreeing to a common set of standards as a starting point, though, we improve everyone’s ability to deliver value to consumers and professional customers.

    Data standards are the rising tide that floats all boats. We are an industry of professionals focused on delivering quality consumer experiences. It’s a necessity that we focus our technology partners on ensuring RESO standards are at the core of their development of any tools or systems. Our businesses, our bottom line, and our credibility with consumers demand it.

    Sam DeBord

    Sam DeBord
    Sam DeBord is CEO of the Real Estate Standards Organization (RESO), VP of Government Affairs for Washington REALTORS®, and NAR President’s Liaison for MLS and Data Management.



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  • Are You In Compliance? L&I Audits Will Reveal All

    paper cut-outs of people with a magnifying glass in front

    Lack of Industrial Insurance coverage could leave firms on the hook for thousands of dollars in back coverage, interest and fines…

    Many real estate designated brokers are not aware of their requirement to pay industrial insurance for all brokers licensed to the firm. They argue that since brokers are independent contractors and not employees, there is no obligation to pay industrial insurance for brokers. However, the State Court of Appeals rejected that argument in 1993 (http://www.biia.wa.gov/DO/881191_ORD_19890323_DO.PDF). Industrial Insurance must be paid, quarterly, to the Department of Labor and Industries for each real estate broker licensed to a firm.


    What Happened During The Last Round Of Audits?

    In 2008, the Department of Labor & Industries conducted an audit and found that 88% of those offices audited did not comply with payment requirements. Interest, penalties and four quarters of back-owed, unpaid premiums, were collected from non-compliant firms. This was during the Great Recession and in recognition of the devastating affect the economy had on so many in our industry, and in appreciation of the efforts made by the Washington REALTORS® to assist in the education of firm owners regarding their payment obligations, the Department offered a number of concessions to the real estate industry, related to that round of audits only.

    There was no obligation on the Department to make those concessions and nothing in the law constrained the Department’s right and ability to aggressively pursue full repayment of all amounts owing. Fast forward to 2019, the Department of Labor & Industries has no obligation to offer concessions to all real estate broker owners should their audits reveal non-compliance.


    Are There Any Benefits From The Payment Of Industrial Insurance?

    While the payment of Industrial Insurance is viewed by many as only a monetary obligation, there is actually a significant benefit that flows to real estate firms from the payment of Industrial Insurance. If an employee, and in this case, a broker, is injured in the workplace, the employee or broker will be prohibited from suing the firm for recovery of lost time or medical expenses if the firm paid Industrial Insurance premiums for the injured worker. The employee or broker must take recovery of their losses from the Department of Labor and Industries, not from the firm.


    How Does A Broker Get In Compliance?

    If a firm has never paid Industrial Insurance Premiums for any employees or brokers, then the first step toward compliance is to re-file a master business license application through the Department of Revenue, indicating on the application that the business has employees. The process progresses more efficiently if firm files the application on-line rather than using paper forms. http://bls.dor.wa.gov/file.aspx

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    After the business license application is submitted, the firm will be contacted by an L&I account manager who will assist the firm in getting the paperwork necessary to satisfy reporting obligations and determine amounts owing. If the firm has previously paid Industrial Insurance for employees, then the firm only needs to contact their L&I account manager to determine the rate code and amounts owing for their brokers for the prior four quarters. Once the account is established, the firm will receive a rate notice at the end of every year identifying the insurance rate and the portion that the firm can require brokers and employees to pay for the following year.



    How Does A Broker Handle Reporting?

    Reporting from the firm must be handled in one of two ways. The firm can either pay based on the amount of time actually spent working by each broker and employee, or the firm can pay premiums based on an assumed eight hours per day or 160 hours per month for each broker and employee. The critical issue is that the firm must select one option or the other and apply it to every broker and employee in the firm’s office. The firm cannot pay a portion of the premiums based on actual hours worked by some and an assumed eight hours per day or 160 hours per month worked by others. If reporting actual hours worked, it is essential that brokers and employees maintain a calendar showing the hours worked on a daily basis. In any audit, that calendar must be produced for any broker or employee who reported actual hours worked. For this reason, the vast majority of firms report the entire office on an assumed eight hours per day or 160 hours per month.


    What Are The Standard Rates?

    The basic insurance rate applied to new real estate offices is $0.1720 times the number of hours worked and broker is allowed to deduct $0.0672 of that amount from compensation paid to the agent or employee. If reporting based on an assumed 8 hours per day, there are 480 hours per licensee, per quarter. The amount owing, based on this calculation, is less than $83 per licensee, per quarter. Firms may require that approximately $32.26 of that be paid directly by broker or employee.

    These rates and the contribution that can be required of employee or broker will vary based on the experience factor, or hours and claim history, for each firm.

    Accordingly, firms must consult with their L&I account manager or refer to the annual rate notice sent to the firm at the end of the previous year, to determine the exact amount owing. Firms can also report and get information online at https://www.lni.wa.gov/ClaimsIns/Insurance/File/default.asp and https://www.lni.wa.gov/ORLI/LoGon.asp.


    What Happens When There Is A Work-related Injury?

    If a broker or employee suffers a work-related injury, the medical provider will submit the claim directly to L&I. However, the firm has the right to be informed of the claim, amounts paid and to know what is happening with respect to claims managed under the firm’s policy. If only medical costs are claimed by an employee or broker, the firm’s rate will not be affected. If employee or broker also makes a wage claim, the firm’s rate premium is likely to increase. A wage claim is paid to a real estate broker based on prior years tax records showing the amount received in commissions.

    L&I will continue to audit firms and brokers who are not properly reporting and paying premiums and will be required to pay penalties and interest in addition to at least four quarters of unpaid premiums. For more information, visit the Department of Labor and Industries website at www.LNI.wa.gov or call the Department at 360-902-4817.



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  • 2019 Session Ends with Big Wins for Washington REALTORS®

    Governor Jay Inslee signs SB 5334, an Unlock the Door for Affordable Homeownership bill designed to reform condo liability laws (and increase condo development). Governor Jay Inslee signs SB 5334, an Unlock the Door for Affordable Homeownership bill designed to reform condo liability laws (and increase condo development).

    The 2019 session adjourned for the year on Sunday April 28 at 11:59PM. The 2018 election results meant big changes in the Legislature. We ended a successful 2019 Session by (1) protecting our members, (2) protecting their clients, (3) protecting real estate transactions and (4) providing opportunities to increase both commercial and residential real estate transactions.

    We accomplished this by making housing the #1 priority in the Session with our “Unlock the Door to Affordable Housing” campaign. With the support of our members, our coalition partners and the most influential PAC in the state, REALTORS® took the first steps toward increasing housing supply and making housing more affordable in every price range.

    Washington REALTORS® Leadership, Members and Staff in the Senate Chambers at the Capitol Building in Olympia, Washington.

    Washington REALTORS® Protected Our Members

    Our trade association’s primary purpose is to protect our members. With that in mind, we were successful in fighting off a direct tax increase on your bottom line. Although the Legislature passed a 20% B&O tax increase that hit most service businesses, REALTORS® were not included. We reminded the Legislature that the B&O Small Business Tax Credit does not apply to REALTORS® because commissions are pooled, and they agreed that exempting REALTORS® was both fair and a reasonable policy decision.

    Additionally, we protected the foundation of the industry’s business model. When a bill was introduced that would have changed many independent contractors to employees, we made sure REALTORS® were exempted.

    Above Photo: Washington REALTORS® Leadership, Members and Staff in the Senate Chambers at the Capitol Building in Olympia, Washington.

    Washington REALTORS® Protected Your Clients

    From the first days of the Legislative Session, we knew that the Legislature was committed to a tiered Real Estate Excise Tax, based on the idea that higher priced properties would pay more in REET. Although we did not support this proposal, the Legislature listened to us when we spoke and made significant changes, with the result that approximately 95% of transactions will pay the same or less Real Estate Excise Tax. All Transactions up to $500,000 will get approximately a 15% cut in REET. In fact, due to the marginal nature of the new tiered tax (a REALTOR® suggestion), all transactions up to about $1.6M should not be impacted. While this tax impacts commercial real estate and multifamily, it is hoped that the marginal nature of the tax structure will limit that impact. These new rates will not take effect until January 1, 2020.

    Washington REALTORS® Protected the Transaction

    Very early in the session, a bill was introduced in both the House and Senate to require all parties in an “in-house” transaction to have an attorney sign off at every step in the transaction. Obviously, this bill would make real estate more expensive for consumers and greatly impede transactions. Washington REALTORS® jumped in and made sure this proposal did not even make it out of Committee in either the House or the Senate.

    Washington REALTORS® Worked to Increase Transactions

    Washington REALTORS® played a big role in passing condominium liability reform that continues to protect the consumer but adds a fairer standard that should encourage developers to start building condominiums again. After looking at the more balanced bill, one developer told us that once developers got comfortable with the new regulations, we should expect a “mini condo boom” in Washington. Additionally, while working with a number of stakeholders, the legislature passed a bill that encourages large cities to adopt growth policies that allow for additional density in a responsible way, including Accessory Dwelling Units, allowing duplexes and triplexes in single family zoning and cluster zoning or lot size averaging allowances.

    Overall, in large part to our REALTOR® Party philosophy of working with officials on both sides of the aisle, Washington REALTORS® and our members had a winning 2019 season. Many thanks to all who helped carry the agenda over the finish line.



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  • AI-Powered Real Estate

    stylized text: AI Powered

    How artificial intelligence can help REALTORS® work smarter, better, and faster in any market conditions.

    Online clothing subscription service Stitch Fix uses it to tailor apparel recommendations to its customers at scale. eBay uses it in an inventory and pricing solution that tells sellers to stock up on certain products. Tommy Hilfiger uses it to provide a more personalized and interactive shopping experience online, where buying clothing is rarely personalized or interactive.

    What’s the secret ingredient that these companies are using to improve the customer experience? It’s artificial intelligence (AI), or the ability of computers to both copy and exhibit intelligent human behavior. Through the processing of large quantities of data, these computers learn to make autonomous decisions on their own—much like we do.

    Take Tommy Hilfiger’s Facebook Messenger chatbot, for example. Using natural language processing (NLP) technology, it can not only reply to customer queries but it can also offer advice and appropriate products. “By asking a series of questions,” Tara Johnson writes in 10 Jaw-Dropping Examples of Artificial Intelligence in Retail, “the bot gathers information about the user’s personal style preferences and makes an outfit suggestion based on the data given.”

    Of course, the power of AI expands far beyond retail. Companies in nearly all industries are experimenting with it—real estate included. In fact, the chatbots that Tommy Hilfiger is using online can easily be adapted to help brokers work with the nearly-100% of homebuyers who start their new home searches online. Catching those online buyers at the point where they’re ready to buy has been a frustrating game for most REALTORS®, but AI could soon put that goal within reach.


    Saving Money, Time and Man-Hours

    Tom Hormel, a broker with RE/MAX Inland Empire and current Washington REALTORS® First Vice President, says he’s seeing more AI-driven chatbots being added to real estate websites—a move that he says will save brokers money, time, and man-hours. “By having a chatbot or ‘assistant’ on their websites, brokers may no longer have to call and qualify prospects,” says Hormel. Instead, a chatbot will walk potential clients through a series of prompts (e.g., are you thinking about selling your home? Do you mind sharing the address? What’s your timeline for selling?). “As soon as they punch in their address, a picture of the house and the tax information shows up,” Hormel says, “and all without the broker having to touch anything.”

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    That hands-off approach to some of the homebuying and selling fundamentals should be music to brokers’ ears. Because AI never sleeps, brokers can use AI-based bots to provide 24/7 coverage to customers who visit their website or social networking profiles. They can chat with customers on the broker’s behalf and help them make money even after hours.

    “The good news is that real estate brokers will still be needed to draft contracts, answer telephones, and show people around properties,” James Paine writes in 3 Ways AI is Changing Real Estate. “They can use AI to automate much of the work and to free up their time to spend it on more profitable tasks.”


    AI in Action

    The application of AI in real estate goes beyond chatbots. Digital property management system UpTop uses AI to eliminate the wait times, miscommunication and uncertainty surrounding repair and maintenance requests for rental properties. When a request is filed, AI detects the tenant’s phone number and transcribes the issue into a work order which is then sent directly to the appropriate party who can solve that specific problem, according to UpTop. If a work order reporting a plumbing issue is created, for example, it can be transferred automatically to a plumber (instead of the property owner or manager coordinating the repair).

    Artificial intelligence is also being used in the real estate investment and management spaces, where task automation helps save investors and property managers time and headaches. According to VentureBeat, investors rely on AI to take the risk and guesswork out of property investments. AI can assess a property and perform a thorough, detailed risk analysis and even estimate how much money an investment has the potential to earn.

    “Additionally, intelligent bots can predict loan defaults, thus increasing the efficiency of the risk assessment process and helping borrowers avoid less profitable properties,” VentureBeat reports. “Property managers can also deploy AI to monitor and predict when a home’s critical maintenance systems will need repairs or total replacement.”


    Nothing to Fear

    As AI continues to proliferate in the business world, and as more real estate companies adopt AI-driven technology, the number of brokers using it is sure to grow exponentially. Hormel tells brokers that it’s nothing to be afraid of, and that if real estate—as an industry—reaches out and harnesses it now, then it won’t get run over by AI down the road.

    As a good starting point, he says brokers should be thinking about the application of AI in the smart, connected home, where the technology can be used to automatically change thermostats and turn lights on and off. “Set some time aside to research the technology and the related opportunities, and then start experimenting with it,” says Hormel. “If we make it ours and learn how to use it, we can profit from it,” says Hormel.



    Chatbot logo

    WHAT’S A CHATBOT?

    Pops up to provide assistance to your website users.
    Works 24/7 and answers inquiries immediately.
    Can help you qualify your buyer and seller.

    Bridget McCrea Bridget McCrea is a freelance writer who has been covering real estate, technology, and education since 1996. She can be reached at bridgetmccrea@gmail.com.



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  • The Beauty of Hyogo

    Photo of a traditional Japanese building in Hyogo, Japan

    Get to know our Sister Association: The Hyogo Takken Real Estate Association.

    兵庫県宅建協会は、兵庫県内に14の支部があります。

    その中でも尼崎支部は、兵庫県の東部に位置する尼崎市にあり、大阪府に隣接しています。

    尼崎市は、昨年、住宅ローン専門金融機関による「本当にすみやすい街大賞2018 in 関西」で、なんと1位に選ばれました。

    正直なところ、驚かれた方や疑問に思われた方は多いと思いますが、20~30年前位から市街地にある大規模な工場の多くは、マンションや商業施設などに変わり、区画整理をされ、歩道や公園などが整備されています。

    大阪まで近くて利便性が非常に良いにもかかわらず、物価も安く、かざらなく生活が出来る素敵な街ではないでしょうか。

    去る3月29日には、「尼崎城」が一般公開されました。

    ますます観光客が増えて、活気のある街に、足を運んでください。

     

    Hyogo Takken (the equivalent to our state association) has 14 local associations.

    In this edition, we would like to highlight the Amagasaki Local Association. This association is located in eastern part of the prefecture and boarders Osaka. In 2018 Amagasaki was voted as # 1 place to live in the Kansai region by the Mortgage and Lending Association.

    Many people felt that it was strange choice, since it has been known as an industrial and manufacturing area. However, in the last 20-30 years, Amagasaki has been transformed to a very livable community. Many of the old large factory areas have been redeveloped. With new condos, streets, sidewalks, a lot of store front and close proximity to Osaka (the third largest city in Japan at 2.7M), it is one of the fastest growing areas. On March 19, 2019, the re-constructed Amagasaki Castle opened.

    Come and visit the vibrant city of Amagasaki!



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  • Consult the Coach - Summer 2019

    REALTOR-Businesswoman holds up and points to sign saying Pick Me!

    DEAR COACH

    I am a relatively new broker. How do I convince clients that even though I am a fairly new, that I am perfectly capable of handling the sale of their house?

    Signed, New Broker

     


     

    DEAR NEW BROKER:

    This is a great question. All brokers started out as “newbies” and had to deal with this issue. There are several things you can do that will help you be viewed as a competent broker. The common denominator is to build trust.


    TESTIMONIALS

    I am guessing you have already completed several successful transactions. Get testimonials from these clients that describe what they valued when working with you and how you helped them. Post these testimonials on your website and mention them when you are meeting with prospective clients.


    PRESENTATION

    Create effective buyer and seller presentations. Practice your presentations so you come across confident, competent, and trustworthy.


    SYSTEMS

    Create a systematic approach to listings and buyers that demonstrates you have a proven process. Many brokers use checklists. The more you can show clients that you have a plan, the more they will trust you.


    BUILD TRUST

    Use your active listening and questioning skills so that prospective clients feel heard and understood. This will build confidence and trust.


    REPUTATION

    If appropriate, leverage your brokerage company’s reputation. If your brokerage company is a market leader in your area, highlight this during presentations.

    When you get a question that you don’t know how to answer, say that you don’t know and that you will get back to them. Then, follow-up promptly. If you need help, you can always ask your managing broker.

    Stuart Kaufman
    Stuart Kaufman, MS, MBA, is a Real Estate Columnist and Coach who motivates, coaches, trains, and inspires real estate brokers to focus on lead generation, being accountable, and living a balanced life. Contact the Coach at coach@stuartkaufman.com. © Copyright 2019, Metamorphosis Coaching. All Rights Reserved.



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  • Property Management Q & A - Summer 2019

    Invoice stamped with Past Due

    Question

    I have heard that I can no longer force tenants to pay late payment charges. Is this true?

    Answer

    My guess is that you heard someone talking about SB 5600, a law recently adopted by the legislature which adopts substantial changes to the state Residential Landlord Tenant Act (RLTA). This bill, which becomes effective July 28, 2019, seeks to reduce homelessness by adopting a new definition of what rent can be used as a basis to evict a tenant (among other revisions). A full review of SB 5600 is beyond the scope of your question, but all property managers are strongly advised to review their lease forms and procedures to become compliant with SB 5600.

    RCW 59.18.030(25) has been amended to adopt a definition of “Rent” or “Rental Amount” (neither were defined terms previously). The new law says that this “recurring periodic charges identified in the rental agreement for the use and occupancy of the premises, which may include charges for utilities. Except as provided in section 6(3) of this act, these terms do not include nonrecurring charges for costs incurred due to late payment, damages, deposits, legal costs, or other fees, including attorneys’ fees.”

    Since you can only include “Rent” in a Pay Rent or Vacate Notice, non-rent charges can’t be included in that form. Whether you agree with the intent or not, the legislature determined that it didn’t want to see tenants evicted from their homes for non-payment of any monies owing other than rent (please note you can still evict for non-monetary defaults under a standard Ten Day Notice to Comply or Vacate).

    Another thing that the legislature did is to require that any monies received get applied to rent first (unlike many rental agreements which apply payments to other monetary obligations before they are applied to rent). The new law specifically states, “a landlord must first apply any payment made by a tenant toward rent before applying any payment toward late payments, damages, legal costs, or other fees, including attorneys’ fees.”

    The new law cross-references RCW 59.12.030 (the unlawful detainer statute) to make it clear that a residential tenant can only be in default for non-payment of rent if they owe “rent” as defined in RCW 59.18.030(25). It goes on to say, “except as provided in RCW 59.18.410 [which is technically unrelated to your question], the tenant’s right to possession of the premises may not be conditioned on a tenant’s payment or satisfaction of any monetary amount other than rent. However, this does not foreclose a landlord from pursuing other lawful remedies to collect late payments, legal costs, or other fees, including attorneys’ fees.”

    What this means is that tenants do in fact owe late payment charges that are properly assessed against them (again, a full discussion of when late fees are unenforceable is beyond the scope of this article). But, although the tenant does in fact owe them, you can’t use the unlawful detainer process as a means to collect them, or as a penalty for non-payment. In most cases, unpaid late charges will continue to accrue until the end of the tenancy, where the landlord can deduct them from the Security Deposit (provided that the lease authorizes that as one of the terms under which the deposit is refundable). In other cases, an aggressive landlord could conceivably refer late fees and other charges to a collection agency or try to collect them in small claims court.

    So, turning back to your original question (and sorry for the long digression), you can force tenants to pay late fees. You just can’t use unlawful detainer as a mechanism for doing so.

    Christopher T. Benis
    Christopher T. Benis is an attorney with Hecker, Wakefield & Feilberg in Seattle. The information contained herein is not legal advice. You are encouraged to consult with your attorney before relying on anything contained herein.



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  • Sales or Safety? Yes, You Can Have Both...

    Sales or Safety?

    Real estate sales can be one of the most dangerous careers in America. Real estate professionals typically meet strangers in vacant homes. Brokers often work alone and rarely observe significant safety procedures to thwart crime. Criminals know this and pose as clients to lure unsuspecting brokers who they then rob, assault, rape or even murder.

    Despite these dangers, the nature of real estate sales won’t change. Brokers will continue to meet strangers, tour vacant homes and conduct open houses. It’s impossible to sell real estate without these activities. Rather than changing, we must learn how to balance sales with safety.

    Here are five easy ways to start:


    Identify before taking clients to buy.

    Before taking clients to tour homes, meet them in your office and collect copies of their driver’s licenses for your records. A simple comment such as “this is our brokerage’s policy as part of our safety protocol” will fully explain this familiar practice. Be obvious in sharing their information with someone in your office—so your clients understand that someone else knows who you’re with and where you are going. If you don’t meet clients at the office, the same routine can be performed with your smartphone camera. Just make sure your clients see you email or text the file to a colleague.

    When you go, let somebody know.

    Give colleagues a list of the properties you plan on touring that day. Let your clients see you share a physical file or email with your team.

    Stay alert, don’t get hurt.

    A demonstrated level of awareness broadcasts you won’t be an easy target. Be present in your interactions. Read their body language, listen to their comments. Be aware of your surroundings and nearby exits. In any room, stand between your clients and the exit.

    Listening to your gut can save your butt.

    Trusting your intuition is a critical safety skill. If something seems off, then it is. Leave. Cancel or reschedule the appointment. Invent an excuse to maintain your professionalism, and leave the situation quickly. You don’t need to define what feels wrong, only that something feels wrong.

    A home listed to sell should be packed very well.

    An open house is an advertisement of a broker being alone on a property for 3-4 hours. Make your environment safer by touring the property with your sellers and removing anything that could be stolen or used as a weapon.

    All real-estate professionals should embrace, practice and personalize these easy practices until they become second nature. They won’t hurt your productivity, and they might just save your life. For more safety tips, go to nar.realtor/safety.

    Amit Z. Baruch
    Amit Z. Baruch has 20 years of experience as a mortgage lender and is a self-defense instructor. He blends these two facets of his life to teach clock-hour classes and self-defense seminars to real estate brokers. Learn more about Amit at https://www.fairwayindependentmc.com/Amit-Z-Baruch.



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  • How to Maximize Instagram TV

    Smartphone with a video onscreen with the IGTV logo in the background

    Video content is hot, hot, hot and even more so on Instagram. Are you leveraging Instagram TV (better known as, IGTV)?

    IGTV is a free mobile app available for any device that allows you to upload vertical video up to ten minutes in length.

    Currently, you can upload a video up to one-minute within the Instagram News Feed and you can upload 15-second videos into Instagram Stories, but IGTV allows you to upload a longer format up to ten minutes.

    When you upload a video to IGTV, you can share a one-minute preview that gets shared on your Instagram feed. Once people watch the one-minute they can tap through to see the full-length video. IGTV also has a prominent spot in the Explore tab. When you click this button, at the top now are categories and the 1st category is IGTV, which will show you videos from people you follow or people Instagram thinks you may be interested in. We have found that because of these two updates, our IGTV videos are getting thousands of views!


    Making The Most of IGTV

    Repurpose existing video content.

    If you’re already creating content on YouTube or Facebook, it’s probably horizontal, but you can repurpose that into vertical video. I recommend using the app called InShot that is available for any device. InShot is an awesome app that will easily take your horizontal video and convert it to a vertical format. You can add text and emojis onto the video to enhance it. Also, Instagram recently announced it would start to allow horizontal video to IGTV!

    Create unique content.

    As you’re out and about (showing homes, meeting up with clients, etc.), shoot quick behind-the-scene videos. As your clients ask questions, write those down and save them for later. Use them to create video content for IGTV.



    How To
    Create an IGTV Account

    Log in to Instagram.
    Sign in to the IGTV App.
    Click on the settings gear icon in the right hand corner, and click “create channel.”



    How To
    Post IGTV Videos

    Go to your new channel by clicking on your avatar from the main page. Click the + icon in the right hand corner to add a new video to IGTV.
    Select a video from your camera roll.
    Write your title and add a description. Just like on YouTube, you’ll want to add in any relevant keywords to your description to make it easier for people to find your videos on IGTV.

    Add a cover photo! You can upload your own custom cover, or choose a thumbnail from your video. The cover photo is what will show up on your channel page and in the IGTV categories, so make it catchy.

    Share your IGTV video to your Instagram feed. Instagram recently introduced the option to share a 1-minute preview of your IGTV video to your Instagram feed. If you select to do this, your IGTV videos will live in the grid on your Instagram profile, with a little IGTV icon in the right-hand corner.

    Click the post button.



    Helpful IGTV Tips

    The title of your IGTV is the caption that gets shared in the preview so a great descriptive title is key.

    In the caption of your video, you can add live links. For instance, you may have a video about a property and in the caption, you could add, “for more information please visit Instagram.”

    When you upload a video, you can scroll through the video to find and select a great cover or thumbnail for the video. TIP: Pause and smile in the first few seconds of your video so you can capture a great thumbnail.

    Looking for some inspiration? Check out what Robyn Burdett and Betti Russo are creating on IGTV. They’re producing great weekly episodic content that they have repurposed from other video content they have created.

    BONUS TIP!

    Don’t just ‘like’ comments on your IGTV videos, but meaningfully comment back. Instagram’s algorithms dictate the order that users see posts and they favor posts that have engagement with the audience. So make sure you actively respond to those comments.

    Katie Lance
    Katie Lance is the author of #GetSocialSmart and founder and CEO of Katie Lance Consulting, a social media strategy firm. She’s been recognized by Inman News as one of the 100 most influential people in real estate and is a featured keynote speaker at many industry events. For more information, please go to http://getsocialsmart.com and use the promo code WAREALTOR to save $30 off your monthly membership in to the #GetSocialSmart Academy.



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  • Top 5 Tips for Staying Organized

    Photo of a very messy, disorganized desk

    As a real estate broker, staying organized can be tough. One of the primary reasons is due to the many different places we do business—in the home, at the firm, in our cars and on the go. It can be easy to have documents, tools and resources all over the place and never quite where you need them.

    However, the more cluttered and less-organized your spaces are, the longer everything takes. Think about the last time you couldn’t find something, whether that was a file on your computer, an email, or even a 3-ring-hole-punch. How long did you search? Five minutes? Ten minutes? Now think of the number of times you do that in a given week. How many precious minutes of your time could you reclaim with a little organization? Here are a few key systems that make life so much easier:

    Office-On-The-Go

    Imagine a briefcase crossed with Batman’s utility belt…your ‘Office-On-The-Go’ can be a shoulder bag with everything you might need or even a rolling case that goes from place to place. The key is to have it stocked with the paper, files, electronics, chargers and cords, pens, highlighters and more that you might need to conduct business. In addition to that, put together a ‘Car Kit’ chock-full of everything else you might need in the field, including: Ziploc bags, zip ties, scissors, hammer, land tape measure, regular tape measure, level, sharpies, copies of my buyer and seller packages, hard copies of the most common types of forms, and more. In fact, I encouraged a broker to build her own Car Kit and within a couple of weeks, she actually got a listing because the seller was so impressed that she had a land tape measure in the back of her car. Having an Office-On-The-Go allows you to be as efficient in a Starbucks as you would be in your home office.

    Physical and Tech Folders

    During the flurry of a transaction, it is easy for paper and communication trails to get off-course and get lost. However, if you do just a little bit of organization each day, it can make tidying up the file at the end of the transaction super-easy. It’s nice to think that everything has the potential to be paperless, but that isn’t realistic for most of the brokers I know. Though, it is logical to have three working files for a client: a paper file, an email file and a computer file.

    Everything related to the transaction goes in one of those three files. Have a wayward paper or notes that you scratched down while in the field? Paper folder! Did you use your phone to take photos or make notes? Either upload those to an online folder in the cloud or to your computer. Have some emails in your inbox from that client or from others about the transaction? Get those into a digital folder or print them out. This is 5-10 minute task can save you hours down the road.

    One-Stop Handling

    Do you find that you are moving papers from one place to another multiple times? Then you need to embrace the ‘One-Stop Handling’ principle. This requires three important practices:

    Pre-Organization

    This requires you to look at your systems for activities such as receipt and bill handling and determine what you can do to minimize the number of times something needs to be moved. For example, keep a section in your wallet for personal receipts and business receipts. When you get a receipt, put it in the correct section and make sure to insert them chronologically. When you reconcile your statement, your paper receipts are right there in order. When you sort the mail, make a spot for bills to be paid. Once those bills are paid, have a system for filing.

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    Basically, create a conveyor belt for every type of paper that comes into your office with pre-organized stops along the way which helps the number of times you have to handle something (otherwise, that paper goes straight into the recycling). You won’t lose paperwork or bills because you have a system in place.

    Everything Needs a Home

    Do you have a pile somewhere in your office right now? Are there things that have moved from one side of the office to another like nomads? These are the types of challenges you may have if you have objects or papers that don’t have a home. I don’t spend extra minutes looking for staples or stamps. I know right where everything is. Consider this — if you have something without a home, chances are that it isn’t important enough to warrant one. And if it doesn’t warrant a home, why are you hanging onto it? You avoid clutter and save time when you are disciplined and when everything has a home.

    Be Ruthless

    Imagine yourself as the gatekeeper of your office. You have to decide what is important enough to pass through the gate. Don’t let in the junk mail and extra inserts in your bills. If you have 100 pens, then choose your favorites and give the rest away. Extra binders? Donate them! There are organizations that need your excess office supplies so get rid of the guilt and lighten the load.

    Hour of Power Binder

    Several times per week give yourself a quiet ‘Hour of Power’ to work on your business and handle some of those personal tasks that go by the wayside as work gets busy. For example, I have a binder with individual pockets—8 personal projects and 8 business projects. Having this binder that serves as a catch-all for those projects keeps me sane. If something comes in during the day that I need for a project I am working on for my Hour of Power, I just slide it in and move on, reassured that I will be able dedicate time to it later.

    Don’t Just Clean… Purge

    This is critical. If you are really ready for a revolution, take everything out of your office (or offices). Get a bunch of boxes and as you start removing things, categorize. For example, if you are cleaning out your office and find paperclips everywhere, consolidate into one box. Reading material you haven’t gotten to yet? Put it in one box. That way you can more-clearly see what you have, get rid of the excess, and what you need to allot space for when you put the office back together.

    Being organized doesn’t happen by accident, but it is definitely easier to maintain organization once you have a system. Think about the minutes you could save each day just by implementing and maintaining a few systems of organization. Don’t accept a system that is not working for you just because that is how you always have done it. Reinvent and reap the benefits!

    Denise Lones
    Denise Lones, president of The Lones Group and author of the weekly syndicated Zebra Report, brings over two decades of experience in the real estate industry with expertise in branding, strategic marketing, business analysis, and broker/managing broker training. You can reach Denise at (360) 527-8904 or at www.TheLonesGroup.com.



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  • Today's Regulatory Lay Of The Land

    Photo of an opened book with the text 'Joint Ventures / Regulatory' added


    real-trends-icon

    REGULATORY / JOINT VENTURES

    What do recent actions mean for joint ventures in the real estate industry? Here’s an analysis.

    The Real Estate Settlement Procedures Act (RESPA) regulatory environment has changed significantly since the former Consumer Financial Protection Bureau (CFPB) director Richard Cordray left the CFPB in November 2017. New leadership promised to end the era of “regulation by enforcement.” In 2018, the D.C. Circuit Court of Appeals overturned Cordray’s controversial ruling against PHH that rewrote the RESPA statute under his view that any relationship involving a referral source is illegal.

    What do these relatively recent developments mean for joint ventures in the real estate industry? Here’s what two leading RESPA attorneys, Phil Schulman of Mayer Brown and Richard Andreano of Ballard Spahr, had to say about today’s regulatory lay of the land.

    A Clear Statutory Exemption:

    Schulman and Andreano both noted that the regulatory environment for affiliated business arrangements (ABAs) is more precise than that of Marketing Services Agreements (MSAs) since there is a specific ABA exemption (a safe harbor) under RESPA. There must be the disclosure of the affiliation at or before the time of the referral, no required use of the affiliated service and nothing of value received other than a return on an ownership or franchise interest. “The PHH case involved RESPA’s more generic exemption for payments for services rendered (Section 8 (c)(2)), not ABAs,” Andreano pointed out. “If Cordray had tried to rewrite the ABA statutory exemption, he would have had a harder road to follow.”

    RESPA’s Sham Joint Venture Guidelines:

    Both lawyers emphasized that a company should not enter into a joint venture unless both partners are ready to sub- stantially comply with the RESPA Sham Joint Venture Guidelines, which lay out 10 factors regulators use to determine whether a joint venture is bona fide or a sham designed to circumvent RESPA’s referral fee prohibition. These include (but aren’t limited to) adequate and proportional capitalization by both partners, the performance of the core or essential services by the joint venture’s employees, separate management, and separate office space. Note: A 2013 Sixth Circuit Court of Appeals ruling in Carter v. Wells Bowen Realty Inc. that the Guidelines need not be given “deference” is only binding on district courts in Ohio, Michigan, Tennessee, and Kentucky.

    Ownership By Real Estate Agents:

    There are additional securities issues raised if real estate brokers want to include agents as owners, according to Schulman. The ownership interest is a security, which means it must be registered with financial authorities unless the agent is an accredited investor. To be an accredited investor, a person must have an annual income exceeding $200,000 or $300,000 for joint income for the last two years, or a net worth exceeding $1 million. “Some real estate brokers don’t understand this,” he said.

    A Compliant Aba Disclosure:

    Andreano also underscored the importance of providing a compliant affiliated business disclosure, pointing to a $500,000 civil penalty that the CFPB under Cordray imposed on RealtySouth in 2014 for deviating from the model Affiliated Business Disclosure Form provided as an appendix in RESPA regulations. RealtySouth allegedly did not use capital letters when advising of the consumer’s right to choose; did not set apart a statement advising of the consumer’s right to choose, and included promotional language. While an Alabama federal court ruled in 2016 that the exact language of the model disclosure is not required as long as the required statutory elements are present, companies need to be mindful that the CFPB finding is still on the books.

    Dodd-Frank’s 3 Percent Points And Fees Cap:

    Andreano pointed to Dodd-Frank’s requirement that a loan must have less than 3 percent in points and fees to be considered a Qualified Mortgage, which is assumed to have met Dodd-Frank’s ability-to-repay requirements. Current CFPB regulations require that affiliated (but not unaffiliated) title fees and mortgage broker fees be counted towards the 3 percent threshold, which could cause some affiliated loans to exceed the cap—particularly when loan amounts are low.

    State Laws And Regulations

    Both Schulman and Andreano advise a thorough review of state laws and regulations, many of which cap the percentage of business a title agent or insurer can receive from an affiliated business or contain other restrictions on affiliated operations. Many state attorneys general and financial services regulators will be motivated to ramp up their enforcement activity to fill perceived regulatory or enforcement voids at the federal level—often at the urging of affiliated business competitors.

    A Substantial Investment

    Finally, Schulman highlighted the practical considerations of creating a joint venture. “ABAs are more lucrative than MSAs, with higher gains,” he said. “But real estate brokers need to understand that they are creating a whole new business, which means a higher investment.”

    Next month: Today’s Regulatory Lay of the Land for MSAs

    Sue Johnson is the former executive director of RESPRO, the Real Estate Services Providers Council Inc. She retired in 2015 and is now a strategic alliance consultant.

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    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • Northeast Region Posts First Year-over-year Increase In Buyer Traffic Since April 2018

    ShowingTime Showing Index for May 2019


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    BROKERAGE

    The U.S. as a whole reports slightly lower buyer traffic, but more stable showing activity.

    Key Points:

    • Showing traffic experienced a more stable 2.3 percent year-over-year decline throughout the U.S. in May, representing the smallest such decline since August 2018.
    • The Northeast Region reported a 1.5 percent year-over-year gain in showing traffic, the first increase in the region since April 2018. Real estate agents throughout the U.S. may have to brace for a more sluggish market than anticipated based on last month’s decline in home showing activity, the ninth consecutive month of a nationwide year-over-year decrease according to the ShowingTime Showing Index®.
    • Showing traffic was slower in the West (10.6 percent), the South (4.1 percent) and the Midwest (3.4 percent) compared with the same time last year.

    Real estate agents throughout the U.S. may have to brace for a more sluggish market than anticipated based on last month’s decline in home showing activity, the ninth consecutive month of a nationwide year-over-year decrease according to the ShowingTime Showing Index®.

    Buyer traffic was down 6.5 percent across the U.S. compared to the same time last year. The diminished showing activity was felt in every region throughout the country, most notably in the West, where for the 13th consecutive month showings declined on a year over year basis.

    “Showing activity stabilized and is holding steady, but it is still slightly off from the higher levels registered in 2018,” said ShowingTime Chief Analytics Officer Daniil Cherkasskiy. “The slowdown in showing traffic continues to be concentrated in the upper price quartiles across the U.S., with less expensive homes registering the same or slightly higher levels of showing traffic than at the same time last year.”

    The ShowingTime Showing Index, the first of its kind in the residential real estate industry, is compiled using data from property showings scheduled across the country on listings using ShowingTime products and services, providing a benchmark to track buyer demand. ShowingTime facilitates more than four million showings each month.

    Released monthly, the Showing Index tracks the average number of appointments received on active listings during the month. Local MLS indices are also available for select markets and are distributed to MLS and association leadership.

    View the full report online.

    About ShowingTime

    ShowingTime is the residential real estate industry’s leading showing management and market stats technology provider, with more than 1.2 million active listings subscribed to its services. Its showing products and services simplify the appointment scheduling process for real estate professionals, buyers and sellers, resulting in more showings, more feedback and more efficient sales. Its MarketStats division provides interactive tools and easy-to-read market reports for MLSs, associations, brokers and other real estate companies, as well as a recruiting tool for brokers. ShowingTime products are used in more than 250 MLSs representing nearly one million real estate professionals across the U.S. and Canada. For more information, contact us at research@showingtime.com.

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    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • What Is The Future Of Real Estate Brokerage?

    Family looks and points at a house; sky in background has a technological pattern


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    BROKERAGE / TECHNOLOGY

    Despite the constant buzz surrounding technology and its impact on the industry, it is unlikely it will replace the role of a trusted real estate advisor. Here’s why.

    Will technology, artificial intelligence, and machine learning change the real estate business? The answer is yes. Will these disruptors replace the role of the real estate sales associate? I don’t think so. There are five universals or pillars of our business that have not changed and will require the role of a trusted real estate advisor in the future. Technology will change how we do the business, but these five pillars make what we do unique and require a carbon-based life form to orchestrate them.

    1. Frequency

    People only purchase or sell a home on average every 8 to 10 years. This is not the same as ordering a book, an airplane ticket, or a Netflix video. The requirements for selling and buying 10 years ago may be very different today. Most people only buy or sell a home four or five times in their lifetime. The experience ranks up there with graduations and weddings in the frequency of life events. Due to the lack of frequency, people need help navigating the process, which changes with market cycles and legislation.

    2. Uniqueness

    Every property is unique and has unique marketing challenges. We are not selling iPads or cars. We are selling one of a kind. Add the different personalities of buyers and sellers into the equation, and every real estate transaction is unique. Have you ever had to talk a buyer or seller off a ledge? Throw in the emotions of a divorce or a job transfer. Does a computer algorithm have the empathy and counseling skills to deal with the human side of a real estate transaction? A trusted advisor, not machine learning, is the critical value component here.

    3. Size

    The numbers are huge—typically a home is the largest financial and emotional transaction in a person’s lifetime. It’s not the same as ordering an Uber.

    4. Complexity

    There are a lot of moving parts in a real estate transaction—by some estimates over 80 details to be handled. The real work often starts after going under contract. The iBuyer movement is attempting to simplify the process, but at a significant cost to the seller. Will this movement be a niche or become broad-based? Because of the other four pillars, my feeling is that the iBuyer component will be a niche for some sellers.

    5. Risk

    Due to the size and complexity of the transaction, there is a fair amount of risk. If something goes wrong, you can’t just “send it back” as you do products from Amazon.

    Because of these five pillars, clients need sales professionals with deep smarts in marketing, negotiation, real estate law, and contract management as well as empathy, customer service, and communication skills. They need a trusted real estate advisor and concierge.

    When I go over these five pillars with sales associates, owners, and managers, they seem to get a stroke of insight and clarity. They stop being confused and afraid of the disruptors and new technologies. They start focusing on their relationship-building skills, empathy, and finding ways to create a WOW! experience for their clients. The new technologies will assist the sales professional, but not replace them. Most clients are not looking for an app or algorithm to help them. They want an empathetic, trusted advisor. Provide this level of service, and our future is very bright!

    Larry Kendall is the author of Ninja Selling and Chairman Emeritus of The Group, Inc.

    real-trends-icon

    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • REALTOR® PROfile: Maggie McQueen & Bobbie Chipman

    Maggie McQueen and Bobbie Chipman Photography by Amore Studios

    From Survival to Thriving: How one Broker beat the odds & another gave her a chance to succeed.


    Finding a Place to Heal

    When Maggie McQueen walked into John L. Scott Real Estate four years ago, she had no idea how taking that step would change her entire life.

    You wouldn’t immediately associate a real estate office as a safe haven for a survivor of domestic abuse, but that’s exactly how the story played out on the day that Maggie McQueen walked through the doors of John L. Scott Puyallup Main office four years ago.

    Passing over that threshold wasn’t easy for McQueen, who had not only suffered 11 years of emotional and psychological abuse at the hands of her ex-husband, but hadn’t found the right vibe for her when visiting several other real estate companies.

    “I’d spent the entire day interviewing with other offices and John L. Scott was on my way home,” says McQueen, “so I figured I’d swing in.” Catching a positive vibe as soon as she walked through the door, she talked for a few minutes with the person who was manning the front desk. When another broker joined the conversation, he told McQueen to hang out until the office leader got back.

    “He wasn’t going to let me leave for anything in the world,” recalls McQueen, who within a few minutes remembers seeing a woman walking across the parking lot, arms overflowing with stuff, kicking the office’s front door with her foot to open it. The broker made some quick introductions between McQueen and Office Leader Bobbie Petrone Chipman.

    “She brought me right into her office; I was scared because I’d never done anything like this before,” recalls McQueen. “She just sat here very calmly and patiently, listening and asking questions. Then she took her glasses off and got real.”


    There’s More to the Story

    Chipman also remembers that day very well. With no idea that a future team member was waiting nervously for her in the lobby, she found herself face-to-face with a tattooed, slender young woman with bright pink hair. “The moment I saw Maggie, I knew she had something special,” recalls Chipman. She also knew that McQueen didn’t necessarily “look” like your typical real estate broker.

    “All I saw was this woman who had something amazing going on,” says Chipman. The turning point came when those glasses came off and Chipman uttered these words, “I think there’s more to your story than what you’re telling me.” And with that, McQueen opened up and told her about the abuse inflicted by her ex-husband, how she had fled the family home with her children, and how she was currently homeless and in hiding from her abuser.

    “I have no idea why I told her; I guess I trusted her,” recalls McQueen, whose instincts were right on target. “I told Bobbie details that I hadn’t shared with anyone else. She was just so welcoming and easy to talk to.” Within two months, this aspiring broker had earned her real estate license and was already selling homes… even while experiencing her own homelessness.


    Someone Believed in Me

    To better understand how these two professionals came together and formed a mentoring relationship that would span four years (and beyond), we rewind the clock a bit and hear Chipman’s story. A former waitress, she came into the real estate business in 1992 and moved into her first management role six years later. “I spent 17 years in the restaurant business and I needed a better lifestyle for my sons,” Chipman says. “Someone believed in me and suggested that I interview for a real estate position.”

    Chipman took a live class while working full-time at the restaurant and became licensed in 1992.

    After hanging her license as the manager of the Lakewood/Tacoma John L. Scott franchise, she was forced to make a tough decision when its owner passed away. “I loved management; I thrived on supporting and training brokers and the lifestyle that it offered was important to me as the mother of two young boys, so I moved to another company for 11 years,” says Chipman.

    In 2011, someone from John L. Scott’s leadership team reached out to Chipman, letting her know that there was a management opportunity available, and would she like to come and interview for it? The answer was “yes,” and with that, Chipman was hired for her current position as office leader for the Puyallup Main location.


    “Right After I Ran”

    There are no right words when talking to someone who has suffered more than a decade of domestic abuse at the hands of a loved one, but McQueen comes across as extremely straightforward and confident, despite her harrowing experience. “I got my license in November of 2015—right after I ran,” she says, referring to her escape from the abusive marriage. Prior to that, she was a personal trainer and a carpenter. “I got injured on the job,” she explains, “and wound up in a horrific, abusive marriage.”

    Luckily, McQueen’s spirit wasn’t completely broken by the experience. Even while in the relationship, she was already thinking about a potential career in real estate—a career that a REALTOR®-friend once told her she would be perfect for.


    “My ex told me I’d never be able to sell a single home,” she recalls, “and you know what? He was right. I’m going to sell all of them.”

    Fast-forward to 2015 and McQueen had just hung her freshly-minted license at John L. Scott Real Estate, where she not only has the support of an office leader who knew her story, but also a strong REALTOR® mentor to guide her throughout her career. Chipman’s nurturing approach extends through her entire 126-broker office, where McQueen was welcomed with open arms.

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    The depth of those office relationships would be tested fairly early on. Working with a high school friend who wanted to buy a house, McQueen found herself writing up her first deal within three weeks of getting her license. “I was completely freaking out, but I very calmly told my buyer that I had to ask someone in the office if I was doing this right,” recalls McQueen. It was 6:30PM and most of the office had already gone home, but one broker who was there took one look at the frantic newbie and said, “It’s okay, I got you.”

    After going over the contract with the client, the broker took McQueen into his office and spent two hours reviewing it line-by-line. “That’s how I took contracts from training to real-life,” she says.


    Like a Slingshot

    Ask McQueen how her real estate career has progressed since that first deal and she answers quickly: “Imagine a slingshot being pulled back and let go. It’s gone up and up, and further and further.” She’s consistently earned more commission than she did the prior year, and is in a financial position that she never even dreamed possible. “I just bought my first house,” says McQueen, “and more importantly, all three of my children (now ages 16, 18, and 21) are happy and in a good place.”

    Some of that “slingshot-like” production can be attributed to a very special mentoring relationship that spawned between McQueen and Chipman. “In the beginning, if she could have held my hand all day, every day, I would have welcomed it,” says McQueen. “Although I knew I didn’t have to tell her what I was doing or report to her or ask her, knowing Bobbie was there was very empowering.”

    Chipman says that the mentoring relationship (side note: she doesn’t like the word “mentoring” and prefers “relationship”) she formed with McQueen—and any others she’s been involved with during her tenure as a manager—is both casual and informal. “Relationships are extremely important to me; I think that’s one of the reasons that Maggie got the vibe from our office that first day that she walked into it,” she explains. “Everyone here—myself included—is a resource and in a lot of ways, a mentor.”


    "Relationships are extremely important to me…"

    Digging down deeper into her management approach, Chipman says her office is a “safe space” for anyone who is dealing with work, personal, or family issues. “I don’t care what it is, they can come in here and talk to me about whatever it is they darn well please,” she says. “This applies to our staff, brokers, fellow managers, and colleagues.” In some cases, Chipman’s passion for forming strong relationships works in the opposite way—namely, quickly identifying people who may not be right for her team.

    “If someone comes in to interview with me, and if I don’t feel a genuine connection with them, this is probably not the right office for him or her,” Chipman admits. “I want to have an enriched relationship with a broker, I think every broker is entitled to have a honest and supportive relationship with me. If we don’t have that connection from the get-go, I will recommend a few other offices to them where they will be a better fit.”


    The Right Balance

    Unlike most real estate brokers, McQueen was (and to some degree, still is) limited in just how much information she could reveal about herself and her whereabouts. She also couldn’t use her photo on property advertisements or online—again, something that most brokers do to help personalize their advertising and marketing. “I don’t use a photo on any of my marketing, period,” says McQueen, who circumvents that challenge by creating eye-catching, impactful marketing messages.

    Of course, McQueen did have to put herself out there to hold open houses and show properties to her clients—both of which are very “visible” activities. “Staying hidden while completely and totally putting myself out there was an interesting balance,” she recalls, remembering how her first desk was near a doorway that led right to the office’s entrance. Had her ex ever walked in, it wouldn’t have taken long for him to get to her. “There was always a level of fear about that happening,” she says.

    As if those weren’t enough challenges for one budding, entrepreneurial REALTOR® to handle, McQueen was also grappling with depression and the PTSD brought on by the trauma that she’s experienced. “The PTSD was so bad that I couldn’t even go to the grocery store; I would work 10 hours, leave the office, and go straight home,” McQueen recalls. “My friends would leave food out on my porch so that I had something to eat.”


    Opening Her Heart

    Fortunately for McQueen, the further her harrowing experiences fade into the rearview mirror, the more she’s able to enjoy her life, friends, children, and the rest of her blessings. Many of those blessings are right in her office, where she’s made “some of the best friendships” she’s ever had in her life.

    “There are a lot of people here whom I would call ‘family,’” says McQueen. “If you knock on someone’s door and say, ‘Hey, I have a problem and I think you can help me with it,’ they will stop what they’re doing and help you with it. I haven’t come across a single person in this office who wasn’t willing to do that.”

    Early in her career, for example, one of the office’s top brokers listed a home that McQueen brought the buyer for. “I had no idea what I was doing—the listing broker needed something from me and I told her assistant that I didn’t even know how to keep a transaction file,” she recalls. “She came downstairs into my cubbyhole office, sat criss-cross on my floor, and went through all my files. She taught me how to keep a perfect file.”

    As she reflects on the past and looks forward to what’s coming around the next corner, McQueen has a message to other people who have survived seemingly-insurmountable challenges in life: once you are out of the situation and in a safe place, open your heart again. Had she not done this, McQueen may not have ever found her way into the nurturing, supportive space of John L. Scott Real Estate’s Puyallup Main office and its fearless leader. “Don’t close yourself off so much that you forget to live,” she adds, “because amazing, unbelievable things can happen.”

    Chipman says McQueen’s journey shows the importance of reaching out to promising new agents, taking them under your wings, and supporting them through the early stages of their careers (and beyond). “I don’t believe in the ‘boss’ relationship, but that’s a role that brokers can accidentally fall into,” says Chipman. “Instead, let people be their authentic selves. That, and a wonderful workplace can change their lives forever.”


    Maggie McQueen & Bobbie Chipman
    Bobbie Chipman
    Maggie McQueen & Bobbie Chipman
    Maggie McQueen
    Bobbie Chipman
    Maggie McQueen

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  • Lawsuits Against Our Industry: Are We Under Attack?

    Four ominous silhouettes in a board room with a gavel in the foreground


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    Is it the end of the cooperation and compensation structure of brokerage?

    Over the past few months, numerous lawsuits have been filed against the National Association of REALTORS® (NAR) and some of the large national franchisers alleging that they are engaged in a massive conspiracy against housing consumers to maintain a certain commission level and sharing arrangement. Some commentators have said that they believe this is the beginning of the end of the cooperation and compensation structure of the North American brokerage market.

    We Don’t See It That Way

    First, in our consumer studies with Harris Insights from 2001 forward, (and particularly our studies of 2004 and 2005) consumers were well aware that they had choices ranging from selling or buying a home themselves, or using a flat-fee firm, or a discount brokerage firm or a full-service firm. They knew to ask for discounts from the average brokerage commission.

    Second, consumers reported in these studies that not only were they aware of these options, but a significant share of them seriously considered using them.

    Minimum Service Standards

    Some years ago, REAL Trends was retained by the Canadian Competition Bureau (picture the U.S. Federal Trade Commission and the Department of Justice Anti-Trust Division combined) to study the effects of minimum service standards in various states in America on discount, flat fee, and limited service brokerage firms. We concluded, after interviewing more than 25 firms, that although these firms had to add somewhat to their service offerings, it did not affect their businesses.

    No consumer is forced to use an agent by law or regulation. If that were the case, then we could blame the regulators or politicians who put them in their jobs for forcing consumers to do so.

    Sellers who list their homes with an agent do so at arm’s length. First, they don’t have to list with an agent. If they do, they can negotiate the commission. When they do enter into a listing agreement, they know how much the commission is.

    There is no evidence that we are aware of that sellers adjust their market price net of commission. Most data we’ve seen indicates that the market price is, in fact, the market price. Whether a commission is 1 percent or 8 percent does not seem to have a direct impact on what the seller gets for their home.

    In REAL Trends consumer studies with Harris Insights & Analytics, the usage rate of agents has gone from approximately 81 percent in 2001-2002 to 90 percent in 2018. Even millennials are using agents more than predicted, at a 92 percent usage. In an age of more technology, limited inventory, and rising home prices, consumers think using an agent is more important and useful than ever before.

    Where Is The Conspiracy?

    Where is the harm to consumers? What we suspect is that there are those who are hugely frustrated that the combination of tech and Wall Street hasn’t been able to blow up the residential brokerage industry as they have done to so many others. Numerous articles are calling for the demise of the agent, or the broker, or the MLS, and that something about it isn’t fair. They all say the same thing. Consumers now find their own homes online, do all the homework, etc., so why haven’t commissions come down?

    Two things—first, commissions have come down, and they are going to drift even lower in the years ahead. It’s incredible what competition (versus) litigation can accomplish. Second, the housing transaction is infrequent, complex, and consumers know at an instinctual level that if they were to make a mistake in buying or selling a home, it could hurt them badly.

    So, the usage rate of real estate agents goes up even as the commission rate comes down. Some research we’ve done suggests that the scarcity of inventory, together with increasing numbers of agents explains much of the decline in commission rates.

    What’s The Alternative?

    Let’s break up cooperation and compensation. Sellers pay their agent; buyers pay their agent. Suddenly, first-time home buyers (34 to 36 percent of all buyers) have to negotiate to pay their agent and, then, pay their agent—on top of all their other closing costs. Anybody want to opine on the impact on first-time home buyers or the homeownership rate?

    Would this drive more double-sided deals as some buyers go directly to the selling agent to avoid paying any buyer’s agent?

    Would this cause the MLS to go away and tilt the playing field to firms like Zillow or Realtor.com? Or Upstream? Would a national MLS in the hands of two or three providers be a better situation for consumers than what is available today? Or, would change anticipated from the litigation drive the market to fragment the other way with more off-market or coming-soon listings than are available in the large public exchanges?

    Keep in mind that the claimants, in this case, are not non-profit public interest law firms. They are not in this to help improve the system, but to extract money from it.

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    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • When Will It Make A Difference In Brokerage Strategy?

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    FIRST PERSON / BIG DATA

    It’s not a lack of data holding brokers back; it’s that brokers don’t use the data they have.

    We reviewed a new dashboard from one of the largest transaction management firms in North America a few weeks back. The current data on the performance of agents and the brokerage was incredible. Even more, it had a forecasting toolset that allowed brokerage firms to know its 30-, 60-, and 90-day likely results. It also compared and contrasted how the brokerage was performing against the market.

    The Data Is There

    Which brought to mind tools such as Broker Metrics, Real Data Strategies, and TrendGraphix, each of which reads MLS and sold data to do some of the same things. Then, there are the available data tools from companies like Adwerx, BoomTown, SmartZip, and others, that provide excellent information about consumer behavior for their brokerage and agent customers.

    REAL Trends provides a variety of such data, having access to 25 years of performance data on all forms of brokerage firms through our ranking reports and over 10 years of data on agent performance. Also, REAL Trends has 25 years of brokerage financial performance from which we derive metrics about brokerage firms’ financial performance.

    Are You Using It?

    Most brokerage firms do not use this information. Whether it’s their own firm’s financial performance, their performance against the market and competitors or the behavior of consumers, the majority of brokerage firms don’t make strategic or tactical use of this data to operate their companies.

    There is one case of a firm doing so. Keller Williams Realty International makes use of its global operating platform to track the performance of its market centers in every aspect of the business. Among other things, they can track recruiting results, agent performance, training, and educational involvement by their agents and teams, along with typical financial results. There is little argument that this has been a contributing factor in their growth over the past 15 to 20 years. Imagine knowing the correlation between agent performance and involvement in training programs and how that could be used to increase the credibility of a brokerage leader in the use of that training.

    Trainers like Brian Buffini, Tom Ferry and Larry Kendall each have systems for tracking the performance of agents and teams who have adopted their programs.

    Use The Data

    In short, it isn’t a lack of big data that holds brokerage firms back from using it to improve performance. In our view, it’s the leadership of the brokerage industry that needs to learn new ways of operating their businesses using this data.

    Much like the concept of Moneyball (the book and movie by Michael Lewis about the Oakland Athletics’ use of big data that changed how sports teams of all kinds are operated), the leadership and management teams of brokerage firms must not only look at the performance data of their firms and the market, but also must act on that information. It does little good to know you’re getting kicked around in the market if you don’t respond to change your performance. Billy Beane and Paul DePodesta of the Oakland A’s knew their team was underperforming and recognized the data that told them how to improve that performance. However, they had to take the next step and change how they used that data to produce a winning, profitable team.

    Success Story

    One example from our consulting work was from an assessment we did with a reasonably successful brokerage firm that asked us to perform a valuation. The valuation includes a benchmark analysis of revenues and expenses against the firm’s peers. We were able to point out that the data showed that the firm was underperforming in gross margin, had higher-than-normal employment and higher occupancy costs on a per-dollar and per-agent basis. As a result, his EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) was lower both in total and in per-agent contribution. Armed with this knowledge, the principal focused on improvements in those areas. Now, the firm is much larger and leaner. It now leads its peers in EBITDA and most other vital measurements of performance. The firm is also more valuable than it was by a significant factor.

    The leader saw the data. He restructured his business to target the key areas the benchmark provided, changed the allocation of the firm’s leadership team in critical areas, and built a firm, as Good to Great author Jim Collins would say, “built to last.”

    We do believe that the national firms are all headed in this direction with big data and artificial intelligence. Indeed, it will give them a leg up in the environment of the future—although their affiliates must buy into the use of these tools and rearrange how they manage their business. As a result, nothing much will change.

    One might view, therefore, that nothing has changed. It’s still about the quality and intelligence and relationship skills of the brokerage leadership that will determine who wins.

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    This article originally appeared in the July 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • U.S. Median Listing Price Hits $300,000

    a row of simple, graphic houses


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    REALTOR.COM SURVEY

    Based on homes advertised on realtor.com’s website, the U.S. median home listing price crossed into uncharted territory in March, increasing 7 percent year-over-year and hitting $300,000 for the first time.

    “The typical U.S. home list price has set a new high right on the cusp of the spring homebuying season, and despite a slowing growth rate, home prices will likely continue to set new records later this year,” says Danielle Hale, realtor.com’s chief economist. “Heading into spring, U.S. prices are expected to continue to rise, and inventory is expected to continue to increase, but at a slower pace than we’ve seen the last few months as fewer sellers want to contend with this year’s more challenging conditions.”

    Part of the reason for the higher median asking price may be related to fewer listings for home prices at $200,000 or less. Although housing inventory continues to increase nationally, the pace of that rise continues to slow as fewer new listings hit the market. Homes priced $200,000 or below decreased 9 percent year-over-year.

    However, that situation might be true everywhere. “A buyer’s experience will vary notably depending on the market and price point they’re targeting,” Hale says.

    The U.S. housing market has seen years of increasing home prices and surpassed 2018’s summer high of $299,000 as the spring home-buying season launches. The continued, albeit slowing, rise in the national median home price amid a market slowdown is likely driven by inventory growth in the high-end of the market.

    According to realtor.com’s analysis, the inventory of for-sale homes priced above $750,000 increased 11 percent year-over-year, even as the number of entry-level homes priced $200,000 or below declined.

    Housing inventory continued to increase in March, but the rate of growth slowed compared to the last few months, and this slower-price-growth trend could continue into April, especially if fewer new listings hit the market, according to Hale.

    Approximately 56,000 additional homes were for sale in March compared to last year, amounting to a 4 percent increase year-over-year. The growth was primarily driven by the U.S.’s 50 largest markets, which grew by a more substantial 9 percent on average year-over-year.

    However, the number of newly listed properties hitting the market declined by 0.4 percent from last year, suggesting that while buyers may have more options to choose from, the share of new properties coming up for sale has not increased.

    Of the U.S.’s 50 largest metros, those that saw the most significant inventory decreases were St. Louis, Washington, D.C., and Oklahoma City, where inventory declined by 19 percent, 14 percent, and 11 percent, respectively.

    Metros, where inventory continued to increase, were primarily pricey, West Coast markets. San Jose, Calif. topped the list; followed by Seattle, and San Francisco, growing by 114 percent, 77 percent, and 44 percent, respectively.

    Nationally, homes in the U.S. sold in an average of 65 days in March, two days slower than a year ago. Kansas City, Mo.; Hartford, Conn.; and Indianapolis, saw the largest increases in days on the market with properties spending an average of 16, 12 and 12 more days on the market year-over-year, respectively. On the flip-side, properties in Pittsburgh, Birmingham, Ala., and Oklahoma City sold an average of 10, eight and five days more quickly, respectively.

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    This article originally appeared in the May 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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  • Trends In Valuations and Mergers & Acquisitions

    Real Trends 2019 Dealmakers Conference


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    2019 DEALMAKERS CONFERENCE

    Experts Dispense Advice at REAL Trends’ DealMAKERS Conference

    The real estate market is softening, and home sellers who were accustomed to being in a strong negotiating position are seeing their advantage slip away. As go homes sales, so go brokerage sales, said Scott Wright, vice president of REAL Trends at the DealMAKERS conference, a precursor to the annual Gathering of Eagles meeting.

    In 2017, REAL Trends hosted the first DealMAKERS conference, which was designed to answer the most critical questions brokerage leaders have about how to value their companies and teams. That year, the seller’s market was peaking.

    What a difference two years make, said Wright, adding that some brokerages that were once candidates to sell may now be deciding to buy instead. Since valuations have come down, they may look to merge with or acquire another firm rather than try to wait for another upturn to improve their acquisition deal.

    In a panel presentation called “Valuation and Deal Terms,” Wright was joined by Alicia Vivian, the chief financial officer of REAL Trends, who works with Wright to determine the valuation of brokerages as part of REAL Trends’ consulting work. The panel was rounded out with two executives from franchises that have been actively acquiring brokerages: Chrissy Oliver of Compass and Alex Seavall of HomeServices of America.

    The most significant change for brokerage acquisitions is that the transactions are commanding less up-front cash, much to the chagrin of sellers, noted Wright. “We see an environment with margin compression at the top,” said Wright. “Valuations are determined by the last 12 months of activity, which hasn’t been as strong.”

    Brokerages, said Wright, do not get to cherry-pick their best year from several, “it’s ‘what have you done for me lately,’” he quipped.

    The key to preparing for a potential transaction, said Vivian, is to ensure the proverbial house is in order with regards to financial statements, contracts, and agent productivity. “It makes the process much easier when you have clean and organized data available at your fingertips,” she said. “Someone in the organization who can speak to the financials should be prepared to do so.”

    Another factor in the M&A environment is that Realogy Holdings, which had been busily acquiring brokerages, announced in January 2019 that it was going to suspend acquisitions. That’s taken some pressure off buyers to act, the panelists agreed. It’s worth noting that HomeServices of America recently displaced Realogy’s NRT in terms of transaction sides from the REAL Trends Five Hundred ranking of brokerages, although NRT still beats HomeServices when it comes to the total dollar volume.

    Will This Have Any Bearing On Future Acquisitions?

    Seavall of HSA said “our formula has evolved,” adding that the organization looks for brokerages with strong leadership who are demonstrating growth despite the declining market. “We believe in the local ability of management to make the best decisions,” something they had “learned the hard way.”

    Acquisitions have helped Compass quickly grow from its launch in 2012, said Oliver, who oversees strategy and growth for the New York-based tech brokerage. Oliver noted that Compass is now focused on its 22 markets and gaining market share in those areas. She said that 2018 was an expansion year, in which the franchise opened in 11 new markets.

    In a session that followed, “Legal and Tax Issues,” attorneys Jim Thomas and Barbara Wells of Minor & Brown law firm discussed how the 2017 Federal Tax Act would impact the business. It’s paramount to choose the most favorable corporate structure as you consider an M&A down the road, they noted, reviewing the differences between S Corporations, C Corporations, and partnerships. Acquiring stock to buy a brokerage is too risky, they said and does not confer tax advantages. It’s risky because the buyer is “acquiring every skeleton in the closet,” said Thomas.

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    This article originally appeared in the June 2019 issue of the REAL Trends Newsletter. It is reprinted with permission of REAL Trends, Inc. Copyright © 2019. To read the rest of this issue & more, please visit our Real Trends page online.

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