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The 500 Top Brokerage Ranking Report: Accuracy and Relevancy in Brokerage Rankings

by: Steve Murray

The 500 Top Brokerage Ranking Report: Accuracy and Relevancy in Brokerage Rankings

Competition is fierce among those ranking brokerage firms. But, ethics, accuracy, and verification are what matter most.

On March 27, REAL Trends proudly released its annual REAL Trends 500 and Up-and-Comers report which ranks the top residential brokerage firms in the country. This study—now in its 31st year—is the standard by which all other rankings are measured. That’s because firms have the option to willingly submit their numbers and third-party verification. That is the standard set by REAL Trends that sets our report apart from others. The 500 Recently, another firm released its own brokerage rankings. That makes them the third firm to do so. They claim that their report is “the most comprehensive, accurate brokerage” rankings. Their press release also says, “Without the best data available, assumptions and decisions are flawed before they’re even made.” Further, the release says, “We are determined to include all of the nation’s largest companies, whether they participate or not.” Their claims fail in a number of ways. First, located in their footnotes, they admit that they made up the numbers for four of the top 15 firms in the country. Not only are these numbers wrong; they are wildly wrong. Second, they are still missing many firms that belong on the list. These are firms that REAL Trends is aware of; however, we don’t publish their data because they did not choose to have their data released. We respect that decision.

WHAT’S IMPORTANT

The problem with their claims is that they fail to understand the respect a company must have with its clients. The authors of this other report have told brokerage firms that if they don’t submit their data, then the authors of the third-place ranking report will make up the numbers. They will put in whatever they think are the right numbers. REAL Trends has corroborated this information from several sources. Rather than respect the privacy of brokerage firms that chose not to participate, this company tries to force them to do so. Now, let’s talk about third-party verification—the reason that REAL Trends is the standard to which all other rankings is compared. The third-place ranking does not require third-party verification. From their own admission, they made up data for at least four of the top 15. And, now that they add agent count data (for analysis purposes they say) which leads to another problem—they don’t verify agent counts. As we know from long experience, these numbers are among the most easily manipulated for the purposes of one brokerage firm being more productive than another. It will lead to grossly misleading statistics now and in the future in calculations of this kind. They just don’t know it yet, because they don’t have any history doing this kind of work. Brokerage firms don’t live and die by where they rank. These firms like our report because it gives them a sense of what they and others are doing, and which businesses are growing and which are not. Most importantly, they have always enjoyed it because it is the most accurate due to independent, third-party verification. It is this feature that makes the REAL Trends 500 the most respected, even if not every brokerage in the country is on it. Finally, the REAL Trends 500 is not meant to glorify the authors of the report, but rather highlight the incredible brokerage companies that dedicate themselves to building and growing their companies. We have always tried to do the best work we can and let the work speak for itself, just like brokerage leaders do. The relationship we have with those who provide their data and submit to the verification process is the reason we have the most successful brokerage ranking in the industry. The 500

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Low-Cost Models: Is the Brokerage Value Proposition Under Attack?

by: Steve Murray

Yes! It’s time to invest in human capital rather than physical infrastructure.

Today’s headlines include stories about Opendoor, Offerpad, Zillow, and Knock, along with Realogy buying homes direct from consumers; and Compass and NRT acquiring agents and teams. You’ll also see Keller Williams, RE/MAX and others building out global tech platforms that integrate numerous data and software services in a single platform; eXp, HomeSmart, Realty One Group, Fathom and countless local, privately owned flat fee or capped commission plan firms expanding rapidly either through virtual platforms or franchising. Plus, NRT stopping purchasing brokerage firms and Berkshire Hathaway HomeServices lowering the prices and terms it is willing to pay.

THE NUMBERS

• Gross margins for all brokerage firms have declined from 22 percent five years ago to less than 15 percent as of the end of 2018. • Net margins for all brokerage firms have declined from 4.3 percent to 3.5 percent over the same period. • Average agents per office achieved little growth over the past five years for all brands and independents except Keller Williams. • Per-person productivity has declined as existing home sales flattened out and agent counts keep growing. • Teams are growing both in terms of numbers and average size and, in many cases, in the sophistication of their lead generation efforts. A 2018 California Association of Realtors® + REAL Trends team study showed that teams show gross margins of nearly 65 percent versus brokerage firms that average 15 percent.

THESE ARE NOT UNCONNECTED EVENTS

The value proposition of full-service, strong brand brokerage firms is under attack by lower-cost models without strong brand names. Whether the full-service brokerage firms are independent or franchised with a national brand, new competitors are undercutting the gross margin of the incumbents with less office space, less managerial and staff support and little-to-no marketing or advertising. In short, the low-cost models usually offer a tech platform of some kind but not much else—and a growing number of agents and teams are taking them up on it. There are signs of contra-trends as well. Most of the leading teams and individual agents continue to align with brokerage firms with strong local or national brand names. Many privately owned brokerage firms, whether independent or franchised, have deployed tech platforms that work as well as any of the national platforms (thus far). Incumbents are restructuring their operations to address lower gross margins. And there are a growing number of incumbents who are moving away from office space and managerial staff and moving towards mentoring, training and coaching to differentiate their offerings—investing in their human capital rather than physical infrastructure. Low-Cost Models : Brokerage Firms In our view, all the changes going on reflect the end of an era where there could be numerous traditional-type brokerage firms in any given market with relatively undifferentiated service offerings. Indeed, some of these firms will remain and be viable. Some will be replaced with low-cost brokerage firms of all kinds. Most importantly, there will be a growth in the number of brokerages with relatively higher costs that focus on the investment in their agents and teams from a personal development position. We see that there are firms, mostly small- to medium-sized firms, that are doing extremely well by investing in coaching and training, and who are much more intimately involved in their agents’ success than is the norm. Several firms haven’t succumbed to the attack of low-cost models by getting ever closer to their agents, establishing and nurturing these relationships more intensely than at any time in the recent past. We recall one of the great lessons from REAL Trends’ whitepaper “Against All Odds,” which recounted the stories of the most successful brokerages through the 2006- 2010 housing debacle, which was “if you think you are close to your people, get closer still.” The percentage of agents for whom the historical value is attractive is shrinking—but not disappearing. To compete in this new environment, incumbents (and new firms) will have to focus more on the investment of themselves in their relationship with their agents and the development of their success.

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Showing Traffic Falls: Sellers Hope for a Spring Thaw

by: Guest Contributor

The traditionally busy spring home buying season can’t come soon enough for home sellers across the country as February continued the trend of year-over-year declines in showing activity, according to data from the ShowingTime Showing Index®. showing traffic Marking the seventh consecutive month of year-over-year decreases, February saw national showing activity drop 9.3 percent, with the West Region reporting the biggest decline at 16.8 percent. The West’s 12-month average percentage change was -11.7 percent. The South Region saw an 11.3 percent year-over-year decline, followed by the Midwest Region (-10.5 percent) and Northeast Region (-5.5 percent).
“Showing activity remained slow in February, furthering the notion that the historically busy spring selling season may see less traffic than is typical,” said ShowingTime Chief Analytics Officer Daniil Cherkasskiy. “These conditions may prove to be beneficial for home buyers, however, as the greater available inventory signals a strong buyer’s market.”
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.

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Building Your Team: Top 10 Interviewing Tips

by: Larry Kendall

Hiring great talent is at the top of every brokerage’s list. Here’s how to interview agents to find out if they’re good for your team.

The first step in building a great team is hiring the right talent. Clearly, the interview process is a key component. Here are 10 tips in interviewing.

1. Hire to Vision

Hire for the vision you want your organization to become. Also, hire to the interviewee’s vision. What are they trying to accomplish and how is your company positioned to help them achieve their goals?

2. Stop Selling!

Don’t be so focused on selling your brand, technology, marketing, etc., that you fail to interview them. Instead, provide interviewees with a package of information on your company in advance that will answer many of their questions. For the top producers you’re recruiting, ask them what their greatest challenges are in their business and then offer solutions. Stop selling and start solving. The interview should be about them.

3. Look for losers

In my 45 years leading a sales organization, I’ve learned that spotting the winners is difficult. Salespeople come in all shapes and sizes. Many surprise me. I’ve found it’s easier to spot the losers and make sure I don’t hire them. The next few tips will help you eliminate the losers and give the rest a chance. Put those who meet the following criteria into your sales system and see how they do.

4. Character

Did they show up on time? This is a sign of their ability to keep their promises. Are they dressed for the interview? Are they likable? Would I be proud to introduce them to a key client? Would I trust them with the keys to my car and my house? (Note: Our sellers will be trusting them with the keys to their houses.)

5. Commitment

Do they have a commitment to a work ethic? “What was your first job for pay?” is a key question. Research shows that young people who had a job for pay by the time they were 14 have a much stronger work ethic. Explore their various jobs and hours worked to determine their commitment to a work ethic.

6. Capacity

Do they have the capacity to work full time? The failure rate in the first two years for new real estate sales associates runs close to 90 percent. A big reason is their inability or unwillingness to work full time. Our experience is that they’ll need to work 60 to 80 hours a week for their first year to make it in this career.

7. Coachability

Are they coachable? Our industry attracts people who don’t respect the hard work and commitment it takes to be successful. They think what we do is easy, and they won’t have to do the work. One way to test their coachability is to give them an assignment to bring to the interview. Our favorite is to ask them to bring their database. If they show up without it, we learn two things. First, they have a character issue. They don’t keep their commitments. Second, they have a coachability issue. They won’t follow instructions. If they have character, commitment, capacity, and are eager to let us show them the way, they’ll usually make it.

8. Culture

Will they fit into our team? Is their focus we or me? In his book, The Ideal Team Player, Patrick Lencioni says his research shows the best team players are humble, hungry, and smart. We’ve found these three characteristics to be important in building a high-performance culture.

9. Three Accelerators

New people get a faster start in our business if they have one or more of the following accelerators: They have previous sales experience; they have previous real estate–related experience (mortgage, title, builder); and, they have a large network of people who know, like, and trust them—and the interviewee is willing to access this network. Look for these three accelerators.

10. The Informal Interview

Interviewees can sometimes fool you in the one-hour interview. Have them meet with your marketing or technology people to “see the resources available to you.” Tip-off your marketing and tech people to watch for the signs listed above, especially coachability. Does it look like the interviewee will embrace your marketing and tech solutions, or do they think they don’t need it? Are they humble, hungry and smart? This informal interview can be very revealing. By following the 10 tips in this interview template, you’ll hire the talent that fits your culture. That’s a great start. The next step is turning this talent into performance which is the primary responsibility of managers. To turn talent into performance, managers should use one of the proven sales systems available in our industry—and build a great team.

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Broker Challenges: Do You Struggle to Communicate Effectively?

by: David Siroty

It’s time to put in place a strategic communications system.

Real estate brokerages are filled with people-people—a group of leaders, staff, and agents who love connecting. That’s why you would think it’s a place where strong communicators would run rampant. Instead, almost all of the real estate brokerages I’ve come across struggle to communicate for a variety of reasons. The first is the breakneck pace of the real estate environment. There’s so much going on—so many deals, offices, and agents—that having a strategic communications system is challenging to set and maintain. The second reason is the entrepreneurial nature of the industry. Each office tends to have its own culture and each manager his/her style. Most leaders are fearful that any effort to infringe on a manager’s work would hinder their spirit. The third is the agent-led system. While most leaders would love to have their agents tethered to the company, the reality is that most would rather have them selling and producing.

THE TIME IS NOW

If we believe challenges are to be met and overcome, I believe it’s time for brokerages to adopt better systems of communications. I can’t tell you how many broker-owners I’ve spoken to who feel they’re continually showcasing and defending what they offer. They’ll say, “We have X, and we have Y, but the agents don’t come to our meetings and don’t pay attention.” The agents have left the barn. The more they disconnect, the harder it is to share what you offer. Unfortunately, this has led many to have fewer sales meetings hoping that the exclusivity of these events will be a draw. I’ve seen that many have drastically cut back on emails and newsletters. The problem is not how often you’re trying to communicate, it’s what you’re sharing that has gone astray. When communicating, no matter if you do it through emails, texts, newsletters, video or meetings, you have to understand the audience and what they want and need to hear. They come first. Once you hook them, then you can weave in your messaging in a way that will engage them. Of course, you also need to understand the underlying themes you want to get across.

Here are some ideas that may help you better communicate with your teams:

1. Your intranet site is not a communications vehicle. It’s a holding cell. You still have to get them there. 2. Newsletters work. You should have a healthy mix between what the agents want to see and what you want to tell them. As a simple example, if your agents love celebrating birthdays, include a list of birthdays for that week. Write concise, scannable chunks of copy along with bold graphics so that agents can read it on the go. I’m a fan of the weekly newsletter rather than a monthly dump of information. 3. Emails work as long as you’re not overusing them. Only major items should be shared in a company-wide email. Consider a targeted approach where agents interested in a specific topic get those appropriate messages. 4. Facebook groups work. Your firm should have a closed Facebook group where you can communicate, share, congratulate, etc. The group also allows for an environment where agents see energy, learn and engage. Keep it updated with only current agents and staff, and never allow it to become a listings bazaar. 5. Sales meetings work. You must have them. And the broker-owner should be scripting them with the manager’s input. Every office—and every agent—should hear the same thing. The meetings should ooze company culture, energy, and vibrancy with time set aside for hardcore real estate along with traditional pieces that agents love (i.e., new listings). 6. Managers must be in the know. As leaders, we want to equip managers to tell the company story. If they’re not on the same page and have trouble articulating the firm’s value, that has to be fixed immediately. Then, get buy-in on the importance of consistency and the tools that the company will use to share the message. What challenges do you have communicating? David Siroty has spent 30-plus years in marketing and communications, the last 15 in real estate. He launched Imagine Productions, a marketing and communications consultancy focused on assisting real estate brokerages, in December 2016 after 13 years leading global communications for Coldwell Banker. He can be reached at [email protected]

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Commentary: The Problem With The Wall Street Journal Op-Ed by REX

by: Steve Murray

Commentary: The Problem With The Wall Street Journal Op-Ed by REX Executives

An Op-Ed with Unsupported Assertions
In a perceived attempt to smear the Realtor organization and its MLS services and excuse the failure of venture-funded entities to provide consumers with a better market opportunity to buy and sell homes, executives from a low-cost, tech-driven realty firm wrote an editorial filled with numerous unsupported assertions in The Wall Street Journal on March 3. The National Association of Realtors penned a response that was confined to the Letters page.

Expertise

First, a disclosure. I have been retained by and qualified as an industry expert by the U.S. Federal Trade Commission (FTC) in matters pertaining to MLS and its relationship to brokerage and housing consumers. I testified as an expert in a major case brought by the FTC against an MLS that was found to be practicing anti-competitive ways. Further, I was employed by the Canadian Competition Bureau in an investigation into the likely impact of certain minimum service requirements in Canada on low-cost brokerage firms. Plus, I was employed as an industry expert witness by the National Association of Realtors® in the actions of the U.S Department of Justice Antitrust Division. Most of these cases were over 10 years ago. I also provided expert reports on behalf of Zillow in its acquisition of Trulia and, just last year, provided an expert report to the FTC’s panel looking into a review of the industry upon the termination of the consent decree of more than 10 years ago.

Assertions by the writers about the realty industry:

  1. “Sites like Zillow and Homes.com are commonplace, but they could not have thrived without the department’s intervention.”The authors may not have known that Microsoft HomeAdvisor, Realtor.com, Homes.com and others were, in fact, thriving before the DOJ’s actions.
  2. “They’ve shielded themselves with a skein of anti-competitive practices, such as restrictive all-or-nothing membership rules and commission tying practices. These have kept the high fees they charge unchanged since 1991.”Without commenting on how Realtor membership rules have any effect on commission levels, they are absolutely wrong about commission levels. As the Department of Finance/FTC’s own economic reports show, through the end of 2006, the inflation-adjusted cost of commissions had gone up less than 1.5 percent per year for the previous 10+ years. Further, our own authoritative research on commission rates show that the rate has dropped from 6.1 percent on average to slightly less than 5 percent in the past 25 years.
  3. “The Realtors’ anticompetitive practices have had a greater negative impact on the American economy than anything Canadian dairy companies or European car makers could to their counterparts in the United States.”What facts do the authors have to back up that claim? More to the point, what economics courses have they taken, or studies have they read to get anywhere close to a truthful assertion?
  4. “Homeowners are required to hire a buying agent if they employ a selling agent through a multiple listing service—a potentially illegal tying arrangement under the Sherman Antitrust Act that keeps buying agents paid though they offer almost no useful service.”I have news for the writers: No homeowner is required to use an agent at any time. In the U.S., no seller or buyer is required by law to use an agent. No seller is required to pay any stated commission, as commission rates are all negotiable. Our own studies with Harris Insights (REAL Trends 2019 Consumer Study) show that consumers know this. Further, even when a seller employs a listing agent, the homeowner can dictate whatever amount they decide to offer the agent working with buyers. If agents offer no useful service, then why do the authors employ their own agents to help buyers and sellers?
In our REAL Trends 2019 Consumer Study by Harris Insights on recent buyers and sellers in July 2018, over 90 percent of all buyers and sellers used an agent, up from 85 percent in a similar study in 2014 and up from 81 percent in 2001. In fact, Millennials (you know the ones who didn’t want to own homes or who would use smartphones to buy homes instead of agents?) used an agent 92 percent of the time to buy or sell their homes. The REX authors say, “Agents offer no useful service.” Again, our independent Harris Insights research said that the highest value consumers received was “helping me negotiate the price and terms of a purchase or sale.” I assume their own company does the same thing. But, what really jumps out is that buyers and sellers said they found that their agent helped them “by providing me with homes that match my home when I am selling (Comparative Market Analysis) and those I am looking for." They said this when housing consumers can find virtually every home online; yet, consumers still find their agents helping them find homes! There are many things wrong with our industry and those of us who have called it home for 30 to 40 years know what those things are. The MLS can be made more effective. Clearly consumers know something that these executives don’t know:
  • Buyers and sellers like using a real estate agent.
  • Buyers and sellers know that they can dictate the cost of their own transaction, including not using a real estate professional at all.
  • Buyers and sellers find their agents services actually quite useful.
Wall Street and Silicon Valley have been trying for 25 years to blow up our industry and do away with agents, and, in some cases, brokerage firms. They haven’t succeeded yet. Even the best of the real estate tech firms, Zillow and Realtor.com, have found that using agents in their service delivery is critical to their business success. Whether REX succeeds or not, the execs who spent their time writing these unfounded and unsupportable claims should spend more of their time focusing on how they can offer something compelling as a way to win the hearts and minds of consumers. Otherwise, they’re just wasting their investor’s money.

REAL Trending Special Episode: Wall Street Journal Rex

REAL Trending Special Episode: Wall Street Journal Rex

Steve Murray

Hi, this is Steven Murray, president of REAL Trends. In a series of new podcasts, I want to try and tackle what I consider to be the biggest issues facing men and women who own, operate, lead brokerage companies today. So on March 3rd, the Wall Street Journal in the editorial pages printed a letter from senior executives from a tech real estate firm called Rex, which has been in the Denver market for a couple of years now without gaining much traction whatsoever. In this editorial, which did not belong on the editorial page whatsoever by the way, Rex's executives smeared the Realtor organization and its MLS services incredibly.
First to disclosure. I've been retained by and qualified as an industry expert by the U.S. Federal Trade Commission, the FTC, in matters pertaining to MLS and relationship to brokerage and housing consumers. I testified also as an expert in a major case brought by the FTC against an MLS that was found to be practicing any competitive tools. Further, I was employed by the Canadian Competition Bureau in an investigation into the likely impact of certain minimum service requirements in Canada on low-cost brokerage firms. Lastly, I was employed as an industry expert witness by the National Association of Realtors in actions of the U.S. Department of Justice Anti-Trust Division in a case over 10 years ago. As a sideline, I was also provided expert reports on behalf of Zillow when their acquisition of Trulia and an expert report to the Federal Trade Commission Panel investigating practices in the industry. This editorial by the Wall Street Journal in short was inexcusable. Let me give you a few quotes. The authors say, "Sites like Zillow and homes.com are commonplace now but they could not have thrived without the Department's intervention." Since these authors weren't around back then they would not have known that Microsoft Home Advisor, realtor.com, homes.com and many others were in fact thriving before the DOJ's actions. Next they said, "The industry has shielded themselves with a skein of anti-competitive practices such as restrictive all-or-nothing membership rules and commission tying practices. These have kept the high fees they charge unchanged since 1991." Wrong. Without commenting on how Realtor membership rules have any effect on commission level, they're absolutely wrong about commission levels themselves. As the Department of Justice FTC's own economic reports published through the end of 2006, the inflation-adjusted cost to commissions had gone up less than 1.5% per year for the prior 15 years. Further, our own authoritative annual research on commission rates have shown that the rate has dropped from 6.1% to slightly less than 5% in the last 25 years. Next they say, "The realtors anti-competitive practices have had greater negative impact on the American economy than anything that Canadian dairy companies or European car makers could do to their counterparts in the U.S." I don't even want to comment on that, to be polite. I would say “what facts do you have that back that claim up?” More to the point, “what economics courses have you taken or studies to get anywhere close to that assertion?” Next they say, "Home owners are required to hire a buying agent if they employ a selling agent through a multiple listing service. A potentially illegal tying arrangement under the Sherman Anti-Trust Act that keeps buying agents paid though they offer almost no useful service." First, I have news for the writers. No home owner is required to use an agent at any time. In the U.S., no seller or buyer is required by law or regulation to use a real estate agent. No seller is required to pay any stated commission as commission rates are all negotiable and our studies with Harris Insights have shown that consumers know this. Further, even where a seller employs a listing agent, the home owner can dictate whatever amount they decide to offer the agent working with buyers. And lastly, if agents offer no useful service then why do the authors employ their own employee agents to help buyers and sellers? In our Harris Insights Research Report on recent buyers and sellers, in July 2018 over 90% of all buyers and sellers used an agent, up from 85% in a summer study down in 2014 and up 81% in 2001. In fact, millennials, you know the ones who didn't want to own their own homes and would use smartphone to buy homes instead of agents, used agents 92% of the time to buy or sell their homes. And here's a laugher, they say agents offer no useful service. Again, our independent Harris Insights research said that the highest value consumers receive from agents was helping me negotiate the price and terms of a purchase or sales. I assume their own company, Rex, does the same thing but what really jumps out is that buyers and sellers said that they found that their agent helped them, "by providing me with homes that match my home when I am selling my house and when I'm buying homes that match what I'm looking for." This in an age where it is all online, housing consumers can find virtually every home online, consumers still find their agents helping them find homes. Wow, imagine that. There are many things wrong with our industry and those of us who've called it home for 30 to 40 years know what they are. Yes, the MLS can be made more effective and the market more effective but clearly consumers know something these executives don't know. They like using agents. They know they can dictate the cost of their own transaction including not using an agent at all. And buyers and sellers find their agents services actually quite useful. A last comment. Wall Street and Silicon Valley have been trying to 25 years to blow our industry and do away with agents and in some cases brokerage firms. They haven't succeeded yet. Even the best of the real estate tech firms like Zillow and realtor.com have found that using agents in their service delivery is critical to their business success. Whether Rex succeeds or not and that issue remains in doubt, the execs who spent their time writing these unfounded and unsupportable claims should spend more of their time focusing on how they can offer something more compelling as a way to win the hearts and minds of consumers. Otherwise, they are just wasting their investors’ money. As a footnote, the plaintiff from Minneapolis-St. Paul supported by over half a dozen major law firms have filed a class-action lawsuit in U.S. District Court for the Northern District of Illinois claiming that defendants NAR, Realogy, RE/MAX, Keller Williams and Home Services of America have conspired together around NAR's adoption and implementation of a rule that requires all brokers to make a blanket, non-negotiable offer of buyer-broker compensation when listing a property on an MLS. While this practice has been litigated and settled many times in the past in favor of the Realtor organization, once more some parties backed by the plaintiff bar attorney funding have decided to challenge the practice where listing brokers agree to publish what they will pay to another broker working with a purchaser for bringing that purchasers to buy the home. And our last note, it seems ironic in a funny way that the Rex authors cite this same problem in their editorial in the Wall Street Journal at almost the exact time that these law firms have filed this class-action lawsuit.

The Conference for Residential Real Estate Leaders

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Valuations: Valuing Small- to Medium-Sized Brokerages

by: Scott Wright

Valuations: Valuing Small- to Medium-Sized Brokerages

It’s no secret that the housing bull market is in the rearview mirror — years of sharply rising home prices driven by a lack of inventory already created affordability issues. When you factor in rising interest rates and economic fears driven by tanking stock markets and political turmoil, the housing market is no doubt going to feel it. As existing and new home sales continue to slide, the residential brokerage industry is indeed feeling a bit of a pinch. This cyclical activity, mixed with the sharp and steady structural decline of retained company dollar, has put the heat on firms of all sizes. Smaller firms though are feeling especially vulnerable given their lack of economies of scale. There are many excellent smaller brokerage firms able to maintain top- and bottom-line margins, but countless more are finding it harder to repel the relentless assault on their businesses.

ACQUIRING AND SELLING SMALLER FIRMS

The inquiries we’re getting are from both buyers and sellers. Buyers want to understand the mechanics of acquiring smaller firms—what to look for, how to value them, and what kind of terms they should be offering. Sellers, depending on their state of urgency, want to know some of the same—what’s their value, what are reasonable terms, and how do they increase their value if they decide to stay the course? These questions and more prompted REAL Trends to develop the e-book mentioned above that focuses on smaller-sized firms. This book is free for download on our website, and below are some highlights: 1. Approaches to Value. Learn about the two most common strategies that are used to value residential real estate brokerage firms. Understand how to normalize earnings, which expense and income items are included and excluded? How do we treat earnings when the owner(s) is a material producer? We dive deep into these topics and more and provide worksheet examples to tie it all together. 2. Deal Terms. Once a value is established, what are reasonable terms that buyers and sellers can expect? Most commonly, only a portion of the purchase price is up front, with the balance paid via a contingency-based earnout. With the primary asset in this industry being an independent contractor who can come and go as they please, the risk needs to be spread between the buyer and the seller. We provide examples of standard terms and how earnouts are calculated. 3. Key Factors That Influence Value. Numerous factors influence value, some more important than others for smaller-sized firms. How does the role of the owner affect value? How does the concentration of sales across the agent base affect value? Do synergies matter? How are things different if we’re dealing with firms affiliated with national or regional franchises?

Download the FREE e-book to get answers. Download your copy today!

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Recruiting: How One Agent Recruited 50 Agents Her First Year as a Manager

by: Tracey Velt

Recruiting: How One Agent Recruited 50 Agents Her First Year as a Manager

Baltimore Broker Nakia Evans talks about how teaching makes all the difference.

Nakia Evans

One minute on the phone and you can sense Nakia Evans, manager of the Fells Point office of Coldwell Banker Residential Real Estate in Baltimore, is a confident leader. She has that poise and self-assurance that immediately makes you listen carefully. So, it’s no surprise to know she bought her first house at age 23. “I bought a HUD home. I had three small children and didn’t want to rent,” she says. When, five years later, she decided to buy a bigger home, she did extensive research on the area she wanted to live, the home she preferred and any financial assistance programs available.   By the time she hired a Realtor to help her, all that needed to be done was view the homes and sign the paperwork. “She told me I would be great in real estate,” Evans laughs. “So, I earned my license, but I kept a full-time job while practicing. In my family, you had a 9 to 5 job and a second part-time job; that’s just what you do.”

FACING ADVERSITY

In 2011, everything changed after she was in a car accident where she was hit head on by a drunk driver. She was forced to take a year off work to recover. “My position at my full-time job was terminated because I wasn’t able to work for so long. I decided to get into real estate full time,” she says. While working at an apartment community doing leasing, she earned her broker’s license. She also took about 83 hours of continuing education credit in 2015. Finally, in 2016, she went full time. A year later, she was promoted to manager of the Fells Point office. She recruited 50 agents her first year. She did it by crafting an Agent Bootcamp, offered to any agent, including those in her office. The boot camp offers business best practices such as time blocking, business planning and more. Her first boot camp, she had 35 agents attend.

HERE’S HOW SHE DID IT:

1. Target your audience. Since Evans had been a dual-career agent, she wasn’t averse to working with part-timers. “It takes time to make it in this career, so if I spend time with people who show a desire, I feel I can help them be successful and they’ll ultimately move to full time,” she says. She also targets people in real estate school. “Most managers only target the ones who pass the test the first time. I reach out to those who don’t pass the test on the first try as well. I wanted to get in front of them before they passed the exam and had other brokers recruiting them,” says Evans. 2. Get the word out. Evans used Eventbrite, Facebook and Instagram to get the word out about her boot camps. “Social media is great for reaching people,” she says. 3. Be flexible. Rather than hold a boot camp during the day, consider holding it in the evening. “I used to hold coaching in the mornings and would get a few people. Now I do it in the evening, around 6 p.m. and the turnout is double.” 4. Spend time with agents outside the office. Evans does everything from attend continuing education courses with her agents to riding with them out in the field. “When agents see how involved I am, it shows how much you care and that good will goes a long way,” she says. Other than events, Evans says it’s vital to keep your current agents happy and talking about you. “Create video testimonials and feature them on your website. Share them to social media,” she says. In fact, social media is vital to Evans’ recruiting. “I showcase what we’re doing on social media, including our involvement with our local Board of Realtors®,” she says. Finally, thoroughly interview all prospects before hiring. “Meet them in your office, especially at a time when some agents will be around. Our agents provide feedback as well,” she says. Overall, the key to recruiting is to build relationships and offer value. If agents aren’t getting it from their broker or manager, they’ll be enticed by what you’re offering.

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Leadership and Industry Changes: Many Questions With Few Answers

by: Steve Murray

Leadership and Industry Changes: Many Questions With Few Answers

Real estate is moving at the speed of light. What do these changes mean to you?
The year started with some big surprises at the top of the real estate leadership ladder. Nick Bailey stepped down at CENTURY 21; John Davis stepped down from Keller Williams Realty, Ron Peltier changed roles at Berkshire Hathaway HomeServices. There were other senior management changes, as well, including the departure of Mike Ryan and Pete Crowe from RE/MAX International. Adding to these changes, just before the end of the year, Realogy announced two new brands, Corcoran and Climb. Then, one of the most aggressive new firms of the last few years, Compass, announced that it’s likely they would not be entering new markets in 2019 (at least in the United States) but would focus more on the continuation of building market share in the markets they are in and getting their technology platform more fully developed.

HOW WILL THIS AFFECT MY BUSINESS?

We have fielded dozens of calls from brokerage leaders as to what underlies all of these changes all within 60 days of each other. Generally, the questions fall into one of two categories: Is there something we should know about the background of these changes? And, will this affect the way business will be done in the future? Along with this question, of course, is how it might affect our business prospects.

INSIGHT

We don’t have any more clarity about the executive changes than anyone else outside a small circle of the executives involved in the decisions. What we can say with some certainty that, in most cases, the changes will not have any earth-shattering effects on the industry. Gino Blefari will become more involved with a broader range of issues at Berkshire, Gary Keller stepped back in as CEO and elevated Josh Team to be the president of Keller Williams. Michael Miedler has assumed Bailey’s role at CENTURY 21 moving up from a senior position with the company. Ryan, who was with RE/MAX for over 24 years, will now serve in an advisory role. Robert Reffkin’s announcement that Compass was not going to enter new markets will have a significant impact on some brokerage firms’ business prospects in 2019. Brokers in markets that Compass hasn’t entered may be breathing a sigh of relief. Those in markets where Compass has established their brokerage can’t see this as positive. Compass has proven to be effective at building their business in more than two dozen major markets and, according to Reffkin, they will continue to focus on building larger market shares. Our answer to brokers in the markets Compass is in, and many others is that Compass is not the only aggressive recruiter of agents out there. Realty One Group, JP and Associates, HomeSmart, eXp and a handful of others are still very much in the hunt for growth through agent recruiting with low-cost agent business models. Whether the changes at the top of national firms are exciting to you or not, you will need to take them into account in your 2019-2020 planning.

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Nine Percent Drop in January's Real Estate Showing Activity

by: Toni Lapp

Nine Percent Drop in January's Real Estate Showing Activity

Sluggishness portends slower spring showing and sales activity in key markets across U.S.
If January is any indication, home sellers are bracing themselves for a tenuous start to 2019, as the first month of the year saw a 9 percent drop across the U.S. in year-over-year residential showing activity, according to data from the ShowingTime Showing Index®. In a notable contrast to January 2018, when the 12-month average year-over-year increase in showing traffic nationwide was 7.7 percent, January 2019 saw the 12-month average decline to almost one percent. The decrease in showing activity has been felt throughout the country but most noticeably in the West Region, which experienced an 18.8 percent year-over-year drop last month. The Midwest Region recorded a year-over-year decline of 12.4 percent in January, with the South Region not far behind with a year-over-year drop of 11.5 percent. The Northeast Region saw a more modest drop of 2.4 percent in January.
“Showing traffic continues to subside from last year’s impressive heights,” said ShowingTime Chief Analytics Officer Daniil Cherkasskiy. “In January, we did not see an influx of home shoppers to reverse year-over-year declines in showings, which suggests that we may see slower traffic this spring compared to 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 during the third week every month, 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.

To view the full report, visit www.showingtime.com/index.

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. 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 [email protected].

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Become a Category of One: Maximize Your Referrals

by: Larry Kendall

Become a Category of One: Maximize Your Referrals

It's still all about the relationship.
Why do sales associates spend billions of dollars buying leads and chasing strangers? The research is clear. Buyers and sellers prefer to work with someone they know, like, and trust. That’s why, according to REAL Trends 2018 Consumer Study, some 92 percent of consumers say they look for a referral from a friend when selecting a real estate professional. Thought-leader Simon Sinek was asked what he thought about our industry’s obsession with technology, disruption, internet leads, and e-transactions. Here’s his response: “Human beings are social animals and relationships will always win. There is a small percentage of people who want a transaction. Most want a relationship. Invest in your relationships. They are your most valuable assets.” So, back to our original question, “Why do real estate professionals spend so much time and money chasing strangers when consumers prefer a relationship?” Two reasons: 1. Because it works! Their real estate professional abandons most consumers shortly after closing. The Zillow Consumer Housing Trends Report of 13,249 consumers found that 74 percent of them never heard from their real estate professional again after closing! It’s clear most agents have a transaction focus instead of a relationship focus. Because consumers are abandoned, they are ripe for internet lead generation, capture, and conversion. Even though consumers would prefer to work with someone they know or a referral, they end up working with strangers by default. 2. Most agents are committed to providing the five keys to maximizing referrals (see next section). Those who are committed build both a large and smart business. A smart company is a business that is sustainable in all market cycles and has a high net income per hour. In contrast, most lead generation models have a low net income per hour due to the cost of buying leads.

FIVE KEYS TO MAXIMIZING YOUR REFERRALS

1. Relationship & Referral Mindset. Every person in the United States knows at least four people who will move this year. Our mission is to access and earn those referrals. You do this by building relationships instead of chasing transactions. You build relationships through the frequency of interaction. 2. Your Appearance. People will refer you if you make them look good. How you dress reflects on the person who referred you. Studies indicate that your appearance affects your income by at least 20 percent, and some studies say as much as 100 percent. Sloppily dressed agents may get the business, but they don’t get the referrals. A survey of sellers found their two biggest complaints were that the agent was late for the appointment, and the agent didn’t dress for the interview. 3. Fabled Service. Can you deliver “Wow!” Is your service memorable? Does your customer feel they are exceptional–or do they feel like they are just a transaction? They are not transactions; they are people. 4. Consistency. Do you deliver the wow consistently? Or is it by accident? Do all your customers receive the wow? Or, are you selective and only provide that level of service to high-end clients? Agents are notorious for this, and it’s not seen in any other industry. When you check into a luxury hotel, rooms may range in price from 0 a night to ,000 a night, but all guests are treated with the same care at the check-in desk. They are not treated differently. Do the same. A real estate friend of mine was referred to one of the richest men in the world by the man’s limo driver who had purchased a low-priced, two-bedroom condo. Even though he was buying a lower-priced home, the limo driver received the wow and told the rich man about it. As a result, my real estate friend became the go-to agent for all of the corporate executives at the wealthy man’s company—and consistently earns over million a year. 5. Follow-up and Flow. Have you ever sent a referral to an agent and never heard back? Unfortunately, this is the industry standard. When you follow up, you are differentiated in our industry, and you get even more referrals. You need a follow-up system (mailings, emails, phone calls) that are driven by your calendar and keeps you in flow with your clients and referral sources. Maximizing your referrals is a simple five-step process that pays big dividends. Why don’t more real estate professionals do it? Because they would have to organize themselves and commit to their relationships. It’s easier for most of them to buy leads and chase strangers. If you follow the five steps, you’ll have all the business you can handle, you’ll build great relationships, and you’ll have a high net income per hour. You will also be so differentiated. You will be a Category of One!

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The Other Side of Real Estate: The Key to Making Successful Tech Decisions

by: Warren Dow

The Other Side of Real Estate: The Key to Making Successful Tech Decisions

It’s amazing how simple some concepts appear but how complicated they are in practice. Here are some observations on how decision making at the brokerage level can improve.
Who’s the decision maker? Ultimately, the broker-owner is the final decision maker at 99 percent of brokerages. But, the size of a brokerage has an impact on how much involvement the broker-owner has in the due diligence and analysis of whether they should say “yes” or “no.” A smaller brokerage, generally up to 15 or 20 agents, may only have a single administrator and their agents. This would leave the broker-owner involved in nearly every step of the decision-making process. On the other hand, a medium-sized brokerage, between 20 to 50 agents, will start hiring management and administrative positions. The management team could be dedicated to a specific function, like accounting, or they could have more open-ended positions that touch many different aspects of the business, such as business development. Finally, a large brokerage, generally over 50 agents, will start hiring dedicated positions for each management function. In most brokerages, decisions usually pass through the appropriate channels before reaching the broker-owners desk for a final decision.

USER ADOPTION IS THE KEY

More importantly, user adoption is the key to a successful decision. Management should be asking the key questions: Will my agents and staff use this? If so, how many of them? The only way to get the answer to these questions is to make sure stakeholders, such as agents and staff, are brought in to give their feedback. Not only will this information be useful in making the final decision, but if the brokerage decides to move forward with the solution, the agents and staff are much more receptive to using it because they were part of the decision-making process. As an example, in my role as vice president of business development, I’ve been tasked with moving all agent-focused services to the cloud from a dedicated remote desktop server environment. Within a few weeks, I knew which vendors I wanted to work with. I hadn’t had time to have one-on-one meetings with all the firm’s agents and staff. I had a decision to make. Do I present my proposal to my broker-owner without stakeholder feedback? Or, do I delay my goal and the job I’d been tasked with to ensure a successful migration? I ended up calling a good friend and former business partner, Alex Camelio, for his take, and he said, “Your agents being a part of the decision is just as important as the decision itself.” I took his advice, and it’s made all the difference. You can have the best system in the world, but if no one is using it, it doesn’t make a bit of difference. My advice to vendors: Help your decision-makers present your product and services to their teams; give them the assets to bring everyone into the process. To other brokerages, make your agents a part of the process; otherwise, the success of your decisions are just a roll of the dice. NOTE: Warren Dow is the VP of Business Development at Peabody & Smith Realty based in New Hampshire. Warren has over a decade of leadership experience in real estate software and services. With a degree in behavioral neuroscience and a background in technology, consumer engagement, and marketing strategy, Warren offers a unique perspective in brokerage efficiencies with a client-first mentality.

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Website Accessibility Lawsuits Soared in 2018

by: Sue Johnson

Website Accessibility Lawsuits Soared in 2018

What are you doing to make your website more accessible? You better do something, or you may have to face a lawsuit.
Thanks to a 2017 decision by the Department of Justice (DOJ), legal challenges over website accessibility for disabled individuals are a rising threat to companies with an internet presence. The federal law governing website accessibility is Title III of the Americans with Disabilities Act (ADA), enacted to prevent discrimination against people with disabilities in places of “public accommodation” such as offices, retail outlets, and events. Passed in 1990, before the advent of the Internet, the law says nothing about websites. However, the DOJ has made it clear that it considers a company’s website to be a place of “public accommodation” subject to the ADA, and it announced in 2015 that it would propose website accessibility standards under Title III by 2018. Then, in December 2017, the DOJ withdrew all pending ADA Title III rulemakings, saying that it is evaluating how best to address the availability of next-generation services that provide text, pictures, and video capabilities. In this regulatory void, the number of website accessibility lawsuits filed by the plaintiff’s bar and disabled advocacy groups against private companies has skyrocketed.

THE FUNDAMENTAL FACTS

According to the law firm of Seyfarth Shaw, the number of ADA Title III lawsuits filed in federal court in 2018 hit a record high of 10,163–up 34 percent from 2017 and triple the number of cases filed in 2013. California, New York, and Florida led the pack by a wide margin as the states with the most Title III lawsuits, with Texas, Georgia, Pennsylvania, Arizona, Massachusetts, New Jersey, and Alabama making the top ten. Seyfarth Shaw noted that its statistics do not even include the number of filings under state anti-discrimination laws, which it does not track. Actual and potential defendants include companies across the whole range of industries. The law firm of Ballard Spahr recently reported accessibility claims against mortgage websites that allegedly hinder disabled individuals from accessing applications and other online content. The National Association of Federal Credit Unions (NAFCU) said that hundreds of credit unions in 26 states received demand letters in 2017-2018 from law firms representing disabled clients who allegedly could not access the credit union’s website. The National Association of Realtors® (NAR) has noted that letters to real estate brokerages from law firms threatening website accessibility litigation are plentiful.

WHAT’S AT STAKE?

Plaintiffs cannot sue for monetary damages under the ADA, but they can seek a court order requiring the company to redesign its website. The court’s ruling for plaintiffs typically need businesses to implement the Web Content Accessibility Guidelines (WCAG) 2.0, Level AA, a universally accepted set of guidelines for accessible online content. Plaintiffs also can seek reimbursement of attorneys’ fees. Seyfarth Shaw says that a majority of federal courts have not been willing to grant early motions to dismiss, and advises that defendants who are unwilling to settle should prepare to go through discovery and summary judgment, if not a trial.

LEGAL DEFENSES ARE DWINDLING

Many defendants have filed motions to dismiss based on a denial of due process, pointing to the lack of DOJ regulatory guidance. Some district courts have agreed. This argument was rejected in January 2019 by the Ninth Circuit Court of Appeals in Robles v. Domino Pizza, which found that Domino’s has been on notice of DOJ’s position that its website must effectively communicate with disabled customers since 1996. The court also found that the district court erred in applying the “primary jurisdiction” doctrine, under which courts do not decide cases where enforcement agencies with particular expertise should weigh in first. Some district courts also have dismissed website accessibility cases in which the plaintiff has not alleged that barriers on the website impeded access to an actual physical place. But appeals courts in recent cases (like the Ninth Circuit in Domino’s and the Eleventh Circuit Court of Appeals in Haynes v. Dunkin’ Donuts) have taken the position that the ADA is not limited to tangible barriers that disabled persons face but can extend to intangible barriers, such as online services of a physical location. A January 2019 National Law Review article written in the aftermath of the Dunkin Donuts case concluded that “[t]he arguments available to businesses seeking to dispose of website accessibility claims at the outset of litigation as a matter of law are dwindling, which may result in opportunistic plaintiffs’ attorneys filing even more claims regarding website accessibility.”

REDUCE LEGAL RISKS

Given this recent spike in lawsuits, it’s advisable to assess your website’s compliance with Title III of the ADA now, with the assistance of legal counsel experienced in website accessibility issues. Not only can you reduce your legal risks, but you will be accommodating a potentially valuable segment of the marketplace.

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Broker Public Portal: Brokers Report on Adoption

by: Tracey Velt

Broker Public Portal: Brokers Report on Adoption

With a partnership with Homesnap, brokerage firms are finding success with the Broker Public Portal.
The Broker Public Portal has quickly evolved into a viable alternative to paying for advertising and leads on the portal sites. REAL Trends spoke with two brokers who were early adopters to talk about agent adoption and future plans. “The joint venture with Homesnap propelled the initiative to deliver a product that is easy for agents to post listings and receive leads with the comfort of knowing that those leads would not be resold,” says Craig McClelland, vice president and chief operating officer of Better Homes and Gardens Real Estate Metro Brokers in Atlanta, Georgia. McClelland is the secretary of the BPP Board of Managers. His firm is one of the early adopters of the Broker Public Portal, (BPP) which is owned and operated by real estate brokerages and MLSs to deliver a better home search experience and provide the same comprehensive, real-time MLS data used by real estate professionals. “The BPP is agent-centric; not advertising centric,” says McClelland, who notes that at the local level, the Georgia MLS has recently rolled out BPP and Homesnap. BHGRE Metro Brokers has 26 offices and 2,400 agents and delivered over one million leads to its agents in 2018, with no charge to the agents for those leads. “Being involved in BPP gives them the tools that protect their business so they can build a business. There are a lot of tools out there that do the same, but agents have to pay for it and where their contacts end up is anyone’s guess,” he says. “If you’re in a market that doesn’t Homesnap, this is the time to raise your hand and ask how to get involved and get the product to your market.” For John M. Deely, CRB, principal managing broker with Coldwell Banker Bain in Seattle, Washington says, “The data we can deliver to our clients through the BPP is superior to anything we’ve had before and competes with some of the tech companies that are presenting data to our clients. It levels the playing field,” he says. He says his agents particularly like social media marketing solutions. “We’re in the center of the tech vortex, and we have a lot of workers who rely on multiple apps and resources,” says Deely. He tells the story of a recent Millennial homebuyer who had “all these different searches with multiple portals going on.” We showed him the Homesnap app, and it provided him with a different listing that wasn’t showing up on the other portal searches. “He and his wife were so impressed with that. It ended up being the home they bought.”

HISTORY OF BPP

In 2014, a handful of real estate industry visionaries set out to prove the naysayers wrong. Brokerage firms representing 300,000 agents and MLSs with 350,000 subscribers announced an effort to develop and manage a new consumer-facing website. The collaboration was born, and brokerage firms and MLSs contributed funding to establish the governance of the Broker Public Portal. A Limited Liability Company was formed, and it drafted one of the first applications to utilize the RESO RESTful API that the National Association of REALTORS® set as the new standard for MLS data. The use of a standard API resulted in the rapid adoption of the Broker Public Portal concept by MLS organizations across the country. In very short order, 45 MLSs joined the effort. From the beginning, the concept was straightforward. Broker Public Portal sought to place control of home listings back in the hands of the professionals who list and sell the property while providing consumers with a better online experience through direct access to real-time MLS data. The concept also was committed to connecting consumers with the professionals best equipped to help them, the people who sell homes, not advertisements.

PARTNERSHIP WITH HOMESNAP

In January 2017, Broker Public Portal and Homesnap formed the National Broker Portal, LLC, a venture equally owned by the two companies. They agreed that the best path to success would be to establish a mutual partnership with Homesnap providing technology, brand, and operational expertise, rather than creating a vendor agreement. As equal partners, their interests are aligned. This strategy added significant momentum to the project. The Homesnap consumer app became the No. 1 rated app in the Apple Store. Homesnap Pro gained penetration becoming available to 71 percent of U.S. agents. And by the end of 2017, the number of participating MLSs increased to 145, a growth rate of 150 percent. Broker Public Portal with Homesnap represented brokerages and MLSs with over 875,000 agents. A revolutionary idea is becoming a reality. About 80 percent of the real estate industry is comprised of the largest 100 MLSs; the remaining 20 percent is represented by less than 600 smaller MLSs.

FUTURE OF BPP/HOMESNAP

One of the future goals of the BPP, according to Deely, is to “work on more information. That’s what our firm is doing with Homespotter within the Matrix, where one can set up and manage searches for clients to help them understand what they’re looking at and help them find the right home.” According to McClelland, “We understand, as business owners and operators, that you can’t take your eye off adoption until you’re fully adopted. You can’t set new goals when you’re not finished with the first goal, which is nationwide adoption.”

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2019 Market: Opportunities and Challenges

by: Steve Murray

2019 Market: Opportunities and Challenges

An uncertain market creates opportunity for brokers who learned from their mistakes in previous down markets.
With the housing sales forecast for 2019 decidedly uncertain, this sets up to be a challenging year for all incumbents, regardless of their size, market, brand name or business model. The news about executive leadership changes does not affect the market overall. As to Realogy’s launch of two new brands, we think that it creates new opportunities for them to grow their franchise reach. But, just as important, their unique approach to the potential for ownership of multiple brands sets up opportunities for growth of their own franchised brokerage firms that were not there before. It also opens the door to having capital from outside the industry.

KEY QUESTIONS FOR OWNERS

• Given that recruiting and developing talent are absolute keys to success in brokerage, how much of your time is allocated to these areas? • Do you have a real budget and business plan for 2019? • How much time have you allocated for relationship building activities with your highest producing agents? • Do you have a system for building both vertical and horizontal communication with and among your management, staff, and agents? • How many new services, programs, etc., are you planning to launch this year? Do you have the resources of time and people to launch them well? What are you going to cease doing so as not to overload or confuse your team? • Do you have a cost reduction plan in your file for what happens if sales cool at any point? • Do you have a minimum of three months cash reserves or access to cash available to you? No one can say for sure what 2019 housing sales will look like, but when we examine a half-dozen forecasts, it seems that they all fall within up 3 percent in unit sales to down 4 percent or so in unit sales. So, bet on flat sales (at best), and you’ll likely be safe in your forecasts and budgets. Do remember that tight inventories and a rising number of new agents are putting downward pressure on commission rates and vigorous competition for productive agents is putting downward pressure on gross margins. Those who plan best and focus on only a few key areas will come through this rough patch in better shape than they entered it.

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Global Trends: Prices Will Rise in 2019 at Slower Pace

by: Peter Gilmour

Global Trends: Prices Will Rise in 2019 at Slower Pace

Here are the factors affecting property prices, according to the 2019 Knight Frank Prime Global Forecast.
Slowing price growth is the story for 2019. Five of the 15 global cities tracked in the Knight Frank Prime Global Forecast—New York, Singapore, Dubai, Mumbai, and Hong Kong—all show zero or negative price growth. Berlin, Madrid, and Paris top the list with price growth of 6 percent, followed by Miami at 5 percent, Vancouver at 3 percent, Los Angeles and Sidney at 2 percent, and Geneva, Melbourne and London at 1 percent. Berlin, Madrid, and Paris are predicted to resist the downward trend of prime residential property prices in 2019. According to the Knight Frank Prime Global Cities index, which tracks property prices across 43 cities worldwide, prices are rising at the slowest rate since 2012. An interesting statistic is that prime residential prices, over the last ten years, have risen by over 100 percent in Berlin and Vancouver, and more than 50 percent in Sydney, Melbourne, and Miami. One major anomaly is that, while prices have risen 33 percent in London over the last ten years, the previous five years have shown a reduction in prices of 2 percent.

FACTORS AFFECTING PRICES

The significant factors affecting the fluctuation in property prices, according to the report, are changes to property market regulations, the rising cost of property financing, uncertainty in the UK and Europe due to Brexit, and the increased supply of prime property in some markets. Vancouver, Singapore and Hong Kong have all introduced new property taxes in 2018, which have affected prices as buyers and developers adjust. Vancouver added a 20 percent tax on foreign buyers and a higher stamp duty. Singapore added a buyer stamp duty for foreign buyers and developers, and Hong Kong added a vacancy tax for developers with apartments unsold for six months. New Zealand introduced a total ban on foreign buyers purchasing existing homes, although they still qualify to buy new properties. Events that will impact property prices in 2019 will be led by the UK leaving the EU, which is still a significant uncertainty and affects many countries. There may be a possible relaxation of loan-to-value ratios in Hong Kong which will impact borrowing. Technology will be seen as an essential driver to price growth with universities, technology parks and startup industries playing an active role in increasing demand for residential properties in certain areas. Although U.S. buyers are benefiting from the strong dollar, there hasn’t been a steady flow of U.S. buyers offshore in 2018. 2019 may be the year that U.S. buyers increase their share of overseas purchases. The report also predicts that in addition to the six major urban markets that saw residential properties sell over million in 2018, San Francisco, Chicago, Dallas, Beijing, and Shanghai could join this elite group of cities with ultra-prime property sales. Property remains a highly rated asset class, and for investors in prime residential property, 2019 may be a year of opportunity.

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CoreLogic Releases Most Recent HPI Forecast

by: Guest Contributor

CoreLogic Releases Most Recent HPI Forecast

CoreLogic®, a leading global property information, analytics and data-enabled solutions provider, released its latest CoreLogic HPI Forecast Validation Report that compares its 12-month CoreLogic Home Price Index (HPI) Forecast to the actual CoreLogic Home Price Index. The report compares the changes in national and key Core-Based Statistical Area-level (CBSA) forecasts made in November 2017 to the actual HPI index, which includes data through November 2018. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables. National values are derived from state-level forecasts by weighing indices according to the number of housing units for each state.

The report showed:

• The national forecast prediction of a 4.7 percent increase was within 0.1 percent of the 4.8 percent increase of the HPI for the 12-month period ending in November 2018. • The most accurate CBSA-level forecast was for the Cambridge-Newton-Framingham, MA area, which at 5.5 percent came on target of the actual HPI increase of 5.5 percent. • The widest CBSA gap was in San Diego, CA with a 6.4 percent over-estimation of actual increase (10.4 percent forecasted vs. 4.0 percent actual). CoreLogic noted that the variance in this under-valued CBSA was due to a downturn of overall demand, combined with a concern over long-term affordability. • Among the 10 most accurately forecasted major MSAs, nine areas had forecasts with less than a 1 percent difference from actual values. • Severe inventory shortages and rising interest rates impacted the forecasts of several MSAs, reflecting the overall market volatility of the past 12 months.
“The latest HPI Forecast Validation report continues to demonstrate why CoreLogic is the gold standard when it comes to home price forecasting,” said Ann Regan, executive, product management for CoreLogic. “Despite an extremely volatile market, our forecasts were still able to provide terrific insight into the overall housing economy, providing HPI clients with the reliability they need in the current market.”
Ranking Market Population HPI Actual Change Forecasted Change Difference
1 Cambridge-Newton-Framingham, MA 4.732 million 5.5% 5.5% 0.0%
2 St. Louis, MO-IL 2.797 million 3.7% 3.7% 0.0%
3 Pittsburgh, PA 2.360 million 4.6% 4.3% -0.3%
4 Portland-Vancouver-Hillsboro, OR-WA 2.389 million 4.7% 5.0% 0.3%
5 Seattle-Bellevue-Everett, WA 3.867 million 5.7% 5.3% -0.4%
6 Virginia Beach-Norfolk-Newport News, VA-NC 1.718 million 2.6% 3.4% 0.8%
7 Jacksonville, FL 1.631 million 6.1% 5.2% -0.9%
8 Los Angeles-Long Beach-Glendale, CA 13.131 million 5.2% 6.1% 0.9%
9 Denver-Aurora-Lakewood, CO 2.850 million 6.3% 5.4% -0.9%
10 Cincinnati, OH-KY-IN 2.131 million 5.4% 4.4% -1.0%
Source: CoreLogic November 2018

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February Newsletter - Agent Shareholders, Team Health, Leading in Chaos & MORE!

by: Nikki Lindholm

The February edition of the REAL Trends Newsletter starts with an article by REAL Trends president, Steve Murray on a topic many agents and broker owners have been asking about - Agents as Shareholders. More firms are offering ownership shares of the parent company - what are the benefits? Steve shares his thoughts. Also in this issue read about how to determine the health of your team, how to lead in a time of chaos, the decisions broker owners need to make to drive growth and much MORE! REAL Trends Newsletters are broken down to cover news for broker-owners and agents on topics like market/economy, regulation, global and technology news - read the full issue below or subscribe to get the monthly newsletter sent directly to your inbox!

REAL Trends Monthly Newsletter

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Frosty December Real Estate Showing Activity Results in Fifth Consecutive Month of Year-Over-Year Declines Nationwide

by: REAL Trends

Flagging showing numbers point to potentially favorable 2019 market for would-be homebuyers across the U.S  

 Key Points:  

  • Showing traffic in December was down 7.2 percent year over year in the U.S.; the West Region continued its nearly year-long decline with a 20.1 percent year-over-year decrease in showing traffic, ending 2018 with a 12-month average drop of eight percent 
  • In a reverse of the five consecutive months of year-over-year increases in showing activity that started the year, 2018 ended with five consecutive months of year-over-year decreases in buyer traffic in the U.S. 
 Home sellers across the country are happy to leave 2018 behind as December marked the fifth consecutive month of year-over-year declines in real estate showing activity nationwide, a 7.2 percent drop, according to data from the ShowingTime Showing Index®.    showingtime Continuing a nearly year-long span of decreasing demand for available residential real estate, the West Region saw a 20.1 percent drop in showing traffic year-over-year in December. The South Region followed that trend, recording a 10.9 percent decline in activity. The Midwest Region also experienced a decline with a 7.9 percent year-over-year drop, as did the Northeast Region, which had a modest 1.5 percent drop compared to showing activity in December 2017.   The news is not all dour, however; as ShowingTime Chief Analytics Officer Daniil Cherkasskiy noted, falling showing activity could make for appealing conditions for prospective buyers in 2019. 
"Buyer traffic continues to subside across all regions of the U.S. compared to the record numbers recorded at the same time last year,” said Cherkasskiy. “In some markets, this is happening despite a stabilization of prices, but this is potentially good news for buyers, who are seeing less competition in the market when trying to buy a home." 
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 during the third week every month, 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.   
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. ShowingTime products are used in more than 250 MLSs representing over 950,000 real estate professionals across the U.S. and Canada. For more information, contact us at [email protected].

Read Past REAL Trends Newsletter Articles

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Time to Review the Health of Your Team

by: Steve Murray

Time to Review the Health of Your Team

In these challenging times, it’s more important than ever to take a look at the health of your team.
Patrick Lencioni is one of America’s foremost leadership and management consultants. He’s written extensively about how organizations function most effectively. Virtually all of his research, consulting and writings focus on the performance of people and their interactions with each other. Now that financial incentives to affiliate with one broker over another is climbing, it may be useful to focus on what creates and maintains a healthy organizational culture. When brokerage firms talk about their strong cultures, it’s important to focus on what is at the core. Lencioni’s’ book, The Five Dysfunctions of a Team, is where I think it all starts. Here they are in summarized version. Absence of Trust. The fear of being vulnerable with team members prevents the building of TRUST within the team. Fear of Conflict. The desire to preserve ARTIFICIAL HARMONY stifles the occurrence of productive, ideological conflict.
Lack of Commitment. The lack of CLARITY or BUY-IN prevents team members from making decisions to which they will stick. Avoidance of Accountability. The need to avoid interpersonal discomfort prevents team members from holding one another ACCOUNTABLE for their behavior and performance. Inattention to results. The pursuit of individual goals and personal status ERODES the focus on collective success. WHY BRING THIS UP NOW? While aggressive agent recruiting has always been a factor in residential brokerage, no one would contend that this recent wave is more prevalent than at any time in recent memory. The fundamental truth is that it’s not always and only about the commission split. Many other factors enter into an agent’s decision where they affiliate their business. At the heart of this are the features and benefits of a brokerage company, and also the feeling by an agent and a firm’s leadership that there is something unique and special about a company.
We know of many brokerage firms that, although they may have lost agents in this recent wave of aggressive recruiting, are still doing their own recruiting and growing. Their ability to do so is not based solely on financial metrics but on revealing what is unique about their company to the agents who work there. Lencioni’s dysfunctions are an excellent way to focus you and your team on the fact that the only thing you can control is your behavior and results.

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