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REAL Trending  Special Edition: Leading Through A Challenging Market

May 8, 2020 6:00:00 AM

Hoby Hanna, president of Howard Hanna Real Estate Services, Pennsylvania, Ohio, New York, Virginia, Michigan, West Virginia, North Carolina, and Maryland

With different rules governing each of the states his company serves, Hanna was challenged to develop plans that adhered to the different government orders. Find out how he handled a multi-state operation and the actions he is taking to ensure agents are being taken care of and staying engaged.

Tracey Velt:

In this special edition of The REAL Trending Podcast, we're speaking to real estate leaders on what they're doing to minimize the impact of the coronavirus on their businesses. We'll talk about actions they're taking, lessons learned from 2008, and more. This is Tracey Velt, editor-in-chief of content for REAL Trends. Today, we're speaking with Hoby Hanna, president of Howard Hanna Real Estate Services. Welcome, Hoby.

Hoby Hanna:

Thank you, Tracey.

Tracey Velt:

Well, thanks for getting on with me. I know this is probably a really busy, stressful time for you right now. So let's talk a little bit about some of the immediate business steps your company has taken to lessen the impact.

Hoby Hanna:

Sure. From an immediate perspective, we feel sort of blessed that over the last four years, through our leadership, we've really been driving to built out our mobile platform and our technology platform throughout the company with partners, with some great vendor partners, and some things we've developed internally. So one of the challenges in 12 states is each state sort of having different rules of whether real estate's essential or not. But very early on, we were able to reinforce.

And the training we've done for the last couple of years to make sure our agents knew that they had all the tools to work remotely or virtually within a transaction, whether that's online contracts and forms and back of the house systems, whether it's a CRM, whether it's the ability to stay in contact with clients and customers, and even some creativity of virtual showings and using report and 3D imaging, and really staying in front of the client and customer and being able to communicate.

Hoby Hanna:

So that, we put ourselves in a good marketing position, coupled with doing a lot. We've moved the company to a lot of online education and training. And we just ramped that up so that we've been able to stay in front of our sales people during this time period, and really communicate with them, make sure they're getting the education they need, giving them plans they're accustomed to look at in terms of going online and saying, "Here's a great marketing strategy," or using our CRM through MoxiWorks, which gives daily updates of what you can be doing to contact more clients in your customer base and stay in touch with them and stay in front of them.

Hoby Hanna:

So in that aspect, we feel really good about how we've been able to support our agents, some immediate steps. We have, because of that, a belief that we can work very digitally. We have looked at some advertising reductions in terms of your traditional advertising, print, some of our institutional advertising, working with those institutional advertising partners.

We do a lot of, for example, billboard advertising and some sports marketing. We've worked with those partners to push those contracts or push the spend back into the third and fourth quarter, still honor the contract rate and the spend we had committed to, but if nobody's driving around, billboard advertising isn't going to work as well right now.

Hoby Hanna:

We've also worked with TV stations that we work with institutionally and some of our other partners that are more traditional marketing. And in some cases, using more of those dollars right now if we think that we might reach more people in their homes to convey a message, or moving the dollars back to when the market's a little more flush.

So those are some things we've done on an immediate basis to sort of put ourselves in a good position to communicate and service with our agents and our clients and still put ourselves in the ability to do business where we can.

Tracey Velt:

Okay. And now have you done any renegotiation of leases, or had to do any layoffs?

Hoby Hanna:

Well, we just started with renegotiation with leases. We began, I guess, let's say last week with some of our ... We have a handful of landlords that have multi office buildings. Some of that's come through acquisitions in the past, where in our strategy of acquisitions, we have allowed the former owner to still be the landlord for us. We haven't worried about arm's length, which some companies frown on that after they do acquisitions.

They want to separate that. But I think in this case, it's been beneficial because those former owners of different companies have stepped up to the plate even before we called some of them and just said, "Hey," because they're still connected with us. They still play the role of chairman in many markets for us. And so they've come forward knowing what we're up against and said, "Hey, how can we help with the leases?"

Hoby Hanna:

And then this week, just actually this morning, we sent some letters out to landlords and reaching out to ones that we have personal relationships with because we are a personal relationship business, and just saying, "Here's what we're looking for in terms of some relief." And in most cases, what we've been doing is asking for some relief for the next three months, and then either taking those lease payments across the balance of the year, being optimistic that the economy will come back strong once we're able to all leave our homes.

Or in some cases, we've extended the lease terms by a few months on the backend, or even six months in some cases. And we've found our landlords really apt to work with us. They want us to stay. They want us to be there and be in the long-term, good, solid tenants like we always have been.

Tracey Velt:

Yeah. Definitely.

Hoby Hanna:

In the terms of layoffs, at this point in time, we have not. But we are, as we go deeper into this and we look at longer times, I'll be honest, we are looking at it. And we're looking at one of the areas we're beginning to look at as people and markets have worked remote or worked at home, we're looking at how we could furlough some of those people that might be jobs they really can't fulfill from home in different departments.

And our hope is in some cases to furlough and support with benefits for a period of time, where the hope is just to bring people back. Unfortunately, the unknown, we've tried to hold off on any layoffs, but the unknown is really how long this stay at home order takes, goes in place.

And then look at what kind of activity we really see, so it's a balancing act because we appreciate and love all the employees that we have with us. But in some cases, it might come down to part-time people or people in jobs that just can't be done remotely right now.

Tracey Velt:

Right. Yeah. Definitely. And so you talked about communicating with agents and your brokers and leadership team. Tell me. What tools are you using? Do you have a weekly video that you send out, or Zoom calls? Or tell me how you're communicating and how frequently.

Hoby Hanna:

Well, I think the one lesson for our management team, looking at the ... We sort of went back and pulled out as best we could, there's never been a market like this, but pulled out our playbook from 2008 and 2009 and said, "Okay. What did we do effectively well during the great recession?"

That was definitely more housing, as we all recall. And we looked back and we realized just at that playbook, and at notes and reflection upon that time, we just realized how important communication is, first and foremost.

So we started out, as this whole virus was spreading, which we found a lot of communication, whether it was here's something we learned, a blog post, something new, because everything, if we go back three weeks even, everything was rapidly changing even day by day or hour by hour.

Hoby Hanna:

And what we got into a little bit of a rhythm is that fortunately, we are using throughout the company Microsoft teams for our offices. So what I would say is that very quickly, all of our managers moved just from their own localized perspective, moved their in office sales meetings. We're still a company that believes in weekly sales meetings, but they've moved those to meetings with Microsoft teams online.

The joke is in some cases, we have better attendance online than we did in live meetings. But they're having those regular meetings. It's throughout the different markets, it's either Monday or Tuesday. So every manager is having that team meeting, communicating what's happening out there on a regular basis.

Hoby Hanna:

Then on top of that, our sort of senior leadership team, we for three weeks now have done a daily briefing call, one at 8:30 in the morning and one at 5:30 at night. That's about 10 people on the call just updating what's happening in North Carolina, what's happening in Virginia, or Pennsylvania, or Ohio, just so it's really been helpful for those market leaders in our team to hear what's happening in a different market and how we're reacting.

And then we use that where our department heads give me data to come back to those people that I work with and say, "Let's focus on this. Here's some new marketing that's out there." So those meetings regularly take place. And then those market leaders have their leadership meetings beneath them.

Hoby Hanna:

And then one of the things to get into a little bit of a rhythm, every Tuesday and Thursday, we created just in this time a new newsletter we didn't have before. We used to do a monthly good news newsletter. We created something called Town Square, which every Tuesday and Thursday goes out.

And it basically is a one singular place, mobile friendly, that has everything that was maybe sent by different departments, and emails and good news stories and positive things that are out there, plus links to blog sites or marketing pieces.

Just everything you could imagine that gets sent between a Thursday and then the following Tuesday is all compiled and put in one place that's there for our agents and employees and managers can go back to and take a look at.

Hoby Hanna:

Every Wednesday, we have a webinar that takes place on some training aspect that some leader in our company's giving for the entire company. We use Zoom for that just because it allows for more people. And then we started last week on Fridays, every Friday I will do what we're just calling a virtual town hall meeting. And it went for two hours last week, the first one.

And it's just basically using Zoom and ask any question you'd like, and being as candid and straightforward as I can to answer every question because we've found that the agents just want to know leadership's there, and people are there, and that we're all in this together.

A rule is, you get an email from an agent somewhere, please respond back to them, even if it's, "I don't have an answer for you," just to know that we're all in this together and communicating. So the more communication you can do, the better.

Hoby Hanna:

And we're even seeing fun things. I know Friday afternoon, there were at least seven offices throughout our whole footprint that were having afternoon virtual cocktail parties, I guess you'd say. And we are a company that works hard and plays hard, so I know a bunch of us were popping in on virtual cocktail parties on Friday afternoon.

A little different form of cocktail party, but it was fun. And so just to have a little levity and not everything ... We're all diving into this, trying to make the company as strong and supportive and communicative as possible, but also trying to have some levity and laugh and smile, and know that it's all going to get better on the other side.

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Tracey Velt:

Yeah, definitely. Well, those are all great ideas. Obviously, this is much different than the 2008 downturn. And you mentioned that one of the things that you kind of was a lesson learned, or helped you lead through that time, was communication. Is there anything else that you learned, or that helped you lead through this current time, that you learned through the 2008 downturn?

Hoby Hanna:

Yeah. I think we have a lot of ... I could say this. Our whole senior management team at Howard Hanna Company was part of our team in some capacity during the downturn, whether they were, from a leadership capacity, whether they were an agent who at that point in their career saw what we were doing, whether they were regional managers, managers of offices, or even in the same positions as the state president today.

So when we looked and saw this, and we looked at the forecasting of sales drops that we could assume, I would say that going and taking a look at, from a marketing perspective, what was necessary and what wasn't, there really wasn't a lot of teeth gnashing. It was a lot of, hey, we've been through this before, and we know where we can get results and where we can support our agents and customers.

Hoby Hanna:

And so looking at just your financial statement and looking at your PNL, our team was, if anything ... It's funny when your CFO has to come back and say, "I think your team's going too deep," that we can give a little back. That's not typically what happens between a sales organization and the CFO. But we were really quickly and nimbly across the size of market we're in, we're able to look and say, "Hey, these are some extensions that we know that we don't need to put in place right now."

So we were able, because that's a big effect, and a lot of cases, our biggest fixed costs as brokerage firms are office buildings and people. And then you can move to your variable costs, but it's how quickly you do move to those variable costs of marketing, advertising, supplies, having nobody complain that we're not ... Or the travel, entertainment and other expenses, we just have to put on curtail right now.

Hoby Hanna:

And in 2008, people were, they knew it was happening. But maybe our team wasn't as aggressive with it. I think today, they were like, "Hey, we can get through this. And we know that the market's going to come back when it comes back." I think the other thing is the agents are reflective of that.

And we're a big listing company, so we were very proactive during 2008 and 2009 in saying, "Hey, there might be fewer sales, but we've got to control the listing inventory." And that same thing's taking place today, whereas, I will tell you our offices are very focused with their agents, and so are our agents, on how to make sure we maintain that listing inventory.

Hoby Hanna:

How do we make sure that we're reaching out to people and saying, "You might not really want to be on the full blown market until we're all out of being sequestered, but let's take listing contracts now. Let's get them under agreement. Let's work with our sellers to view our home, get your house ready to show, get your house ready"?

Whether it's the little projects that you would put off, that are going to maximize value, cleaning out closets, clutter, cleaning the garage, that when we come out of this, no matter when it is, that the house is really ready to show so we can maximize that value. So we've been very focused on listings.

Hoby Hanna:

And I guess the last thing I'd say is we've gone back to some programs that we think are unique at Howard Hanna and really dusted them off and repackaged them. So one, which is a consumer program, is our 100% money back guarantee.

And so we're really leading with our advertising, saying, "If you buy a house during this time, because there are still people buying houses, or if you're nervous, or leery, or whatever it may be, at Howard Hanna, if you buy a home, we'll buy it back from you for 100% of what you paid for if you're not happy in the first year that you're there." And we think we'll push that as a confidence builder, even as we get back into the market. And we're buoyed by that.

Hoby Hanna:

Two is that I would say from a consumer and agent, as we found in the recession, is having a mortgage company and a mortgage bank like we do, we're leading with that. We've gone out to our lenders to make sure we have capacities.

All mortgage companies are busy, but increasing capacity to our ability to lend, working with really diligently behind the scenes, working with a lot of our investors to get the best product we can, maintaining best rates that we can.

And I would say our mortgage, title, and insurance groups have been on overload getting every deal they can closed in this time for our customers, and being really responsive.

Hoby Hanna:

So it sort of has, just as in 2008, we are seeing lenders who shy away. We are seeing title companies saying they don't want to close right now. And knowing that our agents are, that they've got deals, it's one, the customer needs to get their deals closed for a multitude of reasons financially, and it's also making sure we're supporting our agents by using our in house companies to get deals financed, closed and moved to the next level. So we're really focused on that.

Hoby Hanna:

And then the third thing is we know agents are nervous. And we know that most agents aren't going to be able to apply, I don't think, for unemployment benefits because they're independent contractors.

And with all the different stimulus, it's a question of what agents are going to receive if their business is down and they're not doing well. So we've always had a program internally we call income advantage, which is a draw against your commissions. It's an advance against your commissions with a formula that we use. We've always self funded that.

Hoby Hanna:

And usually, the enrollment date's February 15th every year for our agents. Well, we announced about three weeks ago that we were extending the enrollment date until April 15th. And we're taking the bet that if our agents need, whether it's $500 a month or $3000 a month of just a steady paycheck on the 15th of the month, we've extended that.

And we're making sure we give our team time to be able to ... We're giving them time to pay us back because we know that the closings will come and the deals will come. And it's a way of helping the independent contractor have a little bit of stability.

Tracey Velt:

Okay. Yeah, that's great. So there are a lot of obviously smaller brokers out there, who are really very concerned. So what advice do you have for those brokers?

Hoby Hanna:

That's a great question because I think ... It's a great question. I think the advice I'd have is that the first thing is communication on any level, whatever style. I think I've seen a lot of smaller brokers, I've seen agents with smaller brokers reaching out to some of our managers looking for: Is this what I should do or shouldn't do? I think some smaller brokers make the mistake of not using all the tools at their disposal to communicate with their sales people.

The sales people are with any broker, in my opinion, because of leadership and because of the values of a company. Otherwise, agents would just go to whoever paid the highest commission, and that's not always the case. And I think that looking at a lot of small brokerage, maybe the communication piece is number one.

Hoby Hanna:

I think number two is looking at, is spending time at this point, not just to work in the business, but work on it. What are you doing with your landlords? How are you best servicing your agents? How are you making sure your deals are getting closed? Have you invested in the right technology or the wrong technology?

Can you negotiate with some of your vendors that you're using at this period of time to offset some costs, so that you have some cashflow coming in? Those would be all items that I would say would be recommendations.

Hoby Hanna:

And then it's going to be a challenging time. And I think that's what's different here from the housing recession. The one aspect is we're all sitting here without ... March, we had all companies had business that was written that closed at the end of March. The question is April, is: How far off is people's written business going to be?

We all have closings this month. You can look, and whether you're a big broker or small broker, you sort of, even if 20% of the deals you're expecting to close fell through because people got laid off, or they lost some kind of confidence, or whatever it may be, so I think if you look at your pendings, you figure somewhere between 80% and 90% of that's going to close. The question is: How many deals are going to get written this month? Are we going to be off 50% new written business in April that affects us in May?

Hoby Hanna:

And then how long are we still living in this type of environment? How long does that take until June? And that's not to be scary. But I think if you're not looking at that cashflow basis versus what you're fixed expenses are and what you have to do, that this is the time to be analyzing that. This is the time to be addressing that because at least in the 2008, 2009 housing crisis, sales dropped, but there were still sales happening.

You could still hustle and go out on a Monday morning, and call your clients, customers, work with investors, look at short sales, look at working with banks for foreclosure opportunities. There were things you could get up every day to create an opportunity.

We're sort of in this, depending on what state you're in, we're in this market where in New York and Pennsylvania, you're not even ... They're now making. They don't even want you listing houses, even if it's virtually and online right now until this stay at home order's done, which sort of doesn't make sense to me, but that's what some of the edicts are coming out from state associations.

Hoby Hanna:

So it's scary in that sense because no one's saying, "Hey, we'll all be back to work April 30th, April 15th, May 1st, June 1st." It's sort of until we get the virus sort of leveled out and flattened out. I don't know if anybody knows when that's going to change.

Tracey Velt:

No, right. Definitely. So my last question is just let's set the numbers aside for a moment. And tell me: How are you feeling right now?

Hoby Hanna:

Right now, today, I feel pretty energized. I feel like I wake up in the morning and I feel one day closer to this all being over. I feel it's amazing I get sales reports and listing reports. From the weekend this morning, I see traffic on our website has increased, even this weekend over last weekend. So from a perspective of thinking that people are still thinking about housing and looking at their housing options and needs, I feel positive.

And I feel like I've got an incredible team. And I'm blessed and thankful that we do because I don't know if I could do it all by myself, and I know I couldn't. And I know that we've got team that woke up this morning energized to take care of our agents, our customers, our employees, and everybody involved in any transactions at Howard Hanna.

Hoby Hanna:

And I'm an optimistic by nature. That's me today, and that's me in the thick of it. I will say, if you'd asked me that question last night around 8:00 or 9:00, and I heard the president say that we're in this until April 30th, there are times I sort of ... It brings me down a little bit because I don't know when we can just get back to normal and get back to being able to do business, and even if business is off because of consumer confidence, or because we're in a recession, or because we're ... I feel like, hey, I can overcome those obstacles.

I can put my plan in place. It's right now, best laid plans, if a sales force and a consumer base isn't even allowed to leave their home and actually transact, that's what sort of can knock my wind out.

Hoby Hanna:

But I do feel pretty good. I feel fortunate that the size and scope of the company that we have, even though we're big, we are nimble enough that we've been able to move pretty quickly, make decision, act as entrepreneurs. And so I feel good about the position my company's in throughout all this. But it's a lot of long days and a lot of long nights.

Tracey Velt:

Yeah, it's definitely unsettling, for sure.

Hoby Hanna:

Yes.

Tracey Velt:

Well, thank you so much for joining REAL Trends today. We really appreciate your time and all of your advice as well, so thank you.

Hoby Hanna:

And thanks for all the articles and podcasts and research and white papers that REAL Trends as a collective group puts out because keep sharing all the things you are because it still helps all of us sort of navigate this time.

Tracey Velt:

Yeah. Well, great. That's what we try to do.

Hoby Hanna:

We'll all get through this together, so thank you.

Tracey Velt:

All right. Well, you have a great day.

Hoby Hanna:

You too, Tracey. Thanks. Bye-bye.

Tracey Velt:

Bye-bye.

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