Category: The Industry

Five Timely Truths

  1. When consumers want information about residential real estate today, they go to Zillow.com.  I say that because my Brokers tell me Zillow consistently produces quality leads.  Trulia comes in a (usually) distant second.  Realtor.com is not even on the map.
  2. Data mining and manipulation of real estate information has progressed so far and so fast that 95% of the people in the industry have no idea how to use it.  Ok:  maybe that’s a little hyperbole.  But I am impressed that the data guys are to the point of predicting buy and sell behavior via algorithms and so much more.  They have taken their business way out there and the rank and file Realtor – who is still trying to figure out how to resize their prom picture so they can use it on their business card – has no clue.  The good news is that the 5% (or 15%) who do have the desire and the smarts to use this new information will survive to be the next generation Realtor.
  3. Virtual companies (at the moment) suck.  I encountered yet another that has one broker in one city, holding licenses and ‘managing’ hundreds of salespeople all over the State.   While I believe that systems and technology may make it possible to supervise transaction activity at a distance,  it hasn’t yet evolved to where a Broker might watch an agent with a buyer or seller or to allow a Manager to casually overhear a phone conversation.  The Broker’s duty to supervise becomes a ‘wink, wink, nudge, nudge,’ item.  But the real downside – at least today – is that these companies have become an alternative for non-productive agents who otherwise would probably get out of the business.  For a small fee they can continue to be ‘active’ and do 3 or 4 deals a year.
  4. By devoting themselves to the preservation of the Status Quo, by fighting tooth and nail every step of the way to keep information out of the hands of consumers, by not insisting on production standards for members, Realtor Groups (NAR and it’s affiliated State and Local Boards and Associations) have made themselves largely irrelevant.  It’s probably too late to wake up and realize that things will NEVER be the way they used to be, that real estate reality has changed, and changed significantly.  The next generation real estate professional is not at a meeting at the Board of Realtors.  He/She is online, networking and discovering the tools that will enable them to do more transactions and provide better service.
  5. Help-U-Sell, with proprietary technology that we created, own and control,  is the only national brand positioned to lead the industry into the new tech-efficient real estate age while preserving a razor focus on the needs of the consumer.  We’ve always been a consumer-centric company and now we can bring that focus to bear in a leaner, more efficient, tech-driven industry.  Every time I go to a real estate trade show I get tickled when people tout the latest and greatest tech innovation (Mobil phone websites, QR codes, map searches, online lead management, syndication and on and on)  . . . and it’s all stuff we’ve had for a couple of years.

 

Scratching My Head . . . A Little

The CAR Expo in San Jose has been a success for Help-U-Sell.  Our booth was big and impressive – well located, too. We had substantial conversations with a number of people, and I believe everyone in attendance knows we are here and ready to roll. 

Having said that, I am also coming away with an unanticipated impression. 

We are here to grow the network.  We know the future of real estate is young, aggressive tech savvy agents and brokers with vision and a hunger for entrepreneurial growth.  My impression – and I know:  I am committing REALTOR Blasphemy – is that they are not here.  Most of the people I’ve seen and talked to in the exhibit hall are seriously older (not a bad thing; I’m 60), and far less in touch with technology than their much younger buyers. 

We’ve had one person click on the QR code at our booth and had numerous others point and ask, ‘What’s that?’

Trying to explain the benefits of having a SmartPhone optimized website has met with blank stares. 

It’s not so much that the people who are here don’t look and sound like our target. . . it’s that our target seems conspicuously absent.  If I were a Martian REALTOR, just come down to earth to observe this convention, I would conclude that the California Association of REALTORS is a club for the semi-retired. 

My guess is that the people we want to reach are somewhere else:  Inman, Agent Re-Boot . . . something like that. 

I have to say:  I am so proud of Help-U-Sell.  It is very clear to me that we are the class act at this show.  We have the tools and systems, we are sharp and we are full of energy.  So many others just seem . . .tired. 

While most of our reception has been very positive, we have had a few comical encounters with traditional agents and brokers who see us as the enemy.  Three behaviors I have observed:

1.  Walking the aisle until the Help-U-Sell logo is spotted out of the right corner of the eye . . . then the head turns immediately to the left and the pace quickens.

2.  Drifting along, all smiles and then, when the booth is recognized, appearing to have smelled something bad . . . and my favorite,

3.  Walking a straight line and, upon arriving at our booth cutting a quick arc as far away from it as possible, as if getting too close might result in catching some form of plague. 

Of course, most who have stopped by have wanted to know how we work and what our plans are.  Many mentioned quality Help-U-Sell brokers in their marketplaces.  The above are just the silliness that goes along with being different (and better). 

Amazing:  could we be becoming ‘elite?’

Tapped Out!

A little quote from NAR’s Chief Economist, Lawrence Yun:

Housing equity – housing asset value minus mortgage liability – has greatly shrunk in the painful aftermath of the housing market crash. The aggregate homeowners’ real estate equity stood at $6.1 trillion today versus $13 trillion in 2006 according to Flow of Funds data from the Federal Reserve. According to Census, there are 74 million homeowners. So on average, the average equity per homeowner in 2011 is $82,000, which is down from $170,000 in 2006. A separate Federal Reserve data from Survey of Consumer Finances showed that the median homeowner net worth to be $190,000. This larger net worth figure is due to homeowners having other assets in addition to housing equity. The median renter’s net worth was $4,000. The only good news at the moment is that the further declines appear largely over. Price measurements from NAR, Case-Shiller, Core Logic, and Federal Housing Finance Agency have all noted a slight uptick in home price in recent months.

We just don’t have the clout of equity we did five years ago; and it was clout.  I’ve seen it in franchise sales.  Five years ago an eager prospective franchisee could easily pull a second mortgage to finance a start-up business.  The equity was there and banks were falling all over themselves to lend the money.  Today that door is pretty much shut.  Most times, the equity is not there and when it is, the lenders are so difficult (and guidelines so strict) that the old equity cash-out bonanza is almost impossible.

The good news is (and there’s always good news):  It’s not that expensive to get started today.  Five years ago, retail space was very pricey and Marketing – which in Help-U-Sell was largely direct mail based – was huge.  HUS offices routinely spent $7,000 -$10,000 a month on marketing and it was mostly postcards and mailbox delivered flyers (ETMs).  Today, postcards are still an important part of the mix, but Marketing is mostly about the Internet.  While it’s not free, it’s cheap compared to mailbox stuffing.

But the drop in equity has had big implications elsewhere, too.  Small business expansion is not happening like it used to.  In fact, most real estate companies are doing the opposite: scaling back, hunkering down, closing offices, merging, and consolidating.  I talked with a Help-U-Sell broker the other day who was a little intimidated by the new mega-office in her town.  Two medium-sized companies had combined to produce the largest house of agents on the block.   I reminded her that offices consolidate in an effort to cut expenses, and it happens when neither office is making it on their own.   She used to have two competitors, each with 50 agents doing less than half a closed side a month.  Now she has one competitor with 100 agents each doing less than half a closed side a month.  She called back to say she’d run into the new consolidated broker and he wanted to know how she was doing so well.  He’d seen her listing and sales activity and was amazed that she was able to turn the numbers with her minimal staff and small location.

Now let’s get practical.  Let’s assume we have a homeowner with equity (hallelujah!).  Let’s assume this homeowner is in a $300,000 house (that used to be worth $425,000) and has a mortgage of $200,000. That’s $100,000 in equity.  The homeowner is grieving for the $125,000 he’s lost, but still needs to sell.  ABC Realty will take the listing and charge 6%:  $18,000.  But that $18,000 is 18% of the homeowner’s equity! Here’s a homeowner who already thinks he’s lost more than half his equity to the economic downturn and now some real estate broker is trying to extract 18% more!!

Thank goodness Help-U-Sell is in the equity preservation business!  If this homeowner is smart he’ll keep interviewing until he finds a HUS broker charging a low set fee of, say, $4,950.  That works out to a savings of $13,050 and the set fee is just 5% of equity, not 18%.

Yes, we’ve had a huge collective drop in equity.  We all want to hang on to as much of what we still have as possible.  Today, that means saying goodbye to high, percentage-based real estate commissions and hello to Help-U-Sell.  In addition to ‘Save the Whales!’ and ‘Save the Rain-forest!’ let us add ‘Save the Equity!’  List with Help-U-Sell.

 

It’s Up! It’s Down! And the Problem with ‘Virtual’ Companies

Having finally gotten back from vacation, my thoughts are a little scattered . . . but I still have a few morsels to share.

The NAHB (Home Builder’s Association) is out with a list of marketplaces that have shown sustained improvement over the previous six months.  These are places where three indicators (Housing Permits, Housing Prices and Employment)  have improved steadily over the period:

    • Alexandria, LA
    • Anchorage, AK
    • Bangor, ME
    • Bismarck, ND
    • Casper, WY
    • Fairbanks, AK
    • Fayetteville, NC
    • Houma, LA
    • Midland, TX
    • New Orleans, LA
    • Pittsburgh, PA
    • Waco, TX

Meanwhile, Zillow is out with a list of the ten metro areas experiencing the greatest drop in home values over the past five years, based on their own Z-Estimate guess at value.  All of these markets have experienced at least a 50% drop in value, according to Zillow:

    • Merced, CA
    • Modesto, CA
    • Stockton, CA
    • Las Vegas, NV
    • Vallejo, CA
    • Salinas, CA
    • Daytona Beach, Fl
    • Bakersfield, CA
    • Ft. Meyers, FL
    • Phoenix, AZ

Of course, I see a 50+% drop in values and immediately imagine a 50% drop in percentage based real estate commissions.  The whole traditional approach to the business has taken a 50% pay cut and that’s before factoring in any decrease in the number of sales occurring.  Clearly, we are in the midst of a huge change.  I don’t believe we will ever do business again the way we did it in the past.  In the future, consumers will demand a leaner, more efficient, less expensive, no-nonsense approach to buying and selling real estate.  Oh!  What was that I just heard?? Did someone whisper ‘Help-U-Sell?’

In the past, when we had a downturn, there was a purgative effect on the business.  Bad agents – I hate to mince words, but anyone doing less than a deal a month is, well, a bad agent – usually left the business when the pickings got slim.  While REALTOR ranks have shrunk during this long season, they’ve not dwindled they way I expected.

Concurrent with this downturn, we have the widespread advent of the ‘Virtual’ real estate company, an innovation I believe will be part of the future of real estate.  Unfortunately, the current aberration of the ‘Virtual’ company presents a problem.  Most have simply become a place were unproductive agents can hang their licenses cheaply.  Some charge an agent only a few hundred dollars a year, while others charge a small per-transaction fee.   So the three or four deal a year agent – the one who used to get out when things got tough – can now afford to stay in and scrape a few deals together each year while earning a regular paycheck somewhere else.  Of course, that’s fewer transactions available to the real professionals in the business, but in the end, it is the consumer who suffers.  They’re saddled with agents who do so little business they can’t possibly be as current or effective as others who live and die real estate every day.

I think it is very relevant and totally appropriate for any person thinking of selling today to ask their prospective agent, ‘How many transactions have you done this year?  How many last year?  How many were successful short sales?’  Today, you want an agent who is capable of turning numbers, who knows how to navigate a short sale and to solve the big problems that torpedo so many transactions.  One of the biggest mistakes a potential seller could make would be to select an agent who is doing so little, they don’t have the depth of experience to do much at all.

By the way:  Jackson Hole, The Tetons, and Yellowstone were all wonderful, but Utah . . . now that’s a State in which to spend some recreational time.  Zion National Park and, especially, Capitol Reef were amazing.  I learned many important lessons on the trip, especially that dogs and toads don’t mix.  Homer bit one when I wasn’t looking and immediately turned to foaming at the mouth and shaking.  Turned out this was not a lethal toad, just a typical one, and he got through it.  But All toads can produce the same reaction in a dog, even from just licking the little rascals.  There are a few that are lethal, but they are rare.  Although frogs don’t seem to be a problem, my advice is:  if it croaks and hops, give it a wide berth.

 

A Little Good News

Fiserv, the company that operates and distributes results from the Case-Schiller Index is out with some welcome predictions.  The Index tracks trends in the sale of existing single family homes and uses historical data and a variety of other factors to predict everything from prices to volume.  The good news is:

They expect nationwide prices to stabilize in 2012 and rise 2.7% by the first quarter of 2013. Gains are expected in 365 out of 384 metro markets by 2013.

Now there’s a breath of fresh air.

Four markets they expect to see the greatest increase in value over that period are:

Palm Bay-Melbourne-Titusville, FL: Prices to rise 18.3% by the 1st Q of 2013.

Seattle-Bellevue-Everett, Wash.: Prices to rise 10.2%.

Tucson, Ariz.: Prices to rise 10.2%.

Memphis, Tenn.: Prices to rise 10%.

I can’t help but focus in on Tucson, which is arguably the ‘epicenter’ of the housing crisis (the argument would probably come from Phoenix, Las Vegas and Southwest Florida).  Our Help-U-Sell Brokers in the Tucson area have done a very good job of weathering the storm.  Jimmie and Beverly Sonnier have continued to list, sell and maintain a good level of production and a wonderfully Cajun positive attitude.  John and Maria Powells’ business, which they opened in the middle of this mess (2008), has absolutely exploded.  Every time I talk to them they are trying to find another assistant or another buyer agent.  So I’m very proud of our folks in Tucson and am excited to see good opportunity there. (And, oh, by the way:  our other ‘epicenter’ brokers in Phoenix, Las Vegas and Southwest Florida have also done a stellar job.  I am a little in awe of what they’ve accomplished).

That’s the thing about this tough real estate market:  it’s full of opportunity.  I understand you can buy a duplex in Tucson for less than $100,000.  Think about that!  Getting financing might be a challenge – that’s why so many investor sales are all cash today – but if you did secure a mortgage you’d have a positive cash flow right from day one PLUS the good possibility of an excellent increase in value.

Fortunately, it seems the public has started to recognize the opportunity.  With interest rates ratcheting down once again, to levels below 4%, there seems to be an uptick in activity in many markets.  A lot of ‘on-the-fence’ buyers have hopped off and are ready to make a move.  So, you survivors out there:  take a breath, give yourself a hug, a little pat on the back, get that smile adjusted and get busy.  And I’d say, focus on Listings.  They will attract that good emerging opportunity and those good emerging opportunists to you!

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