Category: The Industry

Recruit! Recruit! Recruit! Red Flag

Here’s a direct quote from a franchise sales solicitation one of our brokers received:

“At Realty World, we understand that recruiting is your number one priority”

Funny.  I thought the number one priority of a real estate company was selling real estate.

I don’t mean to pick on Realty World.  If you ask any other national franchise what’s most important, they’ll tell you the same thing:  recruit, recruit, recruit.  It’s just that RW is the latest to solicit our members, a practice that could be considered tortious interference with a contractual relationship (regardless of the legal disclaimers at the bottom of their solicitations).  It’s kinda like one of your competitors going to a seller who has his or her property listed with you, telling them they should cancel and list with them.

I think if I were up against Realty World for a listing presentation, I’d share that little quote with my prospective seller.  Seems to me they need to know they’re not Realty World’s number one priority.

In fact, why not start collecting this stuff.  Really – if you read through the franchise sales solicitations of any of the national brands they’ll assert all kinds of stuff that leaves the consumer out in the cold.

Of course, if you are a broker stuck in the quicksand of the old agent-oriented model, recruiting must be your number one priority.  With average agent production hovering somewhere between 4 and 6 closed sides a year, you’re going to need a ton of agents to pay the electric bill!  Especially when your number one tool for recruiting them is an 80% commission split!

(Cut to a traditional franchised broker’s office somewhere in suburban America.  The broker is sitting behind his desk, his franchise representative sits across from him.)

Broker:  I’m working my #)$I% off and I’m absolutely goin’ broke here!

Rep:  Are you recruiting?

Broker: Sure I’m recruiting!  I recruit every day!

Rep:  How many new agents did you add last month?

Broker:  Two.  But I lost three!

Rep:  Oh . . .why did you lose them?

Broker:  This nutcase down the street is offering 90%.

Rep:  Did you offer to match it?

Broker:  Of course not!  Do you think I’m out of my mind?

Rep:  No.  But I know if you’re not making money it means you don’t have enough agents, and if you can’t get and keep agents it probably means your split is too low.

Broker:  Let me make sure I understand . . . Right now I have 30 agents and I’m paying an average of 75% and each of them is doing about half a closed side a month and I’m not making any money.  You’re telling me if I raise my split to 90% I’ll make money?  How can that be?

Rep:  It’s all about numbers.  You don’t have enough agents.  If you had enough you’d make money.  That’s the way other offices do it.  Recruit, recruit, recruit . . .

Broker:  But I thought I was in the real estate business!

(Fade to black . . . )

That’s so sad it’s hard to chuckle.  But it’s a conversation that’s repeated daily in the traditional real estate world.  Rarely does traditional advice ever get down to selling real estate:

Maybe we should get more listings!

Maybe we should do a better job of converting buyer inquiries into prospects!

Maybe we should have a minimum standard of production!

Maybe we have the accent on the wrong syllable.  Instead of AGENTS it should be on BUYERS and SELLERS.

Maybe we should know our business so well we can put together a transaction even under impossible circumstances.

Here’s the new reality . . . set in motion in 1976 when Don Taylor got a better idea:

Help-U-Sell is about selling real estate.  We focus on the consumer and keep our offices under the firm control of our Brokers.  We love agents (and good ones love us), but we only add them when we’re producing enough leads to keep them busy and productive . . . and then we hold them accountable for the activities that produce the results all of us want.  We’ve discovered how to make more by charging less, how to earn more with a lower split and how to have a great time being heroes to the buyers and sellers fortunate enough to work with us.

(By the way:  I know you get bombarded with franchise sales solicitations all the time.  I’d love to see them.)

Ha Ha Ha Ha (or Ja Ja Ja Ja in Spanish)

Enough time has passed since I saw the article that I can now talk about it without anyone remembering it or the people who made the bonehead statements.  One of the industry rags did a story about differentiation in the real estate business and how important it is to be unique, special and different.  It’s something we at Help-U-Sell know a lot about.  To make the point, the writer interviewed a couple of ‘shirts’ from two companies on the A-List.  They both went on and on about how important it is to be different and then pointed to what made their companies special:  quality service.  It was a real ROTFLMAO moment for me! (Google it)  Quality Service is not a differentiator!  It’s and expectation!  It’s an expectation the consumer has.  You either meet the expectation or you don’t and if you don’t the consumer goes elsewhere.  It’s one of  those things that companies who have nothing special to offer hold up and point to as what makes them special . . . which is exactly what happened here.

Real estate is not Nordstroms.  If you don’t like your house you can’t just take it back to the Realtor and exchange it or get your money back.  And I think the whole Nordstroms – Quality Service thing is misunderstood anyway.  Pundits point to that example and conclude that excellent service will make people love you and cause them to come to you rather than your competitors.  I don’t think it’s the service at all.  I think it’s about the money.  We love Nordstroms because we know we’re not going to lose if we make a mistake with our money.

If you want to differentiate yourself in a way that causes consumers to choose you over your competitors, you do it with dollars, the consumer’s dollars.  You have to offer a better deal.  Then you have to meet their expectations which include quality service.

I swear, sometimes I think the whole industry (with a few exceptions) is trapped in an elevator moving down, floor by floor.  They’re leaving a revolving restaurant at the top of the skyscraper where they just had a delicious meal of too many baked beans, frijoles and broccoli!  Good luck with that. . .

Smack A Young Person Today! (It’s All Their Fault)

Here’s a little statistical analysis for you, courtesy of NAR.  First is a chart comparing rates of homeownership by age group in 2004 with the second quarter of 2010:

The blue line is the 2004 rate, the green is 2010 and the yellow is the % difference in the two.  What’s important is that homeownership has declined for every age group since 2004 with the biggest decline occurring in the under 35 group.  The good news:  there’s a whole lotta folks out there who NEED to buy a home!

Here’s another graph, this time from the Census Bureau.  It’s showing the ‘Mover Rate’ — which tells us who’s moving around out there.  Again, it’s the under 35 set that’s moving the most.  They are running around like chickens with their head cut off when what they should be doing is so simple:  buy a home!

Finally, here’s a non-comparative graph showing rates of homeownership, again by age:

Again, it’s that under 35 set that has the greatest need.

So, it’s younger people who are moving around the most, who have the greatest NEED to buy, but who are pulling back from homeownership at a faster rate than anyone else!  And all of this is happening at a time when interest rates are very low and housing is more affordable than it’s been in decades.

I sniff a sales challenge here.  What are we saying to the under 35 set to get them interested in buying real estate?  What should we be saying?  Does the old rent vs. buy analysis still work?  Or is it old hat?  What’s it going to take to get these folks off the fence and back into the market?

I also believe it’s time for young people to step up and take responsibility for this mess!  Clean it up!  Young people:  it is your DUTY to get out and buy a home this week.  You don’t just owe it to yourself, you owe it to your ECONOMY!  Personally, I think each of us should go out and find someone under 35 and just smack them!  It’s all their fault!

Financing Home Mortgage and Repairs At Once

The  FHA 203(k) mortgage program is the bomb (that’s for the gen Y’rs out there . . . for us Flower Children, it’s way cool).  With this program, a home buyer can choose a property in need of repair and finance the cost of fixing it up right in with the mortgage.  The repair and renovation money is held in escrow after closing and is doled out as repairs are made.  This is beneficial to the home buyer as repairs are financed under the same terms as the home mortgage (usually that means lower interest, longer term and, therefore, lower payment).  It also makes the home in need of serious repair — often the best buy in the market — an option for the average home buyer.

But here’s the catch:  in order for this great program to work, everyone has to know their stuff!  Most mortgage people have never done a 203(k).  Most agents haven’t a clue about how to go about putting together a deal involving this kind of financing.  Home buyers and agents are stymied when they contemplate how they are going to coordinate all of the bids and contractors involved in a project like this.  Suddenly it looks  like a 203(k) purchase is out of the question for most.

If you’re interested, however, there are some great resources out there.  My San Diego area B of A Mortgage Loan Originator, Rob Webber,told me he has access to a specialized team of Mortgage Reps who do nothing but 203(k) loans.  That’s a good start.  And today I read about REbuildUSA, a network of agents and lenders who have trained and become certified in working this kind of transaction.  REbuildUSA has just designated Lowes as their remodelling partner.  Now, working with a REbuildUSA certified agent, a purchaser can go into Lowes and get their entire project bid, from materials to contractors and schedules.  It’s one stop and all the gritty work is done.

I think this is an outstanding development.  We’ d all like to work these kinds of transactions (and they will become more prevalent as time goes on) but few of us have the time or resources to figure it out on our own.  REbuildUSA has created a path on which to run and has simplified the process of getting home buyers into rehab property.  To learn more about their program, click HERE.

What Did The Home Buyer Tax Credit Cost?

According to the Government Accountability Office (GAO)  the home buyer tax credit will end up costing tax payers $22 billion.  About a third of those claiming the credit were trade-up buyers from the most recent phase of the credit, which allowed repeat buyers in addition to the first time buyers. In terms of states’ participation in the credit, California had the most claims.  Nevada, Idaho, and Wyoming had the most dollars for the tax credit claimed per resident. Here is a link to a chart showing the dollar amount per resident by State.

There is no doubt that the Tax Credit programs helped kick the industry into gear, though only temporarily.  I’m hearing that another dynamic developed:  home buyers who missed out on the last two Tax Credit programs waiting in the wings for the next Tax Credit to be announced.  Though the two programs created a flourish of activity, they also created a pulling back of potential buyers as soon as they ended.  I don’t want to get overly political (and I am grateful for the Tax Credit programs of ’09 and ’10), but this is what happens when government attempts to manipulate the economy.  It’s artificial, the benefits are often short term,  and it sometimes creates an offsetting reaction in the opposite direction.  Hindsight is 20/20, but we’d probably be in better shape today had we done a better job overseeing Wall St. over the past 10 years, rather than attempting to create a momentary urgency around homeownership after the fall.

Thank goodness we have the Help-U-Sell Homebuyer Stimulus Program to coax some of those procrastinating potential buyers back into the market.  Truth is:  there’s probably NOT going to be another Tax Credit for home buyers.  But, when you combine remarkably low interest rates with amazingly low prices — and then toss in the Homebuyer Stimulus Program — this is one of the best times in the history of the world to buy a home.

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