Category: The Industry

What’s Up with Franchise Sales?

We are not actively marketing franchises at the moment.  Since the birth of the new Help-U-Sell a the end of 2008, we have been focused on just two things:  stabilizing the franchises we have and adding value to the brand.  The former had to do with ending the relationship with franchisees who didn’t have the heart to continue and reconnecting with those who did.  The latter involved creating a new, more effective presence on the Internet, exploiting new business alliances and communicating.  The franchise sales function has not been part of the mix. 

Oh, we’ve had a few new offices open:  Elias Klaeb and Tammy Whitehead both returned to Help-U-Sell after being gone for awhile and reopened in Southern California and Jeanne Lukes opened an office in Indianapolis.  But these were franchise sales that sought us out, not ones we created through aggressive marketing and that’s very different for a real estate Franchisor. 

The disease of the industry — the real estate franchising industry — is the strong emphasis on franchise sales as the ultimate goal and strategy for growth.  It’s a problem in every real estate franchise.  You have these gigantic organizations with lots of facets, all aligned to produce one result:  more franchise sales.  The result is a rush to approve almost every applicant and nearly every location, which leads to greater numbers of poorly performing franchises and a dilution of the power of the brand. 

It’s not unlike the disease that infects most ordinary real estate offices, where recruiting is seen as the answer to all problems and becomes the broker’s most important job.    The selling of real estate is seen as the agents’ job and is largely delegated to them to figure out individually and on their own.  (I remember myself, 30 years ago working for one of the other franchises, saying to their brokers, ‘There’s not a problem in the world you can’t solve with recruiting!’)*

Today we’re using different language to describe the Help-U-Sell Team.  While ‘Franchisor and Franchisee’ still describes us from a legal standpoint, we’re now using language that puts all of us on the same team with the same objective.  Today we talk about CTs and MTs:  the Coaching Team and the Messaging Team.  (I know:  in the latest Corporate Update video, we said MT stood for ‘Member Team,’ but it was just a flub, one I should have caught).  The Messaging Team carries the message to the consumer:  Help-U-Sell is the best value in real estate.  The Coaching Team does everything in its power to ensure that the Messaging Team delivers the message to as many consumers as possible.  We coach, train, explain, build technology, lead, communicate, form alliances and so on. 

The most important thing about all of this has actually been at the heart of Help-U-Sell from the beginning:  all eyes are firmly focused on the consumer.  We are all working to get to as many consumers as possible, to save them as much money as possible and to create as many fans as possible.  And we approach this with a great sense of mission — it’s more than a business, it’s a cause.   

In this tough world, in this difficult business, it is energizing to have a cause, a mission, something to believe in.  It gives you the power to dig deeper, do more and be more than you could all by yourself. 

So, will franchise sales become a part of the new Help-U-Sell?  Sure.  But it’s not going to be what it was in the past nor what it is in other franchise organizations.  We don’t plan to pursue anyone who isn’t pursuing us.  They’re going to have to really want us.  And they’re going to want us because our existing Messaging Team is smiling in growth and profitability.  Protecting that will be job number one.

 

*Here’s an interesting aside.  About seven years ago, I talked with a business consultant who worked for a big 100% company (no names).  We were at a Brian Buffini Turning Point rally.  At the break we were talking about what we did and he mentioned market share as a measure of his company’s success.  That was a hot button for me because we at Help-U-Sell were finding it difficult to get consistent sales data to calculate market share on a national basis.  So I asked:  ‘How do you calculate market share?’   ‘Simple,’ he responded, ‘We count the number of agents in the local Board and then compare that with the number who work for us.’  The water I was sipping took that moment to go down the wrong pipe and I fell into a fit of coughing.  If that doesn’t show how far from the consumer the business focus has strayed, I don’t know what does.  Here is a real estate organization — and a good one — that is not even in the real estate business.  They’re in the agent business!  They don’t count transactions to determine market share, they count agents!  In most 100% companies, where the agents pay a desk fee and then keep all of the commission, the broker’s revenue stream has nothing to do with how much real estate anyone is selling.  All that matters is how many agents are paying desk fees every month.  The consumer is . . . lost.

I’m Concerned: FHA . . .

12/10:  Matt Kellam, Help-U-Sell Keystone Realty, Chambersburg, PA, was on our Broker Roundtable teleconference yesterday and raised a red flag of warning.  He said changes in FHA guidelines were in the works and they could greatly impact the number of borrowers who might qualify for FHA insured mortgages. 

I spent this afternoon trying to track down the truth.  I Googled everything and talked at length with a Bank of America MLO — a fellow who really knows his stuff — and didn’t learn anything much beyond new Condominium guidelines (which will basically be favorable to our industry) and something called  ‘The FHA Taxpayer Protection Act of 2009’ that’s stuck in Committee in the House. 

But then our Communication Resource, Tami Patzer, sent me a copy of Secretary Shaun Donovan’s remarks to the Senate last week.  You can read the full piece by clicking here, but this is the section that concerns me the most:

. . . . we are committed to a series of additional steps to increase the quality of our business going forward.
 
An initial measure is to reduce the maximum permissible seller concession from its current 6 percent level to 3 percent, which is in line with industry norms, and we will continue to consider additional reductions.  The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.

Secondly, to protect the fund from the riskiest borrowers, we will for the time being also raise the minimum FICO score for new FHA borrowers.

We are currently analyzing what this floor should be, including the relationship between FICO scores and downpayments to determine whether we should increase FICO minimums in combination with changes to other underwriting criteria for lower downpayment loans.

Third, we have made the decision to exercise our authority to increase the up-front cash that a borrower has to bring to the table in an FHA-backed loan – to make sure that FHA borrowers have more “skin in the game” and a stronger equity position in their loans.  There are several ways to accomplish this, and so we are currently analyzing various options to determine which is the most effective and consistent with our mission.
 
Finally, we are examining our mortgage insurance premium structure to determine whether an increase is needed and, if so, whether it should be the up-front premium, the annual premium or both. Our current up-front premium of 1.75 percent is below the statutory cap of 3 percent, while the annual premium is currently at the statutory maximum.  To protect against future uncertainty in market conditions, we are requesting authority from Congress to raise annual premiums, as this is one of the most effective means of raising capital for the fund with the least impact per borrower.

In the opening section, he says they are ‘committed to’ the following changes.  I normally take that to mean they are considering them.  However, as you read further, it seems clear that these changes have already been mandated.  

If this, in fact, is the case, the impact on FHA buyers — wh0 are fueling the real estate recovery — will be big.  It saddens me to see this on the heels of the extension of the home buyer tax credit and I can only hope that the language is not what it seems.  I will continue to search for confirmation (and hope for the opposite) — and if you hear anything, please let me know.

Update:  12/10 – Inman News says the changes will be announced to lenders in January and likely won’t go into effect for 60 days.  Usually, new guidelines don’t affect loans already in process, so it’s likely anything pending before March will fall under the current rules.

New Short Sale Guidelines

The Treasury Department announced new Short Sale guidelines a few days ago.  The new rules go into effect on April 10,2010 and are set to ‘sunset’ on Dec. 31, 2010.  There is lots of confusion about the new program, so here is my short, bulleted list of its provisions:

  • Borrowers must be HAMP (Home Affordable Modification Program) eligible*
  • Lenders must provide a short sale pre-approval, including minimum acceptable net proceeds, prior to listing
  • Lenders have 10 days to approve or disapprove  a short sale
  • Borrowers are fully released of liability:  no cash contribution, promissory note or deficiency judgment
  • Servicers are prohibited from reducing real estate commissions specified in the Listing Agreement (up to 6%)
  • Secondary lien holders may receive a maximum of $3,000 of short sale proceeds to satisfy  their liens
  • Borrowers receive $1,500 in relocation assistance
  • Servicers receive $1,000 to cover administrative costs
  • Primary lien holders receive $1,000 for releasing some short sale proceeds to secondary lein holders (up to $3,000)
  • The guidelines standardize processes, paperwork, time lines and deadlines in the short sale process

*To be HAMP eligible, the following conditions must be met:

  • The property is the borrower’s principal residence; 
  • The mortgage loan is a first lien mortgage originated on or before January 1, 2009;
  • The mortgage is delinquent or default is reasonably foreseeable;
  • The current unpaid principal balance is equal to or less than $729,7501; and
  • The borrower’s total monthly mortgage payment exceeds 31% of the borrower’s gross income

So, I gather that Joe Schmoe who has a stable job and good income, who wants to sell but finds himself upside down may not qualify for the new program.  And I guess that’s the problem:  this is a program for distressed homeowners, not a new set of regulations and procedures for the industry.  However, that part is still unclear to me and I expect clarity to come as we get closer to April 10.  As I learn more I’ll pass it on to you.

If you’d like to read the full document from the Treasury Department, you can access it here.  It’s actually a pretty good piece and includes some of the paperwork that would be required in this program.

Full Service Broker vs Limited Service Broker vs Discount Broker

I’m stewing over what people say about us.  You know:  ‘They’ always seem to get around to saying we’re Discounters or, worse, Limited Service Brokers.  Of course, we’ve never been a group that pays much attention to what ‘They’ say, but still:  it makes me wonder where we exactly fit.

As usual, I Googled a bit and came up with a lot of promotional material, mostly from ‘Them’, describing what they do for sellers and buyers and defining that as ‘Full Service.’    By extension anybody who does anything different or charges differently for their service is deemed to be  less-than full service.  I disagreed with everything I saw, but after all, this was promotional material, designed to influence; hardly unbiased.

Finally, I found an attempt to distinguish at Answers.com.  They have delegated most of the content for their real estate section to ‘The Dictionary of Real Estate Terms’, by Jack P. Friedman, Jack C. Harris and J. Bruce Lindeman, published by Barron’s Educational Series, Inc.

First, their definition of ‘Discount Real Estate Broker:’

A licensed broker who provides brokerage services for a lower commission than that typical in the market. Generally, the services provided are less extensive than those of a full service broker or may be unbundled, so that a client may contract for specific services. Many discount brokers charge a flat fee rather than a percentage of the selling price. See Flat Fee Broker.
Example: Henson, a discount broker, offers to list a property for a 3% commission. Henson will refer prospective buyers to the seller and prepare a sales contract. The seller is expected to show the property and negotiate directly with the buyer.

Well, I thought, We usually charge less than an ordinary broker, offer some services as an option,  and we do encourage Seller involvement (because it helps the marketing) . . . does that mean we are ‘discount brokers’? I decided to follow the link for ‘Flat Fee Broker.’   Here’s what they said:

A licensed broker who charges a fixed fee for the provision of brokerage services instead of a commission based on a percentage of the sales price of the property. See Discount Broker.
Example:Kramden, a flat fee broker, charges $5,000 to arrange the sale of a home, no matter what price is agreed upon by the buyer and seller. If a sale is not consummated within the term of the listing contract, no fee is paid.

Ok, I thought, that feels different. . . but it still sounds like us. I decided to check out what they had to say about ‘Limited Service Brokers’

Plan offered by some real estate Brokers that allows the buyer (that’s what they said, ‘buyer.’  My guess is they meant ‘seller,’ but I’m not sure.)  to contract for less than the full array of brokerage services at reduced Commission rates.
Example: The Travises thought they could save money selling their home if they did some of the work themselves. They wanted professional assistance, so they contacted a broker who offered a limited-service option.The broker agreed to place the property in the Multiple Listing Service (MLS), screen prospective buyers before sending them to see the property, and provide the paperwork needed to prepare a Contract. The Travises advertised the property and showed it to those who were interested in buying. They paid the broker a commission fee of 3% of the Sales Price.

Now I was really confused.  That also sounded a bit like us . . . all except that part about charging a percentage based commission.  Then it dawned on me:  before I could understand if we were Discounters or Limited Service, I had to understand what Full Service was!   I went back to Answers.com and looked in the Real Estate Dictionary under ‘F.’ . . . and guess what?  They don’t define ‘Full Service!’

That’s the crux of the matter:  Everyone defines what they do as ‘Full Service.’  They define what we do as ‘Less-Than Full Service’ because we usually end up charging the seller less and we offer them options to eliminate services they may not need while giving them the opportunity to participate in the sale.

Here’s what I know:  we are a completely different business model than the one employed by ordinary brokers.  We analyze our markets in ways ordinary brokers have never even considered.  We design, track and adjust our marketing in a completely different way.  We control the leads our marketing generates in a way most ordinary brokers only dream about.  We achieve the same result they do — and usually do it quicker and for more walk-away dollars to the seller (just compare your KPI against the MLS) — all the while saving the sellers money.  Since nobody seems willing to define ‘Full Service’ (and since we’d probably disagree with the definition if they did!), I’d suggest we stay away from the term entirely.  Instead, let’s describe the business this way:

With ordinary brokers, you get Ordinary Service.  With Help-U-Sell you get Extraordinary Service.

Read more on the subject HERE

Money Loves Happy

Indulge me for a moment.  After all, I’m probably a lot older than you — which means I might be wiser or maybe just senile.  In either case the proper thing to do is to cut me some slack, give me the benefit of the doubt, go easy on me.  I say all this because I’m about to become  less business-like and more personal and it makes me a little nervous.

I’ve spent a lot of time wandering this world and I have come to believe that abundance is pretty much all around us.  I picture it as a great river of money flowing just above our heads.  The trick is to find ways to reach up and pull some of it down.  That’s what we’re all trying to DO:  pull some of that money down and put in our pockets.  So we set goals and work long and hard, we practice, drill and rehearse, and constantly work to improve our performance . . . and so on.   

What I’ve noticed is that working to create abundance (jumping and grabbing at that river), while necessary and important, isn’t nearly as effective as attracting it.  And nothing attracts abundance better than Happiness.  Money loves Happy.  It longs to be with Happy and is constantly looking for a time and place where they can be together.  It’s a love story. 

Happy people have abundant lives; and it starts with getting Happy. 

In other words:   Abundance doesn’t create Happiness.   Happiness attracts Abundance. 

I call Help-U-Sell brokers every day and, as I’ve said, I’m always blown away by the Heroes I find out there.  This Happiness theme runs through those conversations and it comes out as optimism, determination, faith and confidence. 

But let’s also acknowledge reality:  it’s been a very difficult couple of years in this real estate business and the chaos of the recent past has left some wounded and bleeding.   I’ve talked with a few who are so down, so depressed, so defeated that getting anything started is . . . well, it’s probably not going to happen. 

If this is you, if you are one of the crawling wounded who has lost your faith and your hope, then I have something to tell you:

You don’t have a business problem.  You don’t have a sales problem or a market problem.  You don’t have a recruiting problem or a support problem or a cash flow problem.  What you have is a Happiness problem.  And if you can’t find a way to get Happy now, you’re probably not going to turn things around.

********************

How do you get Happy when you’ve forgotten what that feels like?  Well, once again, being positively ancient, I have some ideas.

1.  Move!  Really:  get moving!  If you want to change your emotion, change your motion.  Run.  Dance, Work out.  Walk. Bike. Climb.  I do yoga.  It keeps me from becoming a question mark shaped fossil and makes me sane.

2.  Revive Grattitude.  You want to nurture a spirit of continual gratitude for all of the wonderful blessings you have in your life.  What?  You can’t find any?!?  Then do volunteer work somewhere every week helping those who really have nothing:  orphans, victims of abuse, homeless, mentally ill, infirm, elderly and alone.  Opportunities to reconnect with just how lucky you are, are all around you. 

3.  Picture a positive outcome.  Spend a little time each morning quietly sitting and thinking about what you’re working on.  Picture things working out.  Picture successful results.  Picture these things in detail.  Taste it, feel it, smell it.  It’s unfortunate, but most of us spend much of our quiet time doing  exactly the opposite.  It’s called worry.

4.  Put your subconscious to work.  As you close out your day, take a few minutes to plan the next day.  What are you going to do, when will you do it and what are you trying to accomplish.  Do this within an hour of going to bed and do it in writing.  You may find a good Day Planner will help or you might do better with a yellow legal pad.  If you do this exercise, your brain is going to work on all of that stuff while you sleep through the night.  You’ll find it easier to get started the next day, easier to stay organized, easier to get to yes. 

5.  Get Connected.  Everywhere.  Plug in.  Connect with your family, your friends, your colleagues.  The natural tendency when times are tough is to withdraw and it’s probably the worst thing you can do.  This is especially true with Help-U-Sell family members who are scattered across the country.  You have to seek out ways to connect.  Join the teleconferences on Tuesday, Wednesday and Thursday at 11am Pacific Time.  Get a Facebook account and join the 100+ brokers who have become a friend of Help-U-Sell Real Estate.  Every day you’ll get an update of who’s doing what and what everyone is thinking . . . and  you’ll feel part of something bigger than yourself.  Above all:  next time you hear of a Help-U-Sell rally near your home, make reservations and get to it.  Really:  a day spent in a Help-U-Sell rally is better than a whole bottle of Valium! 

Your job is to find a way to get Happy, then stay Happy, then turn Happy into a habit.  It’s step one to an abundant life.

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