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Looking Back to Move Forward: Power Brokers Reflect on 2017

Apr 7, 2018 by

In 2017, there were highs in housing, and hurdles. For the Power Brokers in RISMedia’s 30th Anniversary Power Broker Report & Survey, assessing both—what was good, and what was not-so-good—is an annual exercise, indispensable to their longevity and paramount to their success.

NEW! Get the digital, interactive ranking of RISMedia’s Top 500 Power Brokers.

When asked what factors impacted them the most in the past year, Power Brokers said:

Williams_Tipper_100x100[The biggest impact on business was] new technology. It’s improving the way we do business by increasing time management and allowing for better conversion rates and leads. The biggest struggle we faced was training our agent base to embrace and adopt technology. My fear is if they don’t get on board, they’ll be out of business. ­­– Tipper Williams, Operating Principal, Keller Williams Virginia Realty Alliance Group, Richmond, Va.

Scott_Lennox_100x100This past year was the most intense market I’ve ever seen in my 41-year career. It was the sixth straight year of a frenzy market in Seattle. – Lennox Scott, Chairman & CEO, John L. Scott Real Estate, Seattle, Wash.

Rand_Joseph_100x100Business was strong in 2017. Inventory is low all over, which finally drove up prices in the Northeast. – Joe Rand, Managing Partner, Better Homes and Gardens Real Estate Rand Realty, Nanuet, N.Y.

Piccinini_JP_100x100We acquired Private Label Realty and grew our brokerage by about 200 new agents in 30 days. While it was a great move, we felt the impact of the growth. It bogged down our back-end office for a month or so, but it forced us to revisit our processes and improve our systems. – JP Piccinini, Founder & CEO, JP and Associates REALTORS®, Frisco, Texas

Mesa_Rei_100x100We had a significant lack of inventory in the entry and move-up price points. In the luxury market ($ 2 million and over), growing inventory and demand is definitely there, but there’s a disconnect between sellers’ and buyers’ expectations on value. – Rei Mesa, President, Berkshire Hathaway HomeServices Florida Realty, Sunrise, Fla.

McLaughlin_Mark_100x100Our vibrant economy and employment market in California has resulted in record-setting job creation that’s outperforming new housing units by a factor of four to one, so demand is driving the equation. With interest rates near all-time lows throughout 2017 and [strong] consumer confidence, we’ve seen a positive impact on the state’s economy and housing market. – Mark McLaughlin, CEO, Pacific Union International, San Francisco, Calif.

Hetherington_Todd_100x100In 2017, there was (and continues to be this year) recruiting pressure from virtually every model of real estate: traditional, flat-fee, technology-based, salaried agent, tiered commission, cap commission, etc. That downward pressure on commissions, along with the degradation of broker profitability, continues to challenge even the healthiest of brokerages. It’s uncertain if some of those models can sustain and thrive in a down market. – Todd Hetherington, Founder, Co-Owner & CEO, NM Management, Inc./CENTURY 21 New Millennium, Washington, D.C.

Hengle_Felicia_100x100The very aggressive market we’re in has had a positive impact on business. We’re still seeing shortages in inventory, favorable interest rates and consumer engagement. – Felicia Hengle, Director of Ohio Operations, Coldwell Banker Schmidt Family of Companies, Strongsville, Ohio

Hampton_Marti_100x100Reduced levels of inventory. – Marti Hampton, Broker/Owner, RE/MAX One Realty, Raleigh, N.C.

RISMedia’s 2018 Power Broker Report & Survey is sponsored by American Home Shield, Homes.com, HSA Home Warranty, Leading Real Estate Companies of the World® and Pillar To Post Home Inspectors. The Power Broker Survey ranks brokerages by residential sales volume and transactions in 2017. The complete ranking of the Top 1,000 will be released shortly.

DeVita_Suzanne_60x60Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com. For the latest real estate news and trends, bookmark RISMedia.com.

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Survey Results: What Keeps Brokers Up at Night?

Jan 15, 2018 by

As we begin a new year, what are the most pressing issues on the minds of the nation’s real estate brokers? What are they most looking forward to in the year ahead? What strategies do they have in place to address inventory issues, technology adoption, agent retention or to ensure their continued profitability? Better Homes & Gardens® Real Estate and RISMedia recently teamed up to find out the answers to these and more questions through a survey on “What Keeps Brokers Up at Night?” Their answers provide a detailed map into the best practices every company can follow to success.

The U.S. brokers we surveyed represented a wide swath of company structures, from companies with less than 3 offices and single digit agent counts to those with more than 400 offices and 13,000 agents. Respondents’ average age range was 51-70 and responded from all regions of the country. Annual sales volume listed by respondents ranged from approximately $ 650,000 to over $ 4.8 billion.

Check out this infographic based on part of the survey results. Full results to follow in article after the graphic.

BHGRE_RIS_survey_infog_final

Top Concerns

Taking a look at brokers’ most pressing, high-level concerns, the top three ‘most disruptive to the current real estate model’ were: Direct-to-consumer, online, flat-fee and 100% commission models. The top three ‘most pressing issues facing the industry’ were lack of inventory, recruiting and non-traditional competition. Top obstacles to profitability were lack of inventory, increasing agent productivity and pressure on commissions. Some responses entered in the ‘Other’ category for this question included discount brokerages, Zillow, too many agents, lead generation and ‘declining market without increase in sales volume on top of rising labor costs.’

On the subject of budgeting, brokers listed online marketing and technology as some of their top investments; also included were administrative, office expenses, labor, rent occupancy, advertising, recruiting and training. ‘Client services’ was the clear winner in what sets their firms apart, showing per tradition that nothing can replace good, old-fashioned customer service. Agent tools, technology and commission structure were the runners up for budget dollars.

Brokers listed their top operational challenges as recruitment of agents, agent productivity and business model competitiveness. And to the question, “What keeps you up at night the most?” brokers listed recruiting more agents as the top answer, followed by new business models, uncertain economy, keeping up with technology, lack of inventory and housing legislation issues.  ‘Other’ answers in this category included: relevance to agents, inspection repairs, Zillow, lack of agent experience, builders and owners reaching buyers directly and lead generation.

Is the key to success being organized? One respondent wrote, “I sleep like a baby because I am organized.” This can only help in business—and with sleep.

Deeper Dive on the Issues

With lack of inventory rising to the top of the most pressing issues, we asked how brokers believe this challenge should be addressed. The top response was ‘increase percentage of new home construction,’ followed by ‘better education of clients on rent vs buy and view of current inventory,’ ‘motivating agents to be more proactive with lead generation,’ ‘reevaluation of local zoning and permit laws,’ ‘changes to tax structure,’ ‘reevaluation of national housing regulations,’ and ‘creative solutions such as manufacture housing.’

Some ‘Other’ responses included: More affordable and entry-level housing and home-buying incentives. One broker stated, ‘Time will solve the problem.’

In an effort to garner some insight from brokers in their own words, our survey included several open-ended questions. On the question, “What best practices do you have in place to ensure your firm and agents remain relevant to today’s consumers?” some answers included: Continuing education, communication, staying on top of technology, training, brand awareness, quality service, integrity, strong online presence, easy-to-use tools, response time, being able to change with the trends, strong marketing and pricing and market knowledge.

We also asked for insight into brokers’ approaches to adopting technology in their firms. Responses primarily indicated this is a high priority, with some having to outsource IT help and other larger firms with dedicated in-house tech departments.

Here’s a sampling of broker responses:

“Technology is a primary focus and one we will continue to put a high priority on keeping up and implementing.”

“The highest priority is absorbing the skills and needs of our millennials.”

“I do not feel like we need to be on the cutting edge of technology because most agents won’t use it anyway. More important to invest in technology that makes agents more productive, happier, gives more free time and easy to learn/implement. Once you make the decision, thorough on-boarding and education is key.”

“Our founder has allocated over $ 40 million to improve technology for our associates.”

“We have a small brokerage It is a challenge to offer the technology that new agents expect.”

“I outsource all of it.”

“We do not have an IT staff. I handle the company’s technology needs as we are a small brokerage. The implementation of CRM or lead management, developing effective on-line marketing and advertising campaigns has become too great a task for the small broker who wants to grow their business. It appears we are entering a period that will greatly benefit national franchise brands.”

“We are continually looking at improving our technology and investing on upgrading our website design to attract customers. Growing our Facebook presence as well.”

“Not the highest priority. Too much industry emphasis on tech and not enough on high-quality, personalized service itself.”

“Moved to paperless system which has been working. This makes everyone more productive. Challenge is learning how to use the technology and staying on top of it. Like marching forward in a sandstorm – you just keep moving and try to pay attention only to those grains of sand that will help you succeed.”

Q. How do you ensure your agents are utilizing the technology systems you have in place?

Many respondents indicated that constant training and education is key to tech adoption by agents. One-on-one support, sales meetings, using technology that monitors agent tech use and providing incentives were also noted.

“Constantly educate them at weekly staff meetings, using case studies or real-world examples. Following up with agents at quarterly reviews to see what issues they’re having.”

“Education. We have literally hundreds of online videos for training on tech systems as well as a marketing company that assists our associates with their online presence and tech skills.”

“Talk about it; demonstrate it and show them personally how to use it. Those that still don’t adopt…they will either grow or go.”

“Offering lots of courses and one-on-one coaching. We track agents’ production based on workshop training attendance.

“My agents are all self-employed independent contractors so I can set company policies that insure legal and ethical practices but cannot require they complete their tasks in a specific manner. I recommend tech and marketing classes whenever available, show agents new and old tech opportunities, explain the advantages of using specific tech tools and make myself available when they feel they need help. I use sugar not a stick.”

Q. What recruiting efforts do you employ to make sure you’re securing the best and brightest?

On this topic, brokers stated they often rely on traditional face-to-face meetings with new recruits, personal relationships and peer recruiting. Some use personality tests. Here are more insights:

“Personal profile of each recruit to learn how they like to work. Tailoring their on-boarding to match their profile. Using our brands extensive recruiting training and tools to help.”

“I mostly do my own recruiting. I try and judge the people that I think would make good sales associates.”

“We are very visible in the local real estate community, interact with agents on a regular basis. Be at their level and not on the “broker pedestal.”

“Ongoing monitoring or local agent’s production. Setting up lunches/coffees to get to know them better and understand what their goals are.”

“Upfront sales personality testing. Create an avatar of our ideal agent, use that to interview and evaluate candidates.”

“Hired a full-time recruiting professional to work with and to hold managers accountable.”

Q. What are your best approaches to retaining agents and how does company culture play a role in that area?

Company culture is paramount to brokers and plays a vital role in agent retention and productivity, and is also key to profitability, many stated.

“We take great pride in the culture we’ve developed over the past 10 years since opening as an independent brokerage. We only recruit/offer to agents that we feel fit our culture…We try to ensure our agents know we expect everyone to act ethically and we ask each of them to know WHY they are in the business and what they want out of it. We make sure they’re in it for the right reasons and support them with their needs.”

“Company culture is essential to retaining agents, as the owner of the company you need to be accessible.”

“Frequently checking in with agents as to how their business and personal lives are going. Showing that you are interested and you care.”

“Maintain a culture of support and focus on agent growth and development. Foster integrity, honesty and sharing among agents. Build a cohesive group of independent contractors who depend on one another.”

“Recognition, incentives, goal setting, accountability – culture is HUGE.”

“Always looking at adding value to our agents’ business through leverage of time through staff, one-on-one coaching, social events, weekly training events, and our culture plays a huge part.”

“Goes to education again. Culture is paramount in our brokerage and we spend a lot of time and energy in bolstering a culture of support, ethics and camaraderie.”

“We offer coaching and focus strongly on building relationships. We have lots of workshops and office parties to have a healthy mix of work hard, play hard.”

“Company culture is critical. As we are small, retention is based upon being involved with each agent’s business.”

“Professional recognition is very important in a ‘sale environment,’ and equally important is being aware of the agent’s personal needs and recognition. Hand-written notes to agents are still effective in a world of impersonal technology.”

“Creating a cohesive and collaborative culture in the office. Offering brokers an attractive split threshold, marketing materials, great websites, attorney PMB and tons of educational opportunities free of charge.”

“Freedom, respect, recognition, mentoring/training, and proper compensation.”

We concluded our survey with a couple of questions about new opportunities and what brokers are most looking forward to heading into 2018. The groups in which brokers see the best opportunities in the year ahead include Millennials and first-time buyers, as well as retirees, move-up buyers, luxury buyers and past clients.

What are brokers most looking forward to in their business in the year ahead? Many said a continued stable economy, continued sustainable growth and sales, low interest rates, more inventory, agent growth and increased productivity, increased market share and new partnerships, and technology platforms. Some also said they were looking forward to retiring in 2018.

In their own words:

“We are going to be trying a new commission structure with our agents/clients with the ability of a flat-fee structure for certain clients. Also, we are going to be taking a more active role in upping the productivity of each of our agents.”

“Having new sales associates joining our firm and hoping an uptick in our local market.”

“Systems, more routine, following the blue print and checking the results.”

“The spring market when buyers are ready to move.”

“Understanding the next technologies that my company has committed to and putting them in motion.”

“Continuing to build successful agent careers. the market may change, but housing needs will always be there.”

And just because we love this…

“We are forming a Golden Girls network of successful women with decades of experience in real estate who are nearing retirement. Our goal is to make the next 5 years our most productive.”

In addition to looking forward to the opportunities to come in the new year, the majority of brokers expressed confidence in the future of the housing industry. Fifty-seven percent of brokers said they are ‘optimistic,’ followed by 20% have a high confidence level. Another 20% stated neutral and only 3% said they had a low confidence level in the housing industry.

Following the survey, John Featherston, CEO and Publisher of RISMedia said, “While real estate professionals are cognizant of the unique challenges facing individual localities or offices, this research overwhelmingly found most to be optimistic about opportunities for success in 2018. From company culture to new technologies to a high confidence level in the housing industry overall, the insights bode well for the industry as a whole and serve as a resource and road map to help others implement best practices and set a productive agenda for the year ahead.”

Sherry Chris, President and CEO of Better Homes and Gardens® Real Estate, had this to say: “I have been fortunate to be in the real estate industry for more than thirty years.  Our industry has undergone far-reaching and important evolution in that time: from being broker centric, to agent driven, to consumer centric, and now to being consumer-data driven. Transformational change is a given in any dynamic industry. Our best advice to broker/owners has always been to stay focused on the aspects of their brokerages that contribute to a singular goal: creating a valuable asset. Strategies vary by company. Competitive pressure varies by market. But some things are universal: consumers will always seek exceptional service. Agents will thrive in values-driven, collaborative environments.”

Beth McGuire is RISMedia’s Online Managing Editor. Email her at beth@rismedia.com.

For the latest real estate news and trends, bookmark RISMedia.com.

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How Brokers Can Use Predictive Analytics to Recruit, Retain Top Agents

Jul 25, 2017 by

Editor’s Note: This was originally published on RISMedia’s blog, Housecall. See what else is cookin’ now at blog.rismedia.com:

In this third and final part of our predictive analytics series, learn how brokers are using predictive analytics to create targeted recruiting campaigns and retain the very best agents. 

Real estate professionals might not have a crystal ball, but predictive analytics come pretty close.

Predictive analytics is used for a variety of hard-to-pinpoint tasks: matching homebuyers with specific properties, showing a prospective buyer how their investment will gain (or lose) value over time, and identifying homeowners who might be ready to sell.

For brokerage owners looking to recruit and retain top talent, it’s a competitive edge. Here are ways for brokerage owners to use predictive analytics to stand out.

Providing Value to New, Existing Agents
Michael Hickman saw the value of offering predictive analytics as a way to stand out in a competitive market. Hickman, CEO, president and broker of Seven Gables Real Estate in Tustin, Calif., provides his 207 agents with access to Totomic, which culls buyer and seller demographical information across numerous consumer database platforms to better match specific categories of buyers to specific properties. Offering this insightful tool helps Hickman’s brokerage stay ahead of market shifts, and, more importantly, appeal to younger, tech-savvy agents, he says.

“An agent with 30 years of experience isn’t going to respond the same way to a recruiting message as a 25-year-old agent who’s in the know about the latest tech offerings,” Hickman says. “I can use predictive analytics to look up a prospect’s address and mine data about him or her. That lets me tailor my [recruiting] message to be more authentic and more likely to align with their interests.”

Generating Leads, Results

Real estate agents are brokerage owners’ clients. Jay Macklin, broker/owner with RE/MAX Platinum Living in Scottsdale, Ariz., says it’s not hard to sell prospects and current agents on predictive analytics once they see how easy it is to use. It’s also quantifiable in ways other tools and marketing efforts aren’t.

Macklin offers SmartZip, another predictive real estate tool that identifies serious sellers through major life events (death, divorce, marriage, etc.) in public records. Predictive analytics, he says, is essentially a lead-generation program.

“It’s good for our revenue stream because agents are able to quickly identify people who are more likely to raise their hand and sell a home,” Macklin says, noting his agents earned 10 listings as a result of using the predictive data in front of sellers. “That’s extra business my agents wouldn’t have received otherwise.”

Hickman admits it can take time for a large brokerage to implement and train agents on how to use predictive analytics properly, but it’s well worth the investment. Hickman’s investment averages out to $ 10 per agent per month, he says.

“My agents are saying time on market is shorter, and we’re hearing that sellers are excited because they can see quantifiable metrics on the marketing of their homes,” Hickman says. “If you’re not using predictive analysis of some sort in your real estate business, you’re missing the boat.”

Learn more about predictive analytics in the first and second parts of our series, “Predictive Analytics: The Next Big Thing in Real Estate?” and “How to Use Predictive Analytics in Your Real Estate Business.”

For the latest real estate news and trends, bookmark RISMedia.com.

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Trump’s Tax Plan: So Few Details, So Much for Brokers to Watch

Jul 4, 2017 by

Brokers have been busy parsing the statement of principles issued in the spring by U.S. Treasury Secretary Steve Mnuchin announcing “a massive tax cut for businesses and massive tax reform and simplification.”

Brokers and real estate professionals from all corners of the industry have spent a good part of their busy season trying to predict what will actually happen with the federal tax code and how it will affect their clients. Yet, there isn’t a real consensus in the community despite Mnuchin’s promise that the mortgage interest deduction will remain intact. Under the statement, mortgage interest and charitable giving are the only two deductions being kept in the plan.

But while all agree that the mortgage interest deduction is a critical federal policy that incentivizes home-buying activity for millions of Americans each year, there are concerns that other major changes to the tax code—such as the doubling of the standard deduction—could render it useless. According to the National Association of REALTORS®, the plan would “impact the demand for owner-occupied housing by reducing the number of homeowners who claim the mortgage interest deduction, eliminating the itemized deduction for property taxes, and decreasing marginal tax rates.” As a result, home values could drop 8 to 12 percent in the short-term depending on the regional market, concluded the NAR report, which was backed by a financial review conducted by auditing giant PricewaterhouseCoopers.

Sam DeBord, managing broker of Seattle Homes Group and vice president of strategic growth for Coldwell Banker Danforth, does not think the comprehensive tax overhaul would benefit the housing market or the local communities that depend on those tax revenues. This is mainly because most won’t claim the itemized mortgage interest deduction, instead opting for the newly doubled standard deduction, which blocks taxpayers from claiming specific items such as mortgage interest.

“As for the proposed tax reforms from the administration, the mortgage interest deduction is not protected,” says DeBord. “The standard deduction would be altered to the point that it would take away 90 percent of mortgage interest deduction users’ ability to claim the deduction. It would remove the incentive to invest in real estate, which we know is most Americans’ primary route to wealth-building and retirement savings. Disincentivizing homeownership and investment in real estate is bad economic and social policy.”

He adds that such a move would also disrupt the plans of former homebuyers who made their real estate investments based on the financing equations dictated by the mortgage interest deduction.

“There are 35 million households who have purchased homes under the promise of the mortgage interest deduction and are claiming it today,” DeBord explains. “Changing the law now would be pulling the rug out from under the budgeting decisions they made based on current tax policy.”

With the mortgage interest deduction all but neutralized for so many homeowners and potential buyers, brokers are looking to other parts of the comprehensive tax reform to find new wealth-building strategies for their clients. One aspect getting a lot of attention is the plan’s removal of the alternative minimum tax (AMT)—a mechanism that was initially implemented to make sure high net-worth taxpayers couldn’t avoid paying their fair share, but has become more of a burden on the upper-middle class instead.

Michael Schaffer, broker/owner of Reason Real Estate in Denver, Colo., noted that the elimination of the AMT could boost the market for second homes even if price increases are slowed by the dilution of the mortgage interest deduction at the entry level.

“The big things that impact real estate are the (elimination of the) alternative minimum tax and doubling the standard deduction. They are really the only things that matter, assuming that the mortgage interest deduction remains as it currently stands,” Schaffer says.

Schaffer predicts that high-income earners will see a major benefit with the removal of the AMT, which will encourage them to borrow the maximum allowable against their home. With current deductibility being limited to the first $ 1 million of home purchase debt—including the primary residence and up to one additional home, as long as the second home is not an income property—the interest rate will effectively be subsidized by the tax deduction, which Schaffer says can free up funds for more second homes or vacation properties, as well as larger loans on personal residences.

“An effective strategy for an individual high earner would be to draw the maximum on a conventional mortgage on their primary residence and then an additional conventional mortgage on a second home up to the limit or a total of $ 1 million between the two properties,” Schaffer says. “If the two properties together don’t cross the $ 1 million line, a home equity line of credit can be drawn for up to $ 100,000 on either of the properties, and all of the interest will be deductible on all three loans.”

For the lower end of the market, however, Schaffer said there could be more of a shift toward renting, and construction will likely shift from building entry-level single-family homes toward move-up luxury homes, second-home condominiums, and multi-family rental units.

At the high end of the market—or regions such as Southern California, where middle-market homes can hit $ 1 million without even including air conditioning—the upside of that analysis has a relatively low ceiling, which has luxury agents like Chad Rogers keeping a close eye on the proposed elimination of state and local real estate tax deductions.

“The proposed change will negatively affect the federal income tax bill for residents in high-tax states such as California, New York and Illinois,” says Rogers, a celebrity real estate expert with Hilton & Hyland.

Rogers sees the elimination of the AMT as a positive for real estate, and he’s reassured by the administration’s desire to keep the mortgage interest deduction. However, he says many successful brokers in his market (where the MLS reported 51 closed sales of over $ 10 million in the first four months of 2017) stand to benefit the most from the pro-business provisions of the plan—mainly the reduction of the corporate tax from 35 percent down to 15 percent.

“The lowering of the tax rate to 15 percent for income from pass-through entities, such as from partnerships, S-corporations and LLCs, may result in significant tax savings to the high-income-producing broker,” Rogers explains, encouraging self-employed brokers to check with their CPAs about creating pass-through entities that will help their businesses.

Andrew King is an award-winning journalist with 15 years of experience with the Gannett newspaper company, appearing in The Journal News (Westchester, NY), Asbury Park Press and USA Today. He also contributes to The Real Deal, TheLadders.com and TechPageOne.com.

For the latest real estate news and trends, bookmark RISMedia.com.

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