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Forget Back to Basics – It’s Time for a ‘New Deal’ in Real Estate

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By Beth McGuire

RISMEDIA, September 10, 2008-Forget back to basics. It’s time for a ‘New Deal’ in the real estate industry. Drawing an analogy to FDR’s historic group of programs aimed at pulling the country out of the Great Depression, RISMedia Senior Advisor Allan Dalton believes it’s brokers and agents who must affect the reform and economic recovery needed to turn today’s housing market around for the better.

The comment held particular meaning to the more than 500 real estate professionals who gathered standing-room-only at New York’s historic Roosevelt Hotel last week for the opening session of the 2008 RISMedia Leadership Conference. Dalton and a panel of industry power players inspired guests by doling out specifics on what brokers and agents can do this minute to improve their businesses and, bottom lines.

The session, titled, “Leadership-Information-Change-Diversity-Profit: How to Succeed in Real Estate Today,” was facilitated by RISMedia President & CEO, John Featherston; Ed Krafchow, president, Prudential CA/NV/TX Realty; and Jim Sherry, president, Innovative Solutions.

In addition to Dalton, panelists included heavy hitters Lloyd Frink, president of Zillow; Robb Heering, founder and CEO of Casa Latino Franchise Corp.; Dottie Herman, president and CEO of Prudential Douglas Elliman; Peter Hunt, chairman and CEO of Hunt Real Estate Corp.; Alex Perriello, president and CEO of Realogy Franchise Group; Craig Proctor, sales associate with RE/MAX Omega Realty; and Monty Smith, SVP of strategic initiatives for NRT.

Overall, close to 1,200 attendees descended on New York for the two-day educational and networking event, now in its 19th year. Over 80 speakers and 17 sessions, including two jam-packed sessions on RISMedia’s new Top 5 in Real Estate program, offered attendees a comprehensive variety of content-rich, take-home information. Two buzzing receptions among the more than 50 event sponsors in the exhibit hall also offered prime networking and business-building opportunities.

Creating a ‘New Deal’ in Real Estate

In his usual high-energy, inspiring delivery, Dalton called on real estate professionals to take action in turning the market around by reforming the messaging they send out every day in their local markets.

“In 25 years I can’t recall a market place like this,” he said. “How do we respond? Do we do a ‘Real Estate New Deal’ and imitate reform? Sadly, we don’t. In my travels I hear ‘We’ve got to get back to basics,’ but no one describes what that means. We have to be cautious before being that nostalgic. The problems we have are far more pervasive. We don’t need to get back to basics. We need a ‘New Deal.’”

So what are the informational changes that have to take place? One, agents have to change the way they market themselves as an industry. “We have to change the messaging. Never before have consumers  been in greater need of being persuaded and never before have so many not been persuading them,” he said. “Our job is to inspire the consumer. We need to script North America’s real estate message. Can you imagine Obama, McCain, or IBM if all they did was promote themselves? What percentage of your revenue is based on communication? One hundred percent. If every single agent said to every buyer, ‘That property is on the market for $400,000. What do you think the price is going to drop to in a year?’ Then tell them ‘Let’s go and get it at that price today.’ We have to put a tourniquet on the bleeding on where the market is going.”

Dalton referenced the two sessions at the conference dedicated to RISMedia’s recently announced Top 5 in Real Estate program, which he said would offer an unprecedented approach that agents can use to not only differentiate themselves, but also revolutionize consumer confidence. Watch in the coming days for more stories from the conference on the Top 5 in Real Estate.

Alex Perriello: ‘We Have Two Choices’

Naming inventory as the principle factor in the housing market correction, Alex Perriello offered a dose of reality to guests as he broke down the market cycles of the past.

“We’re in the fourth year of a market correction following an unprecedented decade-long run up,” said Perriello, president and CEO of Realogy Franchise Group. “How much longer is the correction going to take is the subject of great debate, but the reality is that no one knows for sure.

“One thing that is for sure,” he added, “is the market will at some point recover. So what do we do now? We have two choices: We can hope in due time that the market will recover…or we can roll up our sleeves and accelerate the process of this recovery.”

To do that, Perriello said brokers and agents need to have a keen understanding of where the market is today. There are three key drivers that are most important, he said:

  • The level of inventory influences price
  • Price influences sides
  • Sides influence inventory-a circle effect with inventory at the beginning

He demonstrated housing figures from 2005 though the present, noting that there were 2 million homes for sale in 2005, or a 4.5 month supply of inventory; in 2006 there were 2.3 million homes for sale; 2.9 million for sale in 2007 and as of July of this year, there were 3.9 million homes for sale in the United States.

“That is a 10.6 month supply of homes,” he said. “The last time we saw this scenario was in 1985. We all know that a balanced market has a six-month supply of homes. From 1985 it took eight years to get back to a six-month supply. This is why getting inventory down is what we have to focus on. Nothing is going change until that happens.”

Calling that reduction in inventory “a tactical challenge,” Perriello said to stimulate sales brokers and agents have to restore consumer confidence in the housing industry. Know your local numbers, he said-not just by zip code or city and state; he said drill the numbers down by price, property type and neighborhood, and share the numbers with sales associates on a weekly basis.

Also, he said real estate professionals should focus on getting price adjustments. “Let sellers know what’s going in their local market,” he said. “If you tell them to lower the price without backing it up with data, it’s not going to work for them. Deliver that information to every seller so they can be aware and make the right decision. Have the courage to say ‘no’ to an overpriced listing.”

Other suggestions Perriello offered included going back into client archives and mining the data on those who bought homes prior to 2003. “Let them know that it is a good time to move up to a bigger home or a second home. They have equity in their homes. Mine the clients, pencil them out strategies and create interest in opportunities in the market.”

Words of Advice: Be Online

“The most important thing is following the eyeballs,” said Lloyd Frink, president of Zillow, the widely popular and content-rich listings and real estate information site. “More and more people are going online and that’s where you want to have a presence. Go where the people are.”

He ought to know. Zillow had more than 5.4 million unique visitors last month, Frink reported. And they are adding more robust features to the site to turn those millions into repeat visitors.

“The focus has to be on consumers, giving them information,” he said. “Consumers have an insatiable appetite for it; they want transparency in as much as they can and at the same time they want control.”

Features on Zillow include home sales from the last 10 years, ‘Zestimates,’ and more than three million listings. Visitors also can find out what other homes in their neighborhood are worth.

“We are trying to give them more information, trying aggregate information through quarterly reports targeted at media and industry,” Frink added. “We provide quarterly reports for 160 metro areas and they include home valuations, homes that sold for a loss. We get hundreds of mentions in the media through them and it’s that kind of information that’s useful to agents.”

New plans for Zillow include improving its mortgage market place, which allows consumers to anonymously get mortgage quotes, to include an automated system that delivers hundreds of responses as well as building the tools to help consumers filter the information.

Own Your Own Information

In a counterpoint to Frink, Prudential Douglas Elliman CEO Dottie Herman emphasized that while it’s important to be on popular consumer real estate sites, it’s critical to be the steward of your own information.

“That’s what differentiates me and our company,” Herman said. “People need data and as agents you have to own it, know it and know how to speak it…We can’t change the market but we can help with making people aware of the reality. We’ve given our industry away, she added. “At one time, we kept all the information and people had to come to us to get it. That doesn’t work today. Today, the public is getting information from every site, and that’s good, but don’t forget about branding your own company and your company information on your own site.”

Herman advised that brokers carefully select those they choose to deliver the company message. She says to select someone who is articulate, who has a presence and who knows today’s market.

“If you look like the expert and give people the information they want that’s not self-serving, they will come to you,’ she says. “There are a lot of big deals going on around the country right now, but all the media focuses on is foreclosure. I think all of us should talk to the media, show them your properties are selling and start putting that information out to the press so there’s a balance. The biggest reason this has happened is because we gave our industry away. I love Zillow and sites like it, but the key is to own your own information.”

The Secret to His Success

Craig Proctor has been in the real estate industry for 20 years and achieved status as the world’s leading RE/MAX agent only three years into his career. How did he do it?

“I stumbled onto a marketing secret 18 months into my career that completely transformed my business,” he said.

The secret? “The most effective way to generate leads is to offer prospects something they want and make it easy and non-threatening for them to get.”

Proctor calls his secret ‘reverse prospecting,’ whereby the agent creates a marketing system where motivated buyers and sellers seek them out.

“Many are saying there’s nothing selling now, so why try,” he said. “That’s simply not true. Look at the MLS. In your town there are hundreds of transactions happening now. The key is getting involved in those transactions.”

To do that Proctor said target marketing is key. “The message needs to be effective. Life goes on for our prospects. People are getting married regardless of what’s happening in the real estate market. People are getting divorced-they’re not waiting to see how the market goes. It is possible to design specific messaging for those who must buy and sell right now.”

Examining further, Proctor listed several benefits of the current market including the opportunity to truly differentiate yourself and work with builders, first-time buyers and expired listings.

“For me, understanding effective marketing completely changed my real estate career. Had I not stumbled on the power of direct response marketing, I wouldn’t be here the last 15 years and 500 transactions. There are thousands of agents profiting from this market place. I want to give everyone the confidence that there is a very lucrative business in your hometown now by understanding what the consumer wants and giving it to them in a non-threatening way.”

It’s All about Cash Flow

Peter Hunt, chairman and CEO of Hunt Real Estate Corp. also believes great opportunities exist in today’s market, but brokers need to know how to find them.

“I will offer two bits of advice,” said Hunt. “The first I received from [Long & Foster Chairman and CEO] Wes Foster and that is simply to hunker down. The second I received from [former broker of Schlott Realty] Dick Schlott-you can’t cut costs fast enough.

“Also, be a leader and take advantage of what we have today,” he added. “For example, this year will be our largest profit in our mortgage business. Everyone loves to hate the mortgage business, but this year, it has changed the way we do business. We need to have continued focus on employee-based ancillary opportunities.”

“It’s about cash flow,” he continued. “If we’re not focused on that then there’s no reason to do what we are doing. This may offend someone, but I see myself as a businessman that happens to be in real estate. A professional hockey player is a professional athlete who happens to play hockey. We have to be good businesspeople first and realize we’ve chosen real estate as the place to exercise our business skills.”

Understanding Opportunities in Multicultural Markets

Robb Heering founder and CEO of Casa Latino Franchise Corp., America’s first and currently only Hispanic real estate franchise with a national footprint, filled Oscar Gonzales’ spot on the panel, who was called by the state of Texas to assist in emergency preparations for Hurricane Gustav.

Heering’s remarks focused on multicultural markets and how moving in new directions to turn the housing industry around also includes a comprehensive understanding of these powerful markets.

“What’s been eroded in this industry is trust. Most of my customers come from the Latino market place where trust is best gained through the sharing of information,” he said. “Many need to be educated on how the system works and, on the value of credit and banking. Many don’t have bank accounts and even those of a higher economic scale don’t have the education of the market needed to succeed in it. So you have to share market information and help educate them. You need to understand cultures.

“There is not much in common between a New York Puerto Rican and a Texas Mexican,” he added. “You should be aware that more than half of buyers will come from a multicultural background. The Hispanic community is a large and powerful demographic today. If you don’t speak the language, you need to speak the culture. It’s all about relationships and if you can impart education and are willing to share it so they understand the market, you will see success in this area.”

More Than Information, It’s about Knowledge

Citing NRT’s new transaction management system, “Homebase,” Monty Smith, SVP of strategic initiatives for NRT focused his insights on defining value.

“When we look at where we put our money we divide the spectrum in three customer engagements: transaction, post transaction and customer relationship development,” he said. “So many innovations take place in the first third, all part of customer engagement, but today I’m talking about point of contract,” he said.

Three years in the making and rolling out over the next year, Homebase is created by NRT and offers a new, interactive transaction management system. “If you go online anywhere today, Amazon.com, Barnes and Noble.com, you can log on and see your history of purchases. NRT’s new transaction management system is an avenue for us to take that part of our business from contract through closing and beyond and puts us on an even playing field with the banks.

“It’s not about information, it’s about knowledge,” he continued. “We often define our value by ‘access to information’ but we should now define ourselves by the knowledge we bring to consumers. The value to them is that we know how to lead them through the process in an equitable and successful way.’

Time to Be Evangelists

Change the messaging, and that includes the message to the mainstream media, concluded RISMedia CEO John Featherston. It’s all about taking action at the local level and staying positive.

“Nothing ever happens without enthusiasm,” Featherston said. “If we’re not enthusiastic about the value we provide every day to our customers, how are they going to be enthusiastic about the services and skills that we’re providing? We need to be evangelists. Take advantage of that in your local media and tell them the positive things happening in our industry.”

Keep watching RISMedia.com for more insights from this year’s Leadership Conference.

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