By Maria Patterson
RISMEDIA, June 10, 2009-Realogy Corporation has quickly responded and adapted to market changes in a way that most real estate companies simply aren’t built to do. The distinct advantages that Realogy brings to the table have allowed its affiliates, across all brands, to stay the course, despite rough waters. In this exclusive interview, Realogy Franchise Group President & CEO, Alex Perriello, explains why Realogy and its franchise brands-Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sotheby’s International Realty-are uniquely equipped to not just survive in today’s market, but to come out the other side stronger than ever.
Maria Patterson: In your opinion, how is the real estate industry currently faring in the midst of the country’s economic struggles?
Alex Perriello: First, real estate is a cyclical business. The market goes up, down and back up again. Second, all real estate is local. From the local broker’s perspective, what’s happening in your local market is really what matters most.
There are four phases to a business cycle: the peak, the correction, the trough and the recovery phase. If you look at where the national market is today, we are clearly in the trough but getting a little bit closer to the recovery phase. Inventory levels remain high-with a nine- to 10-month supply-and prices and sides are down. However, through the first quarter of ’09, we’re seeing year-over-year unit sales increases in California, Nevada, Arizona and Florida-the first states to experience declines. So we’re starting to see positive unit sales in the first markets that took the brunt of the correction as a reaction to the significantly lower-than-average sales prices.
MP: What are your predictions for the market moving ahead through 2009 and into 2010?
AP: I wish I had a crystal ball. NAR is forecasting the third quarter of ’09 to be the turning point when the national market would start to show some improvement, and then a big improvement in the fourth quarter. Fannie Mae is more pessimistic, but directionally, they’re the same. They also believe there will be a turn this year, but not until the fourth quarter. Fannie Mae is predicting the full year to be down 3% in sides and 12% in price. My instinct is that the Fannie Mae prediction is closer to what may actually happen. Both NAR and Fannie Mae are predicting that we should see improvements in 2010.
MP: What has been Realogy’s approach toward stability and growth during this difficult time in real estate?
AP: The Realogy Franchise Group is really a proxy for the housing market because we do business in all 50 states and all 900 MLSs. As the market goes, we go. But every challenge creates opportunity. We’ve been focused on organic growth and helping our franchises improve business through productivity enhancement, recruiting and a strong focus on mergers and acquisitions. For brokers, this is an excellent time to be growing profitable market share. You can only do so much expense cutting-a lot of our focus has been on growth. We even launched a new brand with Better Homes and Gardens Real Estate that has been extremely well received.
MP: What is Realogy’s message to its franchisees?
AP: Our message to our franchisees is, one, you need to right-size your business to the size of the market. Two, you have to have a written business plan and operating budget based on realistic market assumptions. Then, you have to aggressively pursue growth opportunities in your local market. Whether it’s through rolling in other companies or through recruiting, you need to focus on growth. In my view, two or three years from now, brokers who haven’t done that will be kicking themselves, saying, “I wish I had acquired so-and-so back in ’09.”
MP: How are Realogy and its franchise affiliates uniquely positioned to meet the challenges of today’s market?
AP: The most important thing that differentiates us from our competitors is that we understand the business as an owner-operator, and we have the capability to test new initiatives-whether they are technology, customer or market-related-in Realogy’s 800 owned offices at NRT. This is an excellent proving ground before rolling out more widely to our franchisees’ offices. We understand the challenges of the market from a broker’s perspective as well as a franchisor’s.
MP: How has Realogy’s strategy enabled your affiliates to stay afloat in a tough real estate market?
AP: About a year-and-a-half ago, we started a strategic development team. As we were seeing the market decline, rather than wait for brokers to call us and say, “I’m in trouble,” we started doing some analysis on a company-by-company basis. If we saw signs that weren’t positive, we started proactively reaching out to those brokers and saying, “We are tracking the market trends in your area and believe that you should consider some cost and operational improvements.” By identifying challenges early on, we’ve been able to help our brokers identify potential merger opportunities or other strategies to thrive successfully in their marketplace.
MP: What is Realogy’s approach to facilitating mergers and acquisitions for its franchises?
AP: We look at our franchise sales force as a complement to our field service teams. We go to our existing franchisees and ask, “How can we help you grow? Would you like us to contact prospective companies that may want to sell, and approach them on your behalf?”
I’ve talked to a lot of our brokers in this situation who would be extremely uncomfortable talking to their competition about merging or selling. They don’t want to make the first move and approach another broker for fear of seeming too motivated. We go in on their behalf and serve as the facilitator to bring people together.
MP: What types of resources does Realogy offer affiliates that give them a unique advantage in the marketplace?
AP: First, each brand is responsible for a unique value proposition. They all have systems and tools that are very compelling and competitive.
One of the most successful tools that crosses all of our brands is Lead Router-and we just launched the 3.0 version. Since launching this technology in 2005, we now have 132,000 agents that are connected to Lead Router; about 60% of our offices have all their Web leads coming in through Lead Router. Since its inception, the Lead Router system has processed nearly five million leads. More importantly, the close rates on those leads have gone from 1% in 2005 to between 5-7% today, with some companies as high as 10%.
The 3.0 version of Lead Router will include lead management functionality that will allow an agent to choose an action plan that’s appropriate for the particular prospect and automatically enroll them so they receive regular updates and agents can stay in touch until the prospect is ready to move forward.
Our investment in Lead Router has been and continues to be significant-but these are the types of investments that have a real material impact on our brokers.
MP: Realogy’s Regional Business Consultants represent another unique resource for brokers. How has the role of the Business Consultant evolved?
AP: The classic role of the Business Consultant was as a resource manager who would show brokers all the tools the brand offered and show them how to use them successfully. Business Consultants would also share best practices they learned from other brokers. All those activities are still part of the job description, but today’s environment requires a different focus. Today, Business Consultants work with brokers to discover the optimum way to run their business. It’s now about, “Let’s review your business plan; let’s review your operating budget. Let’s set goals and objectives for the year.” Our brands have put a lot of resources into training our Business Consultants on how to have that kind of relationship with our brokers. We are extraordinarily committed to that endeavor. In this day and age of streamlining and expense management, we have more Business Consultants in the field than we did in 2005. We have more people out there because our brokers need that support more than ever today.
MP: What is the advantage of being part of the Realogy network in terms of referrals and idea sharing?
AP: From a referral standpoint, we own and operate Cartus, the largest relocation company in the world. Today, approximately 85% of the Cartus broker network is comprised of brokers affiliated with one of the Realogy brands.
In terms of idea sharing and peer-to-peer networking, no other company can compare. Here’s an example. I was in a meeting in the fall of 2007 after it was abundantly clear that the market had turned and we were in a correction phase heading for the trough. Bruce Zipf, president of NRT, was talking about all the innovative things NRT was doing to manage overhead and improve agent productivity, and I said, “Bruce, will you share this with my franchisees?” and he said, “Absolutely-set it up.” In December of 2007, we had 200 of our largest franchisees on a conference call during which Bruce and his senior management team spent almost three hours on the phone sharing their ideas and fielding questions. The call was recorded and we distributed the CD to all our Business Consultants across all our brands so they could share those best practices with their respective brokers.
MP: Ultimately, what gives Realogy the most distinct advantage in today’s real estate market?
AP: When you’re the size we are with multiple brands, with our support services infrastructure and a domestic and global network of professionals, you have the opportunity to optimize all your resources. That makes a huge difference-that is what separates Realogy from everyone else.
Headed by Realogy Franchise Group Executive Vice President of Franchise Sales, Tim Henderson, Realogy’s growth strategy in today’s competitive real estate climate is all about “market leadership.”
“Growth through franchise sales relates to profitable market leadership,” explains Henderson. “In Franchise Sales, we look at the different ways we can help brokers in today’s challenging market. There’s been a dramatic increase in merger-and-acquisition activity within our franchise community. The Franchise Sales team has been key in helping our brands maintain market share and grow to become the leader in their areas.”
Creating new partnerships under the same umbrella is something Realogy is uniquely positioned to do. “We also look to affiliate companies through mergers and acquisitions with our existing affiliates,” Henderson explains. “By consolidating these companies, they increase profitability, extend market share and become the driving force in their local community.”
According to Henderson, Realogy’s vast resources and shared services are critical to making it happen.
“Realogy senior leadership traveled around the country to present a Mergers and Acquisitions Academy that was extremely well attended by our affiliates. We then saw a significant increase in the number of affiliate companies interested in acquiring, merging or selling.”
A Powerful World View
While navigating the domestic real estate market in the United States, Realogy has continued to expand its global presence…to the tune of more than 90 countries. Despite whatever geographic and cultural differences that may be involved, the Realogy approach is consistent: take full advantage of the brand systems and tools and, thereby, succeed. As Realogy Franchise Group President & CEO Alex Perriello says, “We’re not a U.S. company that happens to do business outside the U.S., we’re a global company that does business everywhere.”
“We’ve seen growth throughout the entire world, even though the economic situation in each country is very unique,” says Realogy Franchise Group Executive Vice President of Global Services, Gus Rubio. “We just don’t sell a territory; we form a relationship and provide continuing support throughout the lifetime of our agreement. Our International Business Consultants help with business planning and strategy; they talk about growth, offer support and discuss what it takes to be successful in a competitive marketplace.”
According to Rubio, Realogy’s International Business Consultants are strategically located around the world. “They are out there in the global marketplace,” he explains. “They are there to make a difference.”
Being accessible allows Realogy’s International Business Consultants to forge strong relationships. “It’s not just a matter of putting together the business plan,” says Rubio, “It’s about staying connected and being proactive. It’s about an ongoing dedication to their success.”
As American housing prices have become more attractive, Realogy’s Global Services division has also been a conduit to connecting foreign buyers with U.S. affiliates. “To me, that’s always been an exciting part of the U.S. housing industry-people living abroad and also owning a second or third home in the United States,” says Rubio. “We saw it a lot last year with the euro being so strong. Having that global relationship and brand awareness in their own country as well as in the United States is key. When buyers come to the United States, they are often predisposed to use the same brand they used in their country. Our international footprint and multiple brands allow that natural progression to happen more often.”
For more information, visit www.realogy.com.
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