As we move through the second quarter of 2012, the year continues to pose a challenge for brokers. However, this year, there are several positive signs that indicate the worst is behind us and new opportunity lies just ahead. This month, we talk to RREIN members Ed Krafchow and Chad Ochsner to get their take on the pros and cons of the year at hand.
Colorado’s Front Range
Chairman of the Board
Better Homes and Gardens Mason-McDuffie Real Estate
Northern California, Nevada
RREIN: How would you describe current market conditions?
Chad Ochsner: We have been really blessed and last year was more of a normal year—our transaction sides and volumes both increased and commissions increased. In Colorado, we did not see the big peaks and valleys that many parts of the country saw. We’ve seen our inventory decline significantly, which created—in certain pockets—upward pressure on pricing. There is some job growth in our area as well.
Ed Krafchow: The current marketplace is a new normal. It is not the marketplace of the old spring or summer season in California. I’m taking a conservative approach to the year. In the first quarter, we were quite a ways ahead of projections and we witnessed a higher average sales price starting to trail up. But I have an absolute distrust of the numbers. We’re holding on to see how the numbers continue to form. We have to get through the spring and summer. For 2012, you can trust the numbers will be better, but you have to make sure you verify.
RREIN: What role will the distressed property market play in your business this year?
EK: I moved out of damaged markets, markets that could take five more years to recover, and moved into an equity market—the wine country (northern California). An REO transaction is four times harder to complete than a regular transaction…with half the pay.
CO: Twenty percent of our market is REO or short sales. We have a number of agents who have done very well within that niche within the past number of years. Banks have streamlined the process and there will be additional inventory coming on the market when they choose to release it.
RREIN: What strategies are you implementing to maximize opportunities in the market?
CO: We’re embarking on systematic coaching via Tom Ferry and other coaches in each of our branch offices. A lot of what they’re helping people with is getting back to the basics. You can use social media until you’re blue in the face, but that list you have of your sphere of past clients and people you know is far more valuable than any glorified Facebook page. We have to go back to the basics of touching clients and reaching out to past clients.
EK: In order to be effective in this business, you have to have people going back to the fundamentals of prospecting door-to-door and face-to-face, especially in markets with short sales. Our biggest successes are happening in open houses and farming communities. Part of the new normal is that you must get out there and prospect.
CO: We’re also coaching agents on how to deal with inventory shortage. We are teaching agents to go back and call the listings you didn’t get and let those individuals know we now have a shortage of inventory, and if they still want to sell their home, we can now list it at a better price.
RREIN: What are you telling agents and consumers about the future?
CO: Our message has been that it’s a good time to buy, but we’re beginning to shift that message to the public. It you want to move up and capitalize on interest rates, then now is also a good time to sell. If you put your home on the market today, you’re likely to see multiple offers come in. We’re also seeing new construction slowly come back—building permits are projected to increase this year. We’ll probably also see a third of transactions come from the first-time homebuyer segment. There’s a lot of pent-up demand among young people who had to move back home because they couldn’t find jobs. That’s now changing.
EK: We’re markedly building our associated relationships and partnerships in the business. They’re driving the business at a high level; local ownership is getting out and driving the business.
The industry as a whole has never been at a more difficult point for itself. This is a time in which we have problems that are larger than the industry itself, the mortgage business representing the most challenging part. The three biggest challenges facing the industry this year and beyond are the financial situation, legislation and litigation. Things may improve slightly this year, but the overarching problems the industry is facing are not yet going away.