RISMEDIA, May 2009-With more than 950 responses, RISMedia’s 21st Annual Power Broker Survey demonstrates that brokers are eager to show their strength and use 2009 as a year to move ahead in the real estate industry. Here, read how Ron Peltier, chairman and CEO of the No. 2-ranking HomeServices of America, has stepped up in this difficult market and maintained a role of leadership.
Maria Patterson: How did 2008 turn out compared to your expectations – better, worse and why?
Ron Peltier: Our expectations were very, very reality based. Given the economy, we knew it was going to be an extremely difficult year…and the results didn’t prove us wrong. Clearly, 2008 was a year for us to revisit all aspects of our business and to start preparing for a totally different market, a market of fewer home sales and lower sales prices. We put ourselves in the position to be successful moving forward and eliminated a lot of excess bricks and mortar, as well as eliminated programs that were no longer relevant, particularly in the area of print advertising. We are more and more focused on the Internet. We eliminated a lot of salaries as a function of reduced volume of business and are positioned for better days ahead. The market we witnessed over the last 10-12 years was not sustainable, not a real market.
MP: When the market rebounds, then, will it be a better real estate market than five years ago?
RP: Yes. The fact is, the double-digit appreciation we saw was making homeownership a non-reality for a lot of people. Homes were way overvalued and people were using those tremendously appreciated assets as an ATM cash card to fund other purchases that supported an excessive lifestyle. This was a problem that we knew would ultimately cause economic pain and collapse. What we’re learning is that moderation and housing appreciation at very modest levels is much better for the marketplace and better for the economy.
MP: What strategies are critical to keeping your company afloat in the turbulent market?
RP: We’ve had to realize that it’s back to some of the basic tenets of our business-building relationships and being knowledgeable in your market area. It’s truly about helping those that are capable and in the market to buy or sell a home and about providing superior service.
When the market was overheated, customer service at all levels was diminished-it was really just a race to do the deal. I think there has been an adjustment at all levels of the business to take a step back and evaluate what our value proposition is. It’s about giving customized attention and appropriate levels of advice and knowledge to each individual-it isn’t one size fits all. A lot of skill and knowledge has to be applied to every customer. I think a lot of that was put on hold and got lost in the shuffle during the overheated market. In the environment when every month or every year your home went up 8 -12%, there was, frankly, less due diligence involved in the transaction at every level.
MP: Have you been able to turn this market to your advantage?
RP: In an overheated market you tend not to do the right thing…you tend not to want to make major changes during a boom market even though it might be the best time to. As the market has corrected it has given us the opportunity to really act on what we have believed the long-term direction of the industry is, and that is less dependence on bricks and mortar. Up until last year, there were very few companies that took advantage of technology and mobility as it relates to downsizing. That’s a lesson learned that we can take out of this marketplace. We have eliminated a lot of our office space and consolidated by bringing offices in short proximity together. This did not cause agents to leave and this is something that will serve us well in the future. The impact is, we are not cutting agent commissions and we’re allowing ourselves to have better margins and be profitable at all in the downturn. An important benefit of this downturn is that it caused us to look at every aspect of our business and be more effective and efficient. In an overheated market, we’re guilty of inefficiency and excess.
MP: Were there any areas where you increased spending?
RP: There were several areas where we certainly made no attempt to cut back; those areas are technology, training and recruiting. Those areas were largely left untouched.
MP: What role do you need to play as a leader during a difficult market?
RP: The most important thing that any CEO or leader can do at this time is to be more visible and engaged than ever before and show their passion, their commitment and their dedication to their company and to the mission of their business. It is not a time to be cloistered behind a closed door, not a time to show weakness or uncertainty or fear or confusion. We will get through this and history has shown that our business is cyclical. We need to help communicate the issues that brought us where we are today. We need to be leading our teams out of this correction through our vision and our execution as CEOs. People want guidance and want to be led or coached; they will only do it if they sense that the person in that leadership position is fully engaged and fully committed.
MP: What are your predications for the future? When will the market start to uptick?
RP: In the midst of all this real doom and gloom-and it is real-I think we’re at the bottom and I think we’re going to hit a tipping point. Because of the number of foreclosures and prices that go with a distressed asset sale, I think we are seeing the early signs of buyers being motivated to move into the marketplace, especially the first-time home buyer and maybe the first trade-up buyer, which is critical to get our market moving. If we don’t do anything to kill that motivation through congressional action or through some other limitation that gets put on our industry, I think we are in the early signs of the bottom.
Now, people who are serious, potential homeowners, are beginning to see that this is a great opportunity to buy. Our job as industry experts is to help communicate that message. Homes are to be viewed as a long, gradual asset investment, not a short-term flip. Unfortunately, housing got commoditized over the last six, seven years. We need to bring the entire mindset of the American homeowner in line with the fact that homes are a slow, gradual appreciating asset.