By Maria Patterson, Stephanie Andre, and Paige Tepping
RISMedia
The close of the year often begs a retrospective approach to the events that took place-good, bad or otherwise. The sharp edges are often dulled in hindsight, motivated by the desire to put it all behind us and move on to the fresh promise of a new year.
For those of us in the real estate business, however, the look-back at 2008 is not quite so sentimental. Faced with varying degrees of challenge and crisis, real estate professionals from all walks of life have suffered the wounds of a thorny year.
But many forged ahead and will continue to do so…some lucky few are even expecting business to pick up in ‘09. But, then again, it really has nothing to do with luck. It has to do with understanding and adopting the paradigm shifts swiftly taking root in our industry. The game has changed for good and you’d better have the new rulebook.
To close out 2008, therefore, we’re taking a look at the industry’s most significant paradigm shifts. Don’t mistake these for trends-these are long-term, if not permanent, foundational changes to the way real estate will be conducted in 2009…and well beyond. If you haven’t embraced these shifts yet, start now. They are critical to your survival and bounce-back in the real estate business.
1. Accepting Economic Reality
While maybe, deep down, we naively hoped that writing a $700-billion plus check would instantly infuse new life into our failing economy, it’s important to realize that overall economic health is far down the road. And, according to most real estate pundits, the boom years of the early 2000s will probably never be seen again.
Why? For starters, unbridled price appreciation is most likely gone for good. Blamed, in fact, for many of the ills of the housing market and, in turn, the economic mess, skyrocketing housing prices, combined with pernicious loans, led to most of the problems we are feeling today as homeowners, real estate professionals and American consumers in general.
Sure, it’s tough…but it’s not over. There is still success to be had in this business. But that success will only come with a full acceptance of the current state of the economy-a state that stands to stick around for a while-and learning how to operate within the new business model it presents.
“We’re in the fourth year of a market correction following an unprecedented decade-long run-up,” says Alex Perriello, president and CEO of Realogy Franchise Group. “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 stimulate sales, brokers and agents have to restore consumer confidence in the housing industry, says Perriello. Know your local numbers, he says, not just by zip code or city and state; drill the numbers down by price, property type and neighborhood, and share the numbers with sales associates on a weekly basis.
Perriello also recommends going back into client archives and mining the data on those who bought homes prior to 2003: “Mine the clients, pencil them out strategies and create interest in opportunities in the market.”
2. Waning Consumer Confidence
With all the talk about consumers “sitting on the sidelines,” unfortunately, there are many who’ve now moved from the “sidelines” to the parking lot. The economic meltdown that began in late September has left many consumers less worried about selling their homes, and more worried about keeping their jobs and paying their bills.
“We have this mindset across the U.S. that I call, ‘recession, depression, obsession’,” explains Ron Peltier, chairman and CEO, HomeServices of America. “With all of the negative media, consumer confidence is at an all-time low. In business, in general, 70 percent of the GDP (gross domestic product) is driven by consumers. We are in for an extended recession, perhaps even depression, if you talk to some people. And, if we continue to obsess over that, people will hold tight.
“Our job is to make consumers understand why real estate is still a smart investment,” he continues. “We need to take the proper initiative in each market to get to the news media and talk about the very things we know ourselves-yes, the market corrected and yes, values have dropped, but over a five-year horizon, real estate is still a great investment and very safe. If consumers embrace that, we believe that there will be buyers.”
3. The New Lending Landscape
While industry professionals continue to examine the bailout bill and its possible effects on the housing industry and America at large, many lending institutions are taking the problem into their own hands and offering programs and support systems to families across America. “We will work with families who want to save their homes but are struggling to make their payments,” says Charlie Scharf, CEO of Retail Financial Services at Chase, one company that’s being proactive in today’s uncertain market.
With the lending landscape continuously changing, institutions are modifying their practices to best suit the needs of homeowners. In fact, for the first time in 30 years, HUD revised its RESPA rules in order to restore trust in the housing market. “The new RESPA rules seek to bring more clarity and certainty to the real estate market,” says Steve Preston, HUD secretary.
In addition, the government bailout that was approved in October was recently revised. Regulators were given the power to change the plan, hoping to gain the support of all Americans. The plan, as it stands now, is to give money to financial institutions in return for stock, rather than buying the securities that no one else wants. The objective? Get the banks to start lending again.
Whatever the outcome, agents and brokers must step into the role of financial adviser to guide clients through the new lending waters. Make sure your knowledge of the latest bills, restrictions and credit guidelines is encyclopedic.
4. Creative Cost Control
When the going gets tough, budgets get slashed. It’s a basic business fact of life. But for the successful broker and agent, cost cutting is not random, but rather, a highly creative and refined process. Rashly cutting your marketing budget, for example, can diminish your presence in your respective marketplace, stem the flow of leads and give your competitors a chance to step up and reclaim market share.
Look to more creative cost-cutting ideas instead. Begin by removing underperforming, wrong-attitude personnel, but then look to those areas that will save you money without reducing your prowess and reputation. Chad Ochsner, president of RE/MAX Alliance in Denver, for example, devised a clever way for his agents to save money while also giving an important nod to the environment. This past summer, in the face of dramatically escalating gas prices, Ochsner’s agents asked clients to narrow down their home choices online in order to streamline driving time during showings. Agents then charged clients a gas surcharge for any above-and-beyond time spent driving to scope out homes.
Gino Blefari, president and founder of San Francisco-based Intero Real Estate, recently told the audience at RISMedia’s 13th Annual Power Broker Forum that he managed to cut $1 million from his budget. Among the laundry list were seemingly insignificant items, like getting rid of the “exotic coffee machines” and becoming a green operation. If you’re of the mind that the little things don’t matter, remember that every item contributed to Blefari’s $1 million savings-a savings, by the way, that’s allowing him to grow his franchise and open new offices.
5. Green For Good
Over the past months, we’ve witnessed an unheard of amount of information, deliverables and attention paid to green initiatives. Moving into 2009, expect this shift to become even more prominent and permanent as brokerages look to save both money-and the Earth.
Initiatives like NAR’s new Green Designation and the emergence of Ecobroker are quickly gaining popularity.
“It’s our job as stewards of the environment, but also as real estate agents, to educate our clients about what they can do in the homes that they’re buying and/or selling to help this cause,” explains Carson Matthews, a Realtor with Atlanta-based Harry Norman Realtors. “I really kind of preach about greener living, with the hope that others will follow suit.”
“The greening of the industry is no longer just a trend,” adds Chad Ochsner, president of RE/MAX Alliance in Denver. “It’s become an expectation.”
From paperless transaction management software to recommending more energy-conscious products for the home, brokers and agents will push for green living well through next year.
6. Seeing Real Estate Clearly
The wealth of information online is experiencing exponential growth on a daily basis, taking transparency to a whole new level. Consumers want more information-and they want it fast.
Real estate verticals such as Realtor.com, Zillow, Trulia and Point2 have become mainstays by offering the ability to view millions of listings and their photos.
“The bottom line for an agent with a listing is that you want that property viewed by as many people as possible,” says Kaira Sturdivant Rouda, president of Ohio-based Real Living. “Partnering with [listing sites] is the way to do it. Listing data today is ubiquitous. The more credible places your listing appears, the better.”
Be on the lookout for even more transparency from Fidelity National Real Estate Solutions’ Cyberhomes. The company is prepping to unveil its newest offering-Neighborhood Outlook, which lays out a detailed account of market trends such as loan delinquencies, REOs and foreclosures in any given neighborhood.
Another sign of transparency: collaboration. From Realtor.com’s recent agreement to list FSBOs from forsalebyowner.com to RISMedia’s own partnership with Realtown.com, real estate’s top players realize that working together will deliver even more to consumers.
To that end, companies such as Yahoo! Real Estate, Trulia and Zillow have even adopted a new standard data format for the distribution of real estate listings online. With this standard, listing providers will be able to distribute their listings data to several of the leading real estate sites in one common format, making it easier to get critical information to consumers faster and more efficiently.
7. Differentiation That’s Actually Different
Agents have long touted their differentiation in their respective marketplaces. But the reality is, claims of offering the “best service” are prevalent…and getting old-especially in a down marketplace where consumers are seeking serious financial advice.
Truth be told, most consumers view all real estate agents as more or less the same, and for the most part, not very favorably. According to a 2006 Harris poll, in fact, real estate agents ranked last out of 23 professions in terms of prestige!
To truly stand out in today’s real estate marketplace and dispel poor perceptions, agents need to increase their professionalism by becoming an expert resource and provider of consumer-relevant information.
RISMedia’s recently launched Top 5 in Real Estate Network®, for example, offers agents a way to promote their differentiation and elevated status to consumers by providing consumers with the high-level information they crave. While we all love a good recipe, these are serious times that demand serious information.
“A greater commitment among real estate professionals to meet the increasing informational interests and demands of consumers is needed now more than ever,” explains RISMedia President and CEO John Featherston. “Regrettably, many consumers perceive that real estate agents are principally only transaction-to-transaction oriented. It is to the benefit of our entire industry that these perceptions begin to change-this can only take place by strengthening our profession’s commitment to meeting the informational needs of consumers.”
8. Bye-Bye, ‘Back to Basics’-Hello, ‘New Deal’
Disclaimer: Mastery of real estate fundamentals is, of course, very important.
That said, it’s not nearly enough to hang your hat on. Real estate professionals who wish to be around for the long-term must embrace new ways of doing business, starting with the messaging they are sending out in their local markets.
“In 25 years, I can’t recall a marketplace like this,” explains Allan Dalton, president, RISMedia’s Top 5 in Real Estate Network®. “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.’”
According to Dalton, 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 says. “Our job is to inspire the consumer. We have to put a tourniquet on the bleeding on where the market is going.”
9. Real Estate’s New Face
If you’re among the few who view the multicultural market as a trend, you’re missing the boat-and a wealth of real opportunity.
“Growing your business in the midst of a major economic correction is not the first thing that comes to mind for most organizations, but the customer segment that the industry has traditionally overlooked may now be our economic lifeboat,” says Oscar Gonzales, founder of the Gonzales Group. “Since 2000, we have seen a significant shift in the profile of consumers as the multicultural consumer has grown both in population size and buying power.”
In a real estate market that has us all on our toes, a comprehensive understanding of the rapidly growing multicultural market can only help. Real estate professionals can capitalize on this market segment if they take the time to learn about and understand these cultures.
“What’s been eroded in this industry is trust,” says Robb Heering, founder and CEO of Casa Latino Franchise Corp. “Multicultural consumers need to be educated on how the home-buying system works as well as on the value of credit and banking.”
9. Targeted Technology
It goes without saying that technology is an invaluable tool for today’s real estate professional.
“As we are no longer dealing with a local client, our pathway to everyone begins with technology,” says Carlina Boji, broker/owner, RE/MAX Classic, Farmington Hills, Michigan.
Today’s successful real estate companies have made it their mission to equip real estate professionals with the tools they need to reach consumers. Listing homes online isn’t enough anymore, and VuVista is one example of a technology company offering more in today’s market.
“Our new iVuZoom technology allows us to take the virtual tour concept one step further and deliver an immersive and interactive virtual tour,” says Steve Marques, president and COO, VuVista. “For the first time, you can have a 360- or 180-degree panorama, stop the picture and zoom in to see precise details.”
Also, as cell phones continuously infiltrate the real estate industry, the mobile search concept has taken off and changed the way agents and consumers share information with one another.
Not only are technology companies targeting the Internet, but BlackBerries and iPhones have become a common information-sharing avenue as well.