Volume XXVII • Number 5 • May 2013 Sponsored By:
commentary
Rent Versus Buy As we note the continuing points and counterpoints about whether listing portals are a good thing or not, it appears to us to be a case of deja vu all over again. For at least the past 35 years, the residential brokerage industry has been caught up in deciding between “renting” or “buying” into new market segments populated by new forms of competition. The first example would be that of the emergence of the relocation management firm. Know that the fierce negative reaction to today’s listing portals was in no way different than incumbents’ reactions to third party relocation management firms. The most common statement then, as today, was “these guys are going to get in between us and our customers and skim commission revenues from our efforts.” Sound familiar? Commentary cont. on p2
inside 5 Make the Leadership Investment 7 The Independent Versus Branded Argument
8 Interview with Philip A. White, Jr. 11 REAL Trends Housing Market Report – April 2013
13 U.S. Foreclosure Rates Edge Higher
18
15 Top U.S. Cities Searched By Global Buyers
16 The Wall Street Journal Survey Shows Interesting Patterns Among Well-To-Do
16 Lender Processing Services (LPS) Shares Mortgage Performance Statistics
17 Royal LePage at 100 18 Wouldn’t We All Like Perfect Technology Solutions
That Old Time Religion Now that we are out of the housing depression of 20062010 and can look forward to decent, if not normal housing markets ahead, it’s time to take stock of what we have learned over the past ten years or so. First, we can admit that as smart as the leaders of the brokerage industry think they are, none predicted the boom of 2001-2006 nor the declines of 2006-2010. So much for our acquired intelligence. Second, despite the billions of dollars and millions of hours spent on acquiring or discussing real estate technologies, the fundamentals of successful brokerages still rest on the foundation of interpersonal relationships, between sales professionals and their clients and brokerage leaders and their sales professionals. Brokerage Firns cont. on p9
Commentary cont. from p1 Office: 7501 Village Square Drive, Ste. 200 Castle Rock, CO 80108 Phone: 303-741-1000 FAX: 303-741-1070 E-mail: realtrends@realtrends.com Web site: www.realtrends.com
Editor: Steve Murray – smurray@realtrends.com REAL Trends Team: Amy Broset – abroset@realtrends.com Jaime O’Connell – joconnell@realtrends.com Travis Saxton – tsaxton@realtrends.com Daniele Stufft – dstufft@realtrends.com Tracey Velt – tracey@traceyvelt.com Doniece Welch – dwelch@realtrends.com Copyright 2013 by REAL Trends. All rights reserved. Material in this publication may not be electronically stored or reproduced in any form without written permission. Violators will be punishable by a fine of up to $100,000 per offense.
To purchase a membership or any of the following REAL Trends products please visit us at www.realtrends.com: • Brokerage Compensation Report • Game Plan • Online Performance Study • REAL Facts • REAL Trends 500 • REAL Trends Canadian 250 • Valuing a Residential Real Estate Services Business
There was an answer available to the brokerage industry at that time. Simply, it was to invest in building their own relocation management firms, arrange capital and technology and skilled people to compete for the business. Based on their strengths with local employers this should not have been that difficult. Rather than allow these new entrants to seize market share in the relocating segment of the housing market, brokerage firms could simply have built their own. But for the most part, they did not. There were several reasons. Lack of access to talent and to capital were certainly among the most important reasons. Further at that time the housing market was see sawing between record highs (1979) and record lows (1981) and the survivability of many leading brokerage firms were seriously in doubt. Nonetheless the choice was to “rent” the customer flow by joining relocation networks, paying referral fees and focusing on serving corporate relocation organizations rather than competing with them. A second example of the “rent” versus “buy” decision was during the 1980’s and 1990’s rise of the national franchise brands. The arguments against these new organizations were just as fierce as that which took place with the advent of the relocation management firms and that of today’s arguments about listing portals. These new “interlopers” brought nothing of value and the vehement insistence by incumbent brokerage leaders that brands would amount to nothing more than a tax on locally owned and operated brokerage firms. As Dick DeWolfe, then the owner of a large independent brokerage firm once commented “there is nothing to the argument at all - it is merely a choice between whether you want to build your own brand or rent someone else’s.” Some brokerage firms acquired the rights to strong national brands and some didn’t. Some brokerages did so for the brand name itself others for lead opportunities or financing assistance. Many others felt that they did not need a national brand and stuck with their own. Once again it was merely a difference as to whether one wanted to “rent” a brand name or build their own. Some thought it less expensive to rent or license a good brand than to build their own. The argument as to which was better was a waste of time. You licensed one, built one yourself or focused on neither (not a good strategy as it turned out). Commentary cont. on p4
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Commentary cont. from p2 In 2013, once again, there is a great debate about listing portals and their affect on the industry. Once again passions are running high. Some believe that listing portals will run away with our customers, skim revenues off the top to do it and fully disintermediate the residential brokerage industry. Others view them as useful business partners in using the online world to reach new customers, or at the least, hold onto those customers one already has. And once again, the “rent” versus “buy” decision is faced by leading brokerage firms. To some extent it is not an either/or decision. Most leading national, regional and local brokerage organizations are both developing their own systems and to some extent marketing them, while at the same time embracing some or all of the offerings of the major national portals. But the similarities of historical arguments in “renting” versus “building” are very strong. In our work with brokerage firms and in observing the results of the best brokerage websites, we have found that any brokerage firm (national, regional or local) can compete very favorably in reaching and attracting online customers. Additionally, we have found that a small but growing number of brokerage firms are becoming successful at serving these kinds of customers right through to closing a transaction.
There is an opportunity for any brokerage firm, properly focused in competing online, to compete very effectively with the global listing portals. The evidence is growing that, in fact, there is an opportunity for any brokerage firm, properly focused in competing online, to compete very effectively with the global listing portals.
listing portals are for our industry. We hear of numerous discussions about how the leading firms should build their own national listing portal or those who think everyone should pull away from them. We often refer to this as “the sound and fury” stage of development. Rather each brokerage firm should decide how much of its energy and capital, both human and financial, it should invest in building their own capabilities. That is really the first question each brokerage should ask itself. It could be that there is such a critical lack of both that “renting” this service is better than “building.” It is a decision unique to every brokerage firm regardless of its size or brand. And it is the first decision that should be made. The listing portals will be a part of the industry for years to come perhaps forever. They are not unlike the relocation management firms and the national branded real estate organizations. Just as these two segments of residential brokerage have become just another part of the fabric of our world, so too, will these new firms. Reading their game plans seems to indicate that they want nothing to do with the messy part of actually helping someone buy or sell a home (sound familiar?) but with grabbing a larger share of the advertising and technology spending of the brokerage and sales professionals. At least that is what they say publicly. And that market is large and as the market continues to recover it will grow. Whether a few or many of them achieve the growth their stock prices indicate is another question entirely. That is their challenge. For brokerage leaders, and at the risk of being repetitive, the first question should be “to what extent will I commit to investing in my own capabilities” in competing online. Secondly, what kind of relationship should one have with the listing portals? Should it be with one or more? Should it be a premium level or just base level? Should I integrate even further with their CRM’s or build/buy my own? To rent or to buy - that is the question. n
But once again, we find a great deal of energy and emotion focused on discussing just how bad the
additional commentary Make the Leadership Investment by Jeremy Conaway, contributing editor Yesterday, I had an intense telephone call with a client who had recently come to realize that his cable, wireless and telephone company, financially flush from the mobile communications boom of the past few years, was about to become a major competitor. Assuming he was just being his usual high energy animated self I made light of the very thought of such an event and made something less than a credible intellectual contribution to the conversation. His response was sobering; “they have joined every REALTOR association in the country.” Last weekend, the print media was alive with stories about Warren Buffett’s Berkshire Hathaway organization having agreed to convert its Goldman Sachs warrants into 43.5 million shares when the contracts expire in October, thus potentially becoming the bank’s largest stockholder. According to one expert in this one transaction, profits of $1.3 billion dollars will be generated. Is it possible to consider this reality without also considering the fact that Mr. Buffet has recently increased his company’s stake in our industry including allowing the iconic Berkshire Hathaway name to be used by a real estate company? In some industry circles the current torrential pace of disruption and change is a stated objective, in some it is a source of anxiety, in still others it is an opportunity while for others it seems to not exist at all. Some readers will say that disruption is their objective, another group will spend their days attempting to avoid or micro-managing it, still others will roll their eyes and suggest that this is the best market they have ever experienced and nothing can go wrong. So, perhaps the current industry environment is very much like that described in the early chapters of No Ordinary Times, the exceptional novel of the early days of World II by Doris Kearns Goodwin. The book provides a finely detailed chronicle of the historic events that occurred during that period of time. It is relevant to the current real estate industry situation because it also discusses the levels of threat and disruption that were required before many of the
major business players of that day, like the automobile industry, agreed that an immediate threat of war existed and that things had to be done differently. While a DEFCON 1 analogy may not accurately reflect the current industry atmosphere a strong argument can be made for the fact that it is close enough. There are currently enough critical and crucial events and circumstances within the real estate industry environment to declare a DEFCON 3 or perhaps even level 2 status. Given this situation it is incumbent upon every real estate industry participant to undertake his or her own personal, professional and/or business response to the current circumstances. The question now becomes whether or not there is a single initiative that might be appropriate for all involved. The search for this magic solution returns us to history and to both No Ordinary Times and, interestingly enough, to another book by Doris Stearns, Goodwin, Team of Rivals, a book that chronicles the early events of the American Civil War. In both of these stories the ultimate solution to the conflicts and the complexities of the era was leadership. The search next continued to any number of business books and papers that address the current business environment. Included in this sweep would be the Harvard Business Review’s Leadership Insights volume of 2011 and the Real Trends 2012 publication entitled Against All Odds. All four of these learned studies come to the same conclusion. In times of opportunity, change, disruption, and destruction the single resource that most often leads to resolution, satisfaction and/or victory is applied leadership. Despite the broad diversity of individual, business and corporate responses to today’s industry challenges, the final solutions will ultimately occur along a finite range of response. Over the next twelve to eighteen months’ industry leaders will respond to the transitioning industry environment by investing their time and Leadership cont. on p6
Leadership cont. from p5 resources into a phenomenal number of organizational, While both are critically important to success the relationship, procedural, transactional and financial skills and competencies they represent could not be reviews, modifications, upgrades and course changes. further apart and the journey that they will take without one another could not be more irrelevant. History and research are not the only criterion that point to leadership as the key first step to meeting the • Managers represent a triumph of power within a industry’s current challenges. Leadership development complex organizational system. Leadership enjoys the distinctions of being affordable and having reflects the courage to go against the flow and do universal applicability to individual roles and functions what must be done regardless of the status quo. across the entire real estate business spectrum, from • Management is the skill set for stability and the long agents to managers to consumer. There are easily distance. Leadership is the competency required to accessible resources to develop and promote quality move the organization through the current zone of leadership and, perhaps most important of all, quality disruption, change, challenge and opportunity. leadership is a process that can demonstrate rapid results and success. • The management personality emphasizes However, these factors aside, there exists a number of factors that will stand in the way of bringing leadership to the forefront of the industry stage. Perhaps the most salient factor was that which Abraham Zaleznik wrote about in his classic 1992 piece entitled Managers and Leaders: Are They Different? Over twenty years ago Dr. Zaleznik, speaking to a whole different issue audience on a far different plain, raised many of the issues that will dominate the real estate industry’s attempts to integrate leadership into its current situation. The challenge will come into focus almost immediately upon any real estate organization’s focus on the question; do we have leadership now? Most firms and entities will respond in the affirmative by pointing out how successful they are at the current time and how skillfully they negotiated the recent period of economic crisis and market instability. The conversation will continue until everyone at the table is satisfied that yes, their organization is brimming with leadership. Actually, the discussion will have addressed and answered a significantly different question. As Dr. Zaleznik established so long ago these organizations are really measuring their management talent not their leadership resources. These assets, which were worlds apart twenty years ago, are, in today’s business environment, light years apart. Yet most firms and organizations will continue to claim that management acumen is leadership and that is simply not the case.
responsibility, control and rational thinking. The leadership thrives on creativity and innovation. • Managers can be developed through commitment to and immersion into specific and well-documented processes and procedures. Leadership requires a personality that rejects these components in favor of the excitement, indeed passion, of the discovery and the achievement. • Managers respond to goals in a tactical and routine fashion, interpreting them as mountains that must be climbed for the sake of the objective. Leaders see goals as a mountain that they get to climb for the joy of the strategic view, the new perspective and the opportunity. • Managers see absolute compliance as the key to survival and recognition. The self-esteem of leaders is based upon the fact that they were able to see the challenge differently and wrap themselves around its unique demands and expectations. Today, the North American real estate industry finds itself at the brink of a new operational history, a vastly different working era, a greater investment expectation and an enlightened consumer experience. In order to realize the full potential of each of these factors the industry will have to field both management and leadership resources that can jointly rise to the occasion and capture the brass ring. The first step of this journey must be to understand how these two competencies are different and how they can collaborate in support of this amazing opportunity. n
brokerage The Independent Versus Branded Argument For the past 36 years, since the advent of the modern age of franchising in the residential brokerage business, there has been an argument about which model is better. Some say that having a national brand can make a huge difference, while those on the other side of the argument say that the additional costs of a national brand make those affiliated less able to compete. We have examined performance data of the REAL Trends 500 and Up-and-Comers for years to see if the relative performance of firms reveals any useful information about this topic. Below are the data we have in 5 key areas of performance comparing those firms indentified as “independent” versus those identified as “nationally branded.” We will let our readers draw their own conclusions.
Based on 2003-2012 calendar year REAL Trends 500 data Nationally Branded firms Measurement
2003
Agents/office 45.1 Sides/agent 10.9 Sides/office 469.0 Volume/agent $2.35 mil Volume/office $106 mil
Independent firms 2012
Pct. change
43.0 9.4 404.2 $2.36 mil $101.5 mil
(4.6%) (13.8%) (13.8%) ---------(4.23%)
Measurement
2003
2012
Agents/office 44.7 43.0 Sides/agent 10.8 8.5 Sides/office 482.8 365.5 Volume/agent $2.66 mil $2.33 mil Volume/office $118.9 mil $100.2 mil
Pct. change (3.8%) (21.2%) (24.3%) (12.4%) (15.7%)
One take we have on these data is that the growth of virtual brokerage firms has been mostly found among independent brokerage firms. Virtual brokerage firms tend to have lower productivity (but not always). Such firms as Realty One Group, HomeSmart International and Solid Source Realty are all listed under independents. Also, on the nationally branded side of things we find RE/MAX, which has the highest per person productivity of any national network and Keller Williams which has the highest agent, transaction and sales volume count per office of any national network. So, these two alone would tend to tilt the results in the favor of the nationally branded networks. Otherwise while it appears that nationally branded firms have performed better in a number of categories the differences are slight. Some might try to make a large deal of these performance differences but they are so slight as to be classified as “not material”. Still, it is interesting. n
women make up the second largest segment Did You Single of home purchases, with one out of every five homes purchased by a single woman, according Know? to the National Association of REALTORS . ®
featured leaders Philip A. White, Jr. President and Chief Executive Officer, Sotheby’s International Realty Affiliates LLC Interview with Tracey Velt, contributing writer Philip A. White, Jr., a 33-year industry veteran, was named president and chief executive officer of the Sotheby’s International Realty® brand in February 2013, responsible for the network’s strategic growth as a leading provider of luxury residential real estate services. White believes in a personal touch when it comes to doing business. REAL Trends interviewed him to find out how he got his start: REAL Trends: Tell me about your career path. White: I have a degree in finance and worked for SunTrust Bank (called Trust Co. at the time) in Atlanta in the investment banking department. I sold bonds. I was there for about three years, when I noticed that Sotheby’s had started a real estate company. I was familiar with the brand as, when I studied in London, I attended some evening art auctions and was impressed. It was an incredible environment. I was in New York for business, and, long story short, I talked with a businessman about opening a Sotheby’s office in Atlanta. At the time, they weren’t interested with Atlanta, but they did offer me a job in New York. I worked in the real estate division on Madison Ave., then moved to Palm Beach, Fla. I was licensed in both New York and Florida. In fact, at one time I had licenses in 13 different states. I ran a big operation in Atlanta. From 1980 to 1988, I held several positions in the Sotheby’s International Realty network.
I left the company to start my own independent real estate firm called Philip White Properties, Inc., in Atlanta, and the firm was a Sotheby’s International Realty affiliate from 1988 to 1992. After four years, I sold the firm to Coldwell Banker Residential Brokerage. [Prior to his July 2004 appointment as chief operating officer of Sotheby’s International Realty Affiliates, White spent 12 years with NRT, serving as managing broker of Coldwell Banker Residential Brokerage’s Buckhead office in Atlanta, one of the most successful offices in the entire NRT organization.] When Realogy acquired the brand, I moved from Atlanta to New Jersey (9 years ago). We have about 40 people on staff, 400 offices and about 140 companies with which we’ve affiliated. We’ve gone on to build a global luxury brand. [White formerly served as president and chief operating officer, overseeing the global brand’s operations, business growth, servicing platform, and membership sales process. He was promoted to president and chief operating officer in April 2010, after having served as chief operating officer for the previous six years.] My background helped along the way, certainly during the economic crisis, and I used that background to survive. REAL Trends: How do you do business differently? What makes Sotheby’s unique? White: We meet with every company that joins us. We have a rule that we will never sign up a company without meeting the principals first. Most often they come to New Jersey but there are times I go into the field with our staff. Rich Greene, our vice president of membership sales, met with more than 1,000 companies in the last 8.5 years. Today, the fruits of that are that I know the culture of every company that is part of us, and I know the owners personally. In fact, I know some of the agents as well. It’s like managing one really big real estate office. So, our ability to know our companies is what differentiates our brand.
REAL Trends: What are some trends you’re seeing in your vertical? White: My gut feeling is a big trend is for companies to put together a global network in the luxury end. Although international buyers in the United States represent a small percentage of buyers overall, if you’re a seller of a high-end property, you want to reach international buyers. Companies must have an international strategy where they’re seeking out Russian billionaires, Chinese buyers or Canadian buyers. They must also have a systematic way to source those buyers and a record of success. That’s what a seller wants to hear today. REAL Trends: Do you have any hobbies outside of your career? White: I travel for business, so the best thing I can do is stay at home. I play golf, and I play squash. In fact, I compete in both of them. In the past, I’ve played in national tournaments in squash, but I don’t have time to do that today. REAL Trends: What are you passionate about as it relates to your business? White: One of the cornerstones of our vision right now is trying to focus our group, team
and company on providing exceptional service. That sounds overused but one of the challenges is that the consumer holds the Sotheby’s brand at a high level. Consumers have high expectations of exceptional service. As a franchisor, we don’t have
As a franchisor, we don’t have the right to impose rules to operate by, so the agents must buy in to our philosophy. the right to impose rules to operate by, so the agents must buy in to our philosophy. At the end of the day, that’s what will win agents a lot of business; it’s all about service. Another passion of mine is connecting people and connecting companies. I love to help our existing companies grow. We’re hoping to help our company connect our companies globally through enhancing referrals and putting together sponsorships of events in places like Hong Kong, London and New York. We want to help our company grow through mergers and acquisitions. n
Brokerage Firms cont. from p1 Our own research into differences in relative performance, whether from an examination of REAL Trends 500 data or our research that led to the book Game Plan or the white paper Against All Odds, points towards personal relationships as the most important strength a realty organization can have.
recognized brand helps as well. It is just that all evidence points towards relationships as the key.
One other point. It helps a brokerage firm and a sales professional to have a) goals, b) a plan to achieve those goals and c) an action plan, a series of actions that one must take to perform. Leaders of our Yes, one must be financially prudent. Yes, firms and industry who have achieved outrageous success over sales professionals need to have access to technologies time know this and work on these fundamentals. that assist in productivity. And yes, having a Sometimes the “old time religion” still works. n
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market news Housing Market Report April 2013
The April 2013 report shows that the rate of housing sales increased moderately in March growing 7.4 percent from March 2012. Overall, March 2013 new and existing unit sales were up 7.4 percent from a year ago. The annual rate for March 2013 was 5.595 million up from the 5.211 million recorded in March 2012. The average price of homes sold increased by 6.9 percent in March 2013 compared to March 2012.
April 11, 2013 – The REAL Trends Housing Market Report showed that the combination of new and existing home sales in March 2013 strengthened from the prior year and at a faster pace than in the prior month. The annualized rate of the combination of new and existing home sales increased to 5.595 million in March 2013 up from the 5.211 million recorded in March 2012. The average price of homes sold in March 2013 was up 6.9 percent from the average price of homes sold in March 2012 marking the twelfth consecutive month of increased home sale prices. Housing unit sales for March 2013 were up 12.0 percent in the Midwest, the strongest showing in the country. The next highest region was the South where unit sales were up 11.9 percent. The Northeast was up 3.5 percent and the West declined 0.4 percent for the same period. The average price of homes sold in March 2013 increased 6.9 percent across the country, a better showing than in the prior month. The West had the best results with the average price of homes sold increasing 16.3 percent followed by the South region at 8.2 percent. The Midwest region showed an increase of 7.2 percent while the Northeast lagged with the average price of homes sold decreasing by 4.2 percent. “March 2013 sales of new and existing homes increased at slightly higher rates than in the prior months shaking off the impact of shrinking inventories. The two regions of the country with the lowest average sales prices, the South and Midwest, continue to outperform other regions in terms of unit sales increases. The average price of homes sold was up solidly again due to supply and demand imbalances. As this report and other housing indicators show the scarcity of inventory and buyer demand are creating a situation where prices are advancing at far greater rates than had been predicted due to high levels of housing affordability and restricted inventory,� said Steve Murray, editor of the REAL Trends Housing Market Report. n 11
REAL Trends March/February Housing Market Report (Versus same month a year ago)
March 2013 Closed Sales
March 2013 Average Price
February 2013 Closed Sales
February 2013 Average Price
+7.4%
+6.9%
+4.5%
+5.0%
Northeast
+3.5%
-4.2%
-7.3%
-6.9%
South
+11.9%
+8.2%
+13.2%
+7.8%
Midwest
+12.0%
+7.2%
+7.7%
+6.2%
-0.4%
+16.3%
-2.9%
+15.6%
National Regional Report
West
25.0%
National
Northeast
South
Midwest
West
20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%
March 2013 Closed Sales
March 2013 Average Price
February 2013 Closed Sales
February 2013 Average Price
Advertising Opportunities in REAL Trends Contact Doniece Welch at dwelch@realtrends.com or 303-741-1000.
12
U.S. Foreclosure Rates Edge Higher for Second Straight Month in March as Back Repossessions Continue to Drop First Quarter Foreclosure Activity At Lowest Level Since Q2 2007 IRVINE, Calif. — April 11, 2013 — RealtyTrac®, the leading online marketplace for foreclosure properties and real estate data, today released its U.S. Foreclosure Market Report™ for March and the first quarter of 2013, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 152,500 U.S. properties in March, a decrease of 1 percent from the previous month and down 23 percent from March 2012. The decrease in March helped drop first quarter foreclosure numbers to the lowest level since the second quarter of 2007. Foreclosure filings were reported on 442,117 U.S. properties in the first quarter, down 12 percent from the previous quarter and down 23 percent from the first quarter of 2012. “Although the overall national foreclosure trend continues to head lower, late-blooming foreclosures are bolting higher in some local markets where aggressive foreclosure prevention efforts in previous years are wearing off,” said Daren Blomquist, vice president at RealtyTrac. “Meanwhile, more recent foreclosure prevention efforts in other states have drastically increased the average time to foreclose, which could result in a similar outbreak of delayed foreclosures down the road in those states.” High-level findings from the report
• Foreclosure starts in March increased from the previous month in 23 states and were up annually in 12 states, led by New York (200 percent increase), Maryland (193 percent increase), Washington (154 percent increase), Arkansas (101 percent increase), and Nevada (88 percent increase). • Lenders repossessed 43,597 properties nationwide in March, the lowest since September 2007. U.S. bank repossessions (REOs) in March decreased 3 percent from February and were down 21 percent from a year ago. • A total of 34 states reported annual decreases in REO activity in March, including Oregon (down 72 percent), Utah (down 71 percent), Massachusetts (down 61 percent), Michigan (down 56 percent), and Nevada (down 55 percent). • States bucking the national downward trend in REOs included Arkansas (up 121 percent annually in March), Maryland (up 114 percent), Washington (up 88 percent), Pennsylvania (up 41 percent), and Ohio (up 39 percent). • Properties repossessed by lenders in the first quarter took an average of 477 days to complete the foreclosure process, up from 414 days in the previous quarter and a record high since RealtyTrac began tracking this metric in the first quarter of 2007.
• U.S. foreclosure starts increased 2 percent from February to March, the second straight monthly • The average time to foreclose in the first quarter increase following three consecutive monthly increased from the previous quarter in 39 states, decreases. There were a total of 73,113 foreclosure led by Oregon (up 61 percent), Arkansas (up 42 starts nationwide in March, still down 28 percent percent), Texas (up 40 percent), Tennessee (up 37 from a year ago. percent), and Michigan (up 22 percent) — all non-judicial foreclosure states. Foreclosure Rates cont. on p14 13
Foreclosure Rates cont. from p13 Divergent trends continue in judicial and non-judicial states First quarter foreclosure activity in the 26 judicial or quasi-judicial states combined increased 6 percent from the first quarter of 2012, while first quarter foreclosure activity in the 24 judicial states decreased 44 percent during the same time period. Similarly, March foreclosure activity increased 4 percent annually in the judicial states combined but decreased 44 percent annually in the non-judicial states combined. Florida, Nevada, Illinois post highest foreclosure rates in first quarter There were a total of 85,671 Florida properties with foreclosure filings in the first quarter, the most of any state and one in every 104 housing units — the nation’s highest state foreclosure rate and nearly three times the national average of one in every 296 housing units. Florida foreclosure activity in the first quarter increased 7 percent from the previous quarter and was up 17 percent from the first quarter of 2012. Nevada foreclosure activity increased 13 percent in the first quarter compared to the previous quarter, helping the state post the nation’s second highest foreclosure rate. One in every 115 Nevada housing units had a foreclosure filing during the quarter. First quarter foreclosure activity in Nevada was still down 18 percent from a year ago, but the quarterly increase was driven largely by a recent uptick in foreclosure starts. Nevada foreclosure starts in March increased 88 percent from a year ago to an 18-month high. Illinois foreclosure activity in the first quarter decreased 2 percent from the previous quarter and was down 5 percent from a year ago, but the state’s foreclosure rate — one in every 147 housing units with a foreclosure filing during the quarter — still ranked third highest nationwide. The annual decrease in the first quarter followed four consecutive quarters with annual increases in Illinois foreclosure activity. Ohio foreclosure activity increased annually for the fourth consecutive quarter in the first quarter, helping the state post the nation’s fourth highest foreclosure rate — one in every 188 housing units with a foreclosure filing. 14
Georgia foreclosure activity in the first quarter decreased annually for the third consecutive quarter, but the state still posted the nation’s fifth highest foreclosure rate — one in every 200 housing units with a foreclosure filing. Other states with foreclosure rates ranking among the top 10 were Arizona (one in every 202 housing units with a foreclosure filing), Washington (one in 220 housing units), Maryland (one in 254 housing units), South Carolina (one in 254 housing units), and California (one in 266 housing units). Florida cities account for seven of 10 highest metro foreclosure rates in first quarter One in every 79 housing units in the Miami metro area had a foreclosure filing in the first quarter of 2013, more than three times the national average and highest among metropolitan statistical areas with a population of 200,000 or more. Six other Florida metro areas documented foreclosure rates that ranked among the top 10: Orlando at No. 2 (one in every 86 housing units with a foreclosure filing); Ocala at No. 3 (one in 92 housing units); Tampa at No. 5 (one in 100 housing units); Jacksonville at No. 7 (one in 105 housing units); Palm Bay-Melbourne-Titusville at No. 8 (one in 109 housing units); and Lakeland at No. 10 (one in 128 housing units). Other cities with foreclosure rates in the top 10 were Las Vegas at No. 4 (one in 99 housing units); Rockford, Ill., at No. 6 (one in 102 housing units); and Chicago at No. 9 (one in 116 housing units). Days to foreclose at record 477 days, biggest increases in non-judicial states U.S. properties foreclosed in the first quarter took an average of 477 days to complete the foreclosure process, up from 414 days in the previous quarter and up from 370 days in the first quarter of 2012. It was the highest average number of days to foreclose going back to the first quarter of 2007. The average time to complete a foreclosure increased from the previous quarter in 39 states, led by Oregon (up 61 percent), Arkansas (up 42 percent),
Texas (up 40 percent), Tennessee (up 37 percent), and Michigan (up 22 percent) — all non-judicial foreclosure states. Despite a 4 percent decrease in the average time to complete a foreclosure from the previous quarter, New York continued to register the longest state foreclosure timeline at 1,049 days from foreclosure start to bank repossession (REO). New Jersey came in second highest at 1,002 days followed by Florida at 893 days, Hawaii at 824 days, and Illinois at 720 days. Texas documented the shortest time to complete a foreclosure at 159 days despite a 40 percent increase from the previous quarter. Virginia documented the second shortest foreclosure timeline at 166 days, followed by Delaware at 168 days, Maine at 182 days, and Alabama at 186 days. Report Methodology The RealtyTrac U.S. Foreclosure Market Report provides a count of the total number of properties with at least one foreclosure filing entered into the
RealtyTrac database during the month and quarter — broken out by type of filing. Some foreclosure filings entered into the database during a month or quarter may have been recorded in previous months or quarters. Data is collected from more than 2,200 counties nationwide, and those counties account for more than 90 percent of the U.S. population. RealtyTrac’s report incorporates documents filed in all three phases of foreclosure: Default — Notice of Default (NOD) and Lis Pendens (LIS); Auction — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank). For the quarterly report, if more than one foreclosure document is received for a property during the quarter, only the most recent filing is counted in the report. Both the quarterly and monthly reports check if the same type of document was filed against a property previously. If so, and if that previous filing occurred within the estimated foreclosure timeframe for the state where the property is located, the report does not count the property again in the current month or quarter. n
Top U.S. Cities Searched By Global Buyers Realtor.com® recently released data regarding the top • France: Chicago, Miami, Los Angeles, Miami Beach, countries (outside the U.S.) where consumers are the San Diego ® ® most engaged on Realtor.com & Realtor.com • Russian Federation: Los Angeles, Miami, Orlando, International. The data highlights the markets within New York, Detroit the U.S. that are most popular amongst these global • South Korea: Las Vegas, Irvine, Los Angeles, consumers throughout March 2013. San Antonio, Columbus • Italy: Miami, Los Angeles, Miami Beach, New York, • Canada: Las Vegas, Fort Lauderdale, Orlando, San Diego Detroit, Naples • Netherlands: Los Angeles, Miami, New York, • U.K.: Los Angeles, Orlando, Miami, Houston, Las Vegas Houston, Las Vegas • Germany: San Antonio, Los Angeles, Cape Coral, • Switzerland: Miami, Las Vegas, Los Angeles, Miami, Las Vegas San Diego, Raleigh • Australia: New York, Los Angeles, Las Vegas, • Spain: Miami, Los Angeles, New York, Las Vegas, Houston, Detroit San Diego • Japan: San Diego, Alpharetta, Las Vegas, San Antonio • Ireland: Los Angeles, New York, Orlando, Chicago, • Mexico: San Diego, El Paso, Laredo, San Antonio, Miami Las Vegas • Sweden: Los Angeles, Detroit, Parkland (FL), • India: Los Angeles, Orlando, Chicago, Dallas, Houston Miami, Fort Lauderdale • Brazil: Orlando, Miami, Boca Raton, Fort Lauderdale, • Belgium: Los Angeles, Miami, Las Vegas, Miami Beach Naperville (IL), Orlando • China: Detroit, Los Angeles, Irvine, Las Vegas, Orlando • Philippines: Las Vegas, Saint Paul (MN), Indianapolis, Los Angeles, Henderson (NV) n 15
The Wall Street Journal Survey Shows Interesting Patterns Among Well-To-Do We recognize that those who read The Wall Street Journal likely are wealthier, have a higher propensity to own their own homes and are more likely to own second homes. But is this still true even after the downturn? And is the attractiveness towards second homes more for retirement, vacation or investment? The Wall Street Journal surveyed their readers in July 2012 to find out. The survey went to a random sample of 3,500 U.S. WSJ research panelists and over 1,066 of those responded. Here is a summary of some key findings: • The average household income was $313,000; • The average net worth was $3.2 million; • 93 percent own their own primary residence and of those 82 percent own a single family detached home; • Turns out that most of those responding are
strongly involved in most aspects of selling or buying their personal real estate; • 63 percent own more than one residence and of those 61 percent own a second single family detached residence. The average market value of these second homes is estimated at $711,000; • 37 percent are planning on buying a home in the next 5 years; • The most attractive region for these panelists is the Southeast (likely due to many from New York and New England preferring Florida and the Southeast over a long commute to second home elsewhere); • Among international destinations for the purchase of a second home the Caribbean/ Mexico is first followed closely by Europe; • The most important factors in choosing a real estate professional are responsiveness (89 percent very important) followed by reputation of the sales professional (80 percent);
LPS shares Mortgage Performance Statistics Lender Processing Services (LPS) reported the following “first look” at February 2013 month-end mortgage performance statistics derived from its loan-level database representing approximately 70 percent of the overall market. • Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 6.80% • Month-over-month change in delinquency rate: -3.16% • Year-over-year change in delinquency rate: -6.51% • Total U.S. foreclosure pre-sale inventory rate: 3.38% • Month-over-month change in foreclosure presale inventory rate: -0.98% • Year-over-year change in foreclosure presale inventory rate: -19.58% • Number of properties that are 30 or more days past due, but not in foreclosure: (A) 3,410,000 16
• Number of properties that are 90 or more days delinquent, but not in foreclosure: 1,483,000 • Number of properties in foreclosure pre-sale inventory: (B) 1,694,000 • Number of properties that are 30 or more days delinquent or in foreclosure: (A+B) 5,104,000 States with highest percentage of non-current* loans: FL, NJ, MS, NV, NY States with the lowest percentage of non-current* loans: MT, AK, WY, SD, ND n *Non-current totals combine foreclosures and delinquencies as a percent of active loans in that state. Notes: (1) Totals are extrapolated based on LPS Applied Analytics’ loan-level database of mortgage assets. (2) All whole numbers are rounded to the nearest thousand.
networks
Royal LePage at 100
Among North America’s largest real estate networks, Royal LePage, the second largest among Canadian real estate organizations, recently celebrated its 100th birthday. Among all residential real estate networks in North America, Royal LePage ranks in the top 6 or 7 in terms of the number of sales professionals and likely higher in total sales volume.
our national competitors to restructure the MLS in Canada so it was more open and available to our affiliates, their sales professionals and housing consumers. Not really earth shattering compared to what has already happened in the U.S. but for us a huge breakthrough and done in a way that fits our style of doing business in Canada.
We talked with Phil Soper, president and CEO of Royal LePage recently as to what a 100 year old real estate organization focuses on for its next 100 years.
REAL Trends: What broad changes do you see coming?
REAL Trends: At 100 your organization has seen many changes. What do you think about your firm and the future? Soper: We continue to have a strong appetite to grow and to change how we do business. Around here we constantly ask ourselves “how can we make our system better in some way?” As you may know, we used to be entirely company owned offices, nearly 400 of them at the peak. As the market shifted and new forms of competition entered our markets we had to shift dramatically away from owned and operated to a franchise business model. It is one big example of how we have constantly reacted to changes in the business yet continued to prosper. REAL Trends: What are you seeing now and what are you focused on? Soper: We decided some time ago that we would strive to be the biggest but focus on being unique and different in some measurable way. Three things that we are focused on now is to build and enhance a collaborative environment; have an “openness” to new ideas and concepts and to build a contemporary relationship with our clients and customers. All nice sounding but we work constantly at building our organization and our people around these concepts. One example of being open to change and to build collaborative relationships is our work with many of
Soper: Every industry, as it matures, tends to segment into more and more niches. It is the nature of business. That is one of our key views and of course, we try to build our business around the idea that no one size, service or feature can serve all niches. We think you have to pick your place and then try to become the very best in that segment or niche. For instance, we have opted not to pursue being the lowest cost provider in our business. It certainly is an option, it just didn’t fit who we are and what we wanted to accomplish. We want to be among the most productive organizations of our kind and we want to be known for delivering on the high expectations of our affiliates. REAL Trends: So pick your fights carefully? Soper: You could say that. We would say that you need to determine who you are, what your strengths are and then fight on that basis, not on the other guy’s turf. Or worse, have no “turf” of your own and end up competing on multiple fronts against a myriad of competitors. And that is not to say that we don’t learn a great deal from our competitors. We have some great ones in Canada and try to poach some of their best ideas and adapt them to our own culture and operations. There are multiple sources of great information available in our business (and others as well). REAL Trends: Last thoughts? Soper: We want to be the premium choice for all those we do business with in our markets. That may or may not mean that we can be the largest overall. What we can do is be the best among the premium real estate organizations. n 17
technology Wouldn’t We All Like Perfect Technology Solutions By Travis Saxton, marketing and technology manager
Available Technology Utilized
Agent adoption follows a very common negative linear relationship 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
More Agents Use Less Technology
10% 20% 20% 50% Percentage of Agents
As you can see from the chart 10% of the agents use 90% of the technology they have at their disposal and an overwhelming 50% of the agents use a bleak 10% of the technology provided to them. 18
The Root of the Problem: How many times have you heard your agents are too busy to prospect or follow up with certain internet leads (insert common complaint here) only to be in your management’s office a month later with no listings or buyers to work with. The fundamental problem boils down to priorities and distractions. In the bar chart below is a snapshot into a typical agent’s book of business:
Effort & Attention
The phrase “Beauty is in the Eye of the Beholder” is never more relevant than when discussing real estate technology. Despite the catchy title there is no “perfect” technology system. Many brokerages spend sizable amounts of money and resources to implement technology strategies and bring in shiny systems to keep up with or get out in front of their peers without a proper strategy. Many don’t understand the fundamental objectives of technology. The most common technology problem amongst real estate brokerages is in fact that much of the investment brokerages make in technology goes to waste, as many agents don’t typically use all of the supplied technology. So even if you have the perfect technology solution, you would still see the typical agent adoption unless you can tap into the mindset of your agents. This article will hone in on the root of the problem with the science behind the agent adoption problem.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cold or New Leads
Warm Leads
Hot Leads
A few definitions for you to put this into perspective. Hot leads are leads that are ready to buy or sell now, approved, and engaged with you. Warm leads are ready to buy or sell within 30-90 days or may be close to buying or selling and just don’t know it. It’s the agent’s job to take warm leads to hot leads. As you would
expect, agents dedicate nearly 85% of their attention and effort on hot leads. While we aren’t saying they should disregard these hot leads by any means this type of attention distribution leads to a common cyclical pattern. The question I ask you is what happens to the agent’s business after the hot leads for this month close? If you answered they start all over with no or few leads and spend the next 2 months making up for it, you are right. According to the 2013 REAL Trends 500 we analyzed 1,338 firms that submitted data and found that this year the average agent in these top firms produced 7 transactions per agent, which is up from 5.9 in the 2012 edition of the report. Look at this from the transaction perspective of the average agent if he/she spends all their time and effort on closing their hot leads in a given month. Then that would mean they close 1-2 transactions that month then spend 2 months recovering from not generating new leads or incubating warm leads. They end up chasing their transactions and, over the course of the year, they will end up with the average production of 6-7 transactions (and we know this is skewed with few agents producing the bulk of the transactions and many agents producing few transactions). So how do we siphon through the distractions and break the cycle?
Effort & Attention
Wouldn’t you love a consistent flow of business and leads for your agents that looks like this: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
slightly over 100%. Kudos if you caught that as it was intentional. The only way to achieve these results is with technology and systems. Top producers work systems very effectively. Systems don’t necessarily have to be technology related either as they can be systematic processes that aid lead flow from one “bucket” to another. Technology not only keeps your warm and hot lead buckets full, it can aid in generating new leads and over time turn them into warm and hot leads. Systematic processes such as the NINJA Selling System can also keep your buckets full and growing as you dedicate time to each bucket and organize your effort and attention in such a way that all three buckets increase. You work your database and let technology assist you with the rest. To achieve these types of results you have to commit to a system. Most top producers have bought into technology or have assistants to aid them on the technology side so they can focus on relationships. The fact of the matter is they are using it, but if they are not and are just really good at relationships, a technology system would only make them that much more efficient. How do we get your agents using your technology? It’s no secret as identified above when agents are busy, they are very busy. They don’t systematically have the ability to handle other items so let your technology do this for them. The single biggest way to increase agent adoption of technology is to automate it for them! How many agents do you know who would not like a system that converts leads, finds leads and creates results for them? This is the mindset we need to instill in agents. Here is how to help your agents and increase agent adoption with little to minimal input from their end:
Cold or New Leads
Warm Leads
Hot Leads
The first thing that should jump out at you with this graph is that 1) the percentage of effort on hot leads has actually decreased and 2) the overall percentage of effort has actually increased to an amount just
1) Automate your marketing but be smart about it. Don’t just mass email. Market based on data. Data could be any type of input like a hobby, neighborhood, current status, life changing events and much more. 2) Help them identify life-changing events in their customers. Technology now can mine social media for this simplifying and giving the agents those Technology cont. on p20 19
editor’s note The Fellowship of Realty Professionals REAL Trends is proud to announce the launch of a new membership organization for those real estate sales professionals and teams who have achieved a lifetime of sales excellence. We note that while there are over 30 designations in the residential real estate brokerage business that are awarded for completion of educational programs and training, there is no designation nor membership program that recognizes those who have a lifetime of high sales production. The Fellowship will be open to those sales professionals who have:
The Fellowship will be opened to the global community in 2015. Feel free to contact Steve Murray or anyone on the REAL Trends team at 303-741-1000 for more information. Now available from REAL Trends The REAL Trends 500 and Up-and-Comers Report Rankings of the largest 1350 firms in the U.S. The Canadian 250 Report Rankings of the largest 250 firms in Canada
• Closed 500 transactions or $250 million in volume in their careers for individuals
REAL Facts The country’s most complete data base of top performing brokerage firms
• Closed 1,000 transactions or $500 million in volume in their careers for teams
Coming in late June
From our work in developing The Wall Street Journal/REAL Trends Thousand we think it likely that there are fewer than 2,000 individuals or teams in the U.S. who qualify. June 1 is the formal launch of The Fellowship in the United States and Canada scheduled for 2014.
The Wall Street Journal/REAL Trends The Thousand The Thousand top sales professionals on a national basis Coming in Summer of 2013 REAL Trends State and Local area rankings of the nation’s most productive sales professionals n
Technology cont. from p19 little nuggets they need to engage their consumer. 3) Make routine tasks simpler. Utilize your technology to aid in common tasks such as pricing a property, prepping the home owner for selling, aiding a buyer in finding their dream home and many more. 4) Make it simple. Many agents are even too busy to create their own drip marketing campaigns. I have seen some systems with “easy” 3 steps processes that take too much of the agent’s time or are too complicated for most agents. Reduce the steps. If the campaigns are already created to come FROM the agent and it happens automatically or they can manually enter a phone lead and click ONE button to market to them, you are in business. 5) Automate off line marketing. Technology can even help agents print labels, envelopes and 20
traditional marketing pieces and handle those rudimentary tasks that bog them down. The more your technology can run on cruise control the more agents will adopt it. If you implement a system that aids in one transaction your momentum will start to gather. SHARE those success stories in front of your sales meetings. This is how you create more momentum. Have top producers share how technology has helped them fix a pain of theirs and create more business. Use these small victories to your advantage. They could be as simple as a new lead from a client for life email campaign to a new hot lead from a husband and wife couple which your system automatically recognized their anniversary. The dominoes will start to fall if you can do these simple steps. n