If you desire to own your own home, but are unable to secure conventional financing today, you may want to consider houses for rent with an option to buy, using a lease option contract. It can make your rent money work for you. Typically, many rent-to-own homes offer generous monthly rent credits that reduce the final purchase price! While homes for sale and for rent are abundant, few owners of these types of real estate properties realize the numerous advantages of the rent to own or lease/purchase option strategy.

There are basically three ways to find a home that fits your needs and negotiate terms with the Seller or Landlord of the property. Execute a contract that is a lease with an option to buy the home at some point in the future. Work within your budget to create a lease option contract that works best for you, or negotiate a lease-purchase.

Rent to Own

Rent-to-own homes provide buyers-tenants and sellers-landlords additional options during questionable times for the market or the individual parties. The general agreement allows for a potential buyer, who may not have the capital to buy the house out-right or the credit to get a loan, to pay a deposit up-front, traditional rent and a rent premium and live in the desired home immediately.

The deposit on a rent-to-own is usually between one and five percent of the property price. The traditional rent goes straight to the seller-landlord, as in any other rental agreement. The rent premium acts as a further deposit toward the purchase of the house. Most rent-to-own contracts are fairly short term – one to three years is the usual length – and the price of the property is usually determined by a professional appraisal at the time of contract signing.

Lease Option

A lease option allows the buyer-tenant to work towards the purchase of the house without an obligation to buy. This arrangement provides the buyer-tenant 12 to 36 months to save money or raise a credit score that is slightly below the needed one. A lease option also reduces the potential buyer’s anxiety about making the long-term commitment of purchasing a home and provides them time to further consider the pros, cons and responsibilities of home ownership. At the same time, a lease option agreement gives the seller-landlord more security than with a traditional renter. The tenant can ultimately decide not to by the home, but he or she usually forfeits the original deposit and the rent premiums paid every month.

Example Lease-Option transaction:

• Purchase price of the home is determined to be $215,000
• Monthly rent payments will be $1,500
• You will receive a 50% rent credit ($750 per month).
• You need between 2.5% and 7% in up front Option Consideration. Let’s say your budget allows for $6,000 for Option Consideration. This equates to approximately 2.8% ($6,000/215,000). You will also need $1,500 for the first months rent for a total initial payment of $7,500.

[Please note: Option consideration is not a security deposit. It is a non refundable payment toward the purchase price and is 100% credited toward reducing the price of the home.]

Suppose you paid all your monthly rent payments on or before the due date and you choose to buy the rent to own home at the end of the 12 month lease purchase contract. You will have $15,000 in equity before you even own the home! Here’s the math:

You started with $6,000 and by paying your rent on time your equity position grew 150% (another $9,000) for a total of $15,000 with 12 months. Not a bad deal! Many people find it nearly impossible to save $9,000 in a year with all the costs of living constantly on the rise.

It has always struck me how analogous the behavior of high performing sports teams is to that of high performing sales teams. If you have any questions as to whether this is true or not, please consider the following.

1. In both situations, highly talented individuals are asked to contribute to a team effort
2. Both are highly rewarding in terms of income, but due to spin off success, high performing teams typically earn more than high performing individuals alone
3. Both scenarios require high ego-driven individuals to respect and support overall team goals
4. Both situations present challenges for leaders and managers in creating perceived value for their agents and staff

To Agents

To me, the conversation always comes back to accountability; accountability to self and accountability to the team. Just think about the interviews that were aired during this most recent World Series. In fact, if you recorded the games go back and view them again. What you will hear, time and again, is a high performer crediting teammates for their personal success. If you stop and think about this for just a moment, it is a really striking development and testament to the fact that high performing athletes understand what Warren Buffett meant by the following statement.

“It’s better to hang out with people better than you. Pick out associates whose behavior is better than yours and you’ll drift in that direction” – Warren Buffett

So the secret to winning, whether a World Series of baseball or any campaign in business, revolves around one simple notion – the ability to hone and develop one’s personal skills and success, while at the same time helping others around you to succeed as well. This is an art that was formerly a fundamental part of the fabric of American business, which sports modeled itself after. Today, it all too often seems to be regarded as a nice, yet antiquated idea. This must change!

By the way, It is interesting to note that only two teams (one in professional baseball and another in college football) do not display player’s names on their jerseys. Can you name them?

To Leaders and Managers

Great managers like Vince Lombardi, Tom Landry, or Joe Girardi create cultures where high expectation and a high degree of accountability is the accepted norm. These leaders also understand that all interactions need to form a two-way street of accountability. At times in our business, leaders unwittingly discount their own value by allowing communications and accountabilities with their “team” to become a one way process; always heading in the leader/manager’s direction. Of course agents provide productivity and hence dollars to the company and no one could ever dispute the critical nature of that contribution. But leaders are equally critical in this mix. After all, it is the leader who;

1. Creates a sound culture
2. Coaches agents to higher levels of productivity
3. Uncovers opportunities in the marketplace
4. Distributes company leads equitably
5. Helps in the negotiation of transactions
6. Provides marketing guidance, and
7. A myriad of other things that have value to agents and company alike.

In Summary

It is time we all realize how much we all truly need one another. It is time for all of us to understand how inextricably we are all connected with each other’s success. This applies to agent teams, the entire collection of agents within a brokerage or our entire industry for that matter. Given the pressures we face from organizations outside our industry who continue to wedge their way into our relationship with consumers, let the valuable words of Henry Ford serve as an anthem for how we can win every World Series of real estate.

“Coming together is a beginning. Keeping together is progress. Working together is success”

From years of observation, it is clear that phases in the real estate market can be tracked by changes in inventory levels, home prices and number of homes sold (sides) year-over-year. The ‘initial phase’ of a real estate recovery is indicated when three essential trends emerge.

• Inventory levels begin to fall, implying an initial increase in consumer demand
• Prices still have downward pressure as foreclosed and other lower-priced inventory sell first
• Sides flatten and even increase, as consumer confidence returns and more homes sell

With this information in view, please note the table below showing closed sales and average price in September and August 2009 vs. one year ago. You will observe that closed sales mostly flattened in August and increased in September year-over-year in all regions except the Midwest, while home prices showed some stabilization. It is important to note, however, that three of four regions in the U.S. actually experienced a year-over-year increase in closed sides during September.

Experts expect continued improvement through 2010

Based on a survey released by the National Association for Business Economics, home prices are expected to rise by 2 percent next year and 80+ percent of the economists surveyed by the NABE think the recession is over and recovery has begun. However, economists do warn that expansion will be gradual due to persistent unemployment. Additionally, sales of existing homes will rise by 11 percent in 2010, [Source: Associated Press, Alex Veiga (10/13/2009)] and Jay Brinkmann, Chief Economist of the Mortgage Bankers Association, recently predicted that sales of new homes will climb by a strong 21 percent in the new year. Finally, mortgage rates are expected to rise to 5.6 percent (low by historic measures) by the end of 2010, yet mortgage applications are still expected to increase by 12 percent [Source: Associated Press, Mae Anderson (10/12/2009)].

What can real estate professionals do to prepare?

All in all, the picture is clear. Recovery is upon us and the time to prepare ourselves for a stronger real estate market has arrived.  So what exactly can real estate professionals do in order to put themselves in the best position for success? Below are just a few suggestions to get the thought process going.

• Your confidence level is a self fulfilling prophecy – Keep in mind that market confidence is brought about largely by professionals bringing timely and accurate information to consumers. Your clients need your good guidance in order to navigate these positively changing waters.
• Consumer confidence doesn’t change overnight – Remember to be patient with one another. After all, we have truly been ‘through the mill’ over the last few years and changing consumer attitudes takes time. It is also true, however, that consumer awareness of trends often lags behind market realities, so some guidance now can help them make timelier and more cost effective decisions.
• Get more than one “no” from a mortgage company – Underwriting rules have tightened causing some mortgage applications to be denied. But nothing is preventing a determined buyer from seeking another opinion on their credit-worthiness. So don’t give up!
• If a property doesn’t appraise, look to get a second appraisal – In markets like the present one, banks and appraisers sometimes over react to the downside. Real estate professionals and consumers alike should therefore not hesitate to ask “why didn’t this appraise?” Open communication is the key here.
• Don’t hesitate to write offers – Resist getting tied up by traditional thinking and just make the offer! It’s kind of like baseball… once the ball is in play, anything can happen.
  
• “Do something today (that you did not do yesterday) to enhance your tomorrow” [Dominic Sacci, GM Better Homes and Gardens Real Estate Wilkins and Associates] – This statement sums things up beautifully. Positive change is the key and we should all expect business techniques to keep evolving. So get comfortable with change, embrace the new and watch the magic happen.

Here’s to your success!

As the business continues to change and consumers demand a different type of interaction between themselves and the real estate professional the techniques and responsibilities of lead generation will also continue to evolve.

Seth Godin recently predicted that by 2011, 90% of all sales would be sourced from word of mouth and online promotion.

• What does the future of online lead generation in real estate look like?
• Who should be responsible for generating online leads: the broker, the agent or both?
• Should the next generation brokerage consider directing more attention to generating online leads for their agents? After all, when you ask agents what they want from their broker isn’t leads near the top of the list?
• Should broker/owners offer and manage robust lead management and follow up systems on their agent’s behalf? It is likely that consumers will research for longer periods of time before making the buying or selling decision so offering value during that long term relationship will be important.
• Is there enough trust between broker/owners and agents to allow these types of systems to work?
• Do real estate professionals (whether broker/owner or agent) have the expertise required to execute effectively online?

We are presently seeing examples of brokerages across the country that are surviving and even thriving on broker driven online lead generation models. These companies have taken on the responsibility of generating online leads for their agents. In return, they hold their agents accountable for response time, customer service and follow up. This is a fundamental shift in how most brokerages are operating today.

You might argue that the party who has the ability to generate the most qualified leads has the biggest advantage with the gen web consumer. One thing is certain, online promotion that turns to lead generation will be a huge part of our industry in the years to come.

As for word of mouth lead generation, you’d be hard pressed to hear a real estate speaker today who doesn’t somewhere in their training or presentation throw out the term “back to basics.” These basics of prospecting, follow up, customer service and relationship building are all important components that result in that word of mouth business. The tools and methods may have changed with the introduction of the Internet, but the concepts are still the same. Make connections with people who know, like and trust you. These people will then become advocates for you.

Combining tech and touch in lead generation will prove to a winning combination. 2011 is not that far away, will Seth be right?

Four and one-half years after we entered this downturn, many real estate professionals still attempt to close transactions through the sole use of traditional forms of financing. By traditional, I am referring to ”30-year fixed”, “ARMs” and “Balloon” mortgages. Yet these financial tools can hardly be seen as applicable to some marketing methods which are becoming  more and more prevalent as each year passes.

Real estate auctions provide a good example of this. Many auctions protect Realtor involvement and are therefore an additional revenue opportunity for Realtors. However, a large number of properties being auctioned  require special financing that allows for properties being purchased to be rehabbed in some fashion. Auction companies have only one interest: to get the property sold.  So often the clauses “financing not available” and “proof of funds required” will be noted on specific properties. This means that the buyer needs to demonstrate that cash is readily available for purchase and that no allowance is being made for conventional mortgage processing. For this reason, many people who purchase property at auction have investor financing that allows not only for the purchase of the property but also provides funding for needed home improvements. Often times, there is even a moratorium on payments permitted for several months, to allow for completion of repairs before payments begin.

So many examples of special financing exist that it almost staggers the mind. Below is just a quick and very limited sampling of the many choices that homeowners and investors have in selecting financing type for their properties. Each has it’s own unique purpose and audience, but rest assured there are tools available for all type of buyers and sellers.

For Homeowners

• Fannie Mae 97 – 3% down (or less), up to 38% qualifying ratio
• Fannie Mae 2-4 unit program – Owner occupied up to 4 units, portion of rent used to qualify the buyer, dedicated to rural areas (under 50K residents)
• 203K – No PMI, moratorium on payments for 6 months to allow for repairs to be completed
• Seller financing – Points, pre-payment penalty, term and interest rate are all negotiable

For Investors

• Hope 3 Program – For purchase and refurbishing
• Title One – For home improvement, no appraisal required, no equity needed, takes second or third position, no pre-payment penalty, flat rate for up to 20 years
• Portable mortgages – Variable term, reusable loan
• Wrap-around mortgage – Can facilitate a purchase while leaving existing loans in place
• Seller financing – Allows sellers to take payments over time, creating residual-type earnings

The possibilities and interplay between the types of financing available are too numerous to discuss in the context of a blog.  Some investors that I have spoken with and read about have identified as many as 200 different ways to finance a real estate transaction, yet many real estate salespeople can name only three!

It is time to act! Some steps that can be taken include:

1. Pursue training in the area of creative finance
2. Take a course in real estate investing
3. Take a situational approach to financing. Look for creative ways to faciliate each sale and present them
4. Ask every seller if they are in a position to consider owner financing and explain how it works
5. Think of yourself as a “transaction coordinator”
6. Use your imagination…there is gold there!

]]> http://bhgrealestateblog.com/2009/10/01/future-selling-will-require-increased-knowledge-of-financial-tools/feed/ 3 http://bhgrealestateblog.com/2009/09/08/there-is-more-to-website-content-than-property-listings/ http://bhgrealestateblog.com/2009/09/08/there-is-more-to-website-content-than-property-listings/#comments Tue, 08 Sep 2009 21:19:29 +0000 Jason Steele http://bhgrealestateblog.com/?p=3525

Run a Google search for “Where should I live in…” and fill in any major city in the U.S. and I bet you will be hard pressed to find any national or local real estate brand on the first page of results.  All of the valuable local information that goes into advising a prospective buyer on location seems to be in a Realtor’s head or is scattered all over the web on dozens of disparate sites.

The emphasis today is on property listings and not local content or consultative services helping consumers match their needs to the right community.  Hyper-local content is the most critical information for a real estate buyer to have when they are trying to answer 2 of the most important questions BEFORE they even conduct a single property search which are: Where should I live and do I want to live there?

Answering these two questions used to be something you could find by picking up a local newspaper or scouring a town/community website.

The nation’s latest news print circulation stats (down  7%)*,  ad revenue numbers (down 29% in second quarter)**  and newsroom staff cuts (down 10%)***   clearly indicate certain information staples won’t be around for forever.  Couple that with town budget cuts at the tail end of this recession and there is no way your local government is going to deem this type of information gathering and delivery critical.  With both sources of information on the decline it is both natural and imperative for the local broker to take the baton as the arbiter of hyper-local information.

Hyper-local content can span a single city block all the way to a 521-square-mile county.  In a real estate capacity it can take the form of the following topics below:

• After school programs and strength of district sports programs
• Local lifestyle activities right down to micro needs such as the cost to join the town pool
• Express commute time to major metropolitan areas
• Availability and cost of parking for commuter trains
• Local restaurant recommendations
• Preschool programs
• Last time a tax assessment was conducted
• Closest supermarket with good organic selection
• Summer concerts at the local colleges
• Local recreation programs
• Days and times local farmers market is open

This will dawn a new era of a real estate broker as editor in chief of their website and its agent constituency becoming the field reporters who back-fill all of the valuable hyper-local content.  If the agent, as the local reporter model doesn’t work, then there should be a wealth of talent in the market as a direct impact of the aforementioned newsroom layoffs to cherry pick from.

The most direct benefit of unique content creation is the natural search rankings and traffic that result.  If the strategy proves successful then the top search engines will recognize the local broker website as THE authority within the community.  Also consider the fact that some studies suggest that over a third of search traffic for real estate keywords includes location names and local references.**** This translates into a qualified prospect that is more likely to be closer to working with a real estate company and transacting.

Currently this concept is being executed in a variety of different forms on sites like localism, curbed, EveryBlock, Placeblogger and Patch.  The outside.in publishing platform can enable brokers to create and customize discrete Neighborhood News Pages for every community in their market.  This is all fed by RSS feeds of blogs, local media web sites and even Twitter.  Imagine Twitter streams organized by location and topic constantly flowing on a broker’s site with posts like “#MahwahNJ School board just voted against music program” or “#RamseyNJ Just ate at Varka, amazing Mediterranean food.”

Domus Consulting’s Breaking News network won an Inman Innovator award and is currently applying this concept to cities across America.   Tewspaper is an online newspaper built solely through social media.  The key distinction is that a web site’s content doesn’t have to be maintained via an archaic CMS anymore as it can be populated seamlessly by a conversation stream.

As the Realtor engagement point moves closer to the transaction it is imperative to capitalize on this opportunity.  Hyper-local content isn’t something a large national brand can execute successfully as it requires a group of people who typically live, eat, and send their kids to school in the same community as they transact real estate.  Real Estate is about relationships and trust through written word is the best way to attract prospective customers and retain them far after the transaction has concluded.

In the coming months we will be piloting this concept with a few brokers  in the Better Homes and Gardens Real Estate network.  It will give us a great opportunity to witness the strengths and weaknesses so that we can improve a model that may work for the masses.  I invite you to offer comments and look forward to engaging in a healthy dialogue to shape the brokerage of the next generation.

*Tim Arango, “Fall in Newspaper Sales Accelerates to Pass 7%” The New York Times, April 27, 2009
**Greg Bensinger, “U.S. Newspapers Post Steeper Declines in Ad Revenue”, August 27, 2009
***Michael Liedtke, “APME survey: Newspaper cuts clip younger workers”, Associated Press, August 31, 2009
****WAV Group, “Geo-Domain Targeting trending to assist Real Estate Marketing”, April 2009

(From a phone interview with Keith Nelson, CEO)

As early on as 1991 with only 25 agents, Keith Nelson, CEO of Better Homes and Gardens Real Estate Executive in Seattle Washington was already experimenting with alternate business models. Over time, his concept of “executive suite” type locations has emerged as a strong operational alternative. The basic principles behind his executive suite model include;

• Moving past the need for huge facilities, but locations in the community are necessary
• Locations include niche local office suites for agents
• Functionally, in a good “class A” type building adds competitive advantages.
• Executive Suite type locations have very low monthly costs that include:
  • Unmanned locations
  • Accessed via a secure card
  • Between 400 and 1000 SF, but usually between 800 and 1000 SF
  • Equipped with 1 – 2 conference rooms and an open area for equipment and sales activities
  • Reception, phones, copy machines, fax machines, refreshments, etc. are available and billed on a consumption basis.

Mr. Nelson notes that the average “session time” for his agents is about 20 minutes. That is, agents stop by to mail forms, drop off transactional documents and then move on to sales activities. Agents do not use satellite locations for all of their customer meetings and often execute contracts where it is most convenient for the customer.

Points to consider

Agents still prefer to hang their license in the office where they work, so it’s advisable to continue traditional practice in this area. Mr. Nelson is currently considering dedicating an agent to each office between the hours of 10 am and 3 pm to accommodate walk in clients, although walk-ins are not a major factor. Some suites have signage while other “building” regulations restrict the use of company signage. Nelson makes it very clear that the ability to have signage is by far the preferable situation.

Space Availability

Interestingly, Better Homes and Gardens Real Estate Executive has no issues with availability of conference rooms. Conference rooms are used exclusively for customer meetings, rather than conference calls or agents-to-agent meetings. In addition, many vendors (title, mortgage) allow sales agents to use their conference rooms for client meetings, freeing up even more space in Executive’s offices. Mr. Nelson also keenly observes that most real estate companies have policies preventing clients from entering the agent desk area and as a result, the difference in office size has little or no impact on the consumer’s experience.

Management Style and Climate in an “Executive Suites” model

Many independent contractors prefer to work without being micro-managed, so real estate companies need to develop balanced leadership styles. On the other hand, the situation is simplified by the fact that office politics all but disappear in this type of environment. Some practices that have worked well for Nelson include the following;

• Regular, formal communications keep agents informed of developments (new laws, tools and services) and take the place of traditional office meetings
• Agent phone numbers are displayed on every sign, drawing listing leads to the listing agents
• Company leadership is easily accessible via phone and e-mail, making communication quicker and more efficient

What’s next for Executive?

Keith Nelson clearly understands the need to continue his company’s evolutionary process by finding newer and better ways to serve the needs of consumers and agents alike. The next iteration of Better Homes and Gardens Real Estate Executive will include updating to office locations that possess a newer ‘look and feel’.  Building on the model already described in this blog, anticipated enhancements include;

• Signage for every location
• Agent coverage for a portion of the work day (10 am -3 pm) in every location
• Technology upgrades, and
• Increased availability of “non-formal” work areas

Nine years ago, my boss, along with four other company employees, jumped ship for a boatload of stock options from an Internet-based real estate firm that promised to dismantle “old economy” companies like ours and, quite simply, take over the real estate world as we knew it.

About a year later he and the others were out of work, their promises unfulfilled.  I kept going and growing at my stodgy old economy company as I would for many years afterwards.

During this time, countless threats to the very existence of our industry have garnered media and public attention, many with the promise of being that one “new” model that will change the game completely and wipe everyone else off the planet.

And, of course, before my time there were similar pronouncements.  I don’t need to list them as it doesn’t matter; this story is hardly unique to our industry.

Since no one model has been that all-encompassing game-changer, it’s easy to get complacent and fail to take seriously the next challenge, especially when there seem to be so many coming so often.  The fact is each new player has changed (and continues to change) the “traditional” players to some degree – some more than others – and each new one will as well.  There is adaption and evolution or there is death.

But which deserve the most attention?  Is there a true game-changer out there?

In my most recent post, a spirited discussion on a model whose idea is hardly new was brought up by our readers: the employee-based brokerage.  Some believe that the time is perfect for this model to be the game-changer that will knock the complacent traditionalists on their keisters.

I think this deserves exploration in our consideration of the “Next Generation Brokerage.”  For reasons discussed in my comments, I am not convinced that this model will overtake all others but I’ve been wrong before so I’d like to hand it off to you to argue both sides.  To get you started, here are three sets of questions and one survey to consider:

• For brokers: do you believe employee-based models will change how you do business in the next five years?  Why or why not?
• For agents: what would it take to get you to work as a salaried employee rather than as a commissioned independent-contractor?
• For consumers: do you believe your buying or selling experience would be better, worse, or the same if you were served by employees rather than agents?  How so?

Building expense is a formidable, recurring fixed cost for real estate organizations and the fact that office size increased dramatically between 1990 and 2005 only added to the severity of this situation. During the same period of time, real estate agents were becoming increasingly less and less attached to the idea of working in a ‘formal’ office environment and were progressing toward ‘home’ and other ‘remote-type’ office arrangements. The result of these combined factors for many companies has been a super-developed real estate infrastructure that exceeds capacity requirements.  Given all of this, the time for a new approach to managing physical office space is clearly upon us.

According to Steve Murray, Editor of Real Trends, the average size for all of Real Trends Top 500 companies during 2007 was 124 square feet per agent with an average number of 41 agents per office. This works out to approximately 5000 Sq ft. per-office on average. Making the assumption that this remained relatively constant during 2008, I have based all calculations using 5000 SF as the status quo office size.

The table below demonstrates the ‘before-change’ and ‘after-change’ effects of reducing office size. I have used 1,500 Square Feet (SF) as a typical size for an “Urban” location and 3,000 SF for the “Suburban” model. This is in harmony with my observations that progressive urban offices (such as the Intero’s Andare office in San Jose, CA and @properties in Chicago) tend to be eficient and highly technological, while suburban locations may require added scale along with technologies in order to maintain a competitive image.

So what?

What is the current relationship between square footage and building costs? How are ratios currently tracking? Where are the opportunities for positive change?

The spreadsheet below shows the “Benchmark Ratio Range“ of the relationship between company dollar and building expense as it exists in today’s pre-change real estate environment. Note the heavy toll that building (aka Occupancy) costs are taking on real estate operations. When building costs absorb an average of 24.3% to 28.2% of company dollar, it is challenging for many companies achieve a positive return on revenue.

What if?

What if companies were to restructure their building costs according to urban and suburban square footage sizes described above? What would be the result?

These questions can be answered by determining how building costs would change when reduced by the same percentages shown in the tables above. Then, using this new concept of office size, calculate the new relationship between company dollar and building costs, and then determine how company dollar retention would change.

As you review the visual below, please recall that the typical current building costs average as high as 28.2% of company dollar. After adjusting for reduced office size, the new range for building cost changes from a low of 7.3% in urban areas to a high of 16.9% of company dollar in suburban areas, thus reducing Building Expenses between 40% and 70% as targeted in our model.

What is the result?

When former building costs are replaced with the newly calculated range and placed into the financial model, the resulting differential in company dollar committed to building costs is dramatically lowered.  But how does all of this really help? Here are some thoughts:

• Reducing office size in this manner could, in itself, create a positive ROR for real estate companies, providing all other expenses remain constant.
• Additional revenue could also be used to fund home-office programs, offer additional marketing and provide managerial support where needed.
• Steps as outlined in #2 could bolster talent attraction results
• Proper reallocation of resources in this way should also bolster agent retention.
• Since consumers typically visit only reception and conference areas, office size reduction will in most cases, be seamless to buyers and sellers.

Steps to consider in getting started

• Perform a risk assessment – It is critically important to have a grasp on company culture and to understand risk factors before proceeding with this.
• Create a new vision around building size – How much reduction is enough for the culture? How much is too much? How much change is required in order to ‘right the ship’?
• Renegotiate current leases – Given the current economics of the commercial real estate market, many firms have reduced building expense through lease renegotiation alone.
• Sublet portions of existing buildings – This is self explanatory, but a key advantage of subletting is the ability to remain in the same location, albeit with lower building costs.
• Seek out new locations – Once your vision is clear and building needs are determined, embark upon the mission of seeking out new and better-suited situations.

Attracting and retaining talent to a real estate office has never been more important or more challenging then it will be in the decade ahead. Not only has the housing market seen dramatic changes, but the expectations of current and future industry professionals have dramatically altered.

During the market boom of the early to mid 2000’s, the frenzy to recruit anyone with a license reached a fever pitch. Generally speaking, brokers were both eager and generous in growing their companies by offering higher and higher compensation packages to incent agents them to choose their particular brokerage. Companies began competing on price and not value for the steady stream of new agents. An increasing average house price and number of transactions masked the negative effect this tactic had on the bottom line.

During this same period, the focus on attracting experienced agents diminished. This area of talent attraction for most brokers and managers has always been more challenging. Several mantras became common place: “Experienced agents have baggage, I can train new agents to do business the way I want, and experienced agents are just other people’s problems.”

It’s not that there isn’t truth in these statements, but for many they just became excuses.

With the current rate of licensed REALTORS® as reported by NAR dropping (down 9.96% July 08 to July 09) and expected to continue to decline for years to come. Brokers looking to expand their agent base are faced with additional challenges. Newer agents will be fewer and farther between and the need to attract experienced agents will require a new kind of expertise; one that takes into account that depleted budget brokers have to “buy” agents based on compensation plans of the past.

The experienced agent will need to be a focal point of office growth through the next generation real estate brokerage. Today, the average REALTOR® has been licensed for about 10 years and is 54 years old. They have weathered a dramatic change in the market and are poised to excel in this profession as long as they choose. The criteria they use when choosing which company name they will carry on their website and business card is changing.

They’ve lived through downsizing, mergers and acquisitions, buy outs, office closings, rebranding and more. All of these decisions, for the most part, were beyond their immediate control and made without their input, but each impacting them on a very personal level. Moving forward they will evaluate their local brokerages with a different set of eyes.

Leadership, financial stability, support, training, environment, vision, relationship, technology, online strategies, lead generation, business systems and culture will rank just as high or higher as compensation plans for the reasons to join or stay with a particular brokerage.

Next generation brokerages must figure out how to communicate their value proposition and core messages in these areas to their current agents, potential new agents to the industry and existing agents with other companies. A nice brochure or presentation isn’t going to cut it.

Potential and existing agents have more tools than ever to continually monitor and evaluate a brokerages commitment to them and their success. They will rely on multiple experiences created by the company to act as their measuring stick.

These experiences will include the interaction with the broker or manager, the physical office, the culture of the company, the online presence of the brokerage, how training and coaching is conducted and more. Walking the walk will be way more important than talking the talk. To attract and retain tomorrow’s real estate professional a broker must do more than talk about culture; they will have to present it and allow the agent to experience it themselves.