real trends newsletter | april 2016

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FEATURED LEADER Chris Meyers, Managing Principal Houlihan Lawrence FIRST PERSON ON PG 13 APRIL 2016 NEWSLETTER REAL TRENDS VALUATIONS WANT TO KNOW how much your brokerage is worth? Contact Scott Wright or Steve Murray today to get more information about brokerage valuations. [email protected] [email protected] 303.741.1000 LARGEST FIRMS GREW FASTER THAN THE MARKET Some observations from this year’s REAL Trends 500 by Steve Murray, publisher Continued on pg2 We just posted the results for the REAL Trends 500 for 2016 at Realtrends.com. Here are some observations: • A record 1,605 residential brokerage firms recorded more than 500 closed sides in 2015. This number is up from 1,460 firms that had more than 500 sides in 2014. • The top 10 firms recorded an average gain of 23 percent in closed sides in 2015. The REAL Trends Housing Market Report gain for closed sides was only 9.5 percent. The largest firms grew faster 1-4 FIRST PERSON Largest Firms Grew Faster Than the Marketl How to Grow Your Company Using Stats to Find Productive Agents 5-8 BROKERAGE Stop Selling; Start Solving The Rise of the Team 9-10 CEO CORNER Bob Hale, CEO, Houston Association of Realtors ® 11-12 HOUSING MARKET February Housing Up Strongly 13 FEATURED LEADER Chris Meyers, Managing Principal, Houlihan Lawrence, Rye Brook, NY 14-15 REGULATORY AFFAIRS Signs of Increased Online Lender Regulatory Scrutiny? 16 VALUATIONS The People Side of Deals 17 TECHNOLOGY The Future of Smart Home Technology 19 PUBLISHER’S NOTE 2016 REAL TRENDS 500 RESULTS

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REAL Trends Newsletter | April 2016

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FEATURED LEADERChris Meyers, Managing PrincipalHoulihan Lawrence

FIRST PERSON

ON PG 13

APRIL 2016 NEWSLETTER

REAL TRENDSVALUATIONS

WANT TO KNOW how much your brokerage is worth?

Contact Scott Wright or Steve Murray today to get more information about brokerage valuations.

[email protected] [email protected] 303.741.1000

LARGEST FIRMS GREW FASTER THAN THE MARKET Some observations from this year’s REAL Trends 500

by Steve Murray, publisher

Continued on pg2

We just posted the results for the REAL Trends 500 for 2016 at Realtrends.com. Here are some observations:

• Arecord1,605residentialbrokeragefirmsrecorded more than 500 closed sides in 2015.Thisnumberisupfrom1,460firms

that had more than 500 sides in 2014.

• Thetop10firmsrecordedanaveragegain of 23 percent in closed sides in 2015. TheREALTrendsHousingMarketReport gain for closed sides was only 9.5 percent.Thelargestfirmsgrewfaster

1-4 FIRST PERSON• LargestFirmsGrewFasterThantheMarketl

• HowtoGrowYourCompany• UsingStatstoFindProductive

Agents

5-8 BROKERAGE• StopSelling;StartSolving• TheRiseoftheTeam

9-10 CEO CORNER• BobHale,CEO,HoustonAssociationof

Realtors®

11-12 HOUSING MARKET• FebruaryHousingUpStrongly

13 FEATURED LEADER• ChrisMeyers,ManagingPrincipal, HoulihanLawrence,RyeBrook,NY

14-15 REGULATORY AFFAIRS• SignsofIncreasedOnlineLenderRegulatoryScrutiny?

16 VALUATIONS• ThePeopleSideofDeals

17 TECHNOLOGY• TheFutureofSmartHomeTechnology

19 PUBLISHER’S NOTE

2016 REAL TRENDS 500 RESULTS

7501 Village Square Drive, Ste. 200 Castle Rock, CO 80108 Phone: 303-741-1000 FAX: 303-741-1070 E-Mail: [email protected] Web: realtrends.com

Publisher: Steve Murray - [email protected]

Editor: Tracey Velt - [email protected]

REAL Trends Team: Alec Gress - [email protected] Shur - [email protected]

Bryan Warrick - [email protected] Daniele Stufft - [email protected]

Deirdre LePera - [email protected] Doniece Welch - [email protected]

Jaime O’Connell - [email protected] Paul Salley - [email protected]

Scott Wright - [email protected] Terry Penza - [email protected] Travis Saxton - [email protected]

Rebecca Chapla - [email protected]

Copyright 2016 by REAL Trends. All rights reserved. Material in this publication may not be electronically stored or reproduced in any form without writtern permission. Violators will be punished by a fine of up to $100,000 per offense.

SPONSORED BY

thanthemarketasawhole.Infact,theyrecorded asignificantmarketsharegainoverthemarketas a whole.

• TheREALTrends500recordedanincreaseinclosedtransaction sides of 13.1 percent, well above the national growth rate of 9.5 percent. These top 500 companies recorded over 2.9 million closed sides in 2015 up from a little over 2.5 closed sides in 2014. That means that less than two-thirds of one percent of allthebrokeragefirmsinthecountryhandledjustover 30 percent of all the closed transactions handled by real estate professionals in 2015.

• Amongthe10largestfirms,thosewiththelargestpercentage gain year-over-year were RE/MAX Alliance, headquartered in Arvada, Colo. and Realty ONEGroup,headquarteredinSouthernCalifornia.Thetwofirmsgrewtheirtransactionssidesby90.4percent and 34.4 percent respectively.

• HomeServicesofAmericagrewthemostregardinganabsolute number of closed sides with an increase of 31,179from2014to2015.NRTLLChadthesecondlargest growth regarding total sides with a gain of 25,330 transactions.

• KellerWilliamshadthemostfirmsontheREALTrends500with151brokeragefirmshavingmorethan500closedsides.RE/MAXwassecondwith94firmsandColdwellBankerhad39companiesonthelist.

To see the results for the REAL Trends 500, go to realtrends.com/rankings/rt500.OnApril20,wewillrelease the total results for the REAL Trends 500 and Up-and-Comersinthespecialprinteditionofthe REAL Trends 500.

THE TOP 10 FIRMS recorded an average gain of 23 percent in closed sides in 2015. The REAL Trends Housing Market Report gain for closed sides was only 9.5 percent.

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BROKERAGE INSIGHTS

HOW TOGROW YOUR COMPANYREAL Trends research shows it’s not the brand or business model that helps a brokerage grow.

by Steve Murray, publisher

REALTrendsaddressedseveralhundredofthetopbroker-agefirmsinthecountrylastmonthattheconferenceshosted by Leading Real Estate Companies of the World and RE/MAXLLC.Inourpresentation,weshareddatafromboththeREALTrends500andUp-and-Comersandourownbenchmarkdatabaseofthefinancialresultsofhundredsofleadingbrokeragefirms.TheseweresharedintwoPowerPointpresentationsonthetopicofgrowingabrokeragefirm.

Inpreparingthesepresentations,welookedatdatagoingback15yearsforover1,000brokeragefirmsofallsizes,brands, business models and locations. This is research wehavedoneinthepastasweseekanswerstothequestion,“Howdoesonemosteffectivelygrowabrokeragefirm?”Thecurrentfindingsmirrorthoseofpaststudiesonthesame topic.

Here are some conclusions:

There does not appear to be any correlation of success in growthbetweenwhetherafirmisindependentoraffiliatedwithanationalbrand;nocorrelationbetweenwhattypeofcommissionplanorbusinessmodeloneuses;nocorrelationbetweentheaveragepriceinamarketorthesizeofthemarket.Inshort,noneofthesefactorsappeartoexplainwhysomefirmsgrowornot.

It’snotthatabrandname,businessmodel,commissionplanorlocationdon’timpactresults.Rather,it’sthattheydon’texplainanydifferencesbetweenthosewhogrowandthosewhodon’t.

What appears to be left as a causal agent is the leadership andcultureofthebrokeragefirm.Aswepointedoutinone of our original research studies that led to a white papercalled“PeopleStillMatter,”aneffectiveleader

establishes a culture that encompasses some of the following attributes:

• Havingaclearvisionofwhoyouareandwhatmakesyouunique;

• Communicatingbothhorizontallyandvertically;

• Havingadisciplinedwayofmakingandcommunicatingdecisions;

• Empoweringstaffandagentstoseektheirlevelofsuccess;

• Holdingyourpeopleaccountableforbothresultsandbehavior;

• Beingtransparentaboutyourplansandintentions;

• Buildingasenseofcommunitywithinyourfirmandgivingbacktothecommunitieswithinwhichyouoperate.

Giventhereactiontoourpresentation,wecameawaymore convinced than ever before that many in the brokerageindustryarebeingmisledintothinkingthattechnologywillsolveourchallenges,there’ssomepanaceaforsuccessthatisjustaseminaraway,andthere’ssomeexistential threat to their success and happiness coming fromthecombinationofSiliconValleyandWallStreet.Nothingcouldbefurtherfromthetruth.Whileonecouldsay,“Yourdatalooksback.Whatgooddoesthatdoforthefuture?”However,whenyoucombineourhistoricaldatawith the numerous consumer studies which reinforce the importance of the sales associate in the process of buying orsellingahome,toourwayofthinking,aneffectiveleadermakesallthedifference.Whilethebusinesswillchange at the margins, at its heart there is very little change going on—now or the near-term future.

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How to use Billy Beane’s Money Ball method in real estate.

By Steve Murray, publisher

USING STATS TO FIND PRODUCTIVE AGENTSMostofyouknowwhoBillyBeaneis.He’sthegeneralmanageroftheOaklandA’sbaseballclubandthefocusofabookwrittenbyMichaelLewis,“MoneyBall,”aswellasstarofthemovieofthesamenamestarringBradPitt.Inthemovie,BeaneandayoungbaseballexecutivenamedPaulDePodestaturnedaperennialsecond-tierbaseballorganizationintoonethathaswonmorebaseball games in the last 15 years than almost every other major league baseball team.

DePodestaspokeatourGatheringofEaglesin2012justafter the Money Ball movie came out. He shared that he andBeanestartedwiththenaïve principal:ifweweren’tdoingthingsthewaywehavebeen;howwouldwebedoingthem?AsmallmarketteamwithalowpayrollistryingtocompeteagainstthelargermarketteamsliketheYankees,RedSox,andDodgers,couldnothopetohire the high-priced players. What they chose to do was reinvent the business of baseball, a method that has now been copied to great success by many others.

They studied the actual performance of players using statistics that predicted the performance of the whole teamoverawholeseason.Inonesimplestat,on-base

percentage, they found a high correlation with winning.So,theystartedfindingplayerswho could get on base, found the ones who cost the least and put a team together. The rest was history.

THE REAL ESTATE TIE-INWe wrote about this bookandBeaneover12 years ago, just after thebookcameout. Infact,itwasthefirstbookweeverrecom-

mendedtoourreadersbecausethebook’slessonshadenormousimplicationsforresidentialbrokerage.JustasBeaneandDePodestacouldn’taffordtochasehighsalaries against far richer clubs, nor can many brokeragescontinuetobidforhigh-pricedagentsagainst lower-cost models. We believed then and believe todaythatbrokeragefirmscanusestatisticstopinpointthemostproductiveandprofitableagentsorthemostproductiveandprofitablebrokeragefirmswithwhichtoassociateoracquire.Whiletheanalogyisnotperfect;itis a very close one.

BIG DATAWithmanytalkingaboutbigdatatoday,itseemsthatthefocusisonconsumerdata.Withbrokermetrics,Facebook,Googleandothersourcesofinformation,and a multitude of personal analysis tools available, itwouldseemthatbrokeragefirmscoulduseaccess to big data about agents and people to better their oddsoffindingtherightbalanceofproductivityandprofitabilityintheirselectionofagents.Weknowofatleastonefirmwhichfocusesalmostsolelyonnewagents.Theyuse,asoneoftheirkeybenchmarks,theageatwhicharecruithadhisorherfirstjob.Turnsout,over nearly 30 years of operations, this one stat has been asignificantdeterminingfactorinwhetherornota newagentwillbecomeasolidperformer.Onenationalorganizationknowswithcertaintythat“X”numberofrecruitingappointmentswillresultin“Y”newagents.Theyknowthisbecausetheyhavebeentrackingitforover 15 years.

Itisworthconsideringthatanindustrywhichisdrivingits gross and net operating margins into the ground can andshouldlearnfromtheexperienceofBillyBeaneandPaulDePodesta.So,onceagain,werecommend“MoneyBall.”Don’tthinkofitasabookaboutbaseball,but one that we can apply equally to our business.

Oh,andBeane,justlikeDePodesta,isaphenomenalspeakerandfullofwitandgreatinsights.Hewaswellworth the time spent listening.

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RECRUITING SECRET

Don’t try to answer someone’s prayers until you know what they are praying for.

By Larry Kendall, chairman of The Group, Inc. and author of Ninja Selling

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STOP SELLING;START SOLVING

Most salespeople have been taught the traditional three-step sales presentation:

1.Makeaconnection(buildrapport);2.Makeapresentationoffeaturesandbenefits;3. Close.

My observation is that most managers use this three-step approach in their recruiting, as well. After building rapport, they immediately launch into their spiel: “Let me tell you about the exciting things we are doing in our company—technology, lead generation, brand,staffsystems,etc.”

There’sanoldruleofselling,“Don’ttry tobetheanswertosomeone’sprayers untilyouknowwhattheyareprayingfor.” The traditional three-step sales presentation violatesthisrule.Themanager(orsalesperson)who is telling and selling never discovers what therecruit(orcustomer)isprayingfor. Ifyoudon’taccidentallyhitahotbutton, yourpresentationstartstosoundlike“blah,blah,blah.”

What would happen if the manager used theNinjaFour-StepConsultationinstead?ThisistheprocessweteachinourNinjaSellingclasses,anditworksgreatformanagerswhoarerecruiting.Let’sfaceit; a recruiting interview is a sales interview. Here’showthefour-stepconsultationworks.

Step 1: ConnectionRecruitswanttoworkwithsomeonetheylikeandtrust.Theydecidethisinthefirsttwominutes.Dotheyfeelaconnectionwithyou?Dotheylikeyou,trustyou,andwanttogodownthispathwithyou?Theywillfeelthe

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Econnectionifyouaskquestionsaboutthem. WerecommendyouaskF.O.R.D.questions— Family,Occupation,Recreation,Dreams(goals).Mostpeopleareverycomfortabletalkingabout these four areas of their life, and you are building rapport and connection.

Step 2: Information (Pain/Pleasure)Thisisacriticaltransitionstep.Inthetraditionalthree-step sales process, you would now be at the presentation stage, where you launch into your pitch offeaturesandbenefits.Mostmanagerslovethisstepbecause they get a chance to strut their stuff on stage.

Therearetwoproblemswiththisapproach:first, the manager is trying to be the answer to their prayerswithoutknowingwhattheyareprayingfor;and second, the manager has time of possession (isdoingallthetalking).Afterafewminutes,therecruit stops paying attention, drifts off, and the connection is lost.

Insteadoflaunchingintoyourspiel,listencarefullyto how the recruit answers your questions about F.O.R.D.,especiallyabouttheirbusiness(occupation).Listen for pain and pleasure. This is what they are praying for. Here are my two favorite pain and pleasure questions:

Pain: “What is your greatest challenge in your businessrightnow?”

Pleasure: “Ifyoucouldwaveamagicwandandhaveyour business just the way you want it, what would thatlooklike?”

Step 3: Solution (Create Potential Solutions) Now,formulatepotentialsolutionsthatsolvewhatthey are praying for. How can you connect what you havetowhattheywant?Ioncehadatopproducertellmeshewassobusy,andthemarketwassohot,thatshecouldn’tmakeamoveatthistime.When Iaskedherabouthergreatestchallenge,shesaid shewasworkingallthetime,andbusinesswasfallingoffherdesk.

Step 4: Proposal (Propose Solutions)Ishowedherhowourstaffsystemswouldsavehertimeandmakehermoney.Wecoulddramaticallyincrease her income per hour so she could have a life.Shehadalsotalkedaboutagoalofhaving more time with family and this solution resonated withher.Shejoinedusrightawaybecauseshewanted the solution.

Beamasterrecruiter.Stopsellingandstartsolving.

Recruits want to work with someone they like and trust. They decide this in the first two minutes.

Do they feel a connection with you? Do they like you, trust you, and want to go down this path with you?

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BUSINESS SAVVY

Trends in team offices

By John Steger, New Era Group at Your Castle Real Estate

When my grandmother was a real estate professional, just afewmilesfromwhereInowpracticetheprofession,itwasaverydifferentworld.Inthatworld,thebrokeragehadthepowerandtheresourcestoallowaprofessionaltothrive.ItwasvitalthatyourbrokerageprovidedhardcopiesofcontractformsandMLSintheformofaprintedpropertybookwiththree-holepunchedflierstoshowyourclients.Asecretarywasnecessarytoanswercallsandtakemessages.Mostagentscheckedintotheofficebyputtingaquarterinapayphone.Thefaxmachineandvoicemailstartedtherevolutionthathasnowmadethebrokerageofficeanoptionalpartofanyagent’sbusinessmodel,ratherthananecessity.Onceajacketandaniceofficewasasignofprestige,now,ifanagentuses apairofGoogleglasses,aconsumerismorelikelytobeimpressed.Manyclientsnolongerexpectanagenttohaveanoffice.

Thistransitionallowedwell-networkedagentstooperateindependently.Arecentstudyshowedthatone-personbrokeragesaredominatingtheluxurymarketinDenver.Wheneventhemostprestigiousfirmsinthecityarelosingmarketshare,year-over-year,thevaluepropositionbecomessuspect.Withsalesassociatesabletohangtheirlicenseswithaplethoraofbrokers,commissionsplitswillcontinuetobemorefavorabletosalesassociates,andthemarginsofowningabrokeragewillshrink.Ihavelivedthis,having gone from a two-person shop with my founding business partner to owning and operating a 20-agentfirm.Wehadagreatlittlebrokerage,butafterconsultingwithREALTrend’sSteveMurray,werealizedthatdramaticgrowthwouldbeneededtocomeclosetogettingareturnonallthetimewespent

runningthebrokerage.

Atfirst,wethoughtwehadtwochoices,shut down our boutique brand or sell thebrokeragetoalargerfirm.Therewould have been a decent pay day with an outright sale, but the brand would have disappeared, and our crewdisbanded.Luckily,wefounda solution and merged into a large, well-run independent brokerageandwereabletokeep

our brand identity. Then, the magic happened. The advantage of the

team model led to exponential growth andsuccess.OnlybyhavinglivedthisexperiencecanIexplainitfroma

business perspective.

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THE RISE OF THE TEAM

REAL Trends has been instrumental in the growth of the team featured

in this article, providing them with technology and marketing strategies.

We want to get know teams, their structure, physical spaces, technology and marketing demands and more, to be a part of this groundbreaking study.

—Travis Saxton, vice president of technology

CLICK HERE

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E A MARKETING COLLABORATIVETeams are now ideal in the industry, with a solid, blue-chip brokeragecoveringtheevilnecessitiesofthebusiness,suchasdealingwithtechnologyissues,fileretention,fileauditing, compliance, oversight, lawsuits, complaints, staff turnover, new agent training and more. Running a brokerageisnotasexybusiness,butitisaplatformthatmust be in place for a sales associate to be a professional. Youcanbesuccessfulsolo,butyouendupownedbyyourjob,andyoucan’tbegreatateverything.However,ateamcan focus on what the consumers want—awesome marketingandgreatsupportandservice.ThatiswhattheteamthatIhavemajorityownershipindoesnow.Weconsiderourselvesamarketingcollaborativeandeveryonecontributes.Ourmastermindsessionsarewellattendedand offer fertile ground for new sales associates to learn andquicklyseeresults.Weshareabrand.ThebrandandmarketingplatformareallIown.Ihaveexpectationsofprofessionalismandteammindset,butweareallbrokerassociates for our mother ship. What does this flat organization,teamapproachoffer?

• Wecanbeselectiveastowhojoinsbecauseitisnotabout head count.

• Wearenimblebecausetheleadershipispracticingthe craft and always innovating.

• Wecanlocateinacoolpartoftown,byrestaurantsand coffee shops.

• Wedon’tneedabigoffice.

• Wedon’tgetgeographicallypigeonholed.

• Wedon’tneedastuffyofficebuildingfromwhichtowork;ourofficesareeverywhere.

• Wehaveacentralhubthatisafunplacetopopinand out of, where music is playing and people are selling. There is no expectation that any of us goes to theofficeever,yetweareattractedtotheculture.

• Weinspireandsupporteachotherwithoutanyformalleadership.Yes,I’mstillthemajorityowneroftheteam,butIdon’thavetheresponsibilitiesIhadasabrokerageowner.Now,Igettospendtimeworkingonleadgener-ationforthefirm,improvingoursharedmarketingresourcesandbenefitingfromtheseactivitiesasmypersonal sales volume continues to climb.

• Megaagentsaredevelopingwithintheteam.

• Wehavezeroturnover.

TwoyearsaftersayinggoodbyetomybelovedNewEraRealtyandwakinguptoabusinesscardthatsays“NewEraGroup@YourCastleRealEstate,”Inevercouldhaveimaginedtheresults.We’vegrownfrom20to50agents.

In2014,theteamsold333homesandlastyearwesold443. Although total sides did not increase dramatically, the price point at which many of our agents are operatinghaschanged.In2015,ourteampaidYourCastle Real Estate four times as much in commission splits as it had in 2014. This huge jump in commission earnings and average sales price was, in part, due to dramaticallyimprovedmarketingmaterials.Moreimportantly, the business model has attracted some fantastic agents who want to be part of a positive and progressive culture. We are opening a much larger office,butithasallthekeycomponentsofthesmallerone. We remain in a hip, fun part of town with restaurants and coffee shops.

My grandmother would be proud. Iamhiringmyfirstassistanttohelpmekeepupwiththebusiness that is coming my way. NowthatIdon’thavethedistraction of running a brokerage,Ihavethetimeto focus on my clients and marketingplatform.Thistransition has dramatically increased my personal income, as well as helped every sales associate operatingunderthebrandIown.

Howhasthebrokeragewearepartofreactedtotheexplosivegrowthoftheteam?TheownerofYourCastleRealEstateandIshareamealorplayaroundofgolfonoccasion.Ienjoyaskinghim,“Didyoueverthinkitwouldworkoutlikethis?”Histypicalresponseis,“Never”withabemusedsmile.It’sclearthatwe’vestumbleduponsomething,ashisprofitscontinuetorise.

Ibelievethatteamshaveahugecompetitiveadvantageoverboththesmallshopsandthebigbrokerages.Withexcellentvendorsinthemarketplaceforalmostanyneed,brokeragesarenolongernecessaryinthewaytheyoncewere.Smallshopsaren’texpertsatanythingbecausetheyareoverwhelmed.Plus,it’shardtocompete with a team that is collaborating and sharing freely. We all feel a sense of brand ownership, and my profitsharefromthebrokerageisbecomingmoremeaningfulthantherevenueIhadwhenIownedabrokeragemyself.

Teams are the answer, my friend, and they are on the rise!

A team can focus on what the consumers

want—awesome marketing and great support

and service.

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Learn from leaders where tomorrow’s opportunities and threats lie.

By Steve Murray, publisher

ThereisprobablynomorevisibleandcontroversialAssociation/MLSCEOthanBobHale.HerunsoneofthelargestAssociationsinthecountry with over 32,000 members and also directs HAR.com, one ofthenation’slargestandmostprogressiveMLSs.Halehasbeeninthesedualrolessince1988andworkedinandaroundtheRealtors® sincetheearly1970s,soonecouldsayhe’sseenabit.WetalkedtoBobabouthistimesintheindustryandwhatheseesahead.

RT: What do you consider some of the highlights of your career at HAR?

Hale: WealwayshadaregionalMLS.Becauseofthat,wehadgoodrelationshipswithassociationsin our area, and it made it easier to merge with several. We had three successful association mergersinmytime.Ithinkthiswasarealachievementatthetime.ThecreationofHAR.comwasahugeone.ItcameaboutbecauseIattendedanASAEconferencein1996andheardaspeakersay,‘InthefutureyourbusinessstrengthwillnotbedefinedbyyourphysicallocationbutmorebyyourInternetpresence.’Ididnotunderstanditatthatmomentbutwenthome,talkedtoourteamanddecidedtocreateHAR.com.Itwasprobablythesingle,biggestdecisionweevermade.WejokethatwehaveaClassBbuildingandClassAwebsite.Yourrealestatedoesn’tdefineyou;it’stheservicesyou deliver to your members.

Another big advancement was the development of mobile apps for the members and consumers. Realtorsdon’tneedtobetiedtotheirofficeanymorethanwedothesedays.OnemorerecenthighlightisthedecisiontogostatewidewithourMLS.Wewillhave92percentofthelistingsinTexasonHAR.combytheendoftheyear.AllofKellerWilliams,Realogy,andRE/MAXlistingsinTexas are on our site. The implications are that we compete with the national portals in our territory. While we are on good terms with the major portals, we also intend to compete with them inTexas.Westillprovidedirectfeedstothemandothers.OurgoalistohavethelargestportalinTexasregardingtraffic.

RT: What has been the biggest change you have seen over the years?

Hale: ListingsgoingontheInternetis,withoutadoubt,thebiggestchangeduringmycareer. Wedidn’tknowhowitwouldturnout,butit’sbeenthebiggestadvancementinourindustry forconsumersandrealestateprofessionals.Consumerswantedmoreaccess,andwe(andourmembers)gavethemmore.Westillhaveagreatrelationshipwithconsumers.Itturnsout,therealvalue was service, not information insofar as agents are concerned.

CEO

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BOB HALE, CEO, HOUSTON ASSOCIATION OF REALTORS®

INNOVATIVE AND UNAFRAID

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RNER RT: What has changed most about the operation and/or

business of the MLS in your opinion?

Hale: WhentheMLSbookwasconsideredvital,HARwasamongthefirsttogetridofit.Itwastoodangheavy,and we began to use dumbcomputers(whichweoldtimersremember).

Now,it’sallmobile.Agentshaveaportableoffice, whichmeansnotonlydowenothaveMLSbooksbutinstead we invest in the systems to deliver information to agentsandconsumerstothebenefitofboth.Myview,which is not shared by all, is that the investment of an Associationand/orMLSshouldbedirectedatmembersandshouldbeintechnologyandinformationsystems;not in real estate.

RT: What is the biggest challenge facing the industry at this time?

Hale: The biggest challenge is associations battling each other,battlingMLSs,battlingbrokers—chaosthatdoesn’tleadtoabetteroutcomeforeveryone.Ithinkturfbattlesareharmingourindustryandbusiness.Thebattlesaren’tadvancing our ability to service housing consumers and our agents, which should be our only focus.

RT: How does Upstream strike you?

Hale: Ithinkeveryoneagreesthatthereshouldbe one database of all the data in the country and that

brokerscanandshouldcontroltheirdata.Ascurrentlyenvisioned,inUpstreamitwillgofromthebroker toUpstreamandthentotheMLSandvariousotheroutlets.Idon’tquestionUpstreambeingthedatabaseforallinformation,onlyhowitgetsthere.Ithink therewillbemyriadproblemswiththewayit’scurrentlydesigned.Iimagineitwillgetworkedoutoverthe next few years.

RT: What about in the next three to five years for MLS (information companies)?

Hale: Letmeputthisdirectly.WeprovideMLS,transaction management, agent ratings and reviews, home valuations, agent production data and mobile apps. Zillow provides all of these and does so with a much larger base of customers. They have nearly 92,000 agentspayingnearly$470millionayeartomarketthemselves and gain leads and inquiries. The entire duesbaseoftheRealtororganizationislessthanZillow’srevenues.Theseagentsseevalueintheportals,yetasanindustry,itisalmostlikewedon’twanttoacknowledgeit.

RT: So the future has its challenges yet you remain bullish?

Hale: Youbet.Thereisstillalotwecandotoimprove,andIthinkwecancontinuetobuildonwhatwe’vealready accomplished. What remains to be done outweighs what we have already accomplished.

The biggest challenge is associations battling each

other, battling MLSs, battling brokers—chaos

that doesn’t lead to a better outcome

for everyone.

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FEBRUARY HOUSING UP STRONGLY Unit sales growth up with a gain of 13.9 percent over February 2015

TheREALTrendsHousingMarketReportforFebruary2016 shows that housing sales increased 13.9 percent from the same month a year ago. The year-over-year gainisthestrongestyear-over-yearincreasesinceJune2015.TheNortheastledthewaywitha23percentincrease.

“Februaryhousingsalescontinuedtheincreasedpaceofrising sales recorded in the last two months of 2015 and January2016,”saidSteveMurray,editoroftheREALTrendsHousingMarketReport.“Thelastthreemonthshave seen year-over-year home sales rising faster that any pointsincethespring2015.TheNortheastregionhadthe strongest showing with unit sales up 23.0 percent—the second month in a row that this region has led the nation. Each region showed increased strength indicatingthatthehousingmarketisheadingintothenewyearinverystrongshape,”headded.

Theannualizedrateofnewandexistinghomesaleswas6.267 million which was up very strongly from the 5.501

millionrateofhomesalesrecordedinFebruary2015.Theresultsindicatedthatthehousingmarketcontinuesto strengthen in spite of low inventories.

Housing prices rose an average of 2.3 percent from February2015indicatingthatwhilehomesalesandaverage prices are rising in tandem, the year-over-year house price increases continue to be moderate.

“Themarketappearstobestrongerthananticipatedand has shrugged off other negative news such as the declineinequitymarkets,lowinventoriesandtheslowerrateofforeignpurchasesofhomes,”saidMurray.

HousingunitsalesforFebruary2016increased13.9percent,upfromtheJanuary2016results.Unitsaleswereup23.0percentintheNortheast,thebestperformanceinallregions.SalesintheMidwestregionwereup13.3percent,theSouthsawanincreaseof 12.6 percent and the West region had an increase of 11.1 percent.

REAL TRENDS HOUSING MARKET REPORT

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TheaveragepriceofhomessoldinFebruary2016intheSouthregionincreasedby4.0percent,thebestresult in the nation. The West saw average prices increase 2.6 percent, average prices in the Midwest were up1.0percentwhiletheNortheastexperiencedadeclineintheaveragepriceofhomessoldwithpricesdropping 1.3 percent.

“We now expect that housing unit sales increases will continue to be higher in 2016 than thought earlier this past year. Most forecasts believe that housing unit sales will increase 3 to 5 percent for all of 2016 and that average prices will increase 3 to 4 percent. With the recent strength in housing sales both of those may beonthelowsideofwhatactuallyhappensin2016,”saidMurray.

HO

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REAL TRENDS HOUSING MARKET REPORTF E B R U A R Y & J A N A U R Y 2 0 1 6 E D I T I O N

NATIONAL

NATIONAL

NATIONAL

NATIONAL

MIDWEST

MIDWEST

MIDWEST

MIDWEST

NORTHEAST

NORTHEAST

SOUTHSOUTH

SOUTHSOUTH

WESTWEST

FEBRUARY 2016 JANUARY 2016

0%

0%

0%

0%

8% 8%

4%

4%

4%

4%

12% 12%

16% 16%

2%

2%

2%

2%

10% 10%

6%

6%

6%

6%

14% 14%

18%

20% 20%

18%

9.2%

13.9%

2.5%2.3%

17.8%

-1.1%-1.3%

5.6%

12.6%

4.3%4.0%

13.2%13.3%

4.0%

1.0%

6.6%

11.1%

2.2%2.6%

CLOSED SALES

AVG PRICE

CLOSED SALES

AVG PRICE

NORTHEAST

NORTHEAST

WESTWEST

23.0%

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CHRIS MEYERSMANAGING PRINCIPALHOULIHAN LAWRENCERYE BROOK, NEW YORK

REAL Trends: Tell us about your path to real estate.

Meyers: In2002,IwaslivinginBostonhavingleftaconsultingposition.Iwassearchingforarealjob,which meant running a business rather than acting as an advisor to management. My older brother and sister askedmetolookattheirrealestatebusinesswhichhadgrownrapidlyinthelate90s.Theywantedtomakesurethey had the infrastructure in place to support the scale thatthebusinessbecame.Theywerealsolookingforanotherpartner.Afterspendingeightweeksworkingon a project that gave me a deeper understanding of thebusiness,Itookthebaitandjoinedthebrokerageasthechieffinancialofficer.In2005,Imovedto

chiefoperatingofficerandgotdirectsupervisoryresponsibilityforbrokermanagers.

REAL Trends: Tell me one lesson learned when building yourbrokerage.

Meyers: Itsoundscliché,butthemostimportantlessonlearned is that real estate is fundamentally a people business.Thebeststrategyintheworldwon’thelpyouifyoudon’tattractandmotivatetalenttoexecuteit.Idevelopedamajortechplatformforourcompany.Itwasvisionary,sexyandcompelling.Itwasalsoanexpensivefailure.Therealtragedyoftheprojectwasn’tthe money wasted but the time that the management team spent on it proved to be a distraction from the real driver—people.

REAL Trends: What was the biggest professional challengeyoufacedwhenbuildingyourbrokerage?

Meyers: Iwouldsaynavigatingthroughthefinancialcrisis,andbuildingthebrokeragetowherewearetoday.We’vealwaysbeenagrowthcompany,andsuddenlywewerefacedwithamarketwhereourdollarvolumesalesdropped50percent.Wedidn’twanttolosethegrowthculture that was deeply woven into the fabric of our organization.So,weshiftedfocusfromsalesgrowthtomarketsharegrowth.Asaresult,wewereabletokeepinvestinginareaslikedigitalmarketing,technologyandrecruiting even though we were cutting expenses.

REAL Trends: Basedonyourexperience,whatistheonethingyoudidwithyourbrokeragethatchangedthetrajectoryofyourbusiness?Whatwastheturningpointfromsuccesstomajorsuccess?

Meyers: As an owner, you need to commit yourself to recruitingagents.Igotthememoonthisin2006.Amajor competitor was acquired by a national brand. Thecompetitorhadastrangleholdonkeymarketsthatwecouldn’tcrack.Thechangeinownerscreatedanopening.Idevotedayeartoearningthetrustoftheleadbrokers.Ispentcountlesshourswithspousesandkidsinlivingroomsandkitchens.Itculminatedabout50peoplefromthatcompanyjoiningus.Itfundamentallychangedthedynamicinourmarketandhelpeduscreatethemomentumthatwe’vebuiltupon.

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The U.S. Department of Treasury also

appears to have set its sights on the online marketplace

lending industry.

CFPB AND TREASURY

Online marketplace lenders on regulators’ radar screens.

By Sue Johnson, strategic alliance consultant

Twofederalregulators—theConsumerFinancialProtectionBureau(CFPB)andtheU.S.DepartmentofTreasury—have been sending out signals in recent monthsthattheyintendtomorestrictlyscrutinizeonlinemarketplacelenders,whichofferfinancialproducts such as mortgages, student loans and payday loans. While these regulators have been cautious in their

public statements, their activities raise the possibility of new federal regulations for this fast-growing industry.

CFPB URGES CONSUMERS TO SUBMIT ONLINE LENDING COMPLAINTSOnMarch7,2016,theCFPBpublishedapressreleasethat encouraged consumers to submit complaints about

SIGNS OF INCREASED

ONLINE LENDER REGULATORY SCRUTINY?

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onlinemarketplacelendersonitswebsite.TheCFPBusesitsdatabaseofconsumercomplaints(currentlyestimatedat530,000)todeterminehowitenforceslawsand writes regulations.

TheCFPBsimultaneouslyreleasedaconsumerbulletinthatprovidesanoverviewofmarketplacelendingandtipsforconsumerswhoareconsideringtakingoutloansfrom online lenders. Most of the tips are basic, but the bulletintellsconsumersto“keepinmindthatmarket-place lending is a young industry and does not have the same history of government supervision and oversight as banksorcreditunions.”

IndustryobserversquestiontheCFPB’smotiveforaskingfor complaints against online lenders when it already acceptscomplaintsaboutconsumerfinancialproducts,including mortgages, student loans, and payday loans. Whyaskforcomplaintsagainstaspecifictypeoflenderwhentherealreadyisacomplaintmechanisminplace?

ScottPearsonofWashington,D.C.-basedBallardSpahr,LLCbelievesit’sawarningsign.“TheCFPB’sobjectivesintakingtheseactionsarequestionablesinceconsumersalreadycouldcomplainaboutmarketplaceloansusingtheCFPB’sexistingloancategories,”hesaidinthelawfirm’sCFPB Monitor.“Ratherthanseekingtoprovideadditionalprotectiontoconsumers,perhapstheCFPB’sprimaryobjectiveistowarnmarketplacelendersthattheyareclearlyontheCFPB’sradarscreen.”

TREASURY DEPARTMENT ANNOUNCES ONLINE LENDING STUDY TheU.S.DepartmentofTreasuryalsoappearstohavesetitssightsontheonlinemarketplacelendingindustry.OnJuly16,2015,itannouncedthatitwill“studythepotentialforonlinemarketplacelendingtoexpandaccesstocreditandhowthefinancialregulatoryframeworkshouldevolvetosupportthesafegrowthoftheindustry”andrequestedpubliccommentsonthisindustry’spractices.

DespitetheDepartment’spositivedescriptionofitsstudy,itsrequestforcommentsaskedsuchpointed

questionsas:Inwhatwaysdodifferentmodelsraisedifferentpolicyorregulatoryconcerns?How are borrowers assessed for their credit-worthinessandrepaymentability?Howaccurate are these models in predicting credit risk?Marketplacelendingpotentiallyoffers significantbenefitsandvaluetoborrowers, butwhatharmsmightonlinemarketplacelending also present to consumers and small businesses?Whatprivacyconsiderations,cybersecurity threats, consumer protection concerns,andotherrelatedrisksmight ariseoutofonlinemarketplacelending? Doexistingstatutoryandregulatoryregimesadequately address these issues in the context ofonlinemarketplacelending?

TheDepartmentreceivedover100publiccomments from online lenders, community banks,creditunions,institutionalinvestors,payment services providers, trade associations,

andconsumeradvocates.InAugust2015,itheldaroundtable discussion with input from 80 industry, borrowers and consumer advocates.

OUTLOOKThefederalregulatoryscrutinyofonlinemarketplacelendersappearstostillbeinthefact-findingstage, soit’stooearlytopredicttheresults.Certainly,itwouldbe a complex process, given the substantial differences between various online lending platforms and the diversity of the products they provide.

Whatever the outcome of this debate, it will have implications not just for online lenders, but also for companies that compete or partner with them. It’saspaceworthwatching.

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“Rather than seeking to provide additional protection to consumers, perhaps the CFPB’s primary objective is to warn marketplace

lenders that THEY ARE CLEARLY ON THE CFPB’S RADAR SCREEN.”– Scott Pearson, Ballard Spahr LLC

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VALUATIONS, MERGERS AND AQUISITIONS

THE PEOPLE SIDE OF DEALSBy Steve Murray, publisher

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Whendiscussingthemergeroracquisitionofbrokeragefirms,thefirstquestionisalmostalwaysaboutthemultiple.Then, they move on to terms, how much cash, how long the earn out, how is it structured and executive compensa-tion. And, while these are important, some lessons we havelearnedoverthepast29yearsofputtingbrokeragefirmstogetheristhatit’srarethatit’sonlyaboutthesefactors.Farmoreoften,itisaboutthelegacyoftheseller,theemotionalfeelingonehasaboutendingasignificantchapterinanowner’slifeandhowheorshewillbeviewedin light of doing a transaction that matters the most.

Manybrokeragefirmownersliketothinkofthemselvesasrationalcreatures.Likely,mostofthetimethisistrue.Afterall,they’vesurvivedmultiplerecessions,risingcosts,and the threats of technology and other new intermedi-ariesformanyyears.Forthosewhohavelasted20-30-40years, the business has changed so much in its economics thatitishardlyrecognizable.But,whenitcomesdowntodecidingwhethertosellormergewithanotherfirm,it’sinevitably a very personal decision. And, often at this time, rational thought diminishes and the emotional factors rise.

Inourexperience,thosewho’vebuiltgreatbrokerage

firmshavealsoformedanemotionalattachmenttothem. How the owner will be viewed after a deal by the agents and employees of the company is important. What will happen if they, the masters of their universe, will be judged for the decision to sell or merge that mattersmorethanthemoneyofthedeal?

Infact,it’sthischaracteristicthatmakesthemgreatbrokerageleaders.Theydon’twanttosaytheycareaboutthesefactors,buttheydo,intenselyandpersonally.Yes,theylikebeingatthecenteroftheaction.AsBillMoore,whoranagreatbrokeragefirminDenver,havingsolditsometimeago,decidedtoacquireanotherfirmandre-enterthebrokeragebusiness,toldusthathe“flunkedretirementandmissed being with agents and around the action of the business.”Hesaidaloudwhatmanybrokerageownersthinkandfeel.Theymissitgreatlyoncetheyarenotinit.

So,whilethediscussionswillalwaysbeaboutthepriceandtermsofdeals,it’sactuallyhowanownerfeelsabouthimorherself,andhowheorshethinksadealwillbeperceived, that ultimately will decide whether he or she can successfully transition from owner-operator to some new role.

It is about the legacy of the

seller, the emotional feeling one has about ending a

significant chapter in an owner’s life.

Emotions play a big part in mergers and acquisitions.

17

NEED TO KNOW

THE FUTURE OF SMART HOME TECHNOLOGYBy Paul Salley, marketing strategist

Home automation technology is currently one of the fastest-growing technology segments in the world. There is no question that integrating aspects of home automation into your daily life can add convenience andelegancetoeventhemostmundanetask,suchasturninguptheheatorlockingyourfrontdoor.

Most home automation triggers stem directly from setting preferences inside of an app on your smartphone. Even the most sophisticated home automation solutions depend on various inputs from theoriginatinguser’ssmartphone.Someoftheseinputsandtriggersincludesetprofilepreference,locationqueues,Bluetoothproximity,adaptivelearning of user habits, adapting to external information(suchasweather),anddirectfeedbackfrom the user.

Smarthometechnologytakesallofthisinformationand learned behaviors and uses it to activate technology related to the home. Currently, the most common applications of smart home technology include thermostats, security cameras, lighting solutions and home-entry systems, such as smart garage dooropenersandlocks.

However, there are more sophisticated systems that can recognizepresetentriesfromasmartphonetosetintomotioncustomizedevents.Anexampleofmoreevolved smart-home technology includes a full smart bathroom.Inthisscenario,whenonebringshisorher

phone into the smart bathroom in the morning, his or her shower will start at a preset temperature, favored music will play, and the lights will automatically set to a colorandlevelselectedintheuser’spreferences.

Smarthometechnologyisrelativelyyoung,andreliesheavily on supporting technologies to execute properly, such as a smartphone. The future of smart home technology will gradually shift away from being abletorecognizeandcatertoaphone’sneedsandusers’presetinputsandinsteadrecognizeanindividual’sneedsonanimmediateandadaptivebasis.

Real life examples of this next generation smart home technology include the ability of your thermostat to read your temperature and heart level and adjust the temperature accordingly to best suit your needs at that moment, rather than to pull its temperature from a schedule or repetitive learning activities. Another example is being able to have smart home technology musicsystemsprovideyoumusictofityourmoodbased on face and body queues.

The future is bright for home automation, and smart homes and their technologies will continue to become moreintelligent.Intelligentenoughtoreadyouasanindividual, rather than read what your smartphone is saying?Onlytimewilltell.

Interested in learning more about smart-home tech-nology? Subscribe to our weekly REAL Trends TechTouch enewsletter. Email [email protected]

How can you harness the power of the smart-home trend?

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REAL Trends knows that real estate professionals have lives that are about more than contracts, open houses and virtual tours. There’s a whole secret world that we want to uncover!

Perhaps you moonlight as a guitarist in an AC/DC cover band (Angus Young, anyone?), or you were a guitarist in a top band. Perhaps you have a coveted spot in the Guinness Book of World Records for the longest motorcycle ride by a team. Yes, a real estate professional really does hold that record!

If you’ve got an interesting, dangerous, funny, compassionate or crazy passion or hobby outside of real estate, REAL Trends wants to know all about it. Real estate is about connections, and we want to connect with you on a personal level. Submit your story by June 30, 2016. The winner will receive an all-expenses paid vacation to beautiful mile-high Denver, Colorado (home of the corporate office of REAL Trends), including up to four round-trip coach airfare, one hotel room for up to four nights, four tickets to some of Denver’s top tourist attractions (winner will choose two attractions from our list), a gift card to a premier local restaurant and four Denver Broncos NFL shirts.

THE SECRET LIVESof Real EstateProfessionalsSpill the Beans and Win a 4-Night Vacation!

Deadline for Entries: 6/30/16Winner Announced: 7/14/16

For more details visit www.realtrends.com after April 6, 2016.

See Official Contest Rules at www.realtrends.com

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REAL TRENDS 500 AND UP-AND-COMERSInlateMarch,wereleasedthe28theditionoftherankingsofthenation’slargestresidentialbrokeragefirms—theREALTrends500andUp-and-Comers.Thisyear,arecord1,660firmsfiledapplications,andthevarietyoffirmsontherankingscontinuestoexpandasnewmodelsevolve.Laterthismonth,we release the REAL Trends 500 and Up-and-Comersmagazinewhichlistseachofthesefirmswiththemostcompleterecordoftheiraccomplishments.Werankthesefirmsfirstbytransactionsides(ittakesaminimumof500closedsidestoqualify),thenbyvolumeandfinallybynumerousothercategories.

REAL Trends Market LeadersLater in May, we release a special report that ranksthetopfirmsfromtheREALTrends500andUp-and-Comersbymetropolitanareaandbyclosedtransactionsidesandclosedsalesvolume.Stayonthelookoutforbothoftheseimportantandinformative reports.

REAL Trends The Thousand as Advertised in The Wall Street JournalInJune,wewillreleasethe10thannualrankingofthetopindividualagentsandteamsinthecountry.TheThousandisfourseparaterankingsofthetop250ineachoftopindividualagentsbysides,andvolumeandteamsrankedinthesamemanner.Thisyear,over10,000salesassociateswillapplytoberankedonthisprestigious list.

REAL Trends America’s Best Real Estate AgentsThisranking,whichappearsonREALTrends.com,listsall10,000plusagentswhoclosedmorethan50closedsidesor$20millioninvolume(individualagents)and75 sides or $30 million in volume for teams.

ThoserankedonAmerica’sBestRealEstateAgentsareallverifiedentrants.Whilethey represent less than 1 percent of all agents in the country, they represent more than4percentofallthebusinessdone.Thisweb-basedrankingreportwillappearinearlyJulyforresultsbasedonthecalendaryear2015.

2016

THE 500 LARGEST BROKERS IN THE U.S.

1. NRT LLC2. HomeServices of America, Inc.3. The Long & Foster Companies, Inc.4. Hanna Holdings, Inc.5. RealtyONEGroup

Top 500 Ranked by Sales Volume • Ranking by AffiliationTop Movers • The Billionaires’ Club • Up-and-Comers

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