Wendy Cole is the managing editor of REALTOR® Magazine. She can be contacted at firstname.lastname@example.org.
2010 Top 100 Companies: The Change Artists
Spotting and seizing new opportunities in the face of market difficulties has paid off for many of the Top 100 Companies.
August 1, 2010
"The only constant is change, continuing change, inevitable change."
The real estate market was probably not the original focus of this timeless maxim, which has been credited to both the late writer Isaac Asimov and the ancient Greek philosopher Heraclitus.
Yet the ability to adapt and find opportunities during difficult times is what sets apart the top-performing real estate companies from those that are simply trying to hang on until the economy rebounds.
"It’s not enough simply to cut costs and pull back on your bricks-and-mortar operations," says Pam O’Connor, president and CEO of Leading Real Estate Companies of the World, a global network of 600 real estate companies.
Instead, the smartest real estate companies are being more selective in their recruiting, growing through careful acquisitions, aggressively developing and marketing their ancillary services, and increasing agent productivity by providing outcome-based learning opportunities.
Such tactics have accrued to the benefit of many brokerages on REALTOR® Magazine’s Top 100 Companies list. Slightly more than half of the companies—51 to be exact—showed an increase in transaction sides in 2009, up from just 16 companies with such growth in 2008. Meanwhile, 21 companies reported higher annual sales volume, compared with just 11 the year before.
O’Connor says she’s a strong believer in the power of local branding. Independent brokerages and franchisees with deep roots in their markets have a significant advantage over national companies that don’t have a recognized local brand.
"National brands are less meaningful than they used to be because of the Internet. Consumers may have a harder time, for example, finding a branch in their neighborhood because they have to drill down so far when searching the company Web site," she says. "What makes a difference is having skin in the game. With local ownership, it’s their money and their deals and these businesses tend to do better."
Extra Services Bring in Needed Revenue
Howard Hanna Co., a leader in the Cleveland and Pittsburgh markets, has found that its ancillary services are helping it thrive despite profound economic struggles in its core regions. The company’s mortgage and title services have bolstered the bottom line at a time when sales are less robust.
"In early 2009 we committed to lending $125 million every month, and we lent it all out. That gave us an edge in our markets when credit was generally tight," says Helen Hanna Casey, president of Howard Hanna.
Buyers apparently like the convenience of one-stop shopping as long as mortgages and other services are competitively priced. Casey says the percentage of buyers using her company’s mortgage services rose to about 45 percent in 2009 from 38 percent the year earlier.
Casey is also a champion of strong, consistent communications between managers and sales associates. "We have weekly meetings for all of our managers.
"We do a lot of training and outreach for our offices. And having seen the downturn coming three or four years ago, we didn’t go into shock when it happened. We were prepared by helping our agents develop the right skill sets for the current market," Casey says.
Creating a Great Web Experience
Providing consumers with more transparency in its operations and offering state-of-the art online tools are big parts of ZipRealty’s success strategy. The Emeryville, Calif.–based company’s Web site allows consumers to post reviews of their sales practitioners and see what other houses in their neighborhood sold for.
"People meet us online. Instead of focusing on retail operations, we make it possible to window-shop with us on the computer," says CEO Pat Lashinsky.
The approach is working. ZipRealty’s site gets about 130 million page views a month, he says. And the company—which operates in 20 states from California to Massachusetts—reported a 34.6 percent increase in sides last year and an increase in sales of 14.1 percent.
"We’re known for focusing on the buyer’s side of the business. But now we’re also going after listings more aggressively," Lashinsky says.
Another company that’s doing anything but waiting for the market to turn around is Prudential California/Nevada Realty, based in Pleasanton, Calif. More than half of its 1,795 salespeople have earned the NATIONAL ASSOCIATION OF REALTORS®’ Short Sales and Foreclosure Resource (SFR) certification, and the specialized training has translated into bigger numbers for the company.
Its transaction sides increased 21 percent in 2009 to 7,628, boosting its ranking 10 spots from last year to No. 42. "We believe in going to where the market is. Agents can still be productive and make a living. They just need the proper support," says President and CEO Ed Krafchow.
This type of proactive approach will serve brokerages well as the market continues to improve and change.
As O’Connor notes, "Successful companies need to stand for something. Good people gravitate to places where there are other good people. Winners want to be with winners." Those who most fully and robustly embrace change seemed destined to stay at the head of the pack.
CEO ZipRealty Inc., Emeryville, Calif.
Rankings >> By Sides: 5 > By Sales: 7
How do you keep sales up and overhead down?
"We keep our costs down because we don’t have storefronts. We do have offices in all 20 states we operate in, but they’re for brokers to work in and we use them as training facilities. We’ve found that consumers don’t feel as comfortable meeting in real estate offices—they feel they’re on someone else’s turf. People prefer discussing business in Starbucks or some other neutral setting. We offered enhanced training in areas like REOs and short sales so we were ahead of the wave in handling these transactions. Last summer we had many properties with multiple offers."
Helen Hanna Casey CRB, GRI, president
Howard Hanna Co., Pittsburgh
Rankings >> By Sides: 4 > By Sales: 8
What effect did the tax credit have on your business?
"The tax credit was a driving force in some areas but had no impact in sales in others. In places where it had a big effect, sales jumped toward the end of the year out of fear it would run out. This move-up buyer credit has been harder to communicate to consumers."
Ed Krafchow, president and CEO
Prudential California/Nevada Realty, Pleasanton, Calif.
Rankings >> By Sides: 42 > By Sales: 19
How do you keep up with changing consumer preferences?
"This is a watershed moment for the markets. Things are improving, but brokers and agents recognize it takes hard work. It’s not a lazy man’s or woman’s job. I’m optimistic about the new generation of real estate agents. Generations X and Y see the benefits of the portable, mobile office.
Creating social intimacy with customers is the key. Facebook and the dynamics of social media are changing the industry. Even if you’re not a social media freak, you’re affected by it. Consumers want to know who you are. It’s a good thing to show your dog with you on your Facebook page."
Trudy Moore CRB, CRS, designated broker
HomeSmart Real Estate, Phoenix
Rankings >> By Sides: 19 > By Sales: 26
What makes your business model unique?
"Our growth model is based on widespread recruiting. We’re hiring about 125 agents per month. And we encourage part-time agents. There isn’t the level of sales out there to support as many people working full time. About half of our agents have other jobs.
Since we charge transaction fees as low as $25, we’re attracting a lot of people from more conventional brokerages that have higher administrative fees. Technology helps us keep overhead down. For example, we have just one receptionist for our eight branches in Arizona. When people enter the buildings, she greets them remotely on 36-inch plasma screens. She can even unlock the doors remotely."
Michael Saunders, president
Michael Saunders and Co., Sarasota, Fla.
Rankings >> By Sides* > By Sales: 75
How have you adjusted to the market downturn?
"Our market is in Florida, which really was meltdown central. But we refused to act like deer in the headlights. This was the hand we were dealt, so we approached it with a positive attitude. We’re the market leader in luxury property but we’ve readjusted to a value-based market. We go where the business is.
We formed an REO division in 2007 and created a new section of our Web site called ‘Best Opportunities,’ which features properties that are bank-owned or that are priced below their appraised value or CMA. This part of the site gets 30 percent more traffic than any other area. Our goal was to turn fear into productive activity, and we’re aggressively going after listings. If you own the listings, you own the market."
READ MORE: Download the Top 100 Companies Report (PDF)