REAL Trending Episode 40
Why Is the Industry Optimistic When Housing Sales Are Ebbing?
Also: the value of relationships over tech, and growth in M&A
From REAL Trends, the trusted source for real estate industry news, this is REAL Trending episode 40. We’re breaking down the trends of the week and explaining how they impact brokers and agents. I’m Steve Murray, president of REAL Trends.
Today we’re going to be talking about themes from the big annual national brand conventions, the increasing value of relationships, keys to growing through mergers and acquisitions and a special message about the Gathering of Eagles.
We’ve just attended conferences for Keller Williams, Leading Real Estate Companies of the World, RE/MAX, Berkshire Hathaway home services and four major brands of Realogy who came together for the first time. Coldwell Banker, Century 21, Better Homes and Gardens, ERA and the Coldwell Banker commercial.
Interestingly enough, with housing sales ebbing over the last six to 10 months, virtually every conference had record attendance. It’s very interesting. We noted that the agents, brokers, managers and leaders were enthusiastic, optimistic and feeling overall pretty good about future prospects in the business even though housing sales are not doing that well. In fact, February housing sales, once again, slid from a year ago.
Overall, almost every organization had a significant focus on technology. Whether we refer to the Keller Cloud and all the parts of that, with Berkshire Hathaway’s entry in technology, the Realogy program with OJO and Agent X, their soon-to-come voice-activated access system. The integration of data and systems at the RE/MAX booj project. Almost every national network had a significant focus on building platforms that merge great technologies, massive amounts of data, artificial intelligence and the training to teach people how to use these systems to great effect.
In almost every case, there were demonstrations of parts of what these systems can do now and what they’ll do in the future. We think it’s very interesting, this focus on technology for all of those people who say, “Can the national companies catch up to the Zillows, Redfins and others?” “What does this horse race in technology … Where does it lead to?” It’s just very interesting that all these organizations believe that this is a must-do, not just a want-to-do.
Lastly, the themes overall were the value of also training, education and the value of whether we call it coaching or mentoring, there’s tremendous investment in time and energy by these five national organizations, including Leading Real Estate Companies of the World, on those facets of their business. But all in all, it was uplifting to see people who were in somewhat of a tight spot with new forms of competition coming from five different directions, still believing that agents have value in their relationship with housing consumers. That was highlighted in numerous industry speeches and research reports. Which we have also documented with our Harris Insights study from the summer of 2018.
Value of Relationships
Secondly, the increasing value of relationships. Whether we talk about the relationship between buyers and sellers and their agents, or the relationships between broker-owners and managers and their agents, it’s becoming increasingly clear that in an age of saturation of technology news and venture back new entries into the business, that the one sure, true thing that agents with their customers, and managers and owners with their agents need to focus on that is truly, uniquely theirs, the best away to compete is by getting closer to your best people. In fact getting closer to all your people is a very, very good idea.
It’s important to note that some of the strongest brokerage companies in the country who have withstood the pressure of various new market entrance, whether they be companies like Compass, or eXp, or Realty One Group, HomeSmart, Fathom, traditional or more traditional incumbent brokers who seem to be surviving the onslaught of these new models, and when you look deeply inside those organizations, you find that the managers and leaders of the company spend extraordinary amounts of time and increased effort to build, establish and hold dear relationships with their employees,
If it were only about money, every traditional brokerage in the country would be out of business because in every market there are lower-cost alternatives to these traditional incumbent brokerage companies, whether they’re independents or franchises. So what do we mean by getting closer? In our white paper from 2006, People Still Matter, we pointed out that one of the strengths of the best companies in the country is not just that they communicate well vertically, from leader to agents, from leader to employees, or managers back to the principle, but great companies foster horizontal communication.
Hence the idea of mastermind groups for agents and managers, and even staff employees within a company to exchange ideas, to provide emotional support, and for people to learn how to do their jobs and perform better. That’s a big tip for today. How much horizontal communication are you fostering as a leader or an owner with your agents where you are listening and exchanging not only with them, but fostering that same communication with each other?
Growth in Mergers & Acquisitions
Lastly, let’s address the keys to growth in mergers and acquisitions. Everybody talks about this is a way to grow, well let’s focus on one point first. Mergers and acquisitions, if you want to be very technical, is another way of saying, “I can’t grow organically as fast as I would like.” Or “I can’t grow organically at all because I don’t have the systems and the capabilities or the discipline to recruit organically to add talent to my company.” Doesn’t make it bad, it’s just worth pointing out that a lot of companies will do acquisitions and mergers because they’re not doing as well with organic recruiting.
When you approach merger and acquisitions as a tool of growth, it is important therefore to remember that it is really no more than recruiting. As we know from our experience over 30 years in M&A activity in the brokerage industry, it all starts first with the relationship between two owners of brokerage companies. Building a relationship, understanding the needs of both parties, analyzing the benefits of what might happen if their companies were together is an important first step before you even get to talk about the money or the financial terms of the transaction.
One other thing we like to point out is, men and women who own brokerage companies whether they’re five agents or 5,000 agents, have a great deal of pride in their businesses. In most cases, it’s a well-deserved pride, no matter how big that firm is. This is not an easy business to be a broker-owner. Growth and mergers and acquisitions should always start first with the relationship, understanding the needs of both parties before you get to the financials. So more and more, we are guiding our clients to consider the actual combination of the companies from a people and a cultural viewpoint, before we get to the monetary parts of the deal. It’s very important that you do that.
Secondly, let’s suppose you get to an agreement to do something. One of the very first things that a purchaser should conclude, is what will the role of the seller be in the business after a combination of some kind. What role, compensation, duties, what do they want and what fits best. As we tell people, it’s important that you always look at someone you may want to merge with, not from a point of view of just the agents, but it’s important to know how will these people fit with us. Truly, I will tell you that you have to look at it from the point of view of, are these people that I would want to do business with anyway?
Always think about it that way and think about it very carefully. Then you get to the signing of confidentiality agreements, then you get to the financial aspects of the analysis, the income statements, balance sheets, P&Ls and other documents.
Obviously at REAL Trends, we stand ready to help any broker through any combination of any kind, anywhere in the United States and Canada and have a lot of experience in doing that. But it’s important for people to first understand the analysis of the cultural fit, the relationships with people and how that might all fit is of primary importance if you’re going to grow through mergers and acquisitions.
Gathering of Eagles
Lastly, just a comment. The Gathering of Eagles will be May 15-17 in Denver, Colorado at the Grand Hyatt Hotel. We’ll be hearing from such luminaries to the industry such as Robert Reffkin, CEO of Compass, the heads of four large iBuyer companies and a discussion from myself and some special guests of how brokers can deal with all the change taking place in our industry.
Lastly, we’ll have two of the finest leadership coaches and trainers, Larry Kendall of Ninja Leadership and Mike Staver of Staver Group helping people understand how do you deal with all of the change, all of the threats, in these kind of times.
There are also four to five other conferences between now and the Gathering of Eagles. However, if you want to know how these new companies are operating and how they relate to brokerage companies first, and second if you want to truly know how to deal with all these things going on, I would highly recommend we see you at the Gathering of Eagles May 15-17.
Learn more about industry trends, news and strategies, as well as listen to past REAL Trending episodes by going to our website, www.realtrends.com/blog. This has been Steve Murray for REAL Trends, have a great day.