REAL ESTATE VIDEO

THE NEXT FRONTIER IN REAL ESTATE VIDEO

Technology had evolved, and what was once amazing, untouchable technology is now mainstream. Here’s a look at some video technologies that are evolving.

by Travis Saxton, vice president of technology

Remember when you first heard about drones and what they could do for the industry? It took a while, but eventually, laws were made and clarified. Then, photographers and virtual tour companies that possessed the proper FAA license, equipment and skillset necessary to get high-quality drone video started promoting it for real estate. Rules have changed again, making it easier for photographers to get licensed or certified to use drones.This will again change the landscape. Using drones in real estate photography isn’t quite mainstream just yet. After all, it is costly and not easy to use to market properties under $500,000. But, it soon will be and eventually the majority of real estate professionals will be using drones to market properties.

Such as it is with new technology, a product launches and is out of reach for many until suddenly it’s accessible and mainstream. What’s amazing is how quickly technllogies are developing in the area of photography. Here are our thoughts on the frontier of video:

Digital Photography: It was invented in 1975 but didn’t become mainstream until the 1990s. /by 2004-2005, digital cameras had widely replaced film cameras. It took 30 years for digital photography to become mainstream!

HDR Photography: After digital camera HDR (high dynamic range Imaging) photography, which was invented in 1985. However, it wasn’t used for commercial purposes until 1993 (medical field) and then, in 1997 for motion pictures. HDR didn’t hit real estate until 2006-2007 and was mainly used to market luxury properties. In 2010-2011, it started to become more mainstream. Now, many listings get this treatment, and its adoption is widespread. This also took 30 years from invention to being widely adopted.

Digital Video: Digital video was invented in the late 1970s and became commercialized by Sony in 1986. It didn’t hit personal computing until the early ’90s. This also didn’t become mainstream in real estate until the mid-2000s, with widespread usage by approximately 2010 – another 30-year period from commercialization until mainstream.

Now, let’s look at the cutting-edge tactics that our industry is seeing. One might argue that these are just evolutions of their predecessors or variations. That is a valid argument. What can’t be ignored is how fast these technologies are proliferating through our industry.

Drones: They first hit the scene in a commercial format in 2010 and by 2014 were used to market some luxury properties. Now, in 2016, it’s becoming more mainstream, particularly in the luxury market. All this in a six-year period!

3D Modeling: Used primarily for floorplans and, eventually, layouts, it now is used to present full, #D models. This was invented around 2010-2011 when Matterport burst onto the scene. It is now relatively mainstream in real estate. In May 2015, Zillow announced they would be serving up Matterport tours. This was a short four to five-year period from inception to mainstream.

Virtual Reality (VR): From a commercial and personal use, virtual reality was invented in 2013 by Oculus Rift (which was acquired by Facebook for $2 billion.) Google joined the fun in 2014 with the launch of Google Cardboard and turned it into an affordable and practical way to consume content. We saw this creep into our industry in mid-2014. By early 2015, some companies were adopting VR technology for luxury listings. By late 2015, some luxury firms had adopted VR across our country. While this isn’t mainstream yet, we anticipate a three-year window from inception to mainstream – expect it by late 2016 to 2017.

360-degree Video (aka Immersive Video): The newest kid on the block is 360-degree video. It didn’t become on option until YouTube started working with the format in March 2015. Now, many companies such as Ricoh, Alliecam, 360 Fly are producing consumer products for under $500. This isn’t close to mainstream yet, but we have seen early adopters using it in real estate. In less than one year, we already are using this in real estate.

Technology is moving fast and 360-degree video, drones and 3D modeling have now hit our industry. They are transforming the way we market real estate listings. REAL Trends thinks all of these technologies are amazing and will eventually become mainstream. What’s next? Think something futuristic like holograms and projected content. It will take the place of video as we know it!^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

REAL ESTATE OFFICE DYNAMICS

What is REAL Trends bench-marking data saying about office dynamics?

by Scott Wright, manager of business analytics

Over the years, the real estate industry has seen radical changes to office dynamics. An update of our benchmark matrix offers a glimpse of just how much things are changing.

In last month’s newsletter, I wrote about the ongoing downtrend in the percentage of Gross Commission Income (GCI) retained. This trend may seem alarming, but since brokers are in the business of making money, they’ve ramped up GCI earned per office. Couple this GCI surge with smarter spending and many brokers were able to make 2015 one of their most profitable years ever.

As it turns out, the formula for this per-office GCI surge is a rather simple one. Naturally, there’s the macro factor of home price appreciation, but the biggest factor is a major increase in agents per office. Since 2012, REAL Trends has seen a whopping 43 percent increase in average agents per office, from 53 to 76.

There’s simply no better way to increase GCI than to boost agent count. Agents are the No. 1 asset for all real estate brokerage businesses, and brokers have been on a recruiting spree as they seek to increase agents per office.

Of course, having a higher per-office agent count will only translate to an increase in revenues it the agents are productive. And, productive they’ve been, with an average per-office increase in sides and volume of 48 percent and 35 percent respectively.

Since these sides/volume increases are on par percentage-wise with the increase in agent count, it’s evident that agents haven’t been any less productive. In fact, as you can see in the chart, there’s been a slight uptick in sides per agent, from 8.9 in 2012 to 9.2 in 2015.

This per-agent increase in closed transactions in a smaller workspace may seem counterintuitive by conventional standards. In many industries, a crammed workspace and inaccessibility to the right workspace would have an adverse effect on employee satisfaction and, ultimately, productivity but interestingly this is not the case in the real estate industry.

Earlier this year, I toured several offices of a large, successful brokerage company in the Midwest. I was astounded by their agent and office dynamics. Incredibly, there were some offices with an average-desk-space-per-agent of less than 30 square feet, with one of its larger offices housing agents at a staggering 15 square feet per agent.

With this kind of workspace, you’d expect to walk in and find a group of sour agents grumbling like cattle in a pen. Rather, what I found was an agent population that couldn’t be happier.

This company had the foundation of a very strong culture, so ultimately I wasn’t too surprised. What it drove home for me is that the traditional workspace paradigm doesn’t apply to this industry.

A real estate agent’s office is not a cubicle with a land-line telephone, but rather a smartphone and tablet. More sales associates are working from home, cars or a coffee shop. As long as they have the support of a physical office that gives them access to a conference room, supplies and marketing materials, they’d rather function in a more agile work environment outside of a cubicle.

These shifting office dynamics allow brokers to assign more agents per office, which ultimately  allows them to operate leaner and generate higher per-office profits.^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

BUBBLE TROUBLE?

FOUR FUNDAMENTALS YOU NEED TO KNOW

Track these four fundamentals and you’ll keep your team out of bubble trouble.

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

“Are we experiencing a real estate bubble?” This is a question we’re being asked more and more by customers, investors, media and even our team members.

Dr. Lawrence Yun, chief economist for the National Association of REALTORS® doesn’t see a bubble at the present for three reasons:

  1. A shortage of supply in both new and resale housing. Bubbles are usually the result of oversupply,
  2. Interest rates are lower now than in the bubble years of the mid-2000s resulting in better affordability,
  3. There is no sub-prime lending causing people who are unqualified to buy housing and then default.

But real estate markets are local and cyclical. A local market can experience a bubble while the national market is cruising along just fine. Even sub-markets such as condos, apartments, office or retail can experience bubbles within a strong overall real estate market.

Do you know how to forecast the real estate cycle in your market? There are four fundamentals you should be tracking. As a leader, you need to be the first to spot the changes so you can put your team and your customers in a position to exploit the inevitable. Here they are:

ONE – Employment. Employment is a leading indicator of a real estate market cycle by 12 to 18 months. This is your earliest warning signal of change. Contact your state employment office and get on their mailing list to receive the monthly employment numbers for your county (or go to their website). Watch for a change in employment (either up or down). Compare the number of people employed last month to the same month a year ago. Is the number rising or falling? This is your best crystal ball, giving you a 12 to 18 month head start.

TWO – Appreciation. Go to the government website http://www.fhfa.gov and download their quarterly “House Price Index” report. This is a long report (usually 75 pages), so scroll down to the charts that give you “House Price Appreciation by State” and 300 individual metropolitan markets. These charts show the house price appreciation for the last year, the last quarter, the last five years , and since 1991. Want to see if a market is speeding up or slowing down? Take the quarterly change in prices for a market and annualize it (multiply times four). Then, compare this number to the annual price change. Some markets are seasonal, so be careful about jumping to conclusions based on just one quarter. Start tracking each quarter, and you will spot the trends.

THREE – Affordability. The three components of affordability are house price, household income and interest rates. Ultimately, home prices and real estate activity are a function of people’s ability to pay. Track these components to see if the median household income can afford the median-priced home.

FOUR – Supply and Demand Ratios. Tracking supply and demand for your various sub-markets will also give you a clue as to whether a sub-market is overheated and a bubble is building. Here are two examples: A six-month supply of homes is considered a balanced marlet. In our market right now, the price range under $400,000 has a 1.8 month supply (seller’s market) while the price range over $700,000 has a 13.3 month supply (buyer’s market). We have both a seller’s market and a buyer’s market at the same time depending on the price range. Here’s the second example: Apartments are experiencing a 1 percent vacancy rate and double-digit rent increases, making apartments one of the hottest segments. To get to a balanced market (5 percent vacancy) we need to add about 1,500 apartments in our market. There are currently 1,739 under construction with another 2,165 approved for construction. We see a bubble in apartments a year from now and are warning our investors.

Real estate is a cyclical industry. Knowing where you are in the market cycle is a critical skill. Track the four fundamentals, and you will keep your customers and your team out of the bubble trouble.^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

GROWTH STRATEGIES FOR BROKERS

Looking to grow via acquisition? There are few basic rues that should govern this approach to growth.

by Steve Murray, publisher

Few brokerage firms are truly growing at the same pace as the market through organic means, such as recruiting and developing sales associates. Many are growing at about the same rate that REALTOR® membership is growing – about 3 to 4 percent per year. Most aren’t growing that quickly. Agent productivity runs about 8.6 transactions per REALTOR® per year and has been within a small variation of that number for the last four years. The peak was way back in the 1998-2002 era when it was above 10 transactions per year.

Benefits of Acquisition – Many brokerage firms that want to grow faster than the market turn to acquisitions or variations of this theme. There are many good reasons for this, including faster growth, elimination of competition, adding key office locations, spreading overhead over more units and enhancing profitability from core services such as mortgage, title and escrow. All have worked when a deal can be done at the right price and term without too much risk.

Basic Rules – There are few basic rules that should govern your approach to growth via this path. First, enlist the help of good counsel – accountants, lawyers and operations leaders who know how to put these deals together successfully. Second, while the numbers are important, it is just as important (maybe more so) that the cultures are harmonious and that the commission plans are not too dissimilar. Many people hurry through the due diligence on culture and commission plans without giving them full consideration. This is, in fact, where most combinations go wrong. Too much focus on the numbers and financials and not enough on the actual fit. Do remember that as much as leaders dislike change, sales associates and employees dislike it even more.

Lastly, while growth through acquisitions and mergers is fun and exciting, leaders should not ignore that recruiting and developing sales associates is fundamental to success. When you don’t have an effective program to grow in this organic fashion, you will keep on buying sales associates while losing them on the back end. The data from REAL Trends 500 and Up-and-Comers rankings have shown this over many years.

One Last Thought – Growing through acquisitions and combinations is no different than recruiting sales associates. After all, you’re recruiting and attracting whole companies rather than individual sales associates. The same courtship that goes on with recruiting agents should be used by leaders when approaching a favored company for a combination. As with recruiting agents, it is often not about the money but more about the intangibles of culture ad service. Keep that uppermost in your mind.^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

GROW FASTER

HOW COMPLICATED TO WE NEED TO MAKE THIS?

How can you grow? It’s simple.

by Steve Murray, publisher

Firms that consistently grow their number of sales associates are also mainly the ones growing faster than the market. Firms that are not growing this key number are growing at about the rate of the market. This and other findings will be forthcoming in a analysis of the 2016 REAL Trends 500 and Up-and-Comers report.

Top-performing teams are growing faster than top-performing individual agents – by a significant margin. Team production over the last five years, in total and on average, among The Thousand (REAL Trend rankings of the top 1,000 individual agents and teams in the United States) has substantially outpaced that of individual agents. More on this in next month’s REAL Trends.

We try to make the business complicated when, in reality, it isn’t. For brokerage firms, recruiting good people, developing their skills and spending less than what is coming in, are all that brokerage leaders must do to be successful. For agents and teams to grow, they must execute on the fundamentals. Those fundamentals for brokerage firms are recruiting and growing people’s talents in sales and for teams are growing the customer flow and conversion rates.^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

 

2016 Legislative Update Publication Available

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The sun is bright, flowers are blooming, and boats are on the lakes. Summer is in full swing! It’s also time to learn about new laws enacted during the recently concluded Legislative Session. The Minnesota REALTORS® 2016 Legislative Update is now available. This comprehensive publication provides summaries and links to the policy proposals, bills, and new laws of interest and importance to REALTORS®. Tax Policy, “drop homes”, license renewal policy, Department of Commerce investigation policy, and many other key issues and topics are covered so that you have the latest information regarding what passed, what didn’t pass, and what issues you will likely be hearing about leading into the 2017 Legislative Session. Please take the time to review this important information and familiarize yourself with the legislative issues relevant to your business and homeownership. Click HERE.

The Minnesota REALTORS® are the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

COMPANY CULTURE

INSTITUTIONALIZATION VS. BUREAUCRACY

A healthy organization first has to know what it stands for, culturally and strategically.

by Patrick Lencioni, The Table Group

Whenever I speak to a group of executives about organizational health, I explain that leaders must “institutionalize a company’s culture without bureaucratizing it.” People universally respond to this, most likely because they understand the painful impact of creeping bureaucracy. But what is it about bureaucracy that provokes such a reaction in people?

Before getting into that, let’s be clear that every organization needs a certain amount of structure to preserve what is good about it. This is what I mean by institutionalizing a company’s culture. Rules, processes and protocol are requirements of any organization that wants to build consistency around its unique strategy and culture. The problem with bureaucratic organizations is not only that they implement too many rules and regulations, but that those rules and regulations seem to serve no clear strategic or cultural purpose.

An example might be helpful: there is a big difference between the bureaucracy of United Airlines (or one of the other big ones, I suppose) and the institutionalization of Southwest Airlines.

If I were to relay all of the maddening and incomprehensibly bureaucratic treatment I’ve witnessed and experienced while flying United, this POV would be long enough to be a book. In fact, if someone else were to write that book, I’d certainly read it because, after all, misery loves company. What makes flying United (or going to the DMV, for that matter) so frustrating is the loss of hope and dignity you feel when you ask an employee a question like “What’s the point of that rule?” or “why does it have to be that way?” Usually, the flight attendant or gate agent just shrugs, either with indifference or on a good day, with sense of empathic hopelessness. There is no sense that they understand why they’re doing what they’re doing, or that they’re empowered to make a decision on their own. And if you take the time to talk to them about their experience working at the company, something I often do, you realize they are victims of bureaucracy as much as their customers are.

Contrast that with Southwest, a company that is not perfect, I know. However, one of the biggest differences between flying the two airlines is not simply that Southwest has fewer rules, but rather that it designs its rules to fit its culture and strategy. This is evident when you ask an employee a question and get a coherent, logical and understandable response.

Years ago, I was flying Southwest and expressed my desire to a gate agent, who was no more than 23 years old, that the company put seats in the boarding area that corresponded to a customer’s boarding number. This would allow me to put my luggage down and rest or go to the restroom without losing my place in line (this was before they had numerical boarding passes). In a kind of confident way, the employee explained that it would cost money to do that, and they’d probably have to raise fares, which violates on of the primary tenets of their business. The policy made sense. I felt acknowledged. No problem.

What’s the lesson in all of this? A healthy organization first has to know what if stands for, culturally and strategically. Then it has to put in place just enough processes and procedures to institutionalize its culture and strategy, and no more. Finally, it must communicate – and make sure that employees can articulate – the reasons for those processes and procedures in a way that preserves dignity and sanity of the human beings that the organization serves.

This approach to avoiding bureaucracy applies whether you’re a CEO leading an airline, a superintendent overseeing a school district, or a president heading a nation. When leaders and the people who work for them fail to understand the cultural and strategic underpinnings of their organization, inevitably create an environment where bureaucracy explodes. Rules are put in place for the sake of having rules, and not to serve the needs of the people they’re supposed to serve. When that happens, everyone suffers, with the possible exception of the bureaucrats who always seem to be protected from the costs of rules and regulations.^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.