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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.

DIGITAL MARKETING

Approach Tech Trends With A Marketing Mindset

By Paul Salley, manager of marketing and business development

As technology trends change and new platforms emerge, there’s a constant adoption of and migration to different tech platforms. This holds true in every facet of technology, from operating systems to social media platforms. Digital marketing is no exception to the continually accelerated progress of technology.

There are developments and updates to proven digital marketing platforms that make their capabilities more sophisticated and easier to gauge their success. There’s also the emergence of new platforms. You must be tuned in to these new platforms and understand which audiences they are attracting and leverage them accordingly. For example, Snapchat, being a newer social media platform, pulls a different user demographic than Facebook and can be a potent tool in reaching Millennials as they enter the market. Understanding how Snapchat works is critical in leveraging its capabilities regarding digital marketing. Users can add filters to their pictures, and those filterers are synced to their geographic location. These filters can be sponsoring filters based on geographic location by promoting the lifestyle of the specific location. This is an inexpensive, forward-thinking method to tap into a new client base without any competition saturating the space.

Approaching current technology trends and updates with a marketing mindset will allow your brokerage to stay relevant and in front of the competition with your digital marketing campaigns.

This article originally appeared in the September 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.

BACK TO THE BASICS –

Quality vs. Quantity

Don’t make the mistake that more agents is better than fewer, more qualified agents.

By Kristen MacDonald

We see it more often than we would like—a new broker opens up her first real estate brokerage and immediately her mind goes to recruiting as many sales associates as possible. You may think, well, more agents, more deals, more money, right? But, there is more to the equation. And, it means going back to the basics.

Did you ever get upset as a child because Billy down the road had more people at his birthday party and half of your soccer team couldn’t make it to yours? Chances are you went moping to your parents about it, and they replied with some line about how it doesn’t matter how many people come to your party, or that Billy had 20 guests. What matters is that you have 10 friends coming who really care about you, and you can still have a great time with them.

Sound familiar? It’s a simple principle that many of us were taught from an early age, and one that is reflective of the sustainability of your real estate brokerage – quality vs. quantity.

The reality is that there is no benefit to recruiting 50 agents to your brokerage over five agents if those agents aren’t quality real estate professionals. And as a real estate broker, it’s your job to ensure you have a handle on which agents are contributing to the success of your brokerage and which agents aren’t.

At a first glance, you may be inclined to say that all of your agents contribute to your success and that you are set up for a record year. After all, each agent has closed more deals than last year and you have more listings than ever before. But, identifying quality agents means taking a deeper dive into their true value to your brokerage.

Commission Cutting
A great place to start when evaluating the true value of an agent is with their commission cutting habits. You may think that your highest producing agent is the greatest contributor to your bottom line, but a deeper dive into the metrics reveals that he is actually reducing his commission on multiple deals, meaning money lost for your brokerage.
Agent Net Worth
There is a base cost for each agent on your team. Training, paper, photocopies, websites, software—they all cost money. So, while your agents may be closing deals, you need to ensure their activity is enough to cover their expenses. Then, you will truly understand which agents are making you money and which agents cost you money.
Agent Performance
Understanding how your agents do business will allow you to understand better where your brokerage stands financially. A more in-depth look at agent performance may reveal that your agent who closed the most deals last year had a lower average selling price and, that, in reality, another agent who closed fewer deals did so at a higher price—making you more money.

When it comes to the success of your brokerage, there is more than meets the eye; determining the value of your agents and ultimately the sustainability of your real estate brokerage starts with the data. An investment in the tools to help you collect and understand this data is worthwhile and allows you to plan for your future success. Any business can get complicated. It’s important to remember the basics: quality vs. quantity. After all, I am sure you walked away from that birthday party with memories of a great time with friends, not of Billy’s guest list.

This article originally appeared in the September 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. 

FACTORS TO CONSIDER IF YOU’RE EXPLORING A JOINT VENTURE

Is a joint venture a viable alternative to a marketing service agreement?

By Sue Johnson, strategic alliance consultant

The Consumer Financial Protection Bureau’s (CFPB) aggressive enforcement against Marketing Service Agreements (MSAs), coupled with its 2015 Bulletin warning providers to “proceed with caution” in this area, has led many companies to explore a joint venture as an alternative to an MSA.

The CFPB has not outlawed MSAs per se, and the Supreme Court may decide this year whether or not the agency has overstepped its bounds in its strict interpretation of how RESPA’s referral fee prohibition applies to this type of agreement.

But given the uncertainty of today’s MSA regulatory environment, should you actively explore a joint venture? The answer is, “Maybe.” Here are some factors you should consider as you begin your assessment.

Will you be able to capitalize adequately the joint venture?

To create a RESPA-compliant joint venture, you’ll need to capitalize the entity. No specific amount is required, but many RESPA attorneys recommend an investment covering start-up costs and six months of expenses. Be aware that RESPA regulators expect your investment not to be tied in any way to expected referrals. If the returns are disproportional to the amount invested, you open yourself up to an investigation.

Will your volume of business support a joint venture?

You obviously will need a certain volume of business to make the capital investment and operational costs worthwhile. A pro forma income statement done in conjunction with your prospective partner will enable you to assess how many transactions the new entity will need to close to cover your costs and to achieve your profit goals.

Do you have a viable joint venture partner?

Your partner will be critical to the venture’s long term success. You could start by assessing the suitability of companies that already do business with your sales force and customers. One possible partner is a company with an established track record of creating and managing RESPA-compliant joint ventures.

Are you and your partner ready to make a long-term commitment?

Beware of potential partners that approach you with proposals involving quick profits. A successful and compliant joint venture involves a long-term commitment by the senior management of all owners. If one is a real estate brokerage company, it takes time and excellent service to win the business of its real estate sales force.

Are you ready to comply with RESPA’s ABA standards?

First, you should comply with the three statutory conditions of RESPA’s affiliated business arrangement (ABA) safe harbor:

  1. Provide an ABA Disclosure in writing at or before the time of the referral.
  2. Do not require the consumer to use the affiliated service.
  3. Do not receive any “thing of value” from the venture other than a return on ownership interest or franchise interest.

You also should not consider a joint venture unless you and your partner are ready to comply with the RESPA Sham Joint Venture Guidelines that RESPA regulators use to determine whether a joint venture is “bona fide” or a “sham” designed to  circumvent RESPA’s referral fee prohibition. They include:

  1. Adequate and proportional capitalization: As discussed above, the joint venture should be adequately capitalized, with any returns being proportional to the capital investment.
  2. Employees: It should perform its essential services with its own employees, not employees loaned by either owner. Many RESPA attorneys advise hiring at least one full-time dedicated employee.
  3. Separate management: Its operations should be run by its own management, not the management of wither owner.
  4. Separate office space: Its office(s) should be separated from those of wither partner, and it should pay market value for the space.
  5. Performance of “core” services: It should perform the essential functions for which it receives a fee. If it contracts out services, it should pay for the fair market value of those services.
  6. Outside business: The entity should actively compete for outside business, and not send business exclusively to an owner or its affiliates. Many states require that a certain percentage of revenues be obtained from unaffiliated sources.

Do you need to meet all of these guidelines? Not necessarily. Some, such as capitalization, employees, and the performance of core services, are considered more important than others. But you should be prepared to meet as many as possible to prevent the RESPA police from knocking on your door.

A successful joint venture can bring you long-term financial benefits and enable you to build value for your customers. But it also requires a substantial financial and management commitment, as well as compliance with a separate set of regulatory standards. If you decide to explore this option, make sure you do so with the advice of an attorney with an established RESPA practice.^

This article originally appeared in the September 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.

LEGISLATIVE UPDATE

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It’s that time of the year again in Minnesota when we realize that summer has gone by too quickly and, before we know it, we will be scraping ice from our windshields.

It’s also an election year. Combine an upcoming election where all 201 State House and Senate seats are on the ballot with summer in Minnesota and what we typically see is nothing of significance happening at the State Capitol.

This summer deviated from that pattern is one important way…Since the Legislature adjourned in May, there has been steady discussion about a potential Special Session to address a number of items leftover from the Regular Session, including the “pocket-vetoed” tax bill, and a transportation funding bill.

Ultimately, the Speaker of the House, the Governor, and the Senate Majority Leader could not agree on the terms of a Special Session.

The tax bill included important federal tax conformity provisions, including the mortgage debt forgiveness provision, which would exempt from taxes the “phantom income” associated with a lender forgiving debt in a short sale situation.

In order to extend the federal tax benefits signed into law by the President in December for federal tax purposes to Minnesota taxpayers for state tax purposes, the Minnesota Legislature must pass legislation and have it signed into law by Governor Dayton.

Minnesota REALTORS® lobbyists testified in support of federal conformity in committee hearings and discusses the importance of the mortgage debt forgiveness provision with key legislators. Support for addressing this issue was bipartisan.

We will continue to advocate for federal conformity in the event a “lame duck” Special Session is called after the election or in January when the 2017 Session convenes.

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.

CREATING THE VALUE

Creating The Value Driven Organization

Focus on the investments that give you the greatest return.

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

“Our true worth is determined by how much more we give in value than we receive in payment.” This is the Law of Value from Bob Burg and John David Mann’s book The Go-Giver, and it serves us well whether we are an owner, manager or sales associate.

Owners – As an owner, adopt the mindset of what we call Ninjanomics. There are four rules:

  1. There are no expenses.
  2. There are only investments.
  3. Every investment must have a return on investment.
  4. Focus on the investments that give the greatest return on investment.

Don’t look at your employees, marketing or facilities as expenses. Instead, look at them as investments and expect a return on those investments. Invest in them and expect a return. If you aren’t getting a return, they are expenses, and there should be no expenses, only investments.

Managers – As a manager, adopt the Ninjanomics mindset, as well. Your owner is investing in you, and you need to provide a return on that investment. It is how you make yourself valuable to the organization.

Are you generating more gross commission income (GCI) in the form of referrals, builder accounts or relocation accounts than your salary? How about recruiting? Are you recruiting more GCI each year than your salary? How about coaching your sales associates to higher levels of productivity? Your true worth is determined by how much more you create in value than you receive in payment.

In recruiting, sales associates are attached by value. Can you articulate your value proposition? Typically, they value and are willing to pay money for two things: to solve a problem (pain); and to feel good (pleasure). Two great questions to discover their pain and pleasure are:

  1. “What is your greatest challenge in your business right now?” (Solve their pain).
  2. “If you could wave a magic wand and have your business just they way you want it, what would that look like?” (Help them achieve their goal – pleasure).

Sales Associates – Unfortunately, there’s a group of customers who do not care about value. About 15 percent if the U.S. population make all buying decisions based on lowest price – period! They don’t care about value. As a sales associate, we recommend you let this group work with someone else. These customers tend to be grinders and will steal your time and energy as they try to squeeze every drop of money out of you and the transaction.

Instead, focus your attention and marketing on the other 85 percent who value what you bring to the game. Learn to articulate your value proposition in just a few words. How do you create more in value for your customers than they are paying you?

In my experience, most sales associates need help in this area. You bring tremendous value, but you may not necessarily know how to articulate your value to a customer – specifically to a seller who asks you to discount your fee.

When everyone (owners, managers, sales associates, and staff) have the value creation mindset and actions, your organization will attract and keep the best talent, the best customers, and be highly profitable as well. You have created a value driven organization.^

This article originally appeared in the September 2016 issue of eth 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.

 

JULY HOUSING MARKET

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During July, typically the busiest buying and selling time in Minnesota, there were less homes for those looking to buy. With only 10,889 new listings, a 7.9% decrease over the same time last year; buyers had 28,401 properties available statewide to choose from. In July 2015, there were over 33,000 homes available.

The lack of inventory and competitive nature of the market is having an effect on the sales prices as well. The median sales price in July was at $215,900 – an 8% increase. The average sales price was up 4.3% statewide to $249,353.

With the lack of inventory, homes are selling quickly. Homes are selling in less than two months – approximately 55 days – which is a 12.7% decrease over July 2015. Buyers are forced to make quick decisions, sometimes offering more than the list price in order to secure the purchase.

“With less homes available we are seeing the closed and pending sales numbers decrease as we move through the summer months,” said Chris Galler, CEO of the Minnesota REALTORS®. “However, prices are going up due to the competitive nature of the marketplace.”

Download the Minnesota Housing Report HERE

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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.