Best Practices and Takeaways for your Website

Making your Website ADA Compliant

By Travis Saxton, vice president of technology

More businesses are using their websites as a digital storefront, where they conduct business. Government agencies and programs are starting to push their content online, and this has created a problem for Americans with Disabilities. Under Title II of the Americans with Disabilities Act (ADA) , website accessibility falls under the nondiscrimination requirements.

So what does that mean? The truth is that many of your business practices may need to change. Many American’s with disabilities use assertive technologies to read webpages. This may include text-to-voice, Braille interpretation devices, text enlargers and more. These devices all rely on the ability to interpret the text to be effective. Search engines operate mostly in this fashion as well. So , if Americans with disabilities can’t read the text, neither can Google Crawlers, so it’s in everyone’s best interest to make your site ADA Compliant. Here are the common areas i which websites fall short: images, PDFs, videos, navigation and buttons, iFrames, widgets and embedding content.

Images – This is one of the most commonly overlooked areas in general. Images cannot be read by assistive technologies and search engines of they aren’t properly loaded into the site. Most content management systems, like WordPress, allow you to name the image and add alt text and captions below the image. So, be careful when loading images straight from a camera or SD card that are labeled DSC12345.jpg.

For example, when loading the REAL Trends Logo, the name of the file is REAL Trends Logo.JPG and the alt text would be “REAL Trends Logo – The Trusted Source.” If you want to add a caption, common for photos, not logos, here is an example. If you are uploading a photo of an annual gala, you can caption it “party goers taking in the annual gala.” If you label the images properly, it will help with SEO.

PDFs – Reports produced in PDF format are usually uploaded to your website as a link for people to real. The problem is that most PDFs are unreadable to the assistive devices and search engines. It’s best to load the content onto web pages as stories and break them out into a navigable section of your website.

Videos – Typically, videos are hosted on a hosting platform, such as YouTube or Vimeo, and embedded on your website. While this is easy, it doesn’t take into consideration those who can’t see or hear. It doesn’t give them the context they may need to digest your content. Two ways you can overcome this is to use a tool that naturally embeds the video with full descriptions or write a caption below the video describing what is covered.

Navigation and Buttons – Many times, these are uploaded images, so without proper labeling, assistive devices can’t navigate or read these buttons. Your menu should be ADA compliant, but if you use a lot of buttons or images to navigate your site, you may need to re-evaluate those practices or label properly.

iFrames, Widgets, Embedded Content – This type of content is usually embedded on your site to add value and keep the visitor engaged. It is also used to prevent a reader from leaving the page. Some iFrames, widgets and embedded content are not meant to be read by search engines. The problem is assistive devices can’t read that content either. So, provide a link to the original content in addition to embedding it.

This article originally appeared in the October 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.

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.

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.

 

DIGITAL MARKETING

STAYING AHEAD OF THE CURVE

It’s easy, just be where the eyes are.

by Paul Salley, manager of marketing and business development

At REAL Trends, I work with many of the top brokerages in the United States and Canadian with the creation, planning, execution and monitoring of their marketing initiatives. Some of the main questions I receive include:

  • Where is the most effective place to put my  marketing dollars?
  • Which marketing outlets are trending?

The response to these two questions is, “it depends.” Helpful, right? I’ll explain.

With the capabilities of today’s digital marketing platforms, marketers can marketers can market directly to their desired target audience. The audience and goal of the campaign will determine which platform is the most appropriate to leverage. The key is to know which mediums your audience is most likely to consume. Facebook can be a powerful platform as it has the most users coupled with the most user information and cab incorporate elements such as location, uploaded lists, audience lists, re-targeting and more. We constantly see two to tree percent click-through rates on Facebook. Facebook also allows you to send a specific message ensuring that the correct people see the message. One example of this is a first-time homebuyer campaign. Marketers may effectively market to a specific age demographic, relationship status, location and interests that pertain to the physical location of a listing. Another powerful filter is income – this will ensure that the roper listings pages are paired with the appropriate audience, one that can afford the properties being displayed.

When considering staying ahead of the curve in marketing, the answer is hidden in plain sight. You want to be where the eyes are – mobile. Take a moment to view how many people are currently on their mobile devices: emailing, texting, reading, engaging in social media of some form. This especially holds true when looking at anyone age 25 and under. These individuals live a virtual life surrounded by social media platforms, particularly Snapchat.

It’s important that marketers understand who our next-generation buyers are and how to adapt to reach them where they already are, on Snapchat, Instagram and more. It’s also important what relates to and connects with buyers. Millennial buyers are prone to click on an ad that comes across as organic and authentic or something that would add genuine value to their lives.

Ultimately, to stay ahead of the curve in marketing is to stay relevant. Matching a message to the appropriate audience on platforms that target audience is already using will be key in having a successful marketing platform.

Finally, it’s important to think outside the box. It’s easy to recognize where and how consumers are consuming content; the trick is to leverage these platforms as marketing vehicles, even if a formal advertising platform has not been created around that platform. This grassroots/guerilla approach to marketing will separate your brokerage from others and will allow your message to be accepted in a authentic manner with relatively low competition.^

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 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.