New Era Era New
GMAC Real Estate is helping position its brokers and agents for success
98 January 2007 RISMedia’s REAL ESTATE
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It’s the Dawn of a
The statistics tell quite a conflicting story: the past five years in real estate have been a period for the record books. Record sales. Record home prices. And record gross— commission incomes. But while many brokers and agents were doing their best to try to keep up with this frenetic pace, they failed to notice one thing: that everything about their industry was changing… and that now, a tsunami of change is about to wash ashore. “It’s the dawn of a new era for our industry,” as one industry leader pointedly puts it. “For an industry that’s been resistant to change, we need to realize that everything in our industry is changing, and we ignore it to our peril,” says GMAC Home Services President and CEO John Bearden. “Even though 2006 was the third best year on record for residential real estate, more companies are poised to fail, than succeed.”
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Every Aspect of Our Business is Changing
Bearden, whose nearly three decades of real estate experience is surpassed only by his passion for the subject of the state of the industry and where it is headed, believes now is not the time to pat one another on the back and bask in the glory of the past five years. Bearden—respected for his honest, straightforward approach to solving business problems head-on and his trademark candor—pulls no punches in outlining what he believes must happen for the industry to thrive next year…and for many years to come. “We need to recognize what’s going on, react to it, make wholesale changes now…and realize we don’t have much time.” According to Bearden, “The industry’s cost structures are changing, consumers are changing how they want to receive information and work with us, and technology is changing the very foundations of our business, and how we do business.” He points to four key topics that, even though they’re on the minds of just about every real estate broker in the country, are nonetheless seldom discussed. They are:
bank. Yet this is hardly the reality for most brokers today. In fact, Bearden believes “brokers need to be business people who happen to be in the real estate and home-services business, not just real estate professionals working in the brokerage business. “There are a lot of people in real estate today who will not be in it tomorrow,” he adds. “Many don’t even see things changing and are unwilling or lack the ability to do anything about the changes. Some of these things require investments and, at the very least, a lot of discipline.” More and more, brokers are facing pricing pressures from a number of areas that are squeezing profits, namely:
Declining commission rates as agents and companies facing new competition and declining sales volume choose to discount their commissions rather than sell the value of their service Increasing agent commission splits combined with agents who focus on their split rather than productivity The increasing number of discount brokerage firms The increasing number of intermediaries who are using traditional and Web-based media to generate leads, which are then sold back to real estate professionals The cost associated with traditional bricks-and-mortar offices, which are
“We need to recognize what’s going on, react to it, make wholesale changes now…and realize we don’t have much time.”
-John Bearden, president and CEO, GMAC Home Services
1. Cost and pricing pressures leading to decreased margins 2. Consumer expectations have changed. They demand access to more information, convenience, a trusted advisor and even higher levels of service. 3. The changing role of the sales manager and/or broker 4. The need to adopt new technology If We’re Making So Much, How Come We Keep So Little?
Logic dictates that, if brokers are selling more homes at higher prices, they should be flush with profits, happy (repeat and referring) customers and ample reserves in the
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Recruiting Quality Agents Starts with a Plan
Eddie San Roman, broker/owner of First Service Realty GMAC Real Estate in Florida, has witnessed his company’s rapid growth right before his very eyes: His company doubled its size in just one year. “We affiliated with GMAC Real Estate for one reason: growth,” San Roman says. “We thought it would help us compete. Since January 2006, we’ve added about 150 agents and now have more than 400 working from seven offices.” Says Lane Barnett, president and chief executive officer of GMAC Real Estate Franchise Operations: “Here is a franchisee whose entire team—starting with Eddie and encompassing all 400 sales associates—that is taking every opportunity possible to use the tools, programs and customer service commitment that we have developed specifically for our strategic partners. San Roman says GMAC Real Estate’s numerous national programs are especially appealing to both current and potential recruits, adding that the affiliation with GMAC Real Estate also enabled his company to establish an in-house mortgage
operation, offering its customers a one-stop shop solution. Susan Sipich of Rich GMAC Real Estate—which serves the Orland Park and Oak Lawn markets near Chicago—also has been quite successful recruiting agents. In 2005, Sipich added 10 new agents to her tight-knit team, bringing the total to 50, and added 10 more in 2006. But she stresses that she doesn’t play the numbers game when it comes to building her team. Instead, she looks long and hard for agents who mesh well with the rest of her team, and who demonstrate a solid commitment to customer service. “We look for quality agents who will provide quality service,” says Sipich, who has been a real estate professional for 13 years. “Brandnew agents want and need systems that will help them become successful. Premier Service offers this and so much more. Our agents are excited about Premier Service.”
less and less needed to support our functions High agent attrition rates Crippling and false dependence upon newspaper advertising
To combat these issues, for the past four years GMAC Real Estate has worked closely with its growing network of company-owned and franchise offices nationwide to help transform their operations into true home-services companies that provide brokerage, mortgage financings, title and closing services, insurance and home warranties. With the additional services they’re offering, brokers are not only increasing revenues, but helping their agents add incredible amounts of value to the real estate transaction—all while giving consumers the bundled services they desire. “As an industry, we have done a poor job of explaining the role of the agent and the value they provide to our customers,” Bearden says. “This means the only way we’ve valued our service is on price. GMAC Real Estate
is one company talking about value and quantifiable service that justifies higher commissions.” To that end, GMAC Real Estate developed a comprehensive business strategy and customer satisfaction program, Premier Service®, designed to help brokers and agents focus on more highly satisfying their clients—ultimately resulting in higher levels of referrals and repeat business. Everything about Premier Service was designed to help GMAC Real Estate brokers and agents set themselves apart in their respective markets, demonstrate value and become the proven leader in providing superior customer service. “With Premier Service, our agents are able to clearly—and in our industry, uniquely—demonstrate to clients and prospects the value they bring to the home-buying and selling process—which is an extraordinarily effective way to stem the rampant commission-cutting plaguing our industry,” says Lane Barnett, president and CEO of GMAC Real Estate’s franchise operation.
The CustomerFocused Company
In addition to the financial forces pressuring real estate professionals to manage their businesses differently, an equally important driver of change is coming from consumers and their reliance on the Internet. And the statistic on consumers’ reliance on the Internet speaks volumes: 77%. That’s the percentage of consumers who today begin their home-buying and selling quests online, according to the National Association of Realtors. “The changes happening in the real estate business require us to understand our customers in new ways,” says Bearden. “Technology and the Internet-empowered consumer continue to transform our business.” “In today’s world, the consumer will always win and get what they want. And for those who currently aren’t getting what they want, you’d better believe someone in our industry is feverishly working on a way to give it to them,” Barnett adds. “Brokers and agents must begin to
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deliver an online customer service experience equivalent to the office experience of the past. “Consumers are looking for their agent to be their trusted advisor, skilled negotiator and expert facilitator,” he continues. “We have to adjust to what the consumer wants. Bottom line: The companies that succeed will be the ones to adjust to the consumers’ wants.”
From Deal Doctor to Coach. . .
But Bearden and his team at GMAC Home Services are convinced the industry’s (and individual companies’) future success will require more than just redefining customer service. It will also take a concerted effort by companies to redefine their relationships with their brokers and real estate agents to one of business partnership that is mutually profitable and satisfactory to the agent, company and the customer. “The way we’re accomplishing this at GMAC Real Estate is through partnerships with our brokers and sales associates, or, as we like to consider them, our strategic partners,” Bearden says. “We focus on forging mutually beneficial partnerships that are based on our resolve to help them expand their business and attain new levels of personal success.” The role of the manager is changing, Bearden explains. “The manager of the past was what I call a ‘deal doctor’: he or she swooped in to help save or put the finishing touches on transactions. But successful managers today must be much more. They need to work with agents on developing a realistic, achievable business plan that focuses on meaningfully differentiating themselves through the service they provide and committing to the activities that will generate success. “Managers and brokers also need to create a supportive environment for success that puts at their fingertips a full lineup of tools, programs and company support, and will also attract other professionals in the market,” he continues. “It all boils down
to one word that is so often overlooked in our industry: partnership.” As the pipeline of new, energetic and talented agents continues to shrivel, companies simply must reexamine their current recruiting efforts, Bearden says. Companies cannot afford to recruit, hire and train new agents—and then watch them leave because they did not receive adequate levels of training, support and encouragement. One important way GMAC Real Estate is helping managers recruit promising new agents is through technology. “Recruiting is a business within a business and unless there is a written recruiting plan, any success you have is purely accidental,” he says. As just one example, managers can now use a specific GMAC Real Estate version of Top Producer to:
in an efficient manner that was only a dream as recently as five years ago.” Bearden notes the earlier-mentioned NAR statistic: 77% of consumers now begin their home searches online. “That means that the overwhelming majority of people are not walking into their local real estate office, at least not straight out of the chute,” he says.
Online is Where You Need to Be
Bearden points out the industry’s slow response to the Internetempowered consumer. Despite the importance of the Internet, real estate companies still spend 90% of their ad dollars off line versus online—where customers are looking. And, the vast majority of broker Web sites fail to offer the information and photographs consumers are looking for with 70% of e-mails from consumers to agents going unanswered after three days. Therefore, Bearden believes that the companies poised for success not only understand the importance of providing consumers with access to the information they are looking for, but also understand how to effectively implement internet technology to generate, incubate and manage high quality leads for their agents to close.
Build a database of agent prospects Stay in contact with prospects automatically Build a library of resource material Use Top Producer to handle the follow-up work
(For an example on how GMAC Real Estate franchisees have effectively used the company’s recruiting program, see the sidebar on page 101).
Setting Them Up for Success Removing the Elephant from Our Backs
“When I tell people that everything about our industry is changing, I mean everything—down to the bricks and mortar,” Bearden says. “In the old model of our industry, we had lots of offices, bricks and mortar, big offices with our companies’ names proudly emblazoned on them. “We still have those, but they’re becoming less important as technology is transforming not just how, but where, we do business,” he continues. “Technology allows brokers to reduce occupancy costs by reducing the number and size of retail locations by providing ‘remote’ agents with electronic access to all the resources of the company. Today’s technology is allowing us to operate The companies that succeed next year—and the year after that and the year after that—are those that quickly and eagerly change to meet consumers’ rapidly evolving needs. “The brokers who are sitting back thinking they will wait it out, they’ll be the first to go. Waiting for a wind at your back, crossing your fingers and hoping the market will magically return to where it was five years ago—isn’t a good gamble,” Bearden says. “At GMAC Real Estate, we’re setting our brokers and agents up for success,” he adds. “Not just for today or tomorrow or even next year, but for the long haul. And we’re doing that through a committed partnership with them…one that gives them the insight, tools and support they need to succeed.” RE
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