The RE/MAX International Chairman and Co-Founder's thoughts on recruiting, retention, management and creating brokerage profitability in any market conditions              January 28, 2009

Plan for the Worst, But Aim for Prosperity Like you, we are constantly reading predictions about what's going to happen in real estate this year and beyond. Some of the forecasts seem too dire and others overly optimistic. Many of the top projections, though, support what we've been telling RE/MAX Broker/Owners and Managers for quite some time: that it's vital to adapt to the market conditions of today, because the sales levels of 2005 probably aren't coming back soon. Things might get a little better this year, or a bit worse, but essentially, the market you have now is the market you'll have for a while.

 Outlooks are similar
In the December edition of REAL Trends, Steve Murray sets the worst-case scenario for 2009 as a 10% reduction from 2008, and the best case as a sales figure roughly equal to last year's. Another trusted source, Kiplinger's, sees a 2009 slightly better than 2008.

We have a similar outlook. We believe the various stimulus packages, mortgage renegotiation efforts, policy changes and other actions could increase existing home sales to a point somewhere between 5 million and 5.5 million units, up to 10% higher than in 2008. We see much of that activity coming in the second half of the year with the return of more and more buyers, including a fair number of investors who've been waiting for the bottom.

The best advice: Plan for the worst and take advantage if things end up better than expected.

Longer term, we endorse another prediction Murray makes in December's REAL Trends: "While we firmly believe that the business will begin to regain its footing (in 2009), the number of transactions will not recover to the average level of the 2003-2005 period for at least 10 years, and it could easily be 15 years to get back to 7+ million total home sales."

The red-hot market, according to Murray, could be gone for several years. Think about that and ask yourself this: Is my business still geared for the sales pace of 2003-06 or have I adjusted to the slower market I have now?

It's a vital question, because the nature of the market has changed significantly. Foreclosures, not a factor in 2003-05, now have a huge impact on price, commissions, marketability and consumer confidence. And though much will be done to curb the problem, it will take time to work these troubled properties through the system, due in part to sheer volume. RealtyTrac reported more than 3 million foreclosure filings on 2.3 million properties in 2008, an increase of 81% from 2007 and 225% from 2006; banks repossessed over 850,000 properties last year, more than double the 2007 total.

Homes in some stage of foreclosure will account for a large portion of sales this year. Help your agents recognize that and arm them with the skills and knowledge to serve this sector of the industry.

Begin with expenses

With home prices declining and overall revenues trending downward, cost reduction ties directly to brokerage profitability.

Our friend Howard Lein, Broker/Owner of RE/MAX Excalibur Realty in Scottsdale, Ariz., likes to say he "attacks expenses with a knife and carves them with a scalpel." He used the knife, he says, to close one of his four offices (with no net loss of agents) last year; he used the scalpel to scale back on smaller budget items - phone calls, E&O deductibles, company cars and such - that ultimately added up over time. Those expenses may make perfect sense when houses are flying off the shelves, as they were in Scottsdale for a long time, but in today's market they simply don't hold up.

You have hard choices to make

In another example of Howard's forward thinking, he alerted his Associates that instead of the annual Christmas party, with a budget of $20,000, he would hold a December Sales Rally to introduce several new lead-generation tools, including a unique system called "VoicePad.” We'll discuss VoicePad later - it's a remarkable product - but the point here is that Howard understood that his agents are better served by more leads and more business than by an expensive holiday party. In fact, he says, the Sales Rally, with its focus on agent success, was just as valuable in his retention efforts as the holiday party had been - and it did a better job of preparing his team for the year ahead. It's difficult for leaders to scale back on costs or shift priorities, but ultimately these are good business decisions for the times we're in.

Every expense must somehow help recruit, retain or generate listings and sales. If something doesn't fit those objectives, don't buy it. The end result is a tighter, trimmer operation - one better tailored to the market of today and tomorrow.

Work to upgrade your systems

The other keys to profitability are recruiting, improving the quality and performance of your agents, and finding new ways to increase revenue. In future newsletters, we'll cover a wide variety of strategies in these areas, examining topics such as mergers and acquisitions, distressed properties, motivation, business planning and much more. We'll bring you the best tactics and ideas from some of the most successful Broker/Owners in the RE/MAX network.

It's interesting to note that during our recent 22-city speaking tour, we asked RE/MAX Broker/Owners and Managers whether they were in the business and profitable in 2000, when sales of existing homes (see the chart above, which includes projections) were at the level they are now - about 5 million - and FSBOs were far more prevalent. The hands went up.

Much has changed since then - NAR membership, for instance, grew from under 800,000 in 2000 to more than 1.3 million last year - but the point is that there were profits to be made then, and there are profits to be made now. As a RE/MAX Broker/Owner, you offer many competitive advantages that speak directly to the challenges of today - including foreclosure training on RE/MAX University, unmatched brand power, a high-traffic Web site and top lead-generation tools. You also have each other, and no organization shares its ideas as much or as well as we do.

None of us can change the economy, but we can each change our response to it and our actions within it. We share Steve Murray's vision of a real estate market whose growth will likely be slow over the next few years. Yet we also realize that success is possible within those conditions. With the right approach, the right adjustments, the right agents, the right commitment to recruiting and the right tools and advantages behind them, RE/MAX Broker/Owners can find prosperity, even in these times.


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