Editor’s note: The following Q-and-A interview with Forrest Barbee, a broker in Nevada, is a part of the "To Be a Broker" editorial project that highlights broker challenges and strategies for success. Click here for more info.
Name: Forrest Barbee
Years as a broker: 3.5
Number of sales agents who you supervise: 1,100
Years working in the real estate industry: 7
Q: What is the biggest change you have made to the brokerage in the past year, and what prompted this change? How has this change impacted the bottom line, if at all? What has changed about your service offering in the past year?
A: With the declining market, particularly in terms of market prices, we’ve had to shrink the brokerage department, reduce staff, and what we’ve really had to do is take advantage of technology so we could do more work with fewer people. Volume of units has been going up, which is an interesting dilemma.
We have made transactions paperless for our agents. We really went out of our way to do that in a centralized way. As long as agents have a transaction in the paperless system, they can look up a file without having to go out and get it. It’s been really, really helpful. Frankly, it has improved service all the way around for our agents and streamlined pay.
The change allowed us to totally redesign our brokerage in the past year by using this model. Instead of having … a courier run through the seven offices twice a day, now it’s just once a day. We are handling transactions electronically.
Q: Are brokers more or less relevant to consumers these days than they were five years ago? Why or why not?
A: Brokers are much more relevant today than they were, in great part because of how complicated transactions have become — (particularly) short sales. Transactions are subject to more litigation and more scrutiny. Agents need more support just to make sure they’re dotting all the i’s and crossing all the t’s. Sixty-one percent (of listings) are foreclosures (REOs), 22 percent are short sales.
With short sales, before we even list a property we may be advising clients to contact an attorney or tax person to make sure a short sale is the right choice. It’s not our call to make. That’s a great example of how complicated this has become.
Q: Are brokers more or less relevant to sales associates in the current housing market than they were five years ago? Why or why not?
A: (Brokers are more relevant to) agents as well. We get a lot of calls from even seasoned agents who want us to wordsmith contracts and addendums and counteroffers and mitigate liability .
Q: What changes, if any, have you observed in the structure of real estate commissions/compensation/fees in the past year, and what has caused those changes?
A: The Las Vegas market has been generous in terms of compensation. The medium-sized brokerages (50 to 100 sales agents) are probably struggling the most to survive because they’re trying to grow. You can grow only if you increase overhead, and that automatically decreases profits. You have to do two-and-a-half more sales than you did before to get the same profit.
Q: What are the most vital services, in your opinion, that you provide?
A: Being affiliated with a national company like Prudential (is among the most vital services). Our service is delivered with a lot of education. We help agents adapt to market changes. (In a) litigious market, having a full-time, on-board general counsel who agents have access to is hugely important. Nevada has become very litigious.
Q: What would your agents say are the most vital services that you provide to them? What would consumers say are the most vital services that you provide to them?
A: Our agents would say our ability to generate leads and manage and follow up those leads so that they have business coming in the door all the time (are vital services).
Q: What is the latest trend with home sales in your market area? Short-sale listings and sales? REO listings and sales? Purchases by first-time buyers? What is the latest trend with home prices? Offers? …CONTINUED
A: There are 10,000 homes in the local area: 20 percent are REOs, 40 percent are short sales, 40 percent are traditional sellers. What’s closing: 61 percent REOs, 17 percent short sales, 22 percent traditional. Forty-one percent of closings are cash. There’s an investor component in our market; guys getting good homes, fixing them up, getting new tenants.
We went from almost nothing three years ago — no FHA loans — and now 31 percent are FHA. Six percent are VA (guaranteed by the U.S. Department of Veterans Affairs), and 21 percent are traditional loans. Thirty-five to 40 percent of all 2008 sales were to first-time homebuyers. That’s remarkable because at this time in 2007 we had plenty of homes that got only one bid.
Now, I am hearing about as many as 78 offers on one bank-owned property. The first-time homebuyers tax credit has brought confidence back to the market. They were not buying before.
Prices were dropping up until a couple of months ago. As of November, we’ve leveled out. Now the median price has slowly gone up to about $140,000. It looks like pricing is trying to level out and come back up again.
Q: What are buyers’ primary concerns these days? Has this changed in recent months?
A: Can they get a loan? Can they find a property? They’re really focused on properties under $50,000. They’re really aware of cash buyers who can bid over listing price. (For) HUD auction properties, FHA loans that were foreclosed on and sold through online auction, the first 10 days of the auction (is) open only to owner-occupied bidders. Those market changes have been great for us — to not be constantly outbid by investors.
Q: What are sellers’ primary concerns these days? Has this changed in recent months?
A: The problem (is the) same as it was a couple of years ago. Homes are upside-down and in short-sale condition, which is a long, eight-month process on a good day. On a short sale, you really have to be willing (to take) six to eight months to get everything done from the bank.
If I get approval from the bank, will the terms of the approval at that time be good for me or will my attorney advise against it?
There is some daylight there. Many banks are trying to streamline the short-sale process. A year ago, only 10 percent of our sellers were traditional. Now, those folks who bought in the ’80s and didn’t refinance can stand to make money because they have equity.
Q: Are the demographics of buyers or sellers changing? Explain.
A: The biggest demographic changes have to do with the demand (for) homes in the lower price ranges, as depicted in this PDF file.
However, we have also enjoyed a much broader group of buyers from the international market due to pricing and confidence in the market. Notably, we have seen numerous buyers from Canada and the Far East. That contributes to the high numbers of cash transactions as it is rare that the foreign buyer (investor or first-time homebuyer) is able to finance such a transaction.
Q: What types of properties are selling fastest in your market area and why?
A: Bank-owned. And those below $150,000.
Q: What types of properties are selling slowest and why?
A: The slowest (to sell) are those that are overpriced. (There’s) so much inventory at higher price points, (those properties can remain on market) up to two years.
Q: What is the largest investment you have made in technology in the past year, and has it paid off? …CONTINUED
A: We hired a company called One Park Place and redesigned our Web site (to include) lead generation, client tracking, follow-up and prospecting. It’s great for our agents.
Q: In which areas have you reduced costs in the past year, and what has been the business impact of those cuts?
A: We reduced costs in every single area that we can think of, right down to paper and pencils. We started being seriously cost-conscious in mid-2007. Now, (it’s a) way of life.
We trimmed 50 percent of staff over a two-year period (had more than 100 corporate employees, now down to 35 or 40 people). We have the same number of transactions as in 2005, but the big difference is that the average sales price in 2005 was three times what it is now. Being with Prudential National is what’s kept us profitable.
We keep hoping to get more market share and get stronger, but (we’re) just going to be cautious in 2010.
Q: What is your forecast for the real estate market in 2010?
A: We still think 2010 is going to be an awful lot like 2009 and it’ll be nothing to write home about. We have to be on the lookout for banks that are heavily invested in commercial loans. We’ve got some good things coming in on The Strip. Job creation is going to have to be the next step. 2010 is going to be a struggle — a lot of brokerages will close their doors. We’ve had smaller firms close and come join us because they couldn’t make ends meet.
Q: What is the single biggest challenge that you face as a broker? What is the biggest worry these days about the state of the housing market and economy? About your brokerage?
A: Appraisals (are the biggest challenge). Since the Home Valuation Code of Conduct (HVCC) came about and appraisers have become more independent, appraisals have become inconsistent and way too conservative. They’re still behaving like we’re in a declining market. (They’ve) cost us a lot of deals. Another challenge: recruiting. When you’re a large company and you’re growing, there’s strength in numbers.
Q: Briefly describe a typical day for you, and what duties occupy the most and least time.
A: I don’t have anything that remotely resembles a typical day. (I) start reading e-mails at 5 a.m. I can walk in the office and my day can go to hell in a hurry. Client complaints, brokers complaints, I get them (all).
There’s a lot of frustration in the market from people who have put in 10 to 15 offers and didn’t get any of them. I spend time in arbitrations, hearings. At the same time, I’m trying to nurture agents and conduct training classes. I have an extremely busy and varied day.
Q: What is most misunderstood, by agents and/or by consumers, about the work that you perform?
A: They all have lots of misconceptions about short sales. Consumers often have a hard time. They think that all REO agents are trying to work these deals so they can get a commission on both sides, but most agents are not that organized. They’re giving them too much credit (laughs) — they just want to get it sold. That agent with 78 offers? (That agent doesn’t) want 78 offers. He just wants one good offer.
Q: Feel free to comment on any other aspect of your work as a broker that you think would be relevant and helpful for other brokers.
A: I love this market. We got some new numbers (that show signs of market improvement). And we like to give our customers something to smile about.
Forrest Barbee is corporate broker for Prudential Americana Group, Realtors based in Las Vegas, Nev.
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