Profitability is on the minds of brokers across the country. After plummeting to a 50-year low last year, the U.S. homeownership rate ticked up slightly to 63.6 percent in the first quarter of 2017, according to the Census Bureau. And despite many interested buyers, markets across the country are dealing with severely low inventories. This is pushing brokers to form joint ventures with ancillary services and explore new business streams for their agents.
During the Idea Exchange Council for Brokers at the REALTORS® Legislative Meetings & Trade Expo in Washington, D.C. Tuesday, brokers from across the country discussed methods they’re employing to keep the funds rolling in during this tumultuous time.
Carol Bulman, CEO and president of Jack Conway, REALTOR®, the largest local independent real estate firm in Massachusetts, is facing 62 consecutive months of year-over-year inventory declines in their market. There are lines at open houses in the suburbs of Boston, and multiple offers are now standard. “We’re starting to see buyer fatigue,” Bulman says. Yet, in the city of Boston, construction of rentals and high-end condos is booming. She calls the market “out of whack,” adding, “we owe it to ourselves and our agents to be prepared for the future.”
Her company has taken on a joint venture model to offer mortgage financing. They do about $125 million in mortgage volume each year. She points to three necessities to make the business work: competitive pricing, solid back-office support that understands the residential sales model, and loan officers who work well with the team.
Fellow panelist Al Miller, a strategic alliance and business development expert with New Penn Financial and Shelter Mortgage, has been part of forming and overseeing more than 100 mortgage joint ventures in his career. He says the most complicated points center around compliance and costs for technology. However, one of the greatest benefits for adding a mortgage service is being able to control the customer service experience, he says.
“The mortgage experience is always a fly in the ointment,” Miller says. Whether you own your own mortgage company or you're partnering with another to form a joint venture, you want to ensure that the service provided meets your standards, he adds.
Mortgage joint ventures are spelled out in section 8 of RESPA, and at the time of referral, brokers are required to provide a written disclosure explaining the relationship. The firm can't require that customers use the affiliated business, nor can they tie it to a customer benefit. Jessica Edgerton, National Association of REALTORS®’s associate counsel, was also on hand at the Idea Exchange session. She says some states have their own version of RESPA and some are stricter than the national RESPA rules, so any broker entering into a joint venture must check with their state standards.
In addition to ancillary services and joint ventures, brokers also discussed ways to enhance agent value. Robert J. Bailey, co-broker and co-owner of Bailey Properties Inc. in Aptos, Calif., has developed a new CRM platform and a comprehensive in-house business coaching program, teaching new agents how to structure their business and sustain their income. They cover teams, HR issues, risk management, co-branding, and more.