I have not been as active as I should have been in voicing my opinion on the economic condition of the real estate industry and that of it’s million plus brokers and sales agents. It’s time to get off the sidelines and express myself. In 1999 I retired from owning a very successful real estate franchise company named RE/MAX of Southeastern PA and DE. I once owned 4 RE/MAX franchise offices and sold hundreds of RE/MAX franchise offices and helped recruit thousands of high quality agents. After my retirement I decided I would enter the coaching and consulting arena and share with real estate brokers the many secrets of how to build a success business. Many of my clients became the most successful offices with the most successful brokers in the country. Coaching is not only about giving a client great marketing and recruiting concepts but also sharing with them how to stay out of trouble. TROUBLE IS WHERE WE ARE TODAY. Three years ago I saw where the business was headed. I suggested that my clients start to stack cash and build reserves. I even suggested that they divest unprofitable offices and consolidate into one large facility. After doing so I was instructed that I was no longer welcome at a specific franchisors convention. Obviously a franchisor wants open offices so they can claim being #1 at something. It really did not bother me because I was working for clients who trusted my judgement. Many clients listened to my advice and did consolidate. Many decided that the quest to grow by buying out other franchisee’s was not the prudent thing to do and hunkered down to ride out the pending crash in the real estate markets in Florida, CA, AZ, the Carolina’s and Nevada. There were others who just forged ahead and felt they had the answer and kept buying more franchises. After all that is what every Franchisor wanted and in some cases would even finance the purchase. Most of those clients decided they no longer needed a coach and became their own self professed expert. The rest is history. The market crashed and many lost everything they had due to over expansion.
Today many franchisee’s of all franchise companies are at a crossroads. They wonder if they should renew their franchise relationship with the various franchise companies that are known nationwide. Many are desperate to cut overhead and cannot see the so called value of their franchise affiliation. I am speaking of all franchise organizations. Many brokers are creating their own brands and have figured out that paying all those royalties and national advertising fee’s are not worth the pain and the depletion of the bottom line. This brings me to the point of this blog. When a client tells you they are subsidizing their office to the tune of $50,000.00 per month for two years and you ask why are you doing this, most feel they will get the money back. I say from whom will you ever get that money back? What is the value of a business that shows a loss of half a million a year, or 1, 2 or even 3 million a year? I have seen stubborn Brokers drain their families assets dry paying their respective franchisor monthly royalty fees on agents who were not producing in the climate we are in today. My friends, things are not going to change overnight. The simple hard facts are that the standard of living in this country is declining. BROKERS WAKE UP! The cost of living will be escalating due to all costs rising. Taxes, utilities, fuel, food, health care and even interest rates. We have witnessed the loss of retirement funds, devaluation of home equities, and a big spike in job loss. The next big crash will be the commercial real estate bust. From office buildings to shopping centers to local auto dealerships we are already seeing the demise. All of these businesses employ people who have very little cash reserves. The result will be a spiraling of unemployed people. I lived through the days of Jimmy Carter, the former peanut farmer who is known for causing STAGFLATION. I lived through the days of 18 1/2% FHA rates and a 21 1/2 % prime rate. It was almost bankruptcy for everyone in the business. I was not sure I would survive owning the first 2 RE/MAX offices in PA.
Due to the impossible debt that this administration has imposed on it’s citizens there is no way that taxing the so called rich can ever provide the revenue needed to pay or payoff the debt. Every one of us will incur huge increases in taxes. The housing market is NOT coming back anytime soon. The second home market is DEAD so please think about your next move in the business. Many brokers are merging which even creates more problems long term but when you are desperate the short term is all that matters. Others are giving their companies away and going back to just selling real estate instead of constantly hearing from their agents that things are bad. Things are only bad for those who expect someone to walk through the front door. THERE WILL ALWAYS BE BUSINESS. There will always be people who want to list or buy real estate. That is a truism that is fact. What is also fact is the entire industry will change. The days of the 6 or 7 % commissions are over. The public has no more equity in their homes to pay anyone to sell their home. (A slight over statement but you understand what I am implying), so commissions will drop. The internet will become even more necessary and effective than it is today. Google will become a major player within the industry. http://www.brokeriptv.com/google-will-replace-realtor-com The 900 plus MLS’s around the country will have to either merge or will be put out of business by aggressive private non Realtor type organizations such as the one being developed to serve all of South Carolina. The local Realtor Organizations will also have to merge to cut costs for it’s membership or else the Realtors will decide they do not need to pay all those dues every year. The bottom line is that all costs are rising and the Real Estate Brokers/Agents profit margins are falling faster than the Feds can print money.It is a new day and age. We have never before been so close to Socialism than we are today. If you think I am kidding wait until you hear about plans to cap your commissions like what is done in other countries. If the government can change the contract and security laws to disregard corporate bondholders everything is on the table.Unless we all stand together to stop this ridiculous spending and insidious corruption in government we will be a bankrupt country taken over by the one country we owe the most money to…China! Personally I feel it is time for a THIRD PARTY whose elected officials would commit to a one term program and who will vote for what is good for the country and not voting for a bill that nobody ever read. Now that I have expressed how I really feel over this matter take the time to view the video below. I hope you had a great Memorial Day. Thank someone who you know who is risking their life to keep us free. http://www.youtube.com/watch?v=lqkMfToY9Pk
