realonomics

Gary Keller and I first met via telephone sometime in 1993-94 for a discussion about “profit sharing” real estate brokerage business models. We’ve remained engaged in dialogue over a variety of issues for more than a decade. Off-and-on we bounce back into our overlapping universes to banter over one issue or another, picking mutual brains for insight with me benefiting most. His books, The Millionaire Real Estate Agent , The Millionaire Real Estate Investor and Flip have positioned Gary as one of the true “thinkers” and “doers” of this industry.

Keller Williams Realty International is one of the franchise success stories of the past two decades and has emerged as one of only a few “New Model Math” brokerage concepts. REALonomics caught up with Gary Keller, the co-founder of Keller Williams Realty International, and captured the following insightful interview with this industry leader. Gary talks about “techno-babble,” “brandchising” and how our Internet models have turned into a help desk model that goes nowhere. Here are excerpts from our exceptional exchange with Gary. For the full interview, click here.

Gary Keller, Quoted

“When experiencing the downside of a cycle businesspeople (broker and agent) must do two things: cut expenses to the core and put focused effort around driving growth. You first have to protect your margin and then build from there.”

REALonomics: Keller Williams has seen excellent growth in the past decade, what are the core specifics of your economic model that serve as the fuel for KW’s acceptance in the market place?
Keller: I think it has to do with the economic soundness of our model. It was created out of the tough market of the late 80’s and is built on low risk and a managed rate of return…DOWNLOAD THE INTERVIEW

REALonomics: How did the books Millionaire Agent and Millionaire Investor change your role in the organization and how did it contribute to the success of KWRI? Are there more books coming?
Keller: Actually, these two books came about because of my role in the organization. I have always been a student of the real estate business and helping agents grow their business is a real passion of mine…DOWNLOAD THE INTERVIEW.

REALonomics: Some organizations, we happen to be one of them, think real estate franchising has reached somewhat of a saturation point. Do you think this is true in any way and if so, how does KW define its growth model for the future?
Keller: I really don’t think of it that way. There is “franchising” and there is “brandchising”. The industry is absolutely saturated with “brandchising” but not with “franchising”…DOWNLOAD THE INTERVIEW.

REALonomics: We are obviously out of the rapidly appreciating market run-up we all enjoyed. What is your advice to broker/owners regarding how they can weather the current financial storm in the lending industry?
Keller: The current market condition was inevitable. That is why we call it an economic cycle. When experiencing the downside of a cycle businesspeople (broker and agent) must do two things…DOWNLOAD THE INTERVIEW.

REALonomics: Do you think there are too many real estate agents in the industry? If so, why can’t this industry do what others do and cut back its labor force to create a better economic model? What’s our hang-up with respect to our come-one, come-all approach?
Keller: Yes, but that has always been the case no matter what market we’ve ever been in. Since the nature of our relationship between agent and broker is one of independent contractor it really has never been the role of the broker to decide how many people are or aren’t in the industry – only their company…DOWNLOAD THE INTERVIEW.

REALonomics: Do you think broker/owners are leveraging technology and the Internet in ways that truly make sense for themselves, their businesses and the consumer? Do you advocate paperless solutions such as tablet PCs for agents and back end transaction management technologies?
Keller: This is a tough question to answer. I think the bottom line is that most don’t know what they’re doing. Without a sound lead capture and conversion system in place, which most don’t have, the Internet is being run like a real estate help desk where all the information is given to the caller and then we hang up…DOWNLOAD THE INTERVIEW.

REALonomics: Are you seeing broker/owner profitability problems in the current market situation and do you think the industry is going to see the closing of doors with respect to real estate brokerage firms.
Keller: Those companies who can’t cut expenses to the core may truly have a tough go of it in this market we face right now. Those who can will be the winners coming out of it.

REALonomics: What question would you most like asked of yourself and what’s your answer?
Keller: What matters the most to you? And my answer is GOD, FAMILY and then BUSINESS!

DOWNLOAD THE ENTIRE INTERVIEW HERE.

Want to know more about Keller Williams? Visit www.KW.com.

Want to read Gary Keller’s books: The Millionaire Real Estate Agent , The Millionaire Real Estate Investor and Flip.

Popularity: 9% [?]

Creed Smith’s pamphlet, The Demon of Marketing was just another wake up call written into the prophetic scrolls of our industry. But before we sign-off on the death warrant and send our corpses to the morgue, REALonomics sees an angelic side to the demonic marketing conflict poetically articulated by Smith. The angelic and demonic forces of business model conflict are no doubt standing on our right and left shoulders. Despair not…our industry’s angelic hosts are legion…and, the angels are us!

The Angels of Marketing are congregating amidst a violent industry conflagration. Smith is correct, it’s a take no prisoners campaign and there will be some who will not come through the conflict to bask in the glorious glow of the highly productive and profitable consumer-centric models awaiting us on the other side.

Although there is no cosmic component to what REALonomics has predicted is the real estate industry’s most significant transition ever; moving from broker-centric/agent-centric economic models to new vibrant, thinner-than-air, high-tech, open market consumer-centric models. This is the Third Economic Wave of our industry, no doubt about it and one governed by the forces of the Ten Commandments of the New Real Estate Economy.

Where The Demon of Marketing is correct is in its assertion that we MUST…MUST…MUST open the property information portals in ways that remove obstructions empowering consumers to peer deeply into everything, everywhere and at all times. The property information modus as a means to economic control is collapsing, being replaced by a more pure service model.

Our Angels of Marketing are at work.

Read more about:

• The First Economic Wave - The Broker-Centric Era
• The Second Economic Wave - The Agent-Centric Era
• The Third Economic Wave - The Consumer-Centric Era

Get a FREE copy of The Angels of Marketing

Popularity: 11% [?]

The monsoon rain falls each afternoon on the Mogollon Rim of Eastern Arizona. Molly Butler’s is the oldest lodge in Arizona and sits at 8,400 feet elevation in a small village called Greer; population a few dozen people. Using Molly’s pay phone, one of three or four in the area, has been a twenty-year tradition for me (no, my cell can’t catch a beam and while there I am grateful for that).

Concluding a check of my voice mail, I return to my vehicle in front of Molly’s to wait for family members to join me for the ride to the cabin. While sitting, I find myself musing upon the real estate industry. It’s a quiet afternoon, calm and tranquil. A delicate rain starts dripping down upon my situation. The mountain air is pleasantly washed and I crack the window to allow the aroma to waft about me.

Old Wipers Flappin’ Time

My second nature causes me reach for a lever in order to gain clarity of vision and my windshield wipers began to flap time; their sound seems like a feeble attempt to synchronize with the drum beat of the natural rain drops. A rhythmic melody is created and the new rain cannot intertwine with the sound of the mechanical blades. Within moments, the rain increases in its intensity, its noise rising like a crescendo. The peacefulness of the moment is suddenly drowned out by a deluge of water accompanied by thunder claps; my contemplations are immediately brought to a halt. Huge drops of rain hammer down until I cannot see ahead, my visibility is now obscured, my mind momentarily confused.

I sit, waiting for the rain and the noise to subside. Within a few moments I found myself missing my focus and craving a return to my former clarity. Finally, the force begins to subside and I find myself relieved of the nervousness of the situation. Strangely, I began thinking of this entire event in terms of what the real estate industry is encountering. Introspection comes forth and I see something about me, us, our industry.

The New Rain Falls on Everyone

Especially poignant is the hard rain we are going through that seemingly cannot be abated. As it pounds us our vision is obscured and we are tempted to simply sit still while pretending to be safe. After all, we lack definitive clarity…we can’t see!

What began as small droplets falling on our magnificent markets has suddenly turned into what seems like a mountain deluge with flash flood implications. The clapping sounds of the thunders of foreclosure seem much too close for comfort.

Our mechanical wiper blades can no longer keep pace with this new Niagara of moisture. Our blades are the remnants of the bygone era and they cannot be synchronized with the heavy droplets now falling on our old parade. Try as we may, we cannot control the necessary burst that must come. This drenching will relieve the tired clouds of their weight until they become light and wispy allowing blue sky to break through and become the norm again.

This is the necessary new rain of change. How is your vision doing?

Popularity: 9% [?]

Two days ago the Las Vegas Sun newspaper published an article detailing the declaration of Chapter 11 bankruptcy of a top Century 21 company in Las Vegas, Nevada. Not delightful reading by any means.

REALonomics believes it will take some brain power, a lot of it, to work our way through the current market conditions. In this post we delve deeply into the industry’s business cranium to determine our capacity to execute effective business models during the market downturn and even more importantly, for the future. We invite all industry leaders to do the same gray matter analysis of the industry and our current business models.

The brokerage, mortgage and the title industries have the brain power at their disposal that is both powerful and innovative. But can we, will we, utilize our collective gray matter to implement and control the changes that are inevitably coming our way? An unchallenged prediction: Expect more change! Hopeful anticipation: We will own and control the outcomes…oops, we already own them, don’t we?

Examination of our perception, vision, balance, critical management skills, understanding of event relationships going on within this industry, our ability to translate our models into forward movement and then our interpretation of contemporary developments so that we deliver the value propositions the consumer values.

Here is the bare-bones (no pun intended) dissection report (tell us what you think):

Prerequisites for Analysis and Posture

1. Business perception (are we in possession of honest clarity)
2. A sense of balance (over -v- under reactions to the situation)
3. Critical management skills (right people, right time leadership)

Business Analysis, Modifications & Actions

1. Event relationship understanding (what happens 1st, 2nd, 3rd, etc.)
2. Translation of models into forward movement (initiative, first step action)
3. Interpreting contemporary developments (up-to-date nuance savvy)
4. Delivery of consumer-centric models (a bias for new market models)

Now you can create your own diagnosis and prognosis for the RE industry. Equally important is the dissection of your organization’s operating brain. Please post your comments and insights.

Popularity: 6% [?]

RealtyTrac just released the foreclosure numbers for the first half of 2007, compared with both the previous six month period and the prior year six-month time frame. Most markets in the report are showing increases, with metro service areas showing the highest growth in foreclosures.

Foreclosures are the new normal for the real estate industry. Barring some economic surprises or federal intervention on the part of the Bush administration, it’s going to be a slippery, winding and dangerous road ahead for the next 18 months or so. But all is not doom and gloom as the report shows some declines in foreclosures in some markets.

Marketing Opportunity

During this time period brokerage firms can begin to penetrate the foreclosure markets by offering specialty services to Banks and mortgage companies who would, in some cases prefer short sales to actual foreclosure.

Refinancing is not altogether dead or even dying. Past clients may provide real estate agents and brokers with new opportunity for realistic pricing on the part of owners facing the foreclosure dilemma.

We expect a new round of foreclosure investors to emerge who will creatively take-out or partner with existing owners who are facing the foreclosure process.

Get the Foreclosure Report

The RealtyTrac report ranks foreclosures by the top 100 cities with the highest per household foreclosure rate. Of the top ten, Stockton, CA is number one with 1 of every 27 households in foreclosure, followed by greater Detroit, Las Vegas, Riverside, Sacramento, Denver, Miami, Bakersfield, Memphis and metro Cleveland.

Get the PDF foreclosure report here or online, courtesy of and copyright by RealtyTrac.

Popularity: 23% [?]