Realtors embracing change, looking for alternative methods
By Tom Perkins, Special Writer
PUBLISHED: May 1, 2008
With the gloomy press the real estate market receives, it's hard not to wonder about the fate of those involved in the trade. Are developers, real estate agents and their ilk doomed to hard times brought on by economic forces out of their control?
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Experts in the field have found that for the savvier, the answer is no. Whether it's municipalities, real estate agents, developers, engineers or auctioneers, each has touched on common points of bucking the traditional way of operating and adapting to rapid changes propelled by the market and technology. They all say the buyer has changed, the Internet has altered everything and new ideas are imperative to moving real estate despite the steep challenges.
"I think agents are embracing technology because every avenue opened to achieve our goal, we welcome," Karen Shelton, President of the Downriver Association of Realtors said. "We always are taking technology and using it. Agents are working a lot harder than we ever have, getting up to the minute information to the sellers."
The Internet has played a significant role in changing the face of the market. When a seller walks into Shelton's office, they will likely have a good idea of where they want to live and what type of house they hope to purchase. A little time in front of a computer reveals a lot about a community and its amenities or drawbacks.
"We have a really educated the buyer who knows what they want," she explained. "They are savvy on how to use Internet and research where they want to live. It's up to the realtor to pinpoint the exact property."
But Shelton noted the buyer's knowledge is limited. The help of the real estate agent to package the deal and see to all the particulars quickly removes major stumbling blocks buyers and sellers encounter, and this is one area where the realtor remains necessary.
"I find that the buyer still needs help with finding things like a lender in the community, working with the seller, having a home inspection and the realtor kind of bridges information between each party," Shelton said.
The Internet's presence also has brought more cooperation among real estate agents, who Shelton has found increasingly work together to help sell homes.
"We have many more ways to contact one another than we did in the past, and when I think of the way we have evolved over the years, I am amazed," she said. "Cooperation amongst the realtors to connect the buyer and seller and other agents is really just a click of the button, and that has really helped move the market from what it was in the past."
If an educated buyer doesn't choose your home, it's still the Realtor's job to make sure as many eyes as possible see the home. Beyond the web, more conventional techniques still exist, though with an updated approach.
Open houses, for example, still remain, but have different variations. There are open houses held for brokers or citywide events coordinated by real estate associations. On April 22, The Detroit News and Free Press will hold a region-wide open house.
"Broker open houses weren't something that I recall doing in the last few years and is more common now, and region and citywide open houses are not something that happened in the past, to my knowledge," Shelton said. "We're doing them in a different a way now, but I think the new way is good. It's one more tool for the realtor and seller to get their home out there and in the forefront of buyers."
Shelton also recommends seeking suggestions from a professional stage, which is a practice that has grown out of the ashes of the market.
A stage will come in and prep a home - within a budget - for showing. Suggestions are generally simple; a new coat of paint for the walls, rearranging the furniture or a new carpet.
"You have to be really creative in the way you sell your home," Shelton said. "It has to be a good product, a good value and this is where a realtor can help with ideas."
The National Association of Realtors reported that sales are up 15 percent between January 2007 and January 2008. Shelton suspects some of this can be attributed to Realtors finding more avenues in which homes can be sold, but also thinks buyers are realizing a opportunity might be passing them by if they don't purchase now.
"I also think the way the market is, with the adjustment we've had as far as prices, and with interest rates still historically low, buyers are realizing that maybe markets can't go down forever, just like it couldn't go up forever, so timing is everything."
New Ideas in Development
The story of the developer walking away from a project or building houses in which no one will soon live is common in Michigan.
The developers who have remained successful have survived in much the same way as real estate agents to pull through the slow down. They also have relied on their quality products, adept planning, determination and a little luck.
"The key issue is my partner and I our committed to this business and we're not walking away from anything," Kevin Belew, owner of Norfolk Homes, a developer with projects going in Washtenaw and Jackson Counties said. "We're going to stick this out. Hopefully surviving the worst real estate situation of our generation will come into effect when we later go to bank and with buyers after things improve. Viability is important."
Norfolk saw sales tapering and began acting earlier than most companies by reducing overhead costs and cutting their staff, Belew said.
Despite this the company is sitting on a quite a bit of land it purchased before sales began dropping - the entitlement process on land in Washtenaw County can take years and their surplus land was purchased before 2005.
"We did some not so smart things, too, but we have survived," Belew said. "If you provide a good product in a good location and at a good price, you can sell some homes, and we are seeing some fruits of our labor."
Christian Miller, a spokesman for Singh Homes, which develops homes in Macomb, Oakland and Livingston Counties, sees his company's viability as a result of a similar approach.
"The company's success comes from thoughtfully conceived developments, careful planning, hands-on management, quality construction and astute marketing," he said. "When you have a company that employs a talented team of people, offers a variety of exceptional products, manages all its developments and has a desire to enhance the community and people it serves, you have a company that can survive."
Keith Mayer, Chairman of Giffels-Webster Engineers, which does work such as surveying at housing and commercial developments, has found his company surviving by working with clients who have been wise in their practices.
"It's really important to have a good relationship and a good team of clients that you deal with," he said. "When we have a situation with the market like this, we're fortunate that we have strong, stable clients and they rely on us."
But Giffels-Webster has had to make changes as well. Mayer said the company has begun forging partnerships in Tennessee and California where the market isn't quite as bad.
"The climate here is a little dismal," he said. "We've tried to make a concerted effort to get more national clients and think outside of box and do projects in other areas of the country. The firms that are not getting outside of local home bases are really suffering."
Belew said Norfolk is exploring the possibility of working out of state and Singh has taken advantage of a housing boom in North Carolina.
"Like other developers, Singh seized an opportunity to be part of a growing development market, but this doesn't mean Singh will ever abandon its Michigan roots," Miller said.
Mayer said his company also is finding success in southeast Michigan business in private-public partnerships. Giffels-Webster is involved in an affordable housing project in Inkster made possible with funding from the Michigan State Housing Development Authority.
"It's the public-private partnership that really gave it a shot in the arm," Mayer said. "They are selling a couple units a month, which doesn't sound like much, but it is more than what a lot of developers are seeing."
Mayer said Giffels-Webster is moving in the direction of affordable housing or senior housing because "these are the kinds of projects that are moving."
He added that the company has made smart decisions in doing such work, but said it wasn't all "genius planning" on the company's part.
"I'd like to say that we had some grand master plan and a crystal ball that we were able to look into it, but it was a lot of luck," he said.
Belew is considering steering Norfolk toward MICHDA-funded projects, but they still have condos and single family homes to move, and are - on a limited basis - offering a major incentive to a potential buyer. The company will purchase the buyer's home so they can get into the newly built Norfolk home, then take care of the proper refurbishments of the old home before putting it on the market.
Belew believes part of the problem with sellers is psychological. They don't know what to ask for their house or how to improve it, and Norfolk is in a much better position to make that assessment and take action.
"Our construction guys go in and in a day we can make a home look than a homeowner can in months," he said. "Truly, we're just trying to figure out ways to help the buyer psychologically get over the hump."
Belew said the market in Washtenaw County, where the unemployment rate is slightly below the state average, is slightly better than in other areas, and he hopes the increase seen in company sales will continue as buyers gain more confidence. Norfolk sold 11 homes in the first six weeks of 2008, which Belew noted is much better than a year ago.
Like Shelton, he partly attributes the increased sales to home prices bottoming out.
"There's no question in my mind that if you have a steady job and can get a mortgage, then you should be buying," he said. "This is the bottom, if not near, and you can buy a whole bunch of house in real nice location for a low price right now."
For 2008, he sees as a year of stabilization for his company and the market.
"In Michigan I think we'll see slow improvement," he said. "Well located, designed, and executed homes will sell. There's a lot of stuff out there that should not have been built and subdivisions in places where they shouldn't have built. Fortunately, we don't have any of those."
On the Block
Today's real estate market is filled with uncertainty, so some sellers are gravitating toward auction sales.
The vast majority of Michigan's auctions are held by the Toledo-based Beth Rose Auctions, and owner Beth Rose is seeing her business boom in recent years.
"Auctions have gained huge popularity in the market right now," Rose said "Sellers are choosing auctions because they are wanting a definitive date and time. That's the main reason - you're taking this length of time on the market which can be six months and you're speeding it up into about a four to six week period."
The process by which Rose auctions a home is somewhat unfamiliar to buyers, so she works close with Realtors to inform them of how an auction works. By providing two educational seminars a week to agents, they have another tool with which to move a client's property.
"My thought is to go to the agent so they're educated, because buyers are asking their agent for other solutions," Rose said. "They want solutions and results quickly and are thinking outside the box...Because the public is not understanding auctions, they look to others who are professionals to get their information."
Rose work together with the real estate agents to orchestrate the event, which is a one-home offer. This is where Beth Rose Auctions differs from the "ballroom" auctions that will sell off 200 homes in an afternoon and are mostly aimed at investors.
Rose pays a referral fee to the agent, then creates a "media blitz" through Internet marketing and direct mailing aimed at a demographic that can afford to buy a home, along with an "email blast" to realtors to attract additional attention.
"Unlike traditional real estate where you wait for the market to come to you, in an auction you're going after the market and inviting it to the property," Rose said.
With the introduction of Internet bidding last year, Rose is sending out quite a few more invitations, with the benefit every seller wants - a higher selling price.
"Technology has become so extremely powerful in the auction industry right now, and it brings me more bidders. The more bidders I have, the greater the competition and there is more money at the end of the day," Rose said.
At Bethroseauctions.com a potential buyer can take virtual tours and view slideshows of a home, while those who live in the area but can't make it to auction day can attend two open houses held in the weeks before the live auction.
Rose said her open houses will see around 25 potential buyers while a traditional open house may see two or three, but she explained that her buyers are also of a better stock.
"It's the quality of the buyer coming out to my events because they're bidding on very stringent terms," she said. "I'm not dealing with any buyer, but a buyer who is preapproved and ready to and able to close within 30 days."
And the terms of the auction make ensure a closing, which is a common problem in traditional sales.
The winning bidder must put down a deposit which is kept in the rare case that they do not close. And should the sale fail, the second place bidder wins the house. With this arrangement and safety net, Rose has never failed to close a sale.
"My contracts are the most beautiful in the real estate market because my sales are not going to fall apart," she said "The seller can plan their move and plan their life knowing their property is going to close."
Moreover, the seller is not going to pay the commission - those numbers are totaled into the home's price.
Rose said experts in the field predict one in every three homes will be sold by an auctioneer by 2010, and she sells 400 to 450 homes per year, but expects to see a spike this year.
"That number is definitely going to go up," she said.
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