I am in a conference room at the Hillcrest Keller Williams office among roughly 75 realtors that are pretending to be bunny rabbits. A middle-aged woman places her hands in front of her face, simulating buck teeth. She shouts, "Bunny, bunny, bunny!"
A woman in a pink-and-black-striped sweater lifts her lanky arms above her head, giving them the appearance of floppy ears. She hops in place before yelling, “Bunny, bunny, bunny!”
A man with a microphone hushes the bunnies.
“Very good,” he says enthusiastically. The room applauds.
“That was about lowering your inhibitions,” he continues. “Moving out of that fear of this will make me look stupid is really valuable in real estate. This next game pushes that teamwork thing even further.”
He instructs the agents to break into groups of 12. One person will pretend to be a tree; two are to imagine they are something related.
“I’m the tree,” says a man in a three-piece suit. He stretches his arms, making them branch-like.
“I’m a Christmas present!” a petite woman says, rolling herself into a ball at his feet.
“I’m a little girl opening that Christmas present,” says a blonde in a tight blazer. She bends down and pretends to unwrap the woman.
A spiky-gray-haired agent to my left says with a cynical sigh, “And what exactly does this have to do with real estate?” She looks exasperated.
A nearby realtor raises a judgmental eyebrow.
Five minutes later, the announcer again hushes the room. The realtors fill the available seats. Some must stand at the back of the room.
“That game is a great example of what real estate is really about,” says the announcer. “We have no idea what’s going to happen next.”
He hands the mic to the office’s team leader, Ashley Lunn, a robust woman wearing the company colors, red and black. She passes out two printouts. One has real-estate stats, the other lists local information compiled from the 2010 United States Census.
“What’s the population of San Diego County?” Lunn asks. She pauses while the agents shout out their best hunches.
“Three-point-one-four million,” she says. “That number grows by 40 to 45 thousand per year. Right now, we have less than a month of inventory. We have only about 1000 properties under $350,000. I think our office has 500 buyers right now. Just our office! And there are, what, 400 different brokerages in San Diego and 12,000 realtors?”
Lunn holds up the census-data printout.
“The thing we can’t talk about with our clients is race, ethnicity, and languages spoken. We are a pretty white-bread office. I think most of us forget that we’re in a bilingual city. If you don’t speak Spanish, you sure as hell better get a friend that does. The number of Spanish-speakers in our county represents a huge opportunity. They are usually very much underserved. “
Lunn lists more stats:
“Fifty-nine percent of people in San Diego own homes, while the national average is 65 percent.”
“Eighty-point-seven percent of our sales in the last 60 days were properties under $600,000.”
“We have five times more buyers than inventory.”
Before wrapping up her presentation, Lunn looks out over the gathered crowd. “This next year, 2013, is going to feel crazy. I would rest now, because there’ll be no rest next year. We’re going to have more opportunity than we’ve seen in a long time.”
The room erupts with applause.
This isn’t North Carolina
Thirty-nine-year-old Heather Goodmanson attends Keller Williams team meetings weekly. Goodmanson has been an agent for 20 months. In 2011, she sold seven homes; in 2012, she closed twelve. She was awarded 2012’s “Rookie of the Year” by her brokerage.
“No one is even remotely close to me [in sales],” Goodmanson says.
In those 20 months, Heather has forked over 30 percent of her commission to Keller Williams.
“The education at Keller Williams is keeping me above the curve,” she says.
We are sitting at a glass table in her 2000-square-foot, four-bedroom, three-bath Clairemont home. Goodmanson wears a black dress paired with a tiger-print belt and five-inch stilettoes. She pushes a strand of perfectly curled blond hair behind one ear.
“What is happening in San Diego right now is unique. We’re in a season we’ve never seen before. We have an issue with low inventory. For a normal, even-keel market, we need about six months of inventory. Right now, we have about three weeks of inventory. It’s definitely leaning toward being more favorable for sellers, because you have a ton of buyers. We still have low prices, but they’re inching up. We’ve seen that pattern for about 12 months now. They’re going up at a rate of 4 to 8 percent [annually]. It’s not like this 20 percent increase, like it used to be back in the heyday.”
One of the biggest challenges Goodmanson faces is the difference between a house’s appraised value and what people are willing to pay.
“Appraisers are looking at what happened in the market, while realtors are thinking ahead. I’m currently dealing with an escrow nightmare.” Goodmanson sighs. “I’m on the second property with the same clients that’s fallen apart in escrow because of the appraisal. My clients spent $1800 out of their own pockets on the first property they placed a bid on. On this [second] one, the lender had the docs in hand, ready to go, but wouldn’t sign off on it until the appraisal came in. The buyers offered $595,000 on [the property], but the appraisal came in at $535,000. Meanwhile, my clients need to come up with $60,000 out-of-pocket if they want this home now. They’re going to have another property fall through their fingers.
“Sellers now receive 99.9 percent of their asking price. A year and a half ago, they were getting 92 percent. If a seller is asking $600,000, that’s what it will sell for. You don’t come in and have uneducated clients who say, ‘I want to offer $580,000.’ My parents in North Carolina said I should argue and debate, to get the lowest price I can get. But, guess what? This isn’t North Carolina. We aren’t talking about Kentucky. This is San Diego. That’s a snapshot of our market, right here, right now. You won’t get into a home by bidding under the listing price.”
Goodmanson attributes her success in a highly competitive market to her personality type.
“I’ve never done an open house. I don’t need to. Those are for agents who don’t know how to get business on their own. I have a large sphere of influence. I’m an extrovert. When I walk into a room, I can engage in conversation with anyone. People who work with me know that I’m a driver. I’m a go-getter. Another thing is that real estate isn’t my family’s sole source of income. If it was, I think my clients would feel that pressure.”
I used to have a bench ad
“The main reason I got my broker’s license was to become my own boss,” 32-year-old Ryan Hammond tells me. “I’m not giving a company a ton of my commission for an office and training — things I don’t want or need. When I started, my brokerage was Century 21 Award. They wanted over 50 percent of my commission. I don’t need coaching. I’m motivated enough myself. They wanted us to come in at 8:00 in the morning and do affirmations. I used to make fun of them with my wife. One thing they had us do was to rub our hands together and say, ‘Money, money, money! Yes!’ I was the guy in the back, thinking, Oh my god, I hate this. I absolutely cannot stand affirmations.”
Hammond has been a real-estate agent for seven years and a broker for four. He finds nearly all his clients via open houses. The rest are from referrals that past clients feed him.
“I used to have a bench ad.” The memory makes him laugh. “It was on Tierrasanta Boulevard. I paid two grand a year. I didn’t get any clients from it.”
Hammond takes his time with his clients. On average, he works with them for six to nine months before closing on a property. He often forms personal relationships. When Hammond got married, a former client served as his best man.
In 2012, Hammond’s income has taken a serious hit. As of December 1, he’s closed four deals, compared with his average of seven or eight. For him, it has nothing to do with lack of clients; he’s currently working with eight couples who are actively attempting to buy. He blames the changing real-estate market.
“Now, when you call an agent to tell them you have a client getting ready to write an offer, it’s not ‘Do you have any offers?,’ it’s ‘How many do you have?’”
Because of this, Ryan has shifted the way he does business.
“Nowadays, I have to really communicate with the seller’s agent as much as possible. I find out what I can about the other offers and how to promote my clients. There’s always a way to make my client’s offer look as attractive as possible. It’s a bigger challenge when you’re doing a [Federal Housing Authority or Veterans Administration loan] right now. You have to take it to the next level. With an offer I’m working on right now, I’ve talked to the listing agent for three hours over the phone.”
Despite having a bad year, Hammond remains optimistic.
“Most agents don’t last more than about ten years. They move on to something else. I’m going to work for at least the next eight. I don’t know if I want to work through another down cycle. I got into real estate at the very peak. My first clients bought at the absolute worst time. I was always upfront with my clients. I’d say, ‘You’re buying when prices are definitely going to go down.’ I don’t know if I’d feel good about getting people into homes once there’s another peak, knowing that prices are going to go down again. Once you start dealing with a down market, you have short sales and bank-owned properties. Whenever a bank’s involved, it’s just no fun.”
It can be extremely depressing
On a Wednesday afternoon, I meet with real estate agents Joy Thomas, Jeff Discher, Peggy Walkush, Heather Goodmanson, Lionel Silva, and Luis Flores in a conference room at Hillcrest Keller Williams.
Lionel Silva speaks first, explaining how he has attempted to remain successful in a changing market.
“We’re all going after listings,” he says. “Listings move quickly. Working with buyers right now can be challenging.”
Flores elaborates, “The amount of offers we write is going up. Because prices are still low and rents are increasing, you have a lot of investors with cash that are buying up everything under $400,000. We’re competing with all cash. Anything under $500,000 typically receives multiple offers. If you have a listing, you’ll get investors who write all-cash, no-contingency offers with a 14-day close. You have all these poor VA or first-time FHA buyers come in with strong offers, but from a listing standpoint, it makes sense to go with the investor, even though you want to help out the military.”
“It can be extremely depressing,” Walkush adds. “We try to put a compelling story together when we send cover letters to the listing agent, saying, ‘Give this VA buyer a chance!’ Another thing that is knocking out the VA, FHA, and small-down-payment buyers is appraisals. Appraisers are appraising based on properties that closed 90 days or longer ago. They don’t want to recognize the upward movement of the market. So, you’re writing an offer for a VA buyer, and that seller is anticipating that the appraisal can come in $10,000–$15,000 lower. That puts the FHA buyer at a disadvantage. They can’t come up with the cash to cover what the banks aren’t willing to loan.”
“Appraisals have been issues since the 2008 meltdown,” Silva says.
Adds Goodmanson, “I’ve been speaking with appraisal managers who say, ‘We’re getting chewed out on both sides. If we bring in an appraisal and we don’t have comps to validate it, the bank will fire us.’ It’s not their fault. There’s risk on their side. That’s why they’re being cautious.”
“Buyers nowadays understand that they’re going to have to bid higher than they would like to,” Flores explains. “When you have an FHA buyer all excited to see a property, realistically, the likelihood of them getting into that property is low.”
“It’s sad,” Discher says. “You really want to help your client. If you’re a VA [loan], you’re at the bottom of the list. If a house is on the market 30 days, I say you have a chance. I set my clients up right away and tell them, if you’re VA/FHA, you’re at the bottom of the barrel. It sucks being on both sides. When you have a VA loan, you get pissed off at the other agent for not accepting it; but at the same time, when you get a listing, you do the same thing. We have a duty to our sellers’ best interests. You’ll see compelling stories, with great cover letters, but you’re still going to go with the cash offer. It’s a better deal for your seller. I have the devil on one side and the angel on the other. The angel is writing offers, getting mad at the listing agent, saying, ‘Give us a chance.’ At the same time, if I get a listing the next day and see all cash after ten offers, I’ll say, ‘Let’s go with that one.’ It’s sad.”
I wrote seven offers — none were accepted
Real-estate broker Viki Navardauskaite has considered getting a part-time job.
“I don’t want to switch careers, but it would be nice to have something on the side that’s more stable. I love what I do. It’s very exciting. In real estate, there are a lot of emotions involved. You get married, you buy a house, and you have a baby. Those are the most important steps in life.”
Some of that excitement is starting to dwindle.
“When I show my clients the right house and see a smile on their faces when we write an offer, it gives me such a sense of hope. But things are changing. Now, the listing agents will say they already have 15 offers when I place one. Imagine the chance of getting the house! Last week, I submitted four offers for clients. On Wednesday, the emails started coming in. Not a single one was accepted. It’s so disappointing. Unfortunately, that’s not uncommon.”
Viki tells her clients to remain positive. She encourages them to get their offers in quickly. “I tell my buyers, ‘Roll with the punches.’ It’s almost like, ‘Just take what you can get.’ It’s getting to that point. It’s sad.”
Viki has seen the market go through drastic changes in the past six months.
“With the lack of inventory and the high demand, what we’re experiencing are buyers running around making offers. Everything has multiple offers. It’s really hard to get anything accepted. It’s driving prices up. People submit over asking price and they still don’t get in. I urge my buyers to make their offers as clean as possible. Nowadays, listing agents won’t even counter you. They go ahead and choose the highest offers. Since the summer, there’s been a new rule: make your highest and best offer right away.”
Due to these changes, Viki has seen many clients become discouraged.
“I have clients get into the market and see how hard it is to buy a home. I have a lot of buyers saying, ‘Oh, my god! I will never get into a house.’ I went through the same thing. In spring 2012, my husband and I started dipping into the market, to see what we could afford. We started submitting offers over the summer. I wrote seven offers — none were accepted. They were all clean offers. I didn’t ask for termite expectations [where the sellers would pay for termite damage] or repairs. Nowadays, if it’s a townhome or condo, the buyer has to pay for the homeowner-association document fee. In a traditional market, a homeowner’s fee, which can add up to $500, used to be a seller’s cost. In our current market, that’s out of the question.”
Viki’s cell phone vibrates on the table between us. She looks at it. “I get alerts when something new hits the MLS,” she says with a shrug.
“Right now, I feel like I’m chasing properties. It’s very stressful. My stress levels have gone up this year. I’ve had nine sales; in 2011, I had fifteen or sixteen.”
Viki is training herself to work with more sellers.
“If you have a listing right now, you’re a king. It doesn’t take much effort to sell. Three years ago, it was much harder. You had to do open houses and market on the internet. Now, you really don’t have to do any of that.”
No pickup lines
“I had a short-sale property listed in Lemon Grove in early September,” says 30-year-old real-estate broker Dave Rice. In less than 24 hours, I had 21 offers. Of those, 18 were all cash. Cash buyers bring bank statements to verify that they have the funds. I verified $16 million in cash chasing this one $230,000 house.
“[Of those offers,] I had one FHA loan. I would love to get someone in who actually wants to live in the house, but it had some issues. The heater was broken, and the sellers didn’t have $4000 to fix it. I’m stuck going with this investor who’s going to pay more. You really feel bad for the buyers.”
Dave Rice was raised on real estate. Both his parents and younger sister are brokers. His wife just passed the Department of Real Estate state-board exam after spending the past six years as a property manager; she works in a separate brokerage run by her father. When he was 16, Rice was already processing loan applications, doing filing, and learning the ins and outs of the paperwork.
In 2012, he feels both the pinch and the rewards of dwindling inventory.
“If I were primarily a seller’s agent, it would be great. All I’d have to do is put a house on the market, and I would be set. It’s challenging. You’re going into such competition with other people. It can get frustrating as an agent, writing all these offers and keeping your buyers’ spirits up.
“This has been happening for about the last six to eight months. Around the beginning of 2012, investors started to sense that we’d hit the bottom, and the market started to turn around. There’s been a frenzied rush to get in. Inventory has been tight for the last year and a half. Largely, that’s a result of banks delaying foreclosures. They aren’t foreclosing on properties, either, not as frequently as they could. There are fewer that are falling into default. A lot of the loans that were made in the mid-2000s have already gone bad.
“The greatest agents aren’t necessarily the ones who are good at what they do; they’re the ones good at selling the idea that they’re good at what they do. I’m a shy, quiet person. I’m not much of a salesman, in the pushy Buy this now! sense. I’ve gone to real-estate training seminars. They give you scripts that teach you how to turn casual conversations into sales pitches. I’ll sometimes sarcastically say to people I know, ‘And, by the way, who do you know that would like to buy or sell a house in the next 30 days?’ Because that’s the most asinine question on any of those scripts. They want you to then say, ‘May I have [your] phone number? May I tell them that you referred me?’ In good conscience, that’s just not who I am. I see it as being like the guy trawling the bar who will use a pick-up line on anyone. I don’t get a lot of listings, because I don’t do that.”
You gain control when you ask questions
When I pull into the parking lot of Jason Stewart’s Chula Vista real-estate office, the lot is dotted with luxury cars. There is a slick Mercedes E500, a BMV SUV, a Range Rover, and two Lincoln Navigators. I follow a woman in an animal-print skirt across the lot and up a flight of stairs. When I open the double doors, I’m immediately greeted by a secretary.
She says in a sunny voice, “You must be here for the script class.”
I follow her into an airy room. The walls are painted stop-sign red. The paneled ceiling features cut-outs that resemble marshmallow clouds. Two men and three women take up 5 of 42 folding chairs arranged in front of instructor Jason Stewart. Stewart wears a well-fitted pin-striped suit, a blue shirt, and a red tie. His hair is stiff with product. He looks like a politician.
Jason hands out a four-page script titled “Success with Ad and Call Signs.” There are four bulleted points: master the first five minutes of a call; use transitions; gain control; qualify.
“I want everyone to partner up,” he tells the gathered realtors. “Read off the script. I want one of you to be the buyer, the other to be the seller.”
A woman in a fuchsia blouse meticulously matched to her high heels partners up with an overly accessorized 40-something woman in a skirt suit. One pretends to be a rude buyer, while the other is an assertive seller. After five minutes, Stewart addresses the agents.
“Remember to ask questions. You gain control when you ask questions. You’ve got to be on your toes. The buyers in today’s market are more educated than the ones of ten years ago. Make sure to ask prequalifying questions!”
Anna Campos, a buyer’s agent in the front row, pipes in: “If they aren’t ready to give me their pre-approval, I’m not going to work with them.”
Darin Triolo adds, “I like to poke holes in other relationships. I’ll say things like, ‘Wow, your agent didn’t tell you that?’” He smirks. “That’ll get them in the office.”
Stewart wraps up the script class by saying, “People who practice scripts on a regular basis do better. People who call you are a great lead. Abraham Lincoln said it best: ‘If I had six hours to cut down a tree, I would spend five hours sharpening my axe.’”
After the class, Stewart tells me he has eight different scripts memorized when dealing with potential clients.
“I want to be the Coca-Cola of real estate, or, worst-case scenario, the Pepsi.” Stewart leans forward and shoots me a dimpled smile. “They say that someone needs to see a logo or hear a slogan about a company at least eight times before it registers in their brain. Anyone I’ve had a good conversation with, I try to eventually get that person’s phone number, address, and email. Then they’re going to get my emails on a regular basis. I call them every now and then and ask for referrals. Throughout the year, they are going to get nine to twelve pieces of mail from me. I have over a thousand people in my database. I dedicate two hours a day to nurturing that database. I keep my face in front of them. I call them. I request them on Facebook. I send them personal notes. They might not ever read it, but they’ll know that Jason Stewart is still doing real estate.”
Stewart sees scripts as hugely beneficial to his success.
“Learning the scripts helps me ask for referrals in all different types of conversation. One conversation I like to have with people is called FORD — family, occupation, recreation, and dreams. I call up and ask about their family. Then I’ll say, ‘How is your work?’ And then I’ll ask a recreation question. This causes them to engage in the conversation. I know most people’s FOR. The goal is to learn their D. The people whose D you know will send you the most business. Those are the people that know you, love you, and trust you. The biggest mistake in any real-estate business is not dedicating at least an hour a day to prospecting for business.” ■