Speaking of Real Estate
By Sam Silverstein and Erica Christoffer
The real estate sector faces a host of challenges that will require professionals in all facets of the industry to become more adaptable and agile in the coming years in order to remain relevant and competitive, according to a newly released report commissioned by the National Association of REALTORS®.
Concern about the erosion of the importance consumers place on real estate professionals in structuring and managing transactions in an era of fast-moving technology is among the top issues cited in the study, which is based on data from a national survey of approximately 7,800 REALTORS® and interviews with 74 high-level executives and other real estate industry leaders. The report also takes other real estate-related studies, reports, articles and surveys into account.
Another challenge for the industry is the arrival of companies that previously did not participate in real estate, which could disrupt established business models, according to the study, known as the D.A.N.G.E.R. Report (“Definitive Analysis of Negative Game Changers Emerging in Real Estate”). Concerns about uneven professional standards and the burdens posed by government regulations also are on people’s minds, the report says.
The report was conducted by industry analyst Stefan Swanepoel, head of the Swanepoel T3 Group, a research and consulting firm, at the direction of NAR’s Strategic Thinking Advisory Committee. It is divided into five sections that detail challenges facing agents, brokers, NAR, state and local REALTOR® associations, and Multiple Listing Services.Stefan Swanepoel speaks about the D.A.N.G.E.R. Report at the REALTORS® Legislative Meetings and Trade Expo in Washington, D.C.
“Don’t think that people don’t want to play in your sandbox. They do,” says Swanepoel, who spoke during last week’s REALTORS® Legislative Meetings and Trade Expo in Washington, D.C. “Some will play nice and some will not play nice.”
New technology is another force buffeting real estate. Brokers could find themselves overwhelmed by the cost of building the technological solutions they need to thrive, while agents worry that technology could marginalize the value they bring to buyers and sellers, according to the study. “There are a lot of products that are now being created very fast,” Swanepoel says,
The arrival of newcomers looking to introduce consolidation and new business models to real estate is another issue the industry faces, he adds.
Meanwhile, real estate firms and associations face headwinds in attracting young people to their ranks, Swanepoel says. “Real estate sales [isn’t] a first-choice career” for high school students, he says, adding, “We need to find more people who can make a longer commitment to our space.”
The D.A.N.G.E.R. Report offers no solutions to the challenges it identifies, but instead formulates a starting point for industry-wide conversations and paths for finding solutions, Swanapoel says. “It’s a summary of all the black swans that could be in the future.”
Michael Oppler, senior vice president at Prominent Properties Sotheby’s International Realty and one of the 20 at-large members of the Strategic Thinking Advisory Committee, called the report a peer-to-peer dialog tool. “When you look at this report, you can have a much more open and honest conversation in your office,” he says.
By Jessica Edgerton, NAR associate counsel
In recent months, real estate professionals have reported an upswing in a particularly insidious wire scam. A hacker will break into a licensee’s e-mail account to obtain information about upcoming real estate transactions. After monitoring the account to determine the likely timing of a close, the hacker will send an e-mail to the buyer, posing either as the title company representative or as the licensee. The fraudulent e-mail will contain new wiring instructions or routing information, and will request that the buyer send transaction-related funds accordingly. Unfortunately, some buyers have fallen for this scheme, and have lost money.
A possible red flag to be aware of, and to alert clients to, is any reference to a “SWIFT wire” transaction, a term that indicates an overseas destination for the funds. However, unlike many other e-mail-based “phishing” schemes, this particular manifestation appears to be more sophisticated and less recognizable as fraud. The communications do not contain the typical grammatical or stylistic oddities that are often present in scam e-mails. In addition, because the perpetrator has been monitoring the licensee’s e-mail account, the fraudulent communication may include detailed and accurate information pertaining to the real estate transaction, including existing wire and banking information, file numbers, and key dates, names, and addresses. Finally, the e-mails may come from what appears to be a legitimate e-mail address, either because the thief has successfully created a sham account containing a legitimate business’s name, or because he or she is sending the e-mail from a truly legitimate—albeit hacked––account.
Be aware, also, that this particular scheme is only one of many forms of online fraud being perpetrated against real estate licensees and their clients. In protecting all parties to a real estate transaction from cybercrime, real estate professionals should consider the following guidance:
The best line of defense against fraudsters is to make sure that all parties involved in a real estate transaction implement security measures before a cyberattack occurs. These measures include the following:
- Never send wire transfer information via e-mail. For that matter, never send any sensitive information via e-mail, including banking information, routing numbers, PINS, or any other financial information.
- Inform clients from day one about your email and communication practices, and alert them to the possibility of fraudulent activity. Explain that you will never send, or request that they send, sensitive information via email.
- Prior to wiring any funds, the wirer should contact the intended recipient via a verified telephone number and confirm that the wiring information is accurate. Do not rely on telephone numbers or website addresses provided within an unverified e-mail, as fraudsters often provide their own contact information and set up convincing fake websites in furtherance of their schemes.
- If a situation arises in which you have no choice but to send information about a transaction via email, make sure to use encrypted e-mail.
- Security experts often recommend “going with your gut.” Tell clients that if an e-mail or a telephone call ever seems suspicious or “off,” that they should refrain from taking any action until the communication has been independently verified as legitimate. When it comes to safety and cybersecurity, always err on the side of being overly cautious.
- If you receive a suspicious e-mail, do not open it. If you have already opened it, do not click on any links contained in the e-mail. Do not open any attachments. Do not call any numbers listed in the e-mail. Do not reply to the e-mail.
- Clean out your e-mail account on a regular basis. Your e-mails may establish patterns in your business practice over time that hackers can use against you. In addition, a longstanding backlog of e-mails may contain sensitive information from months or years past. You can always save important e-mails in a secure location on your internal system or hard drive.
- Change your usernames and passwords on a regular basis, and make sure your employees and licensees do the same.
- Never use usernames or passwords that are easy to guess. Never, ever use the password “password.”
- Make sure to implement the most up-to-date firewall and anti-virus technologies in your business.
2. Damage Control.
If you believe your e-mail or any other account has been hacked, you should take the following steps:
- Immediately change all usernames and passwords associated with any account that you believe may have been compromised or otherwise made vulnerable by the attack.
- Contact any clients or other parties who may have been exposed during the attack so that they take appropriate action. Remind them not to comply with any requests from an unverified source.
- Report any fraudulent activity to the Federal Bureau of Investigations via their Internet Crime Complaint Center. More information can be found here: http://www.fbi.gov/scams-safety/e-scams
- Brokers should report any fraudulent activity to their state or local REALTOR® association so that the associations can send out alerts or take other appropriate action, including contacting NAR.
This advice is not all-inclusive, and real estate practitioners should work with Information Technology and cybersecurity professionals to ensure that their e-mail accounts, online systems, and business practices are as secure and up-to-date as possible.
For more information on this and other cyberscams, as well as further information on cybersecurity best practices, visit these resources:
Hey, fellas, you’re not immune to danger
When the National Association of REALTORS® debuted its “Real Estate Safety Matters” course for associations and brokerages, the newest addition to the REALTOR® Safety Program, at the 2015 REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., there was an obvious underlying message for the men in the room: You’re just as susceptible to being attacked as a woman.
REALTOR® safety is a topic that has gained national attention after the murder of Arkansas real estate agent Beverly Carter last September. Since then, a slew of other cases of brutality against practitioners have grabbed headlines, and in every instance, the victim was a woman. They’ve made the industry keenly aware of typical unsafe practices in the real estate business — working alone, meeting prospective clients at empty homes, revealing too much personal information in online bios — but they’ve also made it appear as though only women are vulnerable.
Tamara Suminski, GRI, ABR, a California REALTOR® who led NAR’s safety course, recalled posting to Facebook a recent news story about an attack on an agent. One commenter, a male colleague, wrote on her post: “Good thing I’m a big dude.”
“What does that mean?” Suminski said. “That you can’t be attacked?”
The truth is the mentality that women are more vulnerable to attacks than men is a fallacy. According to the Bureau of Justice Statistics’ National Crime Victimization Survey, which has been recording yearly crime data since 1973, more men have historically been victims of every type of violent crime except rape than women. When it comes to the relationship between victim and assailant, men and women are equally as likely to be attacked by someone they know, according to the survey.
In NAR’s 2015 Member Safety Report, 25 percent of male REALTORS® said they’ve experienced a situation that made them fear for their personal safety. Forty-eight percent of female REALTORS® said the same. Fifty percent of all REALTORS® indicated they first met prospective clients they did not know at a real estate office or neutral location — which means the other half are meeting them in potentially more dangerous locations. That includes a lot of men who are potentially putting themselves in harm’s way.
All of this is to say that men are fooling themselves if they think they don’t need to worry about being a target for attacks as much as women do. REALTOR® safety isn’t just for women. Everyone, no matter their gender, should take heed of the risks involved in real estate and take precautions to improve their safety. Anyone who thinks they have nothing to worry about is making themselves easier to victimize than those who are better prepared for danger.
“We’re all prone to safety concerns,” Suminski said. And nothing could be more true.
With increased media attention on crisis events, which can be anything from natural disasters to shopping-mall snipers, the drive to finger someone responsible for the resulting chaos is growing stronger. And because many crises involve compromised property, it’s the property manager that’s becoming more vulnerable to blame.
During the Property Management Forum at the REALTORS® Legislative Meetings & Trade Expo on Thursday, property managers spoke of situations that can invite scrutiny and offered tips for how to control the message during such high-stress times. Chris Mellen, CPM, vice president of property management for The Simon Companies in Boston, recalled a recent domestic violence incident in one of his properties that resulted in the victim’s death. He also contended with Boston’s most recent hellacious winter, which brought 106 inches of snow to the city over a six-week period and caused widespread property damage. Such instances can put property managers in a position to explain and defend actions they’ve taken to ensure the safety of their buildings.
“When an event happens, the media, the public, and our clients and tenants are looking for someone to hang it on,” Mellen said. “We’re never going to be perfect. We’re never going to be able to head everything off at the pass. But if we don’t do the best we can, we’re making ourselves a target for the blame.”
Randy Woodbury, CPM, president of Woodbury Corporation in Salt Lake City, said the first thing people will want to know in the aftermath is if there was a crisis plan in place at a property to deal with emergencies. It’s incumbent upon property managers, he said, to do a risk audit of their properties and know how to address potential danger. That way, when you’re questioned about your properties’ safety plan, you can outline measures you’ve taken.
“Do walkarounds at your properties and see where you’re vulnerable,” Woodbury said. Assess for things like fire hazards, elevator malfunctions, all possible places where attackers could gain access to the property, and vulnerabilities to weather conditions. Then develop a network of people you would need to call on in case of emergency, such as staffers, engineers, electricians, disaster cleanup professionals, and authorities, and consult with them on devising crisis mitigation plans for your properties. Develop strong relationships with them so you stay top-of-mind.
“When it all hits the fan, who are they going to respond to first?” said Woodbury, who spoke of successfully carrying out an evacuation plan years ago at a shopping mall his company managed when it was threatened by an active shooter. “When you need somebody’s help, are you going to be the property they come to when five other properties are calling for help?”
Mellen said property managers should also develop a plan to communicate with tenants during emergencies. His company makes a point of collecting e-mail addresses and cell phone numbers from as many new tenants as possible so the company can send them alerts.
“If there’s been a mugging in the building, we’ll do an e-blast to all the tenants who have given us their contact info,” he says. “That kind of communication is becoming more and more effective as people go mobile. We also use social media so we can tweet and post alerts to Facebook.”
If you’ve taken all of these measures, you’ll be able to use them to respond to inquiries into incidents at your properties. And you shouldn’t shy from talking to the media in such circumstances. “The media will report on an incident whether you’ve given your two cents or not,” Woodbury said. “You may as well talk to them to make sure the story is correct.”
One thing that’s important to avoid, however, is embellishing the level of security at your properties. That could come back to bite you. “I’ve seen people put up signs saying their properties are under surveillance when they’re really not,” Woodbury said. “Don’t imply you’re providing a level of security that you’re not because then you really open yourself up to scrutiny.”
Make sure there’s nothing written in lease agreements that could lead tenants to believe more security measures are in place than there are, Mellen added. “And don’t agree to apply a level of security that you’re not equipped to apply.”
When we speak of international buyers, we’re usually talking about people from other countries who want to invest in U.S. property. But the lines go both ways. There are high-net-worth Americans who want to buy homes in other countries, and they can spell big business for practitioners who are willing to aid them in their global search. But where should they be looking?
Rick Davidson, president and CEO of Century 21, argued at the Asian Real Estate Association of America’s Global & Luxury Summit in Chicago on Monday that because of the dollar’s strength against many other foreign currencies, American buyers can get great deals abroad. But one country stands above the rest as the best place for Americans to invest their money abroad because of a confluence of economic benefits: Japan.
“We are deeply immersed in the Japanese market,” Davidson said, noting that Century 21 has 900 offices and 6,000 agents there. Here are the reasons Davidson gave for why Japan should be a target for wealthy U.S. home buyers wanting to purchase overseas:
- The interest rates on 10-year fixed-rate loans are 1.5 percent to 1.75 percent — far below America’s historic interest-rate lows.
- One U.S. dollar 119.54 yen, which gives U.S. buyers a 20 percent discount on purchases.
- There are virtually no restrictions for foreign investors in Japan.
- Japan is coming out of recession. Deflation is expected to stop and GDP is expected to grow in the near future, so American investors will start to see a positive ROI starting now.
- Tokyo is the cheapest of all Asian cities in terms of price per square foot. The average price per square foot of a luxury property in the U.S. is $1,180; in Japan, it’s $680.
- Tokyo land prices have been rising for five straight years, making future expectation for price growth high.
Exceptional growth has been the storyline of the luxury real estate market the past few years. No other price segment has rebounded from the housing crash with as much gusto as that of million-dollar-plus homes, which are selling at twice the historical average. According to the National Association of REALTORS®, home sales above $1 million in 2014 grew nearly 9 percent over 2013 — more than double any other price point. And the conservative expectation is that luxury sales will at least repeat that performance this year. Nearly every major city — if not all of them — shattered its record for most expensive residential sale in the last year, and each one has a listing today that, if purchased at asking price, would break it again.
There’s no doubt the industry has a lot to celebrate because of the roaring success on the top end of sales. But underneath that fanfare appears to be a little bit of nervousness that only a few will openly — or even hesitantly — admit. Is the upward trajectory of high-end sales and prices rising too fast?
At the Asian Real Estate Association of America’s Global & Luxury Summit in Chicago this week, the theme was clearly that real estate professionals should jump on the opportunities presented by the soaring luxury market. The conference was mostly tips for how to enter the high end of your local market and serve wealthy buyers’ needs, as well as the outlook for luxury sales going forward. It was on this latter point that a few glimmers of concern shown through at various sessions.
During a presentation by top luxury producers around the county, the panel was asked by an audience member where they thought the luxury market was going in the future. Craig Hogan, director of Coldwell Banker Previews International in Chicago, answered this way: “We want to see the luxury market go up, but we don’t want to see it go up so fast that then it drops. We hope it keeps doing what it’s doing without a bunch of spikes.”
On the same panel, Robert Canberg, a salesperson with Nest Seekers International in the Hamptons on Long Island, said his tony area’s average sales price last quarter was around $2 million, up more than 30 percent year-over-year. Another panelist, Ivan Sher, partner-broker with the Shapiro & Sher Group in Las Vegas, said the number of home sales above $1 million in the city was 19 in January of this year alone, up from 8 in January 2012.
These are, of course, market conditions in only two areas, but against a sea of headlines proclaiming an unprecedented heating-up of luxury sales around the country — San Francisco, Atlanta, Nashville, Boston, Miami — it’s clear that the spikes are already beginning to happen. What no one knows is if or when the drop will come. That’s incredibly difficult to predict.
However, another potentially alarming bit of information: During the opening general session at the AREAA summit, NAR Chief Economist Lawrence Yun said that the rising value of the dollar could make foreign buyers pull back on real estate purchases in the U.S. Foreign buyers have been responsible for a large percentage of high-end sales in these years of the fast-and-furious recovery of the luxury market. If they go away, are there enough buyers here who can sustain the price growth?
Even realtor.com® Chief Economist Jonathan Smoke showed a slide pinpointing the correlation between the U.S. dollar and homebuying demand from international buyers. Beginning in November of last year, the dollar took a sharp turn upward in value, and at the same time, the number of non-U.S. visitors to realtor.com® drastically declined. Pair that with Yun’s statement at the conference that “there is still some uncertainty and risk consideration about where the U.S. is currently. It’s not necessarily the best of times,” he said, noting that GDP growth in the U.S. is expected to “fizzle” this year, though he attributed that to “one-time factors” without elaborating.
That, of course, isn’t enough to say that doom and gloom is on the horizon for the luxury market or the market as a whole, but it’s something to take note of.
Economists started to say last year that the potential for another housing bubble was present, but no one would go so far as to say it was actually happening. No one can say that now, either, but it’s worth noting that eerie signs — whether it speaks to a bubble or not — are popping up. And they’re starting to be acknowledged by some in the real estate community.
As lawmakers on Capitol Hill consider patent-reform legislation, the National Association of REALTORS® has released a video highlighting the urgent need for action to protect real estate and other types of professionals from patent trolls—entities that purchase patents, then use vaguely worded claims to demand licensing fees or threaten legal action. NAR is playing a key role in the effort to reform the U.S. patent litigation system and is a member of the recently formed United for Patent Reform coalition.
Many agents focus on showing their value to clients as an expert in their community. But you can get even more granular — and more relevant to a client’s needs — by showing your expertise in each of your listings. When you know the history of the homes you’re selling, right down to the minute details, you give the client even more knowledge and value than they expect.
Highlighting the small historical details that make up a home is the theme of a recent social media campaign by Century 21. This Facebook campaign featured three historic properties and highlighted each of the homes’ unique historical journeys.
Besides highlighting individual homes, this campaign also seeks to position Century 21 agents as local experts who care about the little details that encompass the lifespan of a home.
“We wanted a social campaign where we could make our agents and their properties stand out, and this idea of looking at the small details of a home was proposed,” says Matt Gentile, Century 21’s director of social media. “We looked at some markets and ended up in Boston — and what better place with the historical homes in that market — and we found some homes that had standout features.”
This campaign is a good reminder to agents that in your online marketing efforts, focusing on learning the history of your listings and your community will truly show your value to clients. This value proposition was something that Century 21 wanted to emphasize. “If you’re the type of agent who is going to know your listing so well that you know the small details, you’re probably the type of person that I want to work with,” says Gentile.
While Century 21 doesn’t have plans to make this campaign a part of its larger social strategy, they do use Facebook as a “learning lab” for online marketing efforts. “Our agents have a stake in the creative direction, and the instant feedback that social allows, Gentile says. “We’ve been getting a lot of feedback globally on this campaign, so you get to know what works and what doesn’t.”