How The Housing Crisis Made Them Stronger
How The Housing Crisis Made Them Stronger
Real estate goes through cyclical ups and downs, and, you would be wise to prepare for the next time your market—and your business—hits a trough. But a slowdown should never be a cause for panic, preventing you from strategizing a forward-looking path.
Three practitioners who weathered the worst of the housing collapse in 2008 and beyond share insights about their own fortitude and business savvy that got them through the toughest times. They all reached a crossroads in their careers as the crisis unfolded, and while giving up might have been the easier choice, their persistence and flexibility enabled them to find a route back to success. Get inspired by their stories.
Adding Value at Low Points
Linda Stevenson chose perhaps the worst time to open a real estate brokerage. An agent in Nashville, Tenn., since 1997, she started Kijiji Realty (meaning “small village” in Swahili—an appreciative nod to the community of people behind every successful real estate transaction) in June 2008 as home prices nationwide were spiraling downward. Her sales business was in the middle of a months-long dry spell with no closings when she launched her company out of her home. It took her another three months to land her first sale as a broker.
Why didn’t Stevenson, who worked alone until hiring two agents last year, wait for a steadier market to take on such a big commitment? “I had been wanting to [open my own brokerage] for a while, and I didn’t want to talk myself out of it if I waited longer,” she says. “And I told myself that if my company could survive the hard times, then I knew I’d be here to stay.”
She would need to be brave as her resolve was put to the test. In 2010, Stevenson and her husband lost their own home to foreclosure and were forced to rent from one of her clients whose property wouldn’t sell. By then, her sales volume, which was typically $1 million annually before the downturn, dropped to less than half that. She was making little money, and her saving grace was not having to pay for a physical office space. “I told my husband that if this doesn’t start to get better, I’m going to have to hang up my license,” Stevenson recalls. “Looking back on it, I honestly don’t even see how I made it.”
But a valuable lesson she learned during those dark, early days as a broker helped her refocus on a way forward. The worse the economic environment got, Stevenson says, the more she noticed buyers and sellers gravitating toward larger, more recognizable real estate brands. For her fledgling brokerage to survive, she realized she’d need to show consumers that she provided something her competitors didn’t. “What do I offer that Crye-Leike or Century 21 doesn’t?” Stevenson says. “I offer individual service. When you call my number, you’ll get me, not someone’s assistant. I will have all the information about your listing, not someone else. And I will tailor my service to your exact needs.”
That became her mission statement, and she followed it up with action every chance she got. In 2012, she went as far as to conduct the entire home search process by herself for one relocating buyer who was moving to Nashville from New Jersey and couldn’t spend enough time in town looking for a condo. The buyer expected to fly in and find a home in 24 hours. “I said, ‘That’s not going to happen,’” Stevenson says. “So she gave me an escrow check and asked me to find a condo for her.” Stevenson went on home tours for two weeks, taking detailed photos of every property to send to the buyer. They closed on a condo a couple of months later.
Offering individualized service brought Stevenson closer to the stresses her clients endured through crises of their own and helped her soften her communication style. One seller who decided to put her home on the market after her son’s death nearly backed out of the sale under intense emotional pressure. Stevenson offered to ease her through the process by helping her move. “I came over and helped her pack and found her a moving company,” Stevenson says. “We looked through family photos and heirlooms, and I listened to her stories. It helped me learn how to deal with people a little better.”
The lengths she would go to for her clients started creating buzz about Stevenson’s brokerage. And once the referrals started pouring in, she realized she had discovered her value. Last year, Stevenson and her two agents, whom she spent much of her time training, completed five and a half transaction sides. But as her agents become more equipped to serve clients, she has goals to grow her brokerage’s production. “I thought I was going to fail at one point just because of the market,” Stevenson says. “But people do business with people they like, so I see now that it was my ability to nurture relationships that kept me alive.”
The Guts to Tell It Like It Was
After closing 48 transaction sides in 2005 during his first year as a real estate agent, Joshua Smith suddenly faced a crisis of confidence. By 2006, homes in the Phoenix area—one of the first cities to be dragged down in the prelude to the nationwide housing meltdown—were already stalling on the market. Soon after, nearly every seller Smith worked with was forced to either abandon the sale or lose tens—or hundreds—of thousands of dollars in a short sale because they were upside down on their mortgages.
Smith, a sales associate with My Home Group Real Estate in Surprise, Ariz., a Phoenix suburb, worried that he wasn’t doing enough to save his clients from heartache and financial ruin. He was feverishly studying the market and trying to offer his best advice to buyers and sellers given the deteriorating market conditions. But sellers in particular were stubborn and refused to listen. “I had clients who had $80,000 in equity and were just chasing the ball down the hill, and they were underwater by the time they accepted an offer,” Smith says. “I would tell them early on to take the best offer, even if it was less than what they wanted, but they wouldn’t do it. And then their situation just got worse.”
As he learned more about distressed sales as more of his clients were forced into a short sale or foreclosure, Smith decided he needed to become more direct and transparent when educating sellers about the obstacles they faced in a down market. He increased regular updates with sellers from monthly to weekly. To this day, he contacts his sellers every Tuesday to give them information on their listings, covering number of showings for the previous week versus activity at comparable homes, an update on market prices, and his written opinion on what he thinks his clients should do next. “I’m big on education way more than I was [at the start of my career],” Smith says. “I’ve learned to get crystal clear on what my clients’ goals are.”
He’s also learned to be more blunt when assessing clients’ needs. Smith says he used to worry about offending sellers with his advice, particularly if their opinions on list price weren’t aligned. But he sees now how much time and anguish he could save his clients by being up front when they want to set a list price that seems too high. His strategy is still important today, as home prices in pockets of Phoenix’s suburbs remain 30 percent below their prerecession peak, according to data from the West Maricopa Association of REALTORS®.
Smith recently had an elderly client who wanted to move closer to her family but demanded $20,000 more for her home than buyers were willing to offer. “I literally said to her, ‘Is losing the memories you could be making with your grandkids worth this extra $20,000 or not?’” he recalls. In the end, Smith’s client accepted a lower offer.
Smith has become more proactive in helping clients avoid worst-case scenarios with their transactions. “I’ve become more aggressive and relentless in my communication and follow-up because I had so many sellers that, if they would have priced their house correctly, they would have put a lot of equity in their pocket,” he says. “So I always tell them up front: ‘You’re the boss, and I work for you. It’s your home, so you set the price, but it’s my job to look out for your best interest. You may not agree with what I tell you, but I’m still going to tell you whether you want to hear it or not.’ My job is to give them enough facts and statistics that hopefully they understand what they’re getting into.”
Staying Connected to Her Roots
Villegas watched more than half of her colleagues quit the real estate office she worked at during the downturn. Out of the eight agents at Associates Real Estate in Chicago a decade ago, she’s one of just three who remain in the business. Having started as a part-time agent in 2005, Villegas, who aspired to be a teacher, considered following her colleagues’ exit. But instead, as the housing crisis deepened in 2008, she switched brokerages and became a full-time agent.
“People were saying, ‘Are you crazy?’” recalls Villegas, SFR, now one of 48 agents with ERA Mi Casa Real Estate. “I never forgot that I got into this business to help people, doing the hard work that others aren’t willing to do. Real estate fulfilled the same desire to serve that I had when I thought I was going to become a teacher.”
In foreclosure-plagued Chicago, Villegas knew she’d have to work longer hours and make twice as many phone calls and emails to get business and help clients. Sometimes her extra work didn’t pay off. She remembers helping a buyer who had lost her job three days before going to the closing table. Her lender performed a final job verification at closing—and the buyer’s loan was denied. “The buyer and seller were both devastated,” Villegas says.
Though that situation was beyond her control, Villegas developed a network of professionals who could help her and her clients through unexpected problems during a transaction. She discovered that a slow real estate market was the perfect time to find people such as local lenders, home stagers, and real estate attorneys who were less busy and more available to work with her. “I was always open to building new relationships with people my brokerage hadn’t been connected to before,” Villegas says. “I created a network of people who had access to things I didn’t know about.”
Villegas also found that a positive attitude could make all the difference to a client struggling through fear. Even in booming markets, buyers and sellers get apprehensive about the real estate process, and Villegas says staying positive reassures her clients and boosts her confidence. “I’m not a Debbie Downer—never have been one,” she says. “Any challenge I’ve faced has helped build strength and given me that extra push to make it work for myself and my clients.”
Keeping priorities straight during rough times is an important aspect of resilience, she adds. From worries about whether a client will qualify for a mortgage to whether a property will appraise, real estate professionals need to exemplify calm and steadiness to balance their clients’ emotions. “You can’t forget that you are the expert,” Villegas says. “We do this every day, and yes, every client and transaction is different, but they all have similar fears. We have to be that rock for them.”
That philosophy recently helped her manage the emotions of a nervous young couple who were buying their first home and needed a great deal of feedback and reassurance. Villegas had to show her clients the home they eventually bought three times before they would make an offer, and she had two additional buyer’s consultations with them. “They say, ‘I’m sorry, Erika, we have more questions.’ And I always say, ‘Do not apologize for anything. I want to make sure you are 100 percent positive with your decision.’
“When they close on a deal, I want them to know that I had their best interests at heart and that I was there educating and guiding them the entire way.”