Riding the real estate boom
Jon Engelsman scanned the new listings board at Royal LePage Village's DDO office, and grunted approval at the dozens of homes its agents had contracted to sell that month.
"New listings are the life-blood of this business," said Engelsman, the franchise's president and co-owner. "As long as our agents can find them, we can sell them."
Engelsman, who also has shares in real estate offices in Pointe Claire and Ile Perrot, is the envy of business operators: he's in the right industry at the right time.
During the last five years, the real estate market has been on fire. The average price of homes sold via the Canadian Real Estate Association's Multiple Listing Service rose close to 60%, during the past six years, from $158,145 in 1999 to $253,826, during the first quarter of 2005. The number of homes sold has also been strong, as has been new home construction.
Not surprisingly, Engelsman, who has lived through all sorts of market swings since he began selling houses during the mid-1970s, is happy about his company's progress. Happy, but cautious. "People think that just because house prices are strong and we are selling more that our business is easy," Engelsman said. "But it's not. We have to work hard at it."
The problem is that the hot housing sector has attracted a lot of new players into the game. Just as the Internet boom led to a stampede of would-be Web-page designers into html classes, the housing boom has attracted a wealth of new agents into the trade.
One indication about how crowded the market is getting is the number of candidates taking the Association des Courtiers et Agents Immobiliers du Québec (ACAIQ)'s entrance exam into the profession.
During 2004, 3,043 prospective agents wrote the test, an increase of 60% from the 1,897 candidates just one year earlier. The number ACQIQ-registered agents and brokers also spiked, rising 29.3 per cent to 13,659 at the end of 2004, from 10,560 just two years earlier.
The flood of new agents means that existing players have to work smarter. Although most real estate agents are affiliated with one of province's half-dozen the major brokers, they are in effect independent contractors. Engelsman's job is to find and recruit those most likely to succeed, and to provide them with the tools they need.
"It starts with finding the right people," Engelsman said. "If you can screen out those who won't cut it, you can save yourself, (and them,) a lot of time and money." Real estate agents don't fit a standard profile. The come from a variety of age, sex, work, educational and ethnic backgrounds. But almost all are self-motivated, enjoy being with people and persistent.
Arrangements between agents and the offices that they work for vary. Real-estate firms typically provide agents with a corporate identity, office infrastructure and support network. In exchange, agents pay either a flat monthly fee, or a percentage of the commissions they generate. Royal LePage Village charges its agents a lower monthly fee, but recoups the difference by taking a higher cut of the initial commissions.
"If you charge an agent too much, he may have a hard time riding out the slow periods," Engelsman said. "But if you and the agent both make most of your money from commissions, your interests are better aligned." According to Greg Clarke, one of Engelsman's partners in the DDO office, the company's focus on training is a key success driver.
"We are constantly coming up with new courses to keep existing agents and new recruits up to speed with industry trends," said Clark, who sold 40 properties last year and is one of the office's top performers.
Royal LePage Village also constantly tries to generate sales leads for its agents. "If they pay us a monthly fee, and we steer them business, that means it costs them nothing to work hear," Clarke said.
One common technique lead generation technique is the buyer-seminars that firm staff conduct each week during the busy Spring period, which are designed to teach potential clients about the ins and outs of house-hunting. According to Clarke, almost 60 per cent of attendees eventually become Royal LePage Village customers. The firm also rents a kiosk at Fairview and agents who man the booth, get to keep any walk-in leads.
So far it appears that Engelsman and Clark's management techniques are working well. According to Engelsman, the average real estate salesman's share of commissions at the DDO office was about $75.000 last year, well ahead of the $50,000 industry average.
Despite the good times, Engelsman, is wary about the future. He has weathered many storms before, including an extended bear market during the early 1980s when mortgage rates approached 20 per cent.
"Growth will eventually slow again this time around too. It's part of the business," Engelsman said. "You have to be able to ride out those periods. Otherwise, forget it."
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|© 2005 Peter Diekmeyer Communications Inc.|