Jim Brown of Keller Williams Joins Aaron Norris on the Real Estate Radio Show #482

Jim Brown

Bruce Norris is joined this week by Jim Brown. Jim is the owner of Keller Williams Corona and has been in real estate for around 20 years. Bruce did a transaction with him back in 1992, even prior to him being in the business. His Keller Williams office did about a $1 billion in the first quarter of 2016.

Episode Highlights

    • The surprising number of Realtors who don’t close a transaction in a year
    • How agents are able to make $1 million differ from those selling next to nothing
    • Is the real estate world dominated by men or women?
    • What is cross-qualifying and how does this work for your seller?
    • How well are agents able to change strategies?
    • Decisions Realtors make that hurt the industry

Episode Notes

Bruce asked Jim how many agents work in his office. He said they have about 240, although this practically changes daily. The volume is considerably up from last year, but that is really not in line with what is happening in the marketplace. Bruce asked if he has added agents or if they have gotten better. Jim said it is a little of both and that they have a very large market share in the Corona area. They do literally twice what their closest competitor does. They are very education focused and have trainings every day in the office. There is also an incredible library of things on video that anybody can see.

For example, if somebody is not used to doing a probate sale they can go online and see everything that has to do with these sales in around 20 minutes. The training at Keller Williams led them to being named the number one training company in the country, not just real estate but all companies. Bruce asked what the typical length of experience would be for the agent at their office. Bruce wondered how many are getting into the business who were brand new in the last three years. Jim said they bring in about 8 agents a month, and right now about six of those are brand new. They lose roughly 6-7 agents every month, whether because they move or leave the business.

It is interesting how half the people with a real estate license do not close a transaction in a calendar year. No matter where you go in the country, if you go to any board and pull up their roster and production, you will find that this is a pretty standard number. About 50% of the real estate licensed people who are part of a board do not do a transaction in a twelve-month period of time. Jim said he also had multiple agents who made $1 million in commissions in a year.

Bruce said his clientele deal with agents all the time, so he wondered what makes the difference between someone who sells almost nothing and somebody who makes close to a million. He wondered what those people do that the others do not. Jim said he used to teach attitude habit and behavior change. He has constantly looked for what makes a top producer, and the common strand he has seen through the years is somebody who is very competitive by nature. They have to be competitive by nature, or they will not be a top producer. This is a burning desire built inside them, and they want to win.

What people buy when they hire an agent is the confidence that person projects. The people who come into the business with a lot of self-confidence or learn enough about the business to feel confident, this is what transposes to the client what the others want. You want to feel confident in that person that they will get you the best deal on the house or the most money on your house if you sell it. This is where Keller Williams goes with the education to give them the confidence they need.

There are certain professions who come to Keller Williams, whether it is people who are retired or have been doing, and there are certain professions that do much better than the average person. Retired peace officers tend to do really well as Realtors because they project that confidence and people buy into this. Jim said when he opened an office he had no idea how many agents did nothing. 10% of the people do roughly 90% of the business. This is something you will see change even more in that direction because of the way the industry is changing. There is the new concept that has been around for 15 years where a rainmaker runs a team of people and leverages his business. One of the big things Keller Williams is doing now is called expansion selling, where an agent is a rainmaker in one area. What makes a one a rainmaker is if they can produce leads.

One thing people are doing now is if you are building a big business and have generated more leads than you can work. Once you have this going, it is literally a machine that is creating these leads. What then happens is you start adding buyer and listing agents. There is one man in Keller Williams who has now opened another branch in Cerritos, so he works out of that office and the office in Corona. Another is running the business in Las Vegas in addition to Corona. You will see that talented person who has that vision and will offer the training for how to do this. This is something you will see more and more.

Bruce asked if the real estate agent world is dominated by men or women. Jim said in his office they are about event, about 125 each. Bruce asked if agents begin their career concentrating on sales then morph into more listings than sales. Jim said most people come into sales because the leads are easier to generate than listing leads. They may get into the business because somebody they know wants to buy a house. Most people do sales first.

It was crazy how Jim first got into the business. He sold a lot of houses his first year, and all but one of them were sales. Where you really make money in real estate is being a listing agent. It is hard to do a lot of sales because they are so time-consuming. Bruce asked how the buyers’ habits have changed within the last 5-10 years, whether they are independent and more capable of looking for things themselves. Jim said there are a lot of buyers out there who know more than the agents with whom they speak because of the internet.

The internet has changed so much, and almost every agent’s problem with it is people never stop looking. You sell somebody a house, are 15 days into escrow, and they call you to see some others because something else popped up on Zillow or Realtor.com. The deal Jim tries to make with people right up front is tell them that as soon as they find the right house, they will stop looking. There is so much information, including inaccurate information on sites like Zillow and Realtor.com because they really do not understand how to assimilate the information.

If you take somebody who does not know what they are looking at, then they see Bruce’s charts he is a fan of, then they still won’t really know what they are seeing. They would not be able to extrapolate what the real meaning would be. They may look at a house on a site that sold six months ago, it was just never taken offline. Bruce asked Jim if he demands a buyer’s agreement and does not want to spend too much time with the client unless he knows they are a match. Jim said this is something that is optional, but several do this.

This is something that is very hard to enforce. If you sign a buyer’s contract and they go buy a house for somebody else, then you would have to sue the people, which no one wants to do. Jim said he personally would not sign one, but he has successful agents in his office who will not go out to show you a house if you did not sign one. Bruce asked about the client getting approved in this cycle and if this is a big impediment to them going from renter to owner. Bruce wondered if it is hard to get a yes answer from a lender at this point. Jim said no and that this has not really changed at all through everything. There may be a higher percentage they are getting, but they generally know in a few hours if they qualify to buy a house. They can know this very quickly to where they are not spending a lot of time on this.

On the other side of this is someone who owns a property, and you go through an escrow with the expectation that it will close and it sometimes doesn’t. The only one that really costs money is the guy writing a check on a mortgage and a hard money loan. We get a little particular about with whom we end up in escrow. In general, the process is as clear as a bell, but there are a lot of people getting a no answer who used to get a yes.

Something Jim does that a lot of good realtors do is if they have a listing and somebody sends them an offer, he has them send along with it a proof of funds and a pre-qualification letter. So many lenders don’t really know what they are doing and will give almost anybody a pre-qualification letter since they may not even have checked their credit. Jim said before he will take a client and let them get tied up in an escrow, he will have a lender he knows and trusts do a cross-qualifying. Before he meets somebody at a property, they will send the information to Jim’s lender. If it is an offer on a piece of property he has for sale, he may have the client accept that offer and have the lender look at that individual to see if they can get them a loan. If they cannot, then the other guy cannot either.

Cross-qualifying is a real service to do for your seller. You are doing your seller a disservice if you tie their property up and have not gotten a second opinion on whether or not the person can buy a house. Bruce asked Jim what percentage of his current sales are owner-occupant vs. investor and if this changed in the last 3 years. Jim said it has gone up a little but not drastically. Certain agents at Keller Williams deal with a lot of investors, but the majority of the agents do not. This may be because they have not hooked up with the right one or with someone who will be loyal to them. About 5% of the transactions they do are “invest yourself.”

Bruce asked if these are typically buy-and-hold purchases or flipping opportunities. Jim said they are both. One of their very top agent has people so loyal to him that he will find a good deal on a house for his clients, and when he thinks it is time for them to pull the money out of it he will call them to sell it. He has made a lot of people a lot of money and makes over $1 million a year himself. A lot of his clients have more than one house, which is helpful. He has built up his trust over the years, having been in the business about 20 years. They build up that trust. The people don’t even care if they see the house, they just need to be told by him that it’s a deal and to go buy it. He has made his customers so much money over the years that the trust factor is there.

Bruce asked how nimble agents are when changing gears becomes necessary. Jim said a lot of agents are on the sheepish side and don’t run a business like a business. One of the things they really try to teach is to run your business like a business and to know whether you are making or losing money as well as where you are getting your leads. They actually teach a course called Shift, which is based on a book written by Mr. Keller. His book, of course, is all about when markets shift and how to deal with this. The REO business actually killed a lot of agents because they put their whole heart and soul into that, and then when the REOs went away they are suddenly out of business.

What is unfortunate about this is that this should not have happened to this business model. This was an orchestrated end instead of a natural end. For REOs to deal with them is not as easy as people think. A lot of it took money out of pocket, and it was impossible to do by yourself. You had to build a support team on that, so several people had people working for them on payroll. You have to do a report on every house every week, so when they suddenly stopped coming in overnight they saw how the overhead would kill them.

Jim had mentioned in front of a group that he thought that when there are sales people migrate to other places. Bruce asked him what percentage of the sellers say it has been great and they are going somewhere else to retire. This is not usual. From Jim’s personal experience, he is not out there hustling like most of them are now since he mostly deals with previous clients. It seems every phone call he receives about his previous clients is him losing a client because they are selling locally and are retiring. Some go to Hawaii, some to Texas, and some to Arizona, but they all seem to be leaving California. Generally they can take their equity here, buy a house with cash, and have a house under your name somewhere else.

Jim said when the younger people move out of California. He said he has had that experience having been in the business for a while. When the younger people move out of California, you want to stay in touch with them because 2-3 years later they are coming back. This is not as likely with the seniors.

Bruce asked Jim if he sees anything decision-wise that could be threatening to the industry. This could include changes in the rules for interest being deductible or Prop 13 changing. Jim said he has not spent a lot of time being concerned about this since he has no control over it. If they take that last benefit to owning a home and having their interest be tax-deductible, that would be a huge mistake and would hurt the industry. The ability to own your own home and not having to answer to somebody else about how to run your home. This will ring true for most, but there has to be a benefit to owning a home. It seems to be a natural target as far as chasing more revenue. The state of California seems to be one of those in the mood to take a piece of it. He does not know if they can change Prop 13 for the residential, but they will work at it.

Taxes is another reason for which people leave the state. California doesn’t do itself a lot of favors with that. If you are making a fair amount of money, you can definitely make a case for going somewhere else. Jim said himself if he were to open another business, he would open it in another state. California is not very business-friendly, and he thinks it is a mistake. The reason people keep coming back is because of the weather, which California has and always will.

Two weeks ago the city of Corona allowed a cfb to be put on any piece of new construction, which will raise the taxes on new homes up to 1.95%. Whatever the tax base is, they can add this to it. Jim thought this was terrible, but even after that initial raise they can raise it an additional 4% of whatever the increase was every year thereafter. This was all at the city council’s discretion. Jim thinks if you own property in this area, it all means they just devalued it. This means it is now more expensive to build, and this is another hurdle. People say developers can afford this, but they are not going to pay a penny and will pass it all on to the buyers. This is what is going to make it that much harder.

 

For more information about The Norris Group’s California hard money loans or our California Trust Deed investments, visit the website or call our office at 951-780-5856 for more information. For upcoming California real estate investor training and events, visit The Norris Group website and our California investor calendar. You’ll also find our award-winning real estate radio show on KTIE 590am at 6pm on Saturdays or you can listen to over 170 podcasts in our free investor radio archive.

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