Harley Rouda Jr. believes the old Dakota Indian saying: when you discover you’re riding a dead horse, the best strategy is to dismount. It’s a perfect fit for a man unafraid of admitting mistakes.

Rouda, CEO and managing partner of Real Living, the third-largest privately owned residential brokerage in the United States, is an entrepreneurial risk-taker driven by the excitement and challenge of change. His wife said he has “adult attention deficit disorder”; Rouda said he might agree if he could slow down long enough to consider the question.

Rouda spoke candidly with Inman News about life, success, failure and what 2004 holds in store for residential real estate. Controversies that have flamed through the industry during the past several years include virtual office Web sites and banking institutions entering the real estate brokerage business. Rouda supports both developments. Not only does he welcome banks into real estate, he’s part of a group that’s lobbying Congress to disregard legislation sponsored by the National Association of Realtors that would block the banks.

NAR says Rouda is a minority voice. An October 2003 NAR survey reported that 97 percent of Realtors who responded opposed the presence of banks in real estate. Drill down through the data, and opposition drops to 79 percent for brokerage firms with 200 or more agents. Drill down to Rouda, whose firm has more than 100 offices and 5,000 associates, and you find nonchalant support.

“I’m fine with banks coming in. First, local and regional banks are already involved in real estate, and that hasn’t hurt our industry. Second, banks aren’t a competitive threat. Being a real estate professional is not the core competency of a banker. Third, NAR’s opposition is political in nature. This fight is about national lobbying power, not genuine threats to our industry and local agents. NAR is throwing away tens of millions of dollars to keep federally chartered banks out of our industry. That money would be better spent in professional development and ongoing training for our members,” Rouda said.

VOWs and online access to MLS listings have come into the mainstream. In 1996, Rouda pulled $1.5 million out of newspaper and television advertising, and applied that money to build an Internet-based communications system for agents and potential home buyers. It was a risky strategy, and several agents left the firm.

“It was a difficult time, with second-guessing and soul-searching. But we were convinced the Internet was a powerful sales place that people would use to buy everything, including houses. Pulling $1.5 million out of traditional advertising was a huge risk for us. This was while we were still one company, before we grew and rolled three firms into Real Living Networks. We lost visibility before we gained visibility, and a number of our agents left for other firms because they thought we were pursuing a ruinous course. But it was tremendously successful. Our investment in the Internet and an early VOW system was a catalyst for growth,” he said.

Rouda became CEO of HER Realtors of Greater Columbia, the agency started by his father, in 1996. Research indicated consolidation would be a major industry trend, with firms such as HER having to decide where to take a stand on the food chain. Rouda and his management team decided they wanted to be the ones buying, not being bought. He prepared his firm to be a powerful regional player by strengthening its brand name and profitability. He used brand-based marketing and the Internet to inculcate a common DNA in his associates and their offices.

“Branding became a huge priority once we decided we wanted to become a national player. The technology investments in the Internet became a vital branding tool. All of our associates, wherever they are located physically, are identified as us. It’s part of how we were able to roll three companies into one and become the Real Living Network,” he said.

Risk-taking entrepreneurs don’t shy away from new ventures. When the risk turns to failure, the measure of a leader is how he or she responds. Rouda recently launched an Ohio real estate development involving pre-fabricated condominiums. By everyone’s account, it was a flop. Rouda dissects the failure, and the lessons he learned.

“We’re brokers and agents, not developers. It wasn’t a core competency. We chose the wrong development partner, the wrong project, the wrong business model and the wrong methodology. The learning that came out of it reinforced the three key things to consider when entering a new market or embarking on a new venture: Is it part of your core business strategy? Provide enough capital funding and management oversight, or don’t do it. And when you realize it’s not going to succeed, dismount that dead horse and bury it, baby. It’s such a temptation to keep flogging the dead horse; you want to have been right and you want to win. So you hit it harder, change riders, give it more money or appoint a committee to study it. And it’s dead. Come on, it’s dead – dismount and bury it,” he said.

Rouda’s father, Harley Rouda Sr., founded HER Realtors, and was president of NAR. Rouda Jr. never intended to follow in his father’s footsteps and chose a legal career instead. Their professional lives came together when Rouda Jr. was hired to be in-house counsel for HER. The father was involved extensively in national industry affairs as the son was taking on more responsibility back home. There were challenges and blessings in working together, and some hard lessons learned along the way.

“The blessing has been to watch his integrity, character and passion. He’s in his 70s and still has a fire in his belly for what we do. He inspires me. The challenges were learning to rely on myself and trust my own judgment and leadership, learning to differentiate a business relationship from our personal relationship, and understanding that you almost always communicate differently with family members than with co-workers,” the younger Rouda said.

Rouda continues to preach branding and consolidation as hallmarks for successful firms. He received a master’s degree in business from Ohio State in 2002, just after concluding the roll-up of three firms into the Real Living Network. As he makes plans to expand Real Living nationally, he offers a residential real estate industry forecast for 2004.

“Home sales will continue to be strong and steady, but it won’t be the major pillar of the economy it has been recently. And consolidation will continue on every level of our industry. Ten years from now, you’re going to see five or six major national players, 30-40 big regional firms and some niche specialty firms in between. We want to be one of the national players. We’ve recently opened some branches in Florida, and we’re fielding offers from Texas to New Zealand. New Zealand may have to wait a while. But we’re going to follow the dual strategies of both expanding concentrically around our current geographic locations, as well as expanding in other parts of North America that make sense,” he said.

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