As a third-generation leader at his family’s eponymous real estate brokerage, Howard Hanna Real Estate, Hoby Hanna has seen his fair share of hot and cold real estate markets.
The brokerage is one of the largest in the country, with offices across the Mid-Atlantic and Midwest, giving its leaders a unique perspective on the market. Hanna, the president of Howard Hanna Real Estate, recently spoke with Inman to discuss how COVID-19 is impacting the market, how his agents are staying busy and how his family-run brokerage is supporting its agents financially.
The interview has been edited for length and clarity.
Obviously your brokerage company is in so many different markets, but can you give me an overview of what the real estate industry has looked like over the past month? Have changes been regionally dependent?
Over the last month the deals that were already written, pending closings that had to close at the end of March and that are closing in April — we’re seeing very little fall through on those deals. I’d say we’re probably looking at about 90 percent of everything that was written prior to really any sort of stay at homes and more COVID-19 response are still closing. We’ve been very active in that sense.
Now, looking at written business, we’ve seen written sales drop off. We think that new written business across almost the whole footprint will probably be off about 50 percent in terms of new written sales for the month of April.
We think that listings will be down, but that really differentiates by state. States where the practice of real estate has been deemed essential, there’s definitely a drop off in a slowdown and they’re probably at 50 percent of new inventory being brought on. Markets where real estate is either deemed non-essential — like a Michigan or Pennsylvania — are almost dead in the market on new inventory.
What we are hearing is, I had a webinar this morning with agents from across the company, about 1,200 agents participated in that webinar, we did hear that agents are beginning to put their listing inventory in place, get contracts signed, they’re just not putting it into the Multiple Listing Systems yet.
There’s sort of more of a strategy of, like in New York they’re trying to time market dates to May 15, because that’s the date the Governor extended the pause until and if they have to extend, they can extend.
In Ohio, they’re timing market dates for the first of May, because that’s when Governor Mike DeWine claimed that he was sort of opening slowly opening markets back up. So we’re seeing people trying to play date games around the psychology of customers.
Do you expect that there’s going to be like this sort of immediate rush of pent up demand into the market. Do you think people are going to be slow to jump back into the market with economic uncertainty?
I think with the amount of layoffs that took place — even with some of the stimulus packages that are for small businesses, there’s really no stimulus created for the middle-market companies — I think this goes on longer. You may see more layoffs than what people anticipated. I think it’s going to be a slow V curve.
Unfortunately, the amount of layoffs in the country was huge, but I think that with low interest rates, and still a strong demand for housing, I think you’re going to see an uptick. I’m not bullish on thinking it’s this giant V curve. I think it’s gonna be slow and I think that’s gonna be more on psychology of how jobs are brought back and even how people feel.
There might be people who they want to buy, they feel secure financially, but they’re just not ready to jump into the market yet out of safety concerns or health concerns. Between some of the economic factors and some psychological, I think we’ll see an uptick, definitely, but I think it’s gonna be until the end of the third quarter and fourth quarter until we see activity getting as close as it was last year in that period.
Real estate business and brokerage wise, what are you anticipating? Do you think a lot of indie brokerages and smaller brokerages are going to struggle through this? Do you think there’s going to be consolidation on the back half of this. Do you think a lot of the tech-focused companies are going to struggle?
I think it’s hard to say that one size fits all to that answer. I think that some of the indie brokers that are smaller, that are well run, they may benefit from the small business stimulus loans that allows them to get through some tough sledding here for a while. The question is: Do they have the technology stack? Do they have the communication ability to keep engaged with their agents and give them the tools to market in a new environment?
I think some bigger brokerages and medium-sized brokers who haven’t invested in technology over the last five years — I mean I see a lot of brokers who haven’t invested in their own platforms and their own technology and current investments for their agents — I think they could struggle as they come out of this.
One thing that will change is how the process of selling a home takes place. Agents will still be at the center, but I can see the consumer, now with people being more comfortable with using video and sharing services like Zoom or Microsoft Teams or other platforms that are out there, coupled with what technology companies have, I think you might see more business done virtually. Whether it’s listing a house online and sharing in a Zoom meeting and going through comparables and contacts, or it’s buyers working with an agent on a virtual showing for houses and then narrowing down their search to the top two that they want to use.
I think you’ll see a lot of strong companies investing more in their platform and more in their technology as opposed to leaving it up to the agent to buy services.
Where some companies may have trouble is holding on to a lot of traditional values and ways we did things and not looking at how to restructure and support the market for what it’s going to need in the future. Those will be the companies that will be challenged.
I do think there’ll be some consolidation. I do think that’ll come as a natural course just like any longer period of recession does.
We’re privately owned and family capitalized, and we’re looking at what we can do, and I’m looking at some of the Wall Street-based companies and capitalized companies, I don’t know that they’ll go away, but they’re probably gonna have to do more in terms of restructuring their business model.
You’ll see smaller indies grow and stay strong, you’ll see the emergence of maybe some new indies. You’ll see some of the tech companies, their investors will say we’re done, we’re not putting more capital into this and then you’ll see others that get stronger and restructure themselves and become even better capitalized going forward. I think you’ll see some medium-sized brokers get stronger, like ourselves, and some who might consolidate.
To follow up on that, how much do you see the industry fundamentally changing from this?
A lot of us invested a lot in technology, and paid for services and products to help work remotely, service customers and clients at their convenience. Companies that have invested in that leading into this, what’s happened is, it’s accelerated their investment. We’ve invested a tremendous amount of money over the last five years in our tech stack, to support our agents, to support our customers, to do more virtual marketing, moving more things online, the ability to work remotely. Under this market presence, we’ve seen greater adoption of all those technology tools and the ability to work that way.
I think agents will still work in their traditional capacity, but they’re going to need that backbone, the structure of the real estate company. I think there’s a lot of companies that haven’t invested that technology stack to make things easier.
An example, when I talk about acceleration, we have a Microsoft Office suite that we operate our email and calendars on as a company. We make that investment, which is a significant, multi-million dollar investment or the footprint in our company. For two years now, part of what we paid for is Microsoft Teams. Until a month ago, most of our managers, agents, branch offices, were not using teams, our education department wasn’t, we maybe had our IT department using it and a couple marketing groups using it. But now the entire company is functioning off of Teams.
One of our initiatives was to do more webinar-based training, online training, remote training. We had the systems, we just weren’t getting people to adopt them. In three weeks, our education department has probably put out 100 different online courses for the footprint of the company and accelerate the use of a portal that we already use. It forced them to do that and we’re seeing better education for our agents.
I think you’ll see office space decrease in the business, you’ll see real estate offices, the square footage decrease because people now are learning that they liked working from home and they’ll still want an office that has a sense of community to meet clients and customers. That will change some of the way people do business. I think people will have to get creative on in terms of innovation that differentiates you from other companies, like partnerships and packages with mortgage companies that you have, so the financing options are innovative.
We have our hundred percent money-back guarantee program, a program we’ve had for years, but we’re seeing an uptick of buyers saying, ‘I am nervous about this, if I can buy this house under this program, and if I’m not happy, they’ll buy it back to me for 100 percent of what I paid for, that gives me confidence to make the purchase today. I think what’s gonna happen is you’re gonna see great industry innovation that comes into play.
What have you been advising your agents to do right now? How are you advising them to keep busy and prepare themselves to be in a strong position when the market does come back?
We mobilized really quickly when this started to happen and looked at what some of our strengths are, which we think is our education department, our ability to communicate, the trust capacity we have in our salespeople and our marketing side. We’ve really tried to drive home on communication. Every one of our branch offices every day is having some sort of touchstone and meeting with the agents, even if it’s a training component, an education component or just even dialogue, getting people to participate and connect and share their feelings, their concerns and best practices.
We also have messaged to our agents that even this time, even if business is slower, you need to have a plan, you need to get up every day. We’ve given them plans and we put a training program together called Elevate, which we sent out all of our agents. It’s work at home that you can do every day to connect with people, to get some education, to work with communicating to sellers and buyers and let them know what’s happening in the market, giving them market statistic data to share with people.
We’ve enhanced a lot of our assets for marketing with shareable assets and added a whole library of sharable assets so that people could make touchstone on their Facebook or Instagram or even just an email with their clients and customers.
Company-wide we also, every Monday afternoon, we have a webinar that’s shared called Motivational Mondays. It’s by two of our great managers who are really like highly motivated, who are just reaching out to agents, just trying to give some inspiration on a Monday. We have a technology webinar every Wednesday that sort of reinforces how you can use today’s tools to grow your business. Every Friday morning we have a webinar, it’s a town hall setting that is a panel where you can ask whatever question you want prior to the webinar or during it.
We’re trying to adjust to reassure confidence amongst our salespeople. We increased our digital advertising spend to drive more leads and traffic to our website. We launched a partnership with BySide and use that as a new tool to try to just get dialogue started about how much your home’s worth, what kind of buyer interest we have in your property, so if you thought about putting your house on the market today or even 30 days from now, you’re sort of getting a glimpse of how we can meet that market expert. It’s just a lot of everyday effort, and I think that this business is about leadership and communication, and we’re just trying to leverage as much of that as we can.
How are you supporting your agents’ financial needs through this time?
An offering we’ve had for our agents for quite some time now is called Income Advantage, which gives our agents a draw against their commission. The way the program is set up, you have to been with us for a year or if you came from another company, show us your 1099, so we verify what you made the year before. What we end up offering is, based on your qualification, we take what you made the year before and basically take half of what you made and we’re advancing you those dollars on a monthly payment. We’re sort of betting, even in a downturn, you’re going to make at least what you made in the prior year.
Agents know they have some steady income coming in, in an otherwise commission-based industry. There’s zero interest on what we loan you, we’re just betting on you and trying to give you some stability. When this hit, we added an extension period through April 15 for anybody who wanted to enroll who felt that they were just concerned about where their business was. Roughly 500 agents across the footprint of the company — who were eligible but who hadn’t signed up prior to — began taking advantage of the program.
We take the risk on them, we know it’s some markets you can’t even list or sell in some markets and it’s just some money coming in. But we’re pretty sure that those agents will make that back, and we’ll be okay on the back end. We’re sort of putting our cash forward to help them when a lot of companies are looking at how they reduce cash and so forth, we’re saying, how else can we help our Realtors.
Second is you know, very early on when this happened, there were a lot of Realtors trying to understand and navigate the CARES Act, navigate their local state unemployment, what they can apply for what they couldn’t and what they’d be eligible for. We know that the boards are doing their best to try to get an answer and so is the National Association of Realtors, but we just felt the nature of our company, we felt the need to do a little bit more.
So we went out and hired one of our outside law firms and asked them to, for each state, do a complete look at how the CARES Act would affect our agents where we can point them in directions. So two weeks ago, we paid for them to do the research and then we paid for them to hold webinars last week across the footprint of our company-specific for each state.
That basically was free legal advice to any of our employees, from our law firm. We saved those webinars and placed them on our intranet, so agents could go back and review it, they could share with their accountants, they could, you know, have their spouses look at it. So, you know, it’s just our way of saying we want to help you get direction on what your benefits were.