You don’t have to be a “Shark” to swim with them … Editors note:
Housing professionals are a stubborn group. Whether you are a real estate professional, appraiser or loan officer, there are very similar characteristics in each sales occupation that define and even predict success. There is no occupation quite like the aggressive and hustle nature of being in real estate. It is difficult to find jobs that represent so much upside per transaction – yet so much financial risk – while you build your book of business. Adding to the difficulty, there are few loyalties in real estate, especially when you are a new agent trying to make your mark on your local market. Fueling this competitive dynamic are a few facts from the National Association of Realtors:
- Over 80% are independent contractors
- Just 30% of all agents have a bachelor’s degree
- There are 1.3M licensed real estate professionals
- Average earnings for agents is just over $40K annually
To close 2011, NAR revised its previous forecasts: With just over 4.2M single family homes sold in 2011, every deal is extremely competitive. Local market demographics naturally will reflect just how competitive, but, on a normative basis, there are a lot of realtors® fighting for each and every deal. Agents know this intuitively, but it is interesting that there is still frequent resistance to learning or embracing what would be considered important sales fundamentals. Fundamentals are annoying because they are
“fundamental.” The “fundamentals” become the very things we know but don’t do, yet they are vital to our success. This is the interesting thing that comes from all interviews with highly successful people. The “best practices” become the very ingredients that make the larger opportunities work well. So if those ‘little things’ are ignored, don’t be surprised if consistent, repeatable success evades you. And yet, when we attend conferences or read interviews, we get annoyed easily as we look for the magic bullet or the secret recipe for success. While we do this, we skip over all the necessary details that in the end ARE the secrets to genuine success. Knowing this, I step into my interview with Barbara Corcoran: investor, real estate mogul, TV personality and residential real estate “Shark.” Barbara epitomizes what it means to be in the real estate industry. Her quick wit, stark ability to analyze, forthright ability to interrupt, redirect and take control are qualities that were pervasive while I was in the “shark tank” – pun intended. Interestingly, this was accomplished while maintaining a likeable personality: intriguing, substantive, competent, helpful, instructive and – dare I say – maternal. She has a way of lecturing, educating, embarrassing and yet mentoring you, all in a single conversation. Perhaps it was the Catholic nuns who taught her this at the convent she attended for college, or maybe it is the male-dominated culture in New York that enabled a disciplined woman to succeed. Whatever the reasons, and we explore several in this interview, it is not surprising when you learn that she sold her real estate company, The Corcoran Group, in 2001 for an estimated $70 million and was the face of residential real estate across the United States on NBC’s The Today Show
. Her new venture is investing in companies she equally tears down on ABC’s hit show, Shark Tank
, which, among other investments, has increased her total net worth to over $1.2 billion – astounding for a woman who was broke 30 years ago, working job to job simply to keep her fledgling real estate business from closing. Barbara’s story is a perfect one that reflects how close any one of us could be to success. It is always one decision away, and it frequently revolves around innocuous factors; it is rarely a one-hit home run. That is the subtlety of success. Frequently, we are so close – and yet we do not know it. We are blindfolded in our business lives, often in the dark as to what the future may (or may not) hold. But those like Barbara, who have succeeded through the passion of their own convictions, nonetheless continue forward.
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In today’s residential real estate market, what is the number one threat that real estate agents should be aware of?
: Believing that it isn’t a good time to grow your business. Don’t wait it out!
It is always a good time to pull ahead of my competitors – in good times, I was always outspent; in down times, larger companies tend to cut back and circle the wagons. It is a golden opportunity – and they wait it out. When I built my business, when the market was great, I worked my ass off and couldn’t pull ahead of my competitors; when the market was down, I ripped ahead of them. The key is to manage the market cycles – the best agents make the most money. The worst thing you can do as an agent in the market is to believe in not growing your business. The very opposite feeling or action is what you should do; waiting it out is the biggest mistake you could make. I am not saying it is the smartest advice, but when I worked my hardest when the market was bad, I truly went past my competitive cycles. Through each cycle I increased my market share. My best agents made the most money in the down cycles; the agents on the fringes generally did worse. I sold my business in the year prior to 9/11. However, I am actively investing in businesses. Real estate is no longer part of that – been there, done that. How should residential real estate agents today respond to this threat and still remain competitive?
It is a great time from the broker owner’s perspective – a great time to renegotiate your leases with your landlords. Even if they said ‘no,’ after three months I’d go back until they said yes. I was always persistent in reducing costs and growing revenue. Secondly, I’d get rid of the bottom 25% of my staff. In every downturn, the bottom 25% produces only 3% of your business – but they occupy a large percentage of resources. You have to move quickly and decisively. Other things such as bookkeeping, listing fees, phone costs – every single part of your costs goes up. If you can save 25% of your costs and overhead, you will be far ahead of the game. Most broker owners don’t do this until two years into a bad cycle because they are waiting for the market to turn around, but often their optimism can put them out of business because they aren’t moving fast enough. [caption id="attachment_9375" align="alignleft" width="300" caption="I would always spend 50% of my week recruiting the better agents in the industry. If you wait until the market is coming back, it will be too late!"]
[/caption] I would recruit as well – the wonderful advantage is that most of the top agents tend to be most unhappy in tighter markets because of the cutbacks in sales and marketing expenses. Broker owners struggle in making clear priorities and they tend to be loyal to people they shouldn’t. As a result, those you should
be loyal to end up leaving. It is very difficult to recruit when times are good; agents are doing well and they are well fed. I would always spend 50% of my week recruiting the better agents in the industry. If you wait until the market is coming back, it will be too late! These principles are very consistent with sales-focused, service-level businesses. It appears they are equally applicable to many of the mortgage companies I work with as well.
Yes, this is very true – sales is sales. Real estate agencies have a much better image and reputation than the mortgage industry. Is this a good time to get into the housing real estate market? And how long do you anticipate the residential real estate market to be as volatile as it is today?
I saw your top agent of the month, Pauline Craven from William Raveis. She is relatively new to the industry within the last three to five years – and yes, top producers get lazy. She probably has a much better opportunity in today’s market than the more experienced agents. Let’s face it – top producers get lazy. I had 1,000 agents – all of my agents started in the worst of times. There is strength in naiveté, and people probably thought she was crazy. When you have experience and many years of selling, the poisons of the mind always hope for a different reality. Newcomers don’t have a reality different from the one they are in. Besides, they have newer approaches to marketing, sales, etc. than the old guys in the field. The old allegiances often break down as a result of a downturn in the marketplace. This is license to kill for new agents like Pauline. New agents don’t operate by the same set of rules. There are actual facts working on your behalf – you create your own reality, the market comes back and you have to break into that market. As far as the market is concerned, I do believe we’ve turned the corner. Of the approximately 300 markets NAR looks at, 25% (NAR Charts) across the U.S. have turned around; there are double-digit improvements in many markets around the country – you can’t ignore this. You have to appreciate the fact that the inventory is 25% less than it was a year ago. Sadly, what grabs the headlines is the black cloud that comes into a buyer’s mind – the foreclosure market. The foreclosure mess we have to work out through the system. All of the efforts by the government have fallen short. How much longer do we have? I am not certain, but things are clearly on the mend. What was behind your success in the 1970’s? As a woman, working in what was largely a man’s industry in such an aggressive city as New York – how did a woman from St. Thomas Aquinas College standout, be competitive and grow a real estate business?
St. Thomas Aquinas – this was a convent, and lucky for me they brought in 30 lay women because they didn’t recruit enough that year, and they accepted me into [caption id="attachment_9376" align="alignright" width="300" caption="I told them, “You know I was almost a Nun, as I went to college at a convent – you can trust me.” That alone closed the deal and I got the job on a large condo project across from the United Nations."]
[/caption] their undergraduate program. It was a stroke of luck. I would have been barefoot and pregnant by the age of 19 like everyone else I grew up with from my home town. It was a stroke of luck that I ended up being introduced to that college. It is a funny story. I had a friend who was visiting the college who was a year older than I was. She had told me about this school. I thought she was crazy because I was a terrible student – I figured I would never get in, but I decided to accompany my friend during her visit to the campus. She was a good student and I wasn’t. I filled out the application on a whim when I was there, and not only did they accept me – they gave me a bill for tuition in equal installments for 12 months. I was able to pay my own tuition. That was a lucky bus ride. It was a 30-minute ride north of my town and she simply wanted company. I was not a smart student and was never successful in business or a trade; I had 22 jobs before I started my real estate firm. This decision literally helped me for the rest of my career. No one has ever focused on my education and how it impacted me, but quite literally, I made hay of that college decision on that fateful day – and I will tell you why and how. There was one bad market in the early 1980’s. I had 18 agents or so at the time, and we were starving to death, which wasn’t all that uncommon. I was thinking of closing my doors.
Two Italian developers come in one day and asked my opinion on some condominiums across from the United Nations. They mentioned they would need to hire a marketing and salesperson to run their project, and I asked them for the job. They were surprised and yet skeptical because I was running this real estate company. They didn’t trust me because my story didn’t make sense – and of course I wasn’t about to tell them that my company was on the brink of closing down.
I said to them, “You know, I was almost a nun, as I went to college at a convent – you can trust me.” That alone closed the deal and I got the job. It wasn’t technically correct but it wasn’t a lie, because I attended the convent and it was indeed a nunnery. These Italians needed someone they trusted and I needed the money to keep my business’s doors open. I worked there for seven or eight months, the market turned around, and I went back to my business full time. The Catholic culture was something that I benefited from, there is no doubt. That “Catholic Card” was pretty effective when I needed it – and it was true. Did you fill a niche market? Do you recommend that other real estate businesses focus on niche markets? I have always been fascinated with niche markets such as the Chinese, Vietnamese or other specific market focal points. As the market shrinks, this large pond, which was a $3T market, is now a $1T series of puddles across the United States. Do you recommend focusing on a niche or taking the business as it comes?
I could argue either side – in life, if you know a niche market better than anyone else, it is powerful and a good place to start. The NYC version of this story is the building where you live – it is great for someone to focus on this. You have local market knowledge. Therefore, to become a strong agent for the immediate 30 blocks can be the target goal. You can specialize in a listing fashion – I focus on single-family homes – or raised ranch or one-level homes. You have to learn other markets; customers are less loyal and they know what they want. This can be really difficult because customers tend to be very picky and less loyal. In the early 1970’s, people didn’t look expansively; they focused on some neighborhoods to the exclusion of other neighborhoods. Customers will be more loyal if you can tailor what is available to their needs. So the agents who can swing with the changing tides of the market are the ones who come out ahead. This is always better than simply sticking to a specific niche market. If you had $5,000 today (this is your $1,000 investment in your business in today’s dollars), where would you spend this money and what would be your approach to the business?
I would invest in real estate; it is one of the few businesses that has a proven model. You can make money across the United States. You can work it – it is a low-risk, wildly profitable opportunity. It works in every town across the country. All the questions are known variables; the only question resides in yourself – can you work it? It doesn’t take much to get into the business. Would you ever invest in tier two or three real estate markets such as St. Louis (MO), Tulsa (OK), Boise (ID), Lexington (KY), Indianapolis (IN), etc., given the stability in certain ‘slow to moderate’ growth regions of the U.S.? Are there strong longer-term real estate growth opportunities in these unsuspecting markets?
It depends on the economy – in shaky times, yes. In down times these markets tend to be more stable because the population isn’t as mobile; there aren’t as many transients. Real estate brokers need mobile markets. Highly mobile markets are great because this is when people need real estate. What setbacks did you experience with your business, perhaps when you were getting off the ground, and what can other real estate entrepreneurs learn from that experience?
Well – these are the mistakes that almost sank my business and honestly, I see these affecting all businesses that eventually end up failing.
- Cash flow; stretching every dollar you have.
- Over-extending – and having the bottom fall out.
- Lack of confidence – questioning your own judgment – vacillating. Be decisive in how you make decisions. Making the right ones isn’t necessarily as important as making decisions in a timely manner.
- Don’t be intimidated by the competition.
Each of these are killers, I mean real killers. Cash flow is always taken for granted. It is always important to be liberal with your attitudes and approaches to the market, but conservative in how you spend money. Don’t just expect that once you spend money, the business will definitely will be there. This often is NOT the case; naiveté always overestimates what the sales response will be. This is a danger for people who are new to the market, and 9 times out of 10, they are too stupid or prideful to know any different. When people criticize you personally or pick at your business, more than likely you are making waves and getting things done. Those are good signs that you are doing the right things in your marketplace. People ultimately will find creative ways to take you down – most of the time they will try to undercut any idea you have before it can be successful. If you believe in it, just move forward passionately and demonstrate the success you believe in. Reflecting back, what were the most important business decisions that later led to your success? Are these principles applicable to independent Agents who own their own local firms but desire to grow?
Some other pivotal moments that led to the success of my business: I borrowed $1,000 from my boyfriend, and not long after, he fell in love with my secretary and left me – that was greatest gift and event that happened because then I could focus on my business! Lastly, I was publishing a market statistical report – the Corcoran Report – on my marketplace; this was based on only 11 sales. This information was posted in the New York Times
because no one was doing something that was LOCAL. It is all about local knowledge – the information that is most helpful for agents. Therefore, publishing every 6 months for the next 30 years grew my business more than I could have ever dreamed. This expanded my image and market presence, and enabled me to crush the competition. Once you control the media platform, you are much bigger in perception. NAR, local market report with your name on it, these become entry points into newspapers, TV, radio, etc. If you become the go-to person in your marketplace, you will own it. How do you recommend a real estate agent balance philanthropic or volunteer activities in a community with their business objectives? Should you leverage one for the benefit of the other?
Personally, I have 10 siblings – I’m the second oldest. Being a middle child – great position – you can easily hide. I wouldn’t want that today. I am closer with some family members than others; this changes depending upon the phase of life. Two siblings are on the West Coast, my sister is in PA, brothers are in Brooklyn and NJ. My relationship with each of them has certainly grown around a commonality of interest. To grow in a relationship you need new experiences – three of them wanted to go into business with me when I started my business, and quite honestly, I said no to all three ... it sounds cold, but I know a lot of people who have gone into business with family, and spend more time talking about those problems than making things happen in their marketplace. In the community, I love to teach. I can lecture and make a huge difference in people’s lives; I like empowering people to get over failure. I can be influential and I know I can make a difference in people’s lives. So, I work in areas that I believe in – you can’t fake passion, and people in business know this. People are drawn toward conviction. Making money and success is a function of your passion and not an end in itself. Was doing TV part of your growth strategy for your business? Social media today is the new ‘media’; how do you think this can be used in such a competitive market?
I was on TV a lot in the NY market because of my published books. TV was definitely part of my growth after I sold the Corcoran Group. Social media – the battle for people today is online – social media, Facebook, Tweeting, Blogging etc., it is the super highway to create an image of your company. If you create a following, you need some middle place to send people to – if you are on TV, radio or are frequently in print, you should send them to some website or some dynamic place where they can always get more of you. The internet is rather simple; you can take advantage of it for your business. The internet is a series of country roads. Via the internet, there are many more options. You are known as a “Shark” on the venture capital startup hit television show Shark Tank. What do you look for in making investments in new companies?
I am a shark on an angel investment show – it is American Idol for business ideas. I felt right at home. This is nothing different than hiring great salespeople. Who do I put my money on? Who will come in? I don’t want to piss my money away, and I want to spot talent. With all of my investments, they are flying – they are great salespeople. It isn’t about the product. You need a salesman to build a business. With so many Americans struggling to qualify for a mortgage, is real estate still a good investment today for the average American family? Or are we entering a new non-home-ownership phase in American culture where more and more will be renting?
Renting is a band-aid solution to recent injury, so people can lick their wounds; people will always want to buy a house or a place of their own. This is America – we don’t rent, we own. And with that, I have my next appointment.
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Barbara was remarkably friendly, professional, matter of fact and yet very personable. She touched upon a number of points that many already know but few put into practice. This is at the heart of The Niche
Report Interview Series – to uncover, articulate and clearly present the specific things agents and brokers need to take advantage of in order to be successful in today’s market. Will you invest, take calculated risks and listen to new ideas? Are you willing to focus on the little things that will build your business and make the tough decisions? These are the key points that have created success in the lives of people. There is nothing special about Barbara Corcoran, but what is special was her willingness to remain committed to her brand, taking advantage of new media and focusing on her market niche, and it was through these few principles that she was able to build one of the largest real estate firms in the United States. [caption id="attachment_4352" align="alignleft" width="150" caption="Rick Roque"]
[/caption] Mr. Rick Roque, Managing Editor. For comments email me at: firstname.lastname@example.org
or call me at 408.914.5895.