Inman is launching a brand-new profile series about independent brokers. Here’s Joe Himali of Best Address Real Estate.
Why do you stay independent when there are so many great franchises to join?
I have not found a franchise brand that provides a positive return on investment for the cost to be a franchise. There are many sales pitches about how buying a franchise will increase your net income, but it is no surprise that there are no guarantees.
The biggest points of differentiation for franchises is their “national advertising and reputation” and their ability to bring marketing and operational advice to an independent broker.
Franchises have fallen into the deadly middle trap of search engine results — they can’t compete with Zillow/Trulia/realtor.com for top billing on broad search results, and they are too big to get good results with hyperlocal SEO (search engine optimization) that independents can use.
From my anecdotal discussions with franchise owners, most of the “hot leads” they are getting from national and international franchise websites are not hot at all. The additional annual revenue generated by the leads given to the franchisee are not sufficient to cover the cost of the annual franchise fee.
For the submarket of properties that our firm specializes in (luxury and historic urban properties), either there isn’t a strong brand that matches our niche, or the franchise has already been purchased and is not available to me. In fact, many franchises and their branding would be a detriment to the pursuit of our niche market.
Operational advice is valuable and could make a franchise worth purchasing, but the reality is that there is not enough fat in our operations that a franchise could cut that would cover the cost of the franchise fee.
When did you decide to launch your independent brokerage and why? What factored into that decision?
I decided to open my own brokerage after I had been an agent for five years in 2004.
There were two driving factors that caused me to start my own brokerage. One is that at the time I decided to open a brokerage, I was an agent at another firm. The amount of money I was paying in splits to the broker was higher than the value of the brokerage service they were providing. It was more affordable for me to keep 100 percent of what I earned and pay my own expenses as I saw fit.
The second is that I had values that were different from what other brokerages had. I feel that most of the large brokerages and franchises have added “additional commission” fees and “affiliated business arrangements” that are not clearly articulated to their clients. Yes, there are RESPA-required forms, but these disclosures are just as useful as the disclosures you get on your mutual fund statements — not useful at all. These arrangements create a conflict of interest when the brokerage tries to convince a client to at least contact the broker’s own settlement company, lender, insurer or other service provider first even if other cheaper or better options are available.
Additionally, I found that the brokerages that existed that I could join did not have a crystal-clear vision of what they believed in. Clearly, they all wanted to make money, but there was nothing beyond that. I didn’t want to work “just for the money.” I wanted to set a new, higher bar in open and transparent real estate brokerage.
Why did you think it was the right time and the right move for you?
It was the right time because the market was strong in 2004 and it was easy for potential clients to try a new brokerage without worry.
More importantly, it was the right time because the sooner I could start a company that had the right values, the sooner I could help my clients the right way.
How old is your brokerage?
Our brokerage is 11 years old now.
What was the biggest challenge you faced in getting your brokerage off the ground?
The biggest challenge initially was just getting through all the regulatory and industry-required paperwork. From forming the legal entity to figuring out all the steps to actually start was a huge time commitment that took away from actually selling real estate.
For the continued operation of the brokerage, it is difficult to manage the cash flow of the firm because the business is so cyclical. But finding the right banker has made all the difference on that front.
What was the easiest part of getting your brokerage off the ground?
Making the decision to do it. Once I became fed up with the nonsense at my previous broker, making the leap to become my own brokerage was easy.
What’s your approximate agent-to-staff ratio?
Six agents to one staff.
Are you part of an independent brokerage network?
I created my own network called the Independent Real Estate Brokers Alliance LLC, or IREBA (www.IREBAlliance.org), which is a not-for-profit company specifically created to give support and training to independent brokers, which we define as nonfranchise companies that have 100 agents or fewer. We have approximately 30 brokerages in IREBA and represent nearly 400 agents from around the U.S. and internationally.
IREBA holds five events per year, and we have large turnouts for the events. Events include training classes, legal updates, business growth courses and networking events.
Additionally, I belong to Who’s Who in Luxury Real Estate, and that has been valuable, but it includes franchises as well as independent brokerages.
What’s the quirkiest thing about your firm?
Quirky is not a strong suit for our firm because the historic and luxury market in Washington, D.C., is extraordinarily conservative. Our agents always dress professionally and conservatively — for men, it’s always suit and tie, and for women, it is equally professional and conservative.
Probably the quirkiest thing about or firm is our office location.
Describe your office. Where is it located? What does it look like?
We are located in a shared-work environment at WeWork. Most of the other companies at our location are technology startups, and it has a Silicon Valley vibe with the requisite foosball table, video arcade and lounge area serving artisanal beer.
We are located in Dupont Circle, which is a downtown, urban neighborhood in Washington, D.C.
What kind of floor plan do you use?
We have an open floor plan with everyone in a common area. There are no “offices” even for the broker and the staff. Everyone shares and is collaborative in the way we work.
How many agents and offices do you have?
We have one office with six agents.
How do you recruit new agents?
Recruitment is always a challenge because we are looking for a very specific type of agent and they are not common. We have found that the agents we have here who are successful come to us after having a transaction with us. We don’t pursue them; they come to us because they see how we operate and share our company’s values.
Where and how do you market your brokerage?
Our main marketing effort is through referrals. More than 90 percent of our transactions come from referrals by past clients and other networking efforts. We find that these referrals also share our values and are naturally inclined to work with us.
We do a lot of handwritten notes, postcards, phone call follow-up and personal visits to past clients.
We market to other brokerages though Who’s Who in Luxury Real Estate and through IREBA. The referrals from those sources are both very strong.
Do you have office parties? What are they like?
We have office lunches once a month where we celebrate our successes and special events in our agents’ lives. Three times a year, we have happy hour for the entire firm and our vendors. These are usually at nearby restaurants and bars. These are the times where we let our hair down and just relax — but being in Washington, D.C., they aren’t wild.
Annually, we have a year-end party where we have a special event where we do an activity as a group, such as behind-the-scenes tours of the city, and then have a wonderful meal together.
Describe your brokerage’s digital presence. Do you have a website? What publishing platform do you use? Are you active on social media? Which channels?
We have a website: http://www.BestAddress.com. We use Boston Logic’s Sequoia platform. We are about to restructure our website completely. We do have a small and inconsistent presence on social media: Twitter, Facebook and LinkedIn. The restructuring of our website is linked to our restructure of our social media.
What would you say are the biggest advantages to operating as an independent brokerage versus as a franchised firm? What are the biggest challenges?
The biggest advantage is that you can operate exactly as you see fit and you can change on a dime. You are free from the branding of the franchisor and can create a campaign that is specifically targeted to your audience. With the extra income saved by not paying a franchise fee, you can use the money for other activities.
The quality control is much stronger with an independent. Since our reputation is built on the work of our office, we don’t get negative preconceptions when someone has a bad experience with another brokerage that is across the country and misbehaved or treated a prospective client badly.
The biggest challenge is to explain our brand and values to people who have never heard of our firm. We mitigate this by having an exceptional response time and by having higher-quality marketing materials than even the biggest franchise.
What sets your brokerage apart? What makes you different from your competition?
Our core values set us apart. We have six core values that drive our business and everything we do. We understand our “why” and that directs how we act. In turn, our actions lead to exceptional results for our clients. For example, we sell our average listing in 14 days, sell 95.2 percent of the listings we take, and have price reductions on less than 5 percent of our listings. All of these statistics are far better than any other firm in our marketplace.
Now that every brokerage says they are “full service,” we’ve had to start describing our company as “concierge service” and explain that we go far beyond what other firms will do. For instance, as part of our services we supervise renovations of our clients’ homes when they buy or sell their homes with us; we can even arrange for interest-free financing of the improvements at no cost to our clients.
What’s the biggest business improvement you made last year? What’s the biggest improvement you have planned for this year?
Moving our office from a traditional office space to WeWork was a huge improvement for our firm. Our rental expense was dramatically reduced; we have a more dynamic work environment and we have more flexibility with our firm since we now have a month-to-month lease. We can expand and contract as the business demands.
Our biggest improvement this year will be the total overhaul of our Web presence, social media campaign and the launch of our new branding effort.