Fires Still Raging in California
The Carr Fire—the largest of the 17 currently ravaging Northern California, and the fourth most destructive in the state’s history—has claimed the lives of seven people and burned through 160,049 acres across Shasta and Trinity counties (at press time), as well as destroyed over 1,000 homes, 24 commercial buildings and 500 other structures, according to the California Department of Forestry and Fire Protection (CAL FIRE). Forty-three percent of the blaze has been contained to date.
Meanwhile, the Ranch and River Fires in Mendocino County have destroyed over 9,000 structures (41 of which were residences), and burned through 218,319 and 48,663 acres, respectively. Outside of Yosemite National Park, the Ferguson Fire—only 38 percent contained—continues to grow, burning through 89,633 acres so far.
Over 35,000 were ordered to evacuate at the peak of the wildfires. Over the weekend, the White House approved FEMA-provided disaster assistance, allowing affected Californians to apply for home repairs, temporary housing, loans to cover uninsured property losses, and more.
“The California Association of REALTORS® (C.A.R.) has a Disaster Relief Fund to help REALTOR® family members who have been impacted by any natural disaster,” according to the organization. “The Association established the fund in the wake of the 2003 California wildfires. Grants provided by the fund are used to help members of the REALTOR® family—REALTORS®, their staff and Association members and their staff—who have incurred substantial losses due to wildfires and other disasters by distributing grants of $1,000 to $10,000.”
According to C.A.R., donations can be made online, or directly to the California Community Foundation (221 S. Figueroa St., Ste. 400, Los Angeles, CA 90012). Checks are payable to the California Community Foundation, with “C.A.R. Disaster Relief Fund” in the memo.
In 2017, wildfires claimed the lives of 46 people and destroyed almost 12,000 structures, according to CAL FIRE.
Liz Dominguez is RISMedia’s associate content editor. Email her your real estate news ideas at email@example.com. For the latest real estate news and trends, bookmark RISMedia.com.
Crazy Book that Could Change Everything You Though You Knew.
You’ll want to pick up a copy of the highly entertaining book, Frenemies, by Ken Auletta, who delves into the world of marketing, advertising and the people and businesses in that arena. It’s a fascinating book. Among the significant issues discussed is the incredible growth in data-driven firms and how they’re already using this data to target (in mostly positive ways) consumers and their buying habits.
We highly recommend this to leaders in residential brokerage firms.
At the same time, we recall a book we recommended more than a dozen years ago, “Money Ball,” by Michael Lewis. In it, he talked about the use of modern data analysis to build a better baseball team and how Billy Beane and Paul DePodesta built an incredible baseball team around those data tools. What one has to note is that today, virtually every professional sports team, as well as many collegiate teams, now use data in powerful ways to better predict the performance of athletes.
Is it time for the residential brokerage industry to join the modern age and build data systems that are established on strong data sets and the tools to make use of these data sets. Is it time for you to change the way that you do business?
Mergers Aren't What They Used To Be
Scott Wright, REAL Trends director of mergers and acquisitions, recently wrote about the boom in valuation activity and how the variety of valuations were well above any levels in prior years. This is true for all brands, business models and regions of the United States and Canada. Not all are about selling a brokerage firm. In fact, those getting a valuation for the potential sale of a firm are in the minority of the work we do.
Age of Ownership and More
It’s also true that mergers and acquisitions activity is robust. Why? Indeed, some of it is due to the age of the ownership of many leading brokerage firms. Some of it is due to the lack of succession planning within the community of brokerage firms. Other segments of mergers and acquisitions are due to the purchase or sale of minority interests in brokerage firms.
Some are also due to market uncertainty. The number of new models entering the business and the levels of their capital backing has affected the confidence of some realty firm’s leaders in their future view of the profitability of a brokerage business. With an apparent race to the bottom by an increasing number of firms regarding agent splits and the price of the retention of high-producing agents, many brokerage firms are left wondering how to continue to grow their firms and profits when they’re getting challenged at both ends of the spectrum. Further, some firms are offering new ways to lower the cost of a transaction to the consumer through direct purchases or lower commission rate offerings.
Each of these factors is playing into owner decisions about whether or not now is the time to consider the sale or all or a part of their brokerage firms. Further accelerating such choices are the number and variety of buyers that are out seeking investments in the brokerage industry. In addition to such well-known firms as HomeServices and Howard Hanna, Realogy/NRT continues to consider small- to medium-sized brokerage firms where they can be combined with their existing operations.
Private Equity Enters the Picture
The private equity industry has also now expressed a keen interest in our business. We are aware of no less than four such companies who are taking a long, hard look at residential brokerage as vehicles for investment. Compass, which has purchased some small- to medium-sized brokerage firm as a means of entering new markets, has also acquired some larger firms as a means of either entering a market or rapidly growing their market share in areas where they already have a presence.
Prices and Terms
Market multiples have remained relatively steady over the past few years, and terms for the purchase of brokerage firms stay at relatively high levels. The private equity firms have yet to make their presence felt, but we believe they will remain active in the near term once a few transactions have been completed.
After seven years of recovery in housing sales, and as outlined in Pending Home Sales Down—Again, we may see a softening in the prices and terms being offered by any number of acquirers of residential brokerage firms. While we have no firm evidence that this will be the case, our experience tells that when the market either flattens out or drops, purchasers become more cautious about which firms they will seek to acquire and, generally, tend to soften the prices and terms of what they are willing to pay.
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Here We Go Again-Wells Fargo Does It Again