Agents need to be aware of unforeseen business problems that can pop up without warning
By Chasity Cooper
Like any industry, the real estate business has experienced its fair share of changes and challenges over the past year. As the coronavirus pandemic continues, REALTORS®, especially those who own their own businesses, are finding that being flexible and willing to change course is crucial. Risk management, which is defined as the process of identifying, assessing, evaluating, treating, monitoring and reviewing a risk, is a skill that REALTORS® must constantly hone. Whether it be a homeowner deciding to take their property off the market or a new piece of legislature at the local, state or federal level, the real estate marketplace brings forth several inevitable uncertainties. Luckily, there are ways to prepare and pivot when unexpected issues find their way to your doorstep.
The ability to adapt
No matter what you might have learned in real estate courses, dealing with an unforeseen problem like property damage, environmental risk or even litigation will absolutely push you to think creatively. But when the circumstance is out of your control (like a global pandemic, for example), you must do your best to adapt quickly.
Timothy Kinzie, CRS, is the founder and CEO of Montlor Luxury Realty, a national real estate company based in North Carolina. When the pandemic began in March 2020, he realized that he and his team had to move quickly to keep business rolling forward.
“I think that going into any business, but especially real estate, you need to inherently have problem-solving skills and an entrepreneurial, creative mindset to resolve issues as they arise,” he says. Over the last year, Kinzie and his team leveraged technology and relied on robust marketing materials like videos, 3D tours and quality photos to showcase properties while social distancing measures were in place. “During the pandemic, a lot of properties were failing. To address that problem, we built an entire inside sales staff to capitalize on converting business that was struggling,” Kinzie says. “Being innovative to problem-solve was something that we were able to adapt to, and I think that it was the perfect time to grow our company and exceed our goals.”
To acclimate to unforeseen circumstances, though, Kinzie strongly recommends having important resources in place. From additional capital on reserve to insurance policies and access to legal support, creating standards for yourself, your staff and how you conduct business can keep you out of trouble.
4 Risk Management Best Practices
1. Always communicate
From the initial discovery call with a potential client to closing on an offer, you want to make sure you’re communicating in a way that’s frequent, clear and concise.
2. Set the proper expectations with all parties involved
Especially when it comes to the onboarding process, it is crucial to explicitly state what can and cannot be achieved in your scope of work.
3. Keep records of everything
Emails, text messages, phone records and receipts are all important documents to hold on to, just in case you need to reference them later.
4. It’s OK to say no
Not every client is going to be a good fit, and that’s OK. Remember to do your due diligence when vetting potential clients or vendors.
Cover your bases
Mark Handlovitch, CRS, who is a REALTOR® based in Pittsburgh, says now more than ever, REALTORS® must be overprepared rather than underprepared. “With COVID-19, for example, it’s the interpretation of the CDC guidelines and what you can and cannot do as far as gathering is concerned,” he says. “We have strongly encouraged our agents to study their listings, and even if it doesn’t say anything about specific COVID-19 restrictions, it’s in your best interest to have clients wear a mask during a viewing and/or to wear booties and have gloves available as a precaution.”
In Pittsburgh, Handlovitch says that the local and state REALTORS® associations have created COVID documents for agents to ensure that they, as well as their clients, are protected throughout the transaction process.
“It’s important for agents to make sure that their brokerage has the proper errors and omissions coverage and that it is up to date,” he says. “Quality over quantity; it’s not about the price, it’s about the coverage.”
Integrity over everything
When Kinzie started his real estate career at age 26, he received important advice from his father-in-law that has stuck with him for more than a decade: “He told me, ‘Tim, I want you to remember, some business is a blessing not to get,’ and that’s because a lot of the risks that you mitigate for yourself as a business or as an agent are by making sure that the people you’re working for are also conducting themselves with integrity.”
Handlovitch believes clients must also have a complete understanding of the situations they are in. “I will tell people all the time not to be afraid to fire a client,” he says. “If you have concerns about a particular client, then maybe they’re not the right fit for you.”
When it comes to learning how to navigate unexpected issues that may arise, Kinzie says that having a network of strong mentors can help all agents at any level of their career navigate the changes and challenges the industry may bring. Handlovitch agrees: “Don’t just try to take the load on yourself and think that you can conquer the world,” he says. “Reach out and seek help from other agents, brokers or even home inspectors.”
Practical Problems
While general risk management practices can help a REALTOR® navigate unforeseen problems, there are several issues that all agents will likely need to deal with at some point in their careers:
Liability — While working for clients, there may be instances where legal action is taken against you. For example, an injury that occurs during an open house you’re holding or any damage that occurs during a showing of a property, could land you in legal hot water. Be sure to have an up-to-date general liability insurance policy to cover these issues should anything go wrong.
Ethics — Being as transparent as possible is necessary to prevent any sort of ethics complaint you may receive from a client. To avoid being sued for a violation you may not have even known you’ve committed, be sure to have every detail of the home transaction in writing. Different associations may have different codes of ethics, but NAR has an extensive and detailed set that includes most industry best practices. Study these to ensure your conduct is always professional.
Market volatility — This is a problem that is almost unavoidable, as individual agents can’t control what’s happening in the real estate market at any given moment. What you can do, however, is stay up to date on industry trends to anticipate any market fluctuations. Annual appreciation of home values, low inventory and homes selling above asking price are signs of a strong market. Frequent price cuts, depreciation of home prices year over year and rising inventory may mean that the market is slipping.
Timothy Kinzie, CRS, founder and CEO of Montlor Luxury Realty in North Carolina, shares a slightly different problem that he had to account for early in his career: Growing too big, too fast. “While most successful agents account for changes in the market, I’ve noticed that many fail to anticipate the resulting issues that arise when their own business grows at a rate they didn’t think was possible,” he says.
This happened with an earlier, more localized business of his, as he realized limitations he had unwittingly incorporated into his business model prevented him from taking his brokerage to the next level. “Before I took my own luxury real estate brand to the national level, I actually built and sold a completely different real estate brokerage because of the business model’s self-imposed ‘success ceiling,’” Kinzie explains. “The instant I realized that national and global growth was my true ambition, it became clear that I would need a completely different vehicle to get myself there. Had I possessed the foresight and wisdom of simply beginning with the end in mind, I could have saved myself a lot of time, energy and money by structuring the correct business plan to begin with.”
To learn how to recognize risk in your business, it’s crucial to understand how state and federal laws and regulations apply. For more information, visit NAR.realtor/risk-management.
Photo: iStock.com/bymuratdeniz
