Realtors Try Harder as the Selling Life Gets a Lot Tougher

Real estate agent Therese Marcus is in an enviable position. The top sales agent in the Studio City office of Prudential California Realty last year, Marcus will likely match her 1989 volume this year, even though the home sales rate in the San Fernando Valley and most of the Los Angeles area has plunged about 30%.

But Marcus’ success won’t come without a price. She’s working longer hours. She’s fighting more with clients who refuse to lower their asking prices when their homes have been on the market for months. And she won’t make as much money because she has to spend more to get the sales.

That’s a sharp contrast to a year or two ago, when the Southern California housing market was soaring and homes sold so fast that agents didn’t have to bother with the kinds of marketing activities typical in a “normal” market. By the time a promotional flyer could be printed, a home was already in escrow.

“Now you have to do flyers, more ads, magazines, cable TV shows. I’ve already spent more money, more time than last year,” Marcus said.

Throughout the Southland, real estate agents such as Marcus are feeling the pressures of the area’s housing market slowdown.

Perhaps the most jarring indication that times have become tough for agents was the recent failure of the San Fernando Valley’s largest residential brokerage, Mike Glickman Realty Inc. On June 6, Glickman closed its five offices, laid off more than 1,200 agents and filed for bankruptcy liquidation.

Glickman’s downfall has been largely blamed on overly rapid expansion and a failure to change course when the market headed south. Glickman spent extravagantly on perks for its agents and continued to give them a larger-than-average share of commissions. That strategy became unmanageable when the market slowed, observers say.

Brokerages and their agents say Glickman’s failure serves as a reminder that they must adjust to a new market reality. Now that prices have flattened, buyers are becoming choosier and more demanding, more likely to ask sellers to make repairs or help them obtain financing. And homes take several months to sell--rather than a few days or even hours. Accordingly, brokerages and agents say basic marketing techniques and sound business practices are again the priority.

“In a hot market, anybody can make money,” said Marcus. But now, she said, a good sales agent will work twice as hard to find that elusive buyer. Many agents say they’re going back to their old bag of tricks to drum up business, including holding more open houses for prospective buyers, hosting lunches for buyers’ agents to get more exposure for their homes, and cutting their own commissions.

Sellers and their agents are even offering incentives to buyers’ agents, such as free trips and cash bonuses. One listing agent offered a seven-day trip for two to Hawaii to any agent successful in finding a buyer for a house in Encino Park.

Brokerage firms say they’re re-evaluating basic business practices, with an eye toward keeping costs down and sales volume up. At Prudential California, for example, corporate overhead is being cut in non-sales-generating areas--by consolidating accounting offices, for example.

However, Prudential is spending more on advertising and promotions. For instance, the firm will spend $750,000 this year on a slick new magazine that shows off its ritziest properties. It has also stepped up training for its agents in negotiation skills.

The biggest firms in the Southland--Fred Sands Realtors, Jon Douglas Co. and Prudential--say they’re looking to lure more foreign buyers and have recently aligned themselves with brokerages in Japan, Taiwan and Korea.

Some agents have also turned to foreign buyers to compensate for the lack of local buyers. Ronald Chang, a Coldwell Banker agent in Arcadia who moved here from Taiwan 12 years ago, specializes in marketing homes to other Asian immigrants. He has become particularly adept at finding houses that conform to his clients’ wishes to have good fung shui , a Chinese superstition that dictates everything from the direction a house should face to its proximity to water.

But Bob LeFever, president of Prudential California Realty’s Orange and San Bernardino counties region, said these tactics still won’t result in the amount of profit that brokerages made a year or two ago. “If anyone is telling you anything different, they’re lying,” he said.

There is evidence that an industry consolidation is already under way. Jon Douglas, which has hired nearly half of Glickman’s former agents and is negotiating to take over the leases at some or all of Glickman’s former offices, recently acquired a small Manhattan Beach brokerage, Thomas & Associates, as well.

George Rathman, Prudential California’s chairman, said in the past several months he has received several calls from other real estate companies interested in entering into joint ventures or selling out. Dana Potter, owner of Pinnacle Estate Properties in Northridge, said he too has received calls recently from three brokerages asking if he would be interested in acquiring them. Roger Hance, president of the R. R. Gable Inc. brokerage firm in Northridge, said he recently acquired a small Simi Valley brokerage and is mulling the purchase of two other firms.

“It will basically be a game of who has the most wherewithal,” Hance said.

Meanwhile, many in the industry believe that if the market continues to slow in the next several months, the dropout rate among agents will start to climb--particularly among those who entered the business during the past few years when the market was booming.

“We had a lot of people jump on the bandwagon last year and they’re all crying the blues right now,” said Tara Conley, a Coldwell Banker agent in Laguna Beach.

But signs of a mass exodus aren’t yet evident. Both the Los Angeles Board of Realtors and the San Fernando Valley Board of Realtors say their ranks have not declined so far this year. That’s partly because many “part-time” agents keep their licenses in weaker markets even though they might not be working. But it is also because many companies report that they’re enlarging their agent work forces in order to keep sales volume up.

Brokerages “need to keep their body count up to get those listings,” said Erny Pickert Jr., president of Norton Realtors in Brentwood. Some offices are stacking three or four agents at a desk, Pickert said. These extra agents cost brokerages little in overhead, since most agents work as independent contractors and are paid only their share of commissions.

But most agents say they’re just working harder and spending more time with sellers, trying to persuade them to lower their prices.

“I had an agent three years ago tell me how easy this business was,” said Bobbie Ross of Jon Douglas’ Beverly Hills office. “I’ve been in this business for 18 years, so I just smiled. I wonder if that agent is still working.”