Historically, the real-estate industry has lagged behind the rest of the business world by a few years in the adoption of new digital tools.
But the housing-market downturn appears to have spurred agents, brokers and others to develop and embrace new technology at an unprecedented rate.
From Facebook to QR codes, to Twitter and multiple custom websites, many agents have come a long way from the days when they jumped in the car carrying printouts of home listings and the latest local street map.
5 key technologies for real-estate agents
Bob Bemis, chief executive of the Arizona Regional Multiple Listing Service, said Arizona real-estate agents have adjusted quickly in terms of their attitudes toward adopting new technology.
“The explosive nature of technical development has been phenomenal,” said Bemis, who has helped promote that change by offering a variety of technology products to listing-service members.
To some extent, it’s unclear where the changes will lead. The worst housing slump in generations came along just as smartphones, social media and other devices were starting to transform the way real-estate business was conducted.
The flood of short sales and foreclosures, not to mention many recent changes in rules and procedure, have required agents to learn new processes and techniques with all the latest tools at their disposal.
Even after the housing market returns to normal, those in the real-estate industry said technology was likely to continue changing their profession in unpredictable ways.
The agent’s role in a home sale - that of buyer or seller representative - is no different, according to real-estate agents in the Phoenix area. But there has been a significant uptick in the knowledge and tools required to do the job effectively.
Rampant change is partly a product of the economic downturn and financial distress many homeowners have endured and partly the result of new information technologies that, depending on how they are used, can be regarded as either a boon or a threat to the real-estate industry.
Most agents and brokers seem to agree their industry is likely to undergo as many changes in the next four years as it has during the previous four.
They said the impact of high-tech tools such as broadband wireless service, Internet data exchange, digital social networking, global-positioning systems and quick-response codes for smartphones had been overwhelmingly positive.
Still, industry representatives said information technology also has the potential to diminish real-estate agents’ role in the housing economy via a process known as “disintermediation,” which is a fancy way to say “cutting out the middleman.”
It’s the same process that has wreaked havoc on travel agents, discount stockbrokers and other professional intermediaries.
“At this point, the threats are not huge,” said Ron LaMee, senior vice president of information services for the Arizona Association of Realtors. “It may carve out pieces of the traditional services that agents provide.”
Agents of change
Today’s real-estate agents operate in an environment in which sales transactions have gotten more complicated, mortgage-lending standards are tighter, the home-appraisal process stricter, and the federal government is constantly changing incentives and restrictions that can save or kill a deal.
Many agents have incorporated technologies into their businesses that allow clients to perform some of the more enjoyable work themselves, such as searching through online home listings, while their agent focuses on the heavy lifting.
Every geographic area in the country has a listing service that maintains a Web-based database of homes available for purchase, along with various details about each property. Some of the information is suitable for public consumption, such as a home’s square footage, while other information is not, such as the lockbox combination to house keys for agents to use when showing a home to clients.
One of the listing service’s major accomplishments in recent years has been developing a Web-based system that lets consumers access and search the public-approved portion of the database.
Bemis has gone on to transform the Phoenix-area listing service into what he calls “a tester and recommender of new technology” for agents.
Bemis said most agents felt pressure to keep up with new technology, but that there could be as many as 50 to 100 applications with the same basic function available on the market.
Generally, real-estate agents are looking for tools that enhance their self-promotion efforts, improve relationships with clients, gauge buyer interest in their listed properties and the track the progress of pending home purchases. Agents have adopted other technologies out of sheer necessity, such as electronic systems lenders have implemented to track the progress of short-sale transactions.
Bemis said competition among agents is more intense than ever, and that any tool which provides a slight edge over the competition is too important to ignore.
“Those that want to survive have to evolve much, much more quickly,” he said.
Apps for agents
High-tech entrepreneurs John Perkins and Grant Gould have spent the past several years developing applications designed to perform certain tasks specifically for real-estate agents.
Co-founders Gould and Perkins’ latest venture, Home Junction Inc., based in La Jolla, Calif., offers a proprietary software product called SpatialMatch that allows users to choose a neighborhood and then view an interactive map showing anything they want to see: schools, public parks, parking garages, bus stops, bagel shops, haberdashers, Whataburgers - anything.
Agents subscribe to a service that lets them embed the SpatialMatch interface on their own websites using a technology known as Internet data exchange, or IDX.
IDX lets visitors to the website use the embedded application without having to link to another site. Many real-estate agents use the same technology to let clients access the listing service’s database.
Gould and Perkins give their agent clients the option of putting the SpatialMatch app behind a lead-generation barrier, which forces visitors to enter their name and contact information.
However, they said few agents use it. Agents have learned by experience that the hard sell and the Internet don’t mix.
“It’s not about lead-generation,” Gould said. “It’s about managing the flow of information to the consumer.”
Unfettered access to apps such as SpatialMatch keep visitors on the website and position the agent as a hyper-local expert, they said.
A previous business Gould and Perkins developed, Real Estate Village, helped agents create custom websites and was sold in 2005 to Homes.com, which provides a variety of Internet-based services to real-estate agents.
Perkins explained that tech tools in the real-estate business usually have one of two opposing goals: automation or disintermediation.
Automation products aim to make the job easier for agents. Disintermediation products aim to make agents obsolete.
Because they offer the application only to real-estate professionals, Perkins and Gould said they are in the automation space.
In fact, their goal is to help agents and brokers compete against the leaders in disintermediation, do-it-yourself home listings Web portals such as Realtor.com, Zillow and Trulia.
“We made a conscious decision to develop products that empower the Realtor,” Gould said.
Too much tech?
In today’s real-estate market, the use of certain high-tech products and services is mandatory, said Laurie Duffy, a real-estate agent with John Hall & Associates Inc., based in Phoenix.
The most critical among them is a quality website devoted specifically to that particular agent.
All real-estate agents are independent contractors, she said, and they succeed or fail based on the strength of their personal branding effort.
“You really have to set yourself apart from other agents by putting your name out there,” she said.
Other must-have technologies include text messaging, a Facebook page, a GPS device, and a laptop computer with wireless Internet service.
One of the most promising technologies to hit the real-estate profession in recent months is the use of quick-response codes, or QR codes, said Realty Executives agent Libby Cohen, of the Scottsdale-based Walt Danley Group.
Cohen demonstrated recently how she uses QR codes, which look like squares partially filled in with black dots, on the front of her listed homes’ for-sale signs.
Any passer-by with a compatible smartphone can scan the code with the phone’s camera, which instantly sends the phone’s Web browser to a page featuring information about the home and even a video tour.
Cohen receives a notice whenever one of her QR codes is scanned, allowing her to track the number of visitors to each property.
She said the system helps her maintain a good relationship with sellers.
Duffy said there were some things she prefers to do the old-fashioned way, and that too much technology can be a bad thing.
Whenever possible, Duffy said she chooses face-to-face conversation over a phone call, and a phone call over an e-mail message.
While Duffy agreed that the role of real-estate agents was bound to continue evolving with new technology, she scoffed at the notion that a website ultimately could displace agents altogether.
“I don’t see how the Internet could ever take the place of an agent,” she said. “People need guidance, and they need it from an actual person.”
Agents of the future
LaMee agreed that real-estate agents always would have a place in the housing market.
A home purchase is far more complicated than buying plane tickets or shares of Motorola, he said, adding that real-estate agents are unusual in that they broker transactions between two consumers.
Still, LaMee said it was likely that real-estate agents of the future would be fewer, more specialized, more productive and able to provide a no-frills version of their services for a reduced fee.
Limited-service real-estate agencies, often charging a flat fee in place of the traditional 3 percent commission, already had begun to emerge toward the end of the housing boom, LaMee said, but the downturn seemed to have put the brakes on that trend.
As much as real-estate agents hate them, complicated and potentially frustrating short-sale transactions now prevalent in the Phoenix-area housing market have made full-service agents vital again, especially to sellers.
Many agents believe the reprieve from their devaluation is only temporary, however.
A survey of agents and brokers conducted recently by Web-based real-estate news service Inman News revealed that many believe flat-fee services are most likely on the rise again.
The online survey, whose respondents included more than 700 self-identified agents and brokers, and about 300 other real-estate professionals, was conducted between February 2009 and March 2011.
Only about 12 percent of respondents said they currently offer services for a flat fee, but 36 percent said they expected flat-fee services to become more popular in the next five years.
The devaluation problem appears more advanced when it comes to the services provided by sellers’ agents, who often do the lion’s share of work in a typical short sale.
The survey found that while the bulk of buyers’ agents still claim to be receiving the standard 3 percent commission, more often than not sellers’ agents are getting less than that, about 2.5 percent.
Not surprisingly, the number of licensed agents and brokers statewide has declined almost 22 percent since 2007, just after the Valley’s housing market peaked.
Roughly 51,000 agents and brokers remain in the state, according to recent figures from the Arizona Department of Real Estate, down from more than 65,000 in 2007.
LaMee said that thinning of the ranks is bound to continue in the foreseeable future.
Therefore, the next generation of high-tech tools for agents will have to address productivity concerns in an industry whose participants do more work and get paid less.
by J. Craig Anderson The Arizona Republic May. 15, 2011 12:00 AM
After considerable pain, downsizing and nearly $1 billion in cumulative losses, Arizona’s native banks finally might be turning the corner.
The 37 banks still based in the state just wrapped up their best quarter since the financial crisis and recession began, breaking a string of 12 straight quarters during which the majority of institutions here lost money.
On balance, the local industry is profitable again, albeit by a razor-thin margin that partly reflects the demise of some of the weakest players. Still, bankers are sensing a silver lining in the latest numbers, and they’re not complaining.
“It’s a good story, a change in the weather,” said Stephen Haggard, president and chief executive officer of Metro Phoenix Bank. “The local economy is doing better, with definite improvement from six months or a year ago.”
As local banks recover, that could make more lending dollars available to customers here, especially small businesses, while improving overall banking services and perhaps even reversing the three-year decline in employment at these firms. Healthy local banks also are in a better position to donate to non-profits and support the community in other ways.
Metro Phoenix Bank posted a $624,000 first-quarter profit after basically breaking even one year earlier.
The big news is that bad-loan difficulties are easing, at long last.
“Problem assets have been dramatically reduced,” said Scott Schaefer, president of Meridian Bank, which improved to a $2.9 million first-quarter profit from a loss of $11.1 million a year earlier.
“We took our lumps in 2009 and 2010,” he said, citing write-downs and other responses for dealing with problem loans.
The banks headquartered in Arizona earned nearly $20 million combined from January through March, with 19 of the 37 turning a profit, based on a preliminary tally of financial reports supplied to the Federal Deposit Insurance Corp.
The agency will release final statewide numbers later this month.
Many local banks were and remain highly exposed to real-estate lending, since that industry was the state’s main growth catalyst for so many years.
The Arizona totals exclude figures for banks that operate here but are based elsewhere, such as the three largest companies with an Arizona presence - Wells Fargo, Chase and Bank of America.
They also don’t include banks that have failed, merged or been acquired over the past few years.
The majority of local banks have been running in the red for the past three years, hammered by real-estate setbacks and hemorrhaging the capital that regulators require for them to stay in business.
At the nadir in late 2009, 84 percent of Arizona’s banks were unprofitable.
Combined, Arizona’s local banks lost $950 million across 2008, 2009 and 2010.
Since the end of 2007, the state has lost 20 banks through failure, merger or acquisition and shed more than 1,500 related jobs.
Also, market share has become more concentrated in the hands of the big out-of-state entities that, critics say, are less motivated to lend locally.
“Local banks will reinvest the money in small businesses,” said Ernest Garfield, president of Independent Bank Developers of Scottsdale and a former Arizona state treasurer and Corporation Commission member.
“The big banks will drain it out of the state.”
Bankers at large institutions contest that claim, but it’s clear that having more healthy entities increases the availability of local loan dollars.
The improved recent numbers for local banks don’t mean all is well. Some of the weakest banks in Arizona and nationally continue to struggle.
The FDIC’s list of “problem” banks is still rising, with one in nine institutions nationally and an untold number in Arizona under close scrutiny. The agency doesn’t name banks on its list out of concern for inciting runs by depositors.
The FDIC generally insures depositors up to $250,000 per bank.
Small community banks that represent the backbone of Arizona’s industry have been hit harder than larger national banks, which have more diversified operations.
The U.S. industry actually remained profitable throughout the slump and earned $87 billion in 2010 - almost back to pre-recession levels.
Arizona banks, as noted, have been heavily dependent on real estate.
Perhaps the main reason banks in Arizona and elsewhere are reporting better numbers is that loan problems and delinquencies are easing, so banks don’t have to increase their reserves to cover losses.
When banks must boost reserves, that eats into profits and capital.
Also, banks are earning higher spreads between what they generate on loans and pay on deposits, and they’re earning more in fee income, Haggard said.
Schaefer sees opportunities for well-positioned banks but cautions that metro Phoenix’s economic recovery remains “spotty.”
Haggard is more optimistic. While real estate remains depressed, prices aren’t dropping as fast as before, he said.
Also, borrowers in other industries generally are faring better.
“The financial reports we’re receiving from clients are showing stronger cash flow and top-line revenue numbers,” he said.
Garfield feels now is a great time to start a bank in Arizona, reflecting the decreased competition, gradual improvement in the economy and other factors.
“Also, bankers have finally learned what gets them in trouble,” he said.
Add it all up and there are reasons for optimism.
Local banks focus their lending within Arizona and thus are a key cog in the economic-development machine.
If they have finally turned the corner, that could be a good indicator for everyone in the state.
by Russ Wiles The Arizona Republic May. 15, 2011 12:00 AM
As the country enters 2011, it is emerging from a depressed housing market and a historic recession. It remains engaged in a pitched political debate. It also has its sights set on a future of ever-changing technology that will increase opportunities.
Today, The Republic looks at what 2011 is likely to hold for Arizonans as we navigate the freeways, send students to our schools and consider our votes. We look at what’s likely to happen to medical care and the prospects for out-of-work Arizonans. We also examine the thing that defined the experience of the past year: the economy.
Race for the White House: Jockeying poised to intensify
The 2012 presidential election is still 22 months away, but what happens in 2011 will likely have a lot to do with who wins. After all, Sen. John McCain essentially won the 2008 Republican nomination by dominating the race in late 2007.
The good news: For political junkies, this is when issues are hatched and stars are born. All eyes will be on Sarah Palin, the GOP vice-presidential nominee in 2008, as well as on that year’s other veterans, such as Mitt Romney and Mike Huckabee.
But others, like Mississippi Gov. Haley Barbour, Minnesota Gov. Tim Pawlenty and South Dakota Sen. John Thune also could prove formidable candidates.
Meanwhile, President Barack Obama will try to win back independents for the Democrats.
His re-election task is complicated by 2010 census results, which show shifts of more electoral votes from the Rust Belt to the South and West.
The bad news: The race for the presidency is always big news, which means political non-junkies, still weary of talk of hope and “tea parties,” should brace themselves for a fresh onslaught of campaign coverage.
The divisive nature of primaries means Republicans will skewer each other for months, while Democrats must accept nearly anything Obama does in the name of party unity.
The bottom line: Whether it’s taxes or the border, who occupies the White House can have a large impact on your life.
It’s never too soon to measure the candidates’ priorities against your own.
- Ronald J. Hansen
Economy: Local and national outlooks upbeat but cautious
Arizona’s economy showed some improvement in 2010, particularly as retail sales and job growth finally picked up toward year’s end. The economy is expected to continue its slow improvement locally and nationally in 2011.
The bad news: Arizona faces a deficit of $2.25 billion over the next 18 months, and legislative leaders plan to come up with a budget over the next two months to deal with it. The expected cuts in spending will almost certainly result in job losses. Concerns about the national debt and deficit also could prompt cutbacks in federal spending and more job and contract losses. As the economy improves, gas prices rise because of increased demand, but gas prices that rise too much and too fast hurt consumer confidence. Experts have predicted prices could rise to $3.30 a gallon or even $3.75 in 2011. A third brake would be continued anemic population growth. Residents in other states who would like to migrate to Arizona are still having trouble selling their homes.
The good news: Stock markets have risen, indicating that investors feel good about where the economy is going. Claims for unemployment insurance have fallen. Hiring and retail sales have picked up. If good news like that continues, consumers will feel better about spending, and hiring will improve.
The bottom line: The economy in 2011 is expected to be the best in three years, although improvements could come slowly. But for those unable to find a job, the recession lingers.
- Betty Beard
Housing: Beleaguered Valley market could start to recover
Metro Phoenix’s housing market could finally start to recover in 2011, but not during the first half of the year.
The bad news: Foreclosures are expected to continue to climb through at least March because of the now-ended Bank of America moratorium. The lender had put a freeze on Arizona foreclosures for two months so it could check for paperwork errors alleged in other states. But BofA began foreclosing on Phoenix-area homes again in early December, and its backlog is likely to push foreclosures to nearly record numbers during the next few months.
The region’s home prices have been falling since last June and are poised to dip below their previous low. Metro Phoenix’s median home price hit $119,900 in April 2009, the current low for this housing crash. But, in November, the area’s median price fell to $121,500 and was expected to drop further in December.
The good news: Another significant drop in home values after the dip is not expected. Home prices could start to climb again as early as April as long as foreclosures fall and investors continue to buy.
The bottom line: Homebuilding has slowed to a crawl and won’t pick back up until there are a lot fewer inexpensive foreclosure homes for sale in the Valley.
- Catherine Reagor
Jobs: Economists see early signs of an uptick in hiring
After losing nearly 300,000 jobs during the recession, early signs of a job-market recovery are in the air.
The bad news: It could take Arizona three years to regain the estimated 275,000 jobs lost during the recession, ASU economist Lee McPheters has said. Although mass layoffs have slackened off, some companies are still shedding workers. Most of Arizona’s estimated 299,000 jobless have been out of work six months or longer. Arizona’s official unemployment rate of 9.4 percent is a count of those who are actively looking for work. It doesn’t include thousands more underemployed or who have given up their job search. Arizona’s official unemployment rate will likely linger in the 9 percent range for the rest of 2011, McPheters projects.
The good news: Arizona, which added 30,800 jobs as of November, leads the nation in private-job growth. State economists expect the state to gain another 16,500 jobs in 2011. The state’s official unemployment rate appears to be declining, probably permanently, economists have predicted. Employers are hiring more temporary workers, and there is a bit more competition among companies to hire top talent, recruiters say.
The bottom line: Arizona is finally starting to gain jobs, but the momentum is far from enough to put everyone who lost jobs during the recession back to work.
- Jahna Berry
Tourism: Hotel rates could stay flat in 2011
Arizona’s tourism industry was blasted in the past few years by the economic recession, the so-called “AIG effect,” when businesses avoided holding meetings in luxury markets, and associations and corporations withdrawing conventions after SB 1070, Arizona’s immigration measure that makes it a state crime to be in the country illegally, was signed into law.
Although occupancy began to grow in 2010, hotels’ average daily room rates fell below the rate for 2009.
The bad news: Some convention business, which traditionally books months in advance, locked in on 2010 rates, prolonging deflated room rates in the Valley.
Although occupancy is expected to grow in 2011, some hotel analysts fear average daily rates will remain flat or fall slightly below 2010 levels. It could be five to six years before Arizona’s room rates rise to where they were at the industry’s peak in 2008, assuming that political matters don’t interfere with its recovery in the meantime, some analysts say.
The good news: Research firms Rubicon, Smith Travel Research and Warnick and Company predict that occupancy will see year-over-year gains of as much as 10 percent in 2011. That could lead to a resurgence of room rates in 2012 and beyond.
The bottom line: Although Arizona’s tourism industry could be on an upward trajectory in 2011, industry insiders remain cautiously optimistic, awaiting a judge’s final decision on SB 1070 and the effect of any future bills.
- Megan Neighbor
Transportation: Programs may face more cuts
The new year brings uncertainty about core transportation programs at every level of government.
Transportation agencies will try to hang on to the money they have and seek new ways to generate revenue, whether through advertising on transit or private partnerships. The Valley’s highways will see continued improvements, including the opening of the first new highway in a decade.
The good news: The Maricopa Association of Governments reports that sales-tax receipts climbed in October for the first time in 38 months. The agency said the worst of the recession may be past. At the same time, the stagnant economy has kept construction prices down, allowing the Arizona Department of Transportation to build more with the limited money it has.
The bad news: The mid-term elections left Arizona with nobody on the key House Transportation and Infrastructure Committee and left Congress talking about cutting transportation funding. The state budget will again face deep deficits, which make continued legislative raids of state transportation funds likely again. MAG will once again need to postpone, downsize or eliminate highway and transit projects in the Proposition 400 plan.
The bottom line: Driving in the Valley should be smoother with major work wrapping up. Bus riders can expect more service cuts in some places. Depending on ADOT cuts, roads will be more littered and repaired less quickly, and services such as rest stops and Motor Vehicle Division office hours are at risk.
- Sean Holstege
Health care: Insurance costs rising, less covered
Arizonans who get health insurance through their jobs learned they will pay more for less coverage in 2011. Arizona’s consumers, hospitals, doctors, health insurers and other health-care stakeholders are adjusting to existing cuts to the state’s Medicaid program and bracing for more severe cuts in 2011. Federal health-care reform was passed in 2010, but the biggest changes that extend coverage to 95 percent of Americans do not take effect until 2014.
The bad news: Health costs continue to rise, and consumers are feeling the pain. Arizonans who have health insurance through their employers will pay more for premiums next year, and many will pay higher co-payments to access doctors, hospitals and drugs in 2011. A survey of major Arizona employers found the typical health-insurance premium increased 6.8 percent last year, to an average of $9,493 per employee.
Those who lost jobs during the recession and landed on the state Medicaid program received leaner benefits in 2010. While the state gained national attention for eliminating some organ transplants for the poor, the state also trimmed coverage for health services such as medical devices and wellness exams.
The good news: The state’s Medicaid rolls swelled by nearly 250,000 from July 2008 through January 2010, but that growth has tapered. Consumers received some initial perks from the federal health-care law, including provisions that bar insurers from denying coverage to children with medical issues and mandate free coverage for preventive care.
The bottom line: Health care is becoming a major financial concern for more Arizonans. Health costs continue to rise, and government-provided health-insurance programs are stressed by increased demand and lower tax collection.
- Ken Alltucker
K-12 schools: Students apt to feel cash crunch
Big changes expected to revolutionize K-12 education are on hold for many schools, given dwindling resources. A push for innovation was buoyed by the expectation of new federal grant money, but the state failed to receive the funds.
Now, reinventing education will move ahead at a much slower rate.
The good news: Federal stimulus money helped schools absorb cuts in state funding this year. Some cuts already made by schools are not obvious to most parents, including reducing maintenance workers and secretaries and sharing art and physical-education teachers among schools.
At the same time, business leaders, education leaders and politicians are coalescing around a new set of education goals: Move up to more demanding national and international learning standards, and reward teachers who move kids ahead.
The bad news: Stimulus cash will soon be gone. Education makes up 38 percent of expenditures in a state budget facing a huge shortfall. Schools face cuts, but lawmakers have only guesses at how much. The amount of money schools make on property and sales taxes isn’t rebounding. Changes that could make education cheaper in the long run, such as more online courses, still need upfront investments many schools can’t afford.
The bottom line: New policies and technologies are being put into place to help students learn. But more parents and students will likely feel the funding crunch. About 85 percent of every school’s budget goes toward salaries. Schools are already thinning staff and now more teachers are expected to be let go. Parents are being asked to provide more classroom supplies, make more donations and expect fewer frills.
- Pat Kossan
Universities: Budgetary ax could cut deeply
Arizona’s three state universities have faced a rocky couple of years.
Systemwide, they’ve seen their state funding cut by 18 percent, or $100 million, while student enrollments have continued to grow.
The Arizona Board of Regents, which oversees Arizona State University, the University of Arizona and Northern Arizona University, has imposed sharp tuition increases in the past few years, a move that has been unpopular with parents and students.
The good news: Unlike the University of California system, Arizona’s state universities haven’t had to limit freshman enrollment.
An influx of federal stimulus money also has helped offset some of the state funding cuts.
The bad news: Given the state’s budget deficit and the likelihood of further cuts, it’s likely that parents and students will be on the hook for a greater portion of their college education.
This could translate into higher student-loan debt or students taking longer to finish their degrees in order to spread out the cost.
It also is possible the universities could shut down what are viewed as underperforming or duplicate programs.
The bottom line: Changes would mean future students who want to stay in-state and go to a public university may have fewer choices on which school to attend.
- Anne Ryman
Nationwide reaction to Arizona’s new immigration law has been fast and furious in its first week, and fallout from the controversy ultimately could hit a broad range of the state’s businesses.
The Arizona Hotel and Lodging Association said Friday that 19 meetings representing 15,000 room nights have been canceled because of the immigration law. more…
With unemployment high and people desperate for money, work-at-home, credit-repair and business-opportunity scams are proliferating, with Arizona home base for many of them.
Regulators say Arizona is a hotbed of boiler rooms where skilled telemarketers sell vulnerable people business opportunities that can drain their bank accounts and max out their credit cards. Smooth-talking salespeople offer victims a chance to get out of debt, stop foreclosures and live on easy street for up-front fees that can start small and grow exponentially. more…
by Chris Casacchia Phoenix Business Journal Friday, April 23, 2010
Even though Chase Bank shut down its $250,000 line of credit for Randy Lujan’s general contracting firm, Sonoran Bank thought it was worth the credit risk.
IFCM Inc. used the line about a once a year. It served more as a safety net than a funding mechanism for the bonding company. That’s why Lujan was surprised to see it had been removed when he checked his account online more than a year ago.
The bank told him since he didn’t use it, they chose not to renew it, eliminating some exposure.
“After that happened, it left a bad taste in my mouth,” said the president and CEO of the Gilbert company.
So he called a friend on Sonoran’s board of directors, and within weeks the line was granted and bumped to $400,000.
Lujan had a profitable company, good cash reserves, liquidity and excellent credit, but his trends were down even with a good pipeline of business from bank construction — ironically, mostly from Chase and Bank of America.
GOOD CREDIT RISK
The credit line is partially cash secured through a CD, creating no risk to Sonoran on that portion.
“He was a good credit risk for us,” said Frank Coumidas, senior vice president of lending at Sonoran Bank. “There’s not a lot of businesses right now that can say they’re trending up.”
IFCM used the credit line numerous times last year because business picked up as big banks received money through the federal Troubled Asset Relief Program. Without that line, Lujan said he would have needed to secure another loan.
Before the downturn, landing a commercial loan would never make headlines. But, given the credit crunch and this market’s reliance on financing, getting the green light for a loan is no small feat.
I/o Data Centers LLC, which designs and builds storage capacity for some of the world’s largest corporations, is well-capitalized and growing. But the company recently needed a loan for additional capital and infrastructure enhancements.
Executives began shopping a year ago for a debt provider and quickly were courted by financial firms, said Parker Lapp, chief corporate development officer of the Tempe company.
Mutual of Omaha prevailed, offering a competitively priced, long-term loan.
Kevin Hollarand, Mutual of Omaha’s head of commercial and real estate lending, said his bank looks at the individual seeking the loan, the company’s cash flow, collateral, and the overall conditions of the business and industry.
“We’re able to structure deals that correlate with the company’s cash flow,” Hollarand said. “A lot of banks aren’t even able to sit down with a client because they’re having capital or regulatory issues.”
Last year, Mutual of Omaha loaned more than $200 million in Arizona.
Dean Rennell, head of Arizona business banking at Wells Fargo Bank, wants his team to identify the top 10 companies in each industry and seek their business. Each business banker is expected to make three face-to-face calls on prospects every week.
Rennell collects financial information from each potential borrower and links it to the size and type of loan request. He favors companies with established work contracts or specialized business lines.
That’s one of the reasons the San Francisco-based bank was attracted to American Metals Co., which processes, buys and sells scrap aluminum, brass, copper and other metals.
The Mesa company wanted to purchase a portable shredder, an $850,000 machine that breaks down scrap metal, which would allow AMI to sell the pieces directly to steel mills and consumers.
Finding financing was not easy.
President Irwin Sheinbein spoke to three other banks, which examined his records with a “magnifying glass” and “fine-toothed comb.”
“Getting the type of loan I wanted was frustrating,” he said. “As a small-business owner trying to grow my business, it was extremely challenging.”
After lengthy negotiations, Wells financed about 80 percent of the cost.
Sheinbein said the machine will bring in more revenue, while cutting freight costs in half by reducing the size of scrap. Although he secured a loan, he wants the banking community to be more sympathetic to the needs of small businesses.
“The economy depends a tremendous amount on small businesses such as ours,” he said.
American Metals Co.: www.americanmetalsco.com
IFCM Inc.: www.ifcminc.com
by Chris Casacchia Phoenix Business Journal Friday, April 23, 2010
Despite owning a successful luminary business and having a $120,000 purchase order in hand from three major retailers, John Norberg couldn’t secure a loan from M&I or Chase banks.
Russ Perry’s young marketing and advertising firm has avoided debt and weathered a storm that rocked his industry, yet Wells Fargo bankers quickly told him he wouldn’t qualify for a line of credit.
It’s a common story for thousands of small-business owners in the Valley who continue to have loans rejected by banks, which sparks the question: What do we have to do to get a loan?
“You need to know what the bank needs to know before they need to know it,” said Scott Mahoney, managing partner of Catalyst Corporate Solutions in Peoria.
Mahoney has spent more than a decade in the financial services industry, including stints as a commercial banker at JPMorgan Chase & Co. and KeyBank’s Technology Investment Banking Group. Now, he’s advising businesses on how to land financing in a difficult environment.
Cash always has been king, but it’s never been more important than now.
“Cash flow, that’s paramount,” said Glenn Gray, CEO of Sunwest Bank, which took over First State Bank in Flagstaff after the Federal Deposit Insurance Corp. shut it down in September.
But that’s only one of the criteria his bank assesses before granting a loan.
He advises business owners to have high-quality financial reports prepared by an accountant — even better, audited by a certified public accountant. Important factors include inventory, quality of receivables and their turnaround time, and current assets.
On the liability side, Gray wants to know whether companies are accounting correctly for their payables and accruing their expenses and cost of goods sold properly. He also wants to examine year-over-year trends and what’s driving revenue.
When a potential borrower doesn’t want to supply tax returns or reports a discrepancy between company financials and tax statements, that’s a big red flag, Gray said.
“We are certainly putting more credence on quality financials,” he said.
Jeff Kunkel, a senior vice president and West region manager of Chase, lists cash flow, liquidity and capital position among his highest priorities. But he also wants to know how a company has adjusted during the recession, the purpose of the loan, if it has been well-thought-out, and if the right business decisions have been made.
This year, Chase intends to double its lending to $10 billion nationwide and hire 325 business bankers to handle that load. If a loan is rejected, a second team will review it and help the customer find either an in-house solution or another lender.
In 2009, lending was way down at Chase, one of the largest banks in the world. When asked why, Kunkel said demand sank as businesses struggled to survive — a similar refrain among many bankers the Phoenix Business Journal talked to for this story.
“It wasn’t so much we stopped lending. The demand is what came to a screeching halt,” Kunkel said.
Norberg, president of RC Co., said he was turned down for a loan last May because of a lack of business experience. He bought the company two years ago, though it was established in 1984.
Norberg’s accountant drafted a business plan for the $100,000 loan, and he relied on the advice of his wife, a former business banker. But even a $120,000 purchase order from Walgreens, Ace Hardware and True Value wasn’t enough to sway the banks.
Within a few months, he found Performance Funding, a Phoenix factoring company that provides accounts receivable financing. The company provided the loan, and Norberg was able to order the supplies to cover the purchase order, which was more than he borrowed.
“If we wouldn’t have gotten funding from Performance last year, we would be bankrupt today because every penny we had, we put into that company,” Norberg said. “We wouldn’t even be in our house.”
ACCESS TO CAPITAL
Perry gave up looking for a credit line after being discouraged by the process. He was seeking a $10,000 to $20,000 credit line as a precaution, in case he needed to hire a new employee or buy software or hardware.
He was rejected a few days after he applied, which entailed filling out a form with personal and business information.
“There was no guidance after that,” said the founder of Keane Creative in Tempe, which has never posted an annual loss.
Perry had worked with the same banker for years and established business accounts with San Francisco-based Wells. Despite the setback, his company hasn’t switched banks. He likens the idea to leaving the Mafia.
“Since then, I haven’t tried again. I felt like a little fish,” he said. “It is very hard to grow because we can’t get that access to capital.”
Keane Creative: www.keanecreative.com
RC Co.: www.luminarias.com
Wells Fargo: www.wellsfargo.com
JPMorgan Chase & Co.: www.jpmorganchase.com
Sunwest Bank: www.sunwestbank.com
Securing a Business Loan
1. Have your financial statements in order. Lenders want to know the business is making money.
2. Be able to explain how the loan proceeds will be used. Lenders like to know whether the loan proceeds are going to increase cash flow.
3. Make sure the business has enough collateral (e.g., accounts receivable) to justify the line of credit. Collateral are assets offered as a repayment source.
4. Ensure the owners are invested in the company. Lenders are looking for sufficient equity in the company on the part of an owner.
5. Know your local economy and competition. Be prepared to describe the primary threats to the business and what measures are being taken to protect the company from these risks.
1. Lie or overstate items on the application, financial statements or your personal financial statement.
2. Get too small a line of credit. If sales are growing quickly, you may not have enough credit to fill orders.
3. Get just one term sheet. There are plenty of lenders, so find one that understands your business and has a good rate.
4. Stop communicating. Whether it is a cash-flow issue or a business opportunity, talk to your lender. Lenders are proactive and can offer solutions.
5. Bluff. Do not threaten to leave a lending relationship just to get a better deal. The lender may just call your bluff.
Tenants at CityNorth’s Residences on High Street could be making higher monthly payments when they renew their leases.
Najla Kayyem, vice president of Related Urban Development, which manages CityNorth, said the higher payments are the result of the end to the first-year concession of two months’ free rent, which was spread throughout the year. The concessions were used to fill the 99 apartments when they first became available last year. more…
Phoenix-based Radical Bunny LLC has been ordered by the Arizona Corporation Commission to pay $189.8 million in restitution to its investors.
After a 22-month investigation, the commission has found that Radical Bunny fraudulently sold unregistered deed-of-trust investments. The group, which raised money from almost 900 investors and then lent it to Mortgages Ltd., was not registered as a securities dealer. more…
WASHINGTON - The pillars of Americans’ financial security - jobs and home values - will stay shaky well into 2011, according to an Associated Press survey of leading economists.
The findings of the new AP Economy Survey, released Monday, point to an economic recovery that will move slowly and fitfully this year and next. As a result, the Federal Reserve will be forced to keep interest rates near zero until at least the final quarter of this year, three-fourths of the economists said. more…
These aren’t the companies that come to mind when you think of banking.
They don’t have branches at every major intersection or ads splashed across billboards or television. Their top executives typically don’t travel by private jet. Most didn’t receive any federal bailout money.
But what the many small banks in Arizona have shared with their large rivals is an inability to avoid fallout from the soft economy and weak real-estate values. more…
WASHINGTON - New signs emerged Wednesday that the economic rebound is sputtering. Sales of new homes hit a record low last month and mortgage giant Freddie Mac said it will need more federal aid and might never repay it.
Against that backdrop, the government is trying to prop up the housing and job markets. Federal Reserve Chairman Ben Bernanke reiterated the need to continue record-low interest rates for “an extended period.” And the Senate passed a bill to give tax breaks to companies that hire the jobless. more…
When the music stopped during the first several months of the recession, commercial real estate professionals across the board found themselves scrambling for the remaining jobs.
People with years of experience suddenly couldn’t find an open door.
Some went into business for themselves. Others set their sights on different aspects of the business that evolved out of the economic downturn. At the same time, recent college graduates discovered that a degree did not earn them automatic employment.
The Phoenix Business Journal talked with several commercial real estate people who have discovered how to survive and thrive in a different world.
Office condo bust
Ross Guttler was brokering office condos at
“The market was still really good then, but residential sales had slowed. I realized then that the office condo craze could not continue,” said Guttler, who now handles commercial acquisitions and dispositions for
The connection between residential and office condos was obvious to Guttler. Buyers were financing their office condos with home equity loans. The residential market was retracting, prices were falling and office condo sales suffered as a result.
“I realized I couldn’t stay (at
But while he was still there, Guttler took on some side deals working with banks that had taken back real estate as a result of loan defaults. That was 2008, which Guttler describes as “my worst year.”
Through a get-together sponsored by the Urban Land Institute’s Arizona Chapter, Guttler met up with Beth Jo Zeitzer, president of ROI, which specialized in bank-owned properties long before it was fashionable.
“She thought I’d be a good fit. I knew she already had a great platform set up,” Guttler said.
He started in June 2009, and he’s on track for the best year of his career.
Terri Tobey also specialized in office condos as senior vice president of marketing at
“Everything was going gangbusters when I started in September 2006,” she said. “A year into it, I realized we were having to get more aggressive. Then the banks stopped lending in 2008, and the party was over.”
Tobey left Utaz in April 2009 and was recruited by CB Richard Ellis for its health care team. A few months later, she left to start her own business, Arizona Development & Consulting Brokerage Service.
“I was too pigeonholed with all my contacts to just do health care. I tell people I specialize in whatever’s hot,” Tobey said.
Now she works seven days a week, and recently spent a day showing a developer from
Adventures in retail
Marc Grayson and Summer Katzenbach were firmly entrenched in the retail development business with one of the Valley’s largest shopping center developers,
Both were closely involved in one of Vestar’s premier projects, Tempe Marketplace, which opened in September 2007. Both were laid off in late 2008 when the economy cratered
The Scottsdale Budget Review Commission wants a $70 million permanent facility at WestWorld included in the city’s 2010 bond package to secure the future of signature attractions such as the Barrett-Jackson Collector Car Event.
Craig Jackson, chairman of Barrett-Jackson Auction Co., said he’s “delighted to see the progress.”
A Sanskrit word meaning “gracious gift” or “clarity” has resulted in anything but for two Surprise business entities.
A doctor who recently opened his first practice, Prasada Pediatrics, is involved in a trademark-infringement dispute with Westcor, the developer of the master-planned community of Prasada.
Dr. Brian Lawrence Young, whose wife’s mother is Buddhist, said he chose the name for its Sanskrit meanings. more…
If you felt like devising a slogan for the coming income-tax season, a good one might be: “Patience required.”
Filing a tax return can be a daunting exercise even in normal years, but Congress has added several new wrinkles that undoubtedly will confuse people. These include everything from new tax breaks for college expenses to those for energy-efficient home improvements and new-vehicle purchases. more…
As any successful person will honestly admit, “I’ve had my share of failures,” especially me. But from every failure I have learned two equally valuable lessons: There was at least one reason why I failed, and I can rebound from that failure.
According to Shiv Khera, author of “You Can Win,” failures most often occur for one of the following seven reasons:
• Lack of persistence. More people fail not because they lack knowledge or talent, but just because they quit. It is important to remember two words: persistence and resistance. Persist in what must be done and resist what ought not to be done. We all have had setbacks in life. Failing does not mean we are failures!
• Lack of conviction. People who lack conviction take the middle of the road. But what happens in the middle of the road? You get run over. People without conviction go along to get along because they lack confidence and courage. They conform in order to get accepted even when they know that what they are doing is wrong.
• Rationalizing. Winners may analyze but never rationalize. Losers rationalize and have a book full of excuses to tell you why they could not succeed.
• Not learning from past mistakes. Some people live and learn, and some only live. Wise people learn from their mistakes. Failure is a teacher if we have the right attitude. I’ve always said experience is the name we give to our mistakes.
• Lack of discipline. Anyone who has accomplished anything worthwhile has never done it without discipline. Discipline takes self-control, sacrifice and avoiding distractions and temptations. It means staying focused.
• Poor self-esteem. Poor self-esteem is a lack of self-respect and self-worth. People with low self-esteem are constantly trying to find themselves, rather than creating the person they want to be.
• Fatalistic attitude. A fatalistic attitude prevents people from accepting responsibility for their position in life. They attribute success and failure to luck. They resign themselves to their fate, regardless of their efforts, that whatever has to happen will happen anyway.
The rebound lesson is the more pleasant part of the equation, but it is not without challenges. Here are Professor Mackay’s lessons learned from the problems posed above:
• Try new approaches. Persistence is important, but repeating the same actions over and over again, hoping that you’ll succeed, probably won’t get you any closer to your objective. Look at your previous unsuccessful efforts and decide what to change. Keep making adjustments and midcourse corrections, using your experience as a guide.
• Decide what is important to you. If something is worth doing, it’s worth doing right and doing well. Let your passion show in even mundane tasks. It’s OK to collaborate and cooperate for success, but it’s not OK to compromise your values - ever.
• Change your perspective. Don’t think of every unsuccessful attempt as a failure. Few people succeed at everything the first time. Most of us attain our goals only through repeated effort. Do your best to learn everything you can about what happened and why.
• Define the problem better. Analyze the situation: what you want to achieve, what your strategy is, why it didn’t work and so on. Are you really viewing the problem correctly? If you need money, you have more options than increasing revenue. You could also cut expenses. Think about what you’re really trying to do.
• Don’t be a perfectionist. You may have an idealized vision of what success will look and feel like. Although that can be motivational, it may not be realistic. Succeeding at one goal won’t eliminate all your problems. Be clear on what will satisfy your objectives, and don’t obsess about superficial details.
• Don’t label yourself. You may have failed, but you’re not a failure until you stop trying. Think of yourself as someone still striving toward a goal, and you’ll be better able to maintain your patience and perseverance for the long haul.
• Look in the mirror every day and say, “I am in charge.” You may not have control over every phase of your life, but you have more control than you realize. You are responsible for your own happiness and success. As I like to say, your attitude determines your altitude!
Mackay’s Moral: You can turn “down and out” into “up and at ‘em.”
It’s also high season for the lucrative but less boastful backbone of
Tom Bour stood on the roof of the
The hospital’s top administrator looked past the dozens of parking spaces and out to the east, to undeveloped acres of brush and dirt. Bour smiled and spoke of the hope for the medical buildings that may come as the hospital begins its 12th year. more…
Dr. Ellie Izzo was the guest last week on Live Talk, discussing New Year’s resolutions.
Here are excerpts from the interview, which can be found in its entirety at aztalk.azcentral.com.Izzo, of