Guests: Michael Krein, Daniel Ramsey
Recorded: March 20, 2020
Excerpt
Michael Krein, president of the National REO Brokers Association, joins us to offer timely advice on the COVID-19 crisis, along with valuable tips on how you can take action to save your real estate business & grab market share in your local market area.
“This crisis will pass,” Krein says, “but we’re going into a recession and the market will be down for a while, so agents need to focus on thinking about where their future deals will come from,” along with building the relationships & lead-generation channels to make them happen.
In addition to being NRBA president, Michael Krein is currently the CEO of RIO Software Solutions, the parent company and provider of the RIO Genesis software platform. It was Dr.Krein’s, 27 years of experience in the real estate and default servicing industry that led to the creation of the RIO Genesis system, whereby his ideas and management systems were incorporated and designed into a user-friendly software system for both general and default real estate companies and their affiliate partners.
Michael Krein is formerly the Owner of Sellstate NRES a/k/a Nevada Real Estate Services. Over the past twenty-five years, he has personally listed and/or sold over 25,000 single-family homes — many of which were properties owned by various financial institutions from around the country. Michael is married with seven children and makes his home in Henderson, Nevada.
Transcript
00:00:05:20 – 00:00:29:13
Daniel Ramsey
Hey, everybody. Danny Ramsey here with my out. Now, normally we’re talking about growing business, doubling, scaling, but today we’re talking about a completely different you know, we’re having a different conversation. And I’ve got the pleasure of having Michael Crane. He’s the founder and president of the RBA. It’s the National RCO Brokers Association and we’re going to be talking about what’s happening right now in the market.
00:00:29:13 – 00:00:31:04
Daniel Ramsey
And Michael, thank you for being here.
00:00:31:16 – 00:00:32:15
Michael Krein
Oh, any time, Daniel.
00:00:33:03 – 00:00:53:04
Daniel Ramsey
Okay, so we got lots, lots, lots to talk about without the doom and gloom, I want to hear where to go in business now. What’s happening? We’ve got this kind of corona bio recession going on. So let’s get a quick update about where the market is and where you think it’s going to be going over the next 3 to 6 months.
00:00:53:23 – 00:01:18:24
Michael Krein
Well, over the next 3 to 6 months, it’s going to be going nowhere. That’s the real problem. So people better prepare for a hit in their income. Short term, long term, we’re going into a recession. That’s a given. Yep. The real estate market was already relatively fragile to begin with, much more so than most people realized. You know, I’m a retired broker of own multiple offices, multiple franchises, regions, four franchises.
00:01:18:24 – 00:01:38:04
Michael Krein
Yes. So I’ve played in both the retail and the roadside areas. My passion is also where a lot of the money was and I like money, so I stayed there. So I do track the default rates. What’s going on? The RBA that’s kind of my family. So I work with about 500 of those people and their business is they’re all very excited.
00:01:38:04 – 00:02:03:23
Michael Krein
They’re going to have a great business run going forward. Yes, are going into a recession. So there are so many different components here. We could spend days listing them and all the nuances of what is going to occur. Yeah, but yes, you’re realtors and brokers are in for some very difficult times right now and they’re beginning to be hit the hardest, whereas the online brokerage is in auction, companies are actually going to grab market share during this time.
00:02:04:11 – 00:02:07:02
Michael Krein
Now they get two sides.
00:02:07:02 – 00:02:30:06
Daniel Ramsey
Yeah, but what do you say to like I’ve seen some really large real estate coaches like doing Facebook lives tweets about you know, the strong and the lions and go out there and grab market share. What do you say to those guys? The guys that are like still even in our or our in air is still going, oh, it’s only going to be a 7 to 10% drop.
00:02:30:12 – 00:02:35:03
Michael Krein
What do you know is NAR has NAR ever admitted that the real estate market was going to drop ever?
00:02:35:09 – 00:02:46:14
Daniel Ramsey
Well, they said they’ve said ever. No, but they’ve said that we’re going to see a 10% decrease in the number of home transactions. What you’re seeing is a complete shift of what they’re saying. So.
00:02:46:14 – 00:02:47:02
Michael Krein
Correct.
00:02:47:08 – 00:02:56:05
Daniel Ramsey
I’m curious, like, what do you say to those guys who are like, no, no, no, it’s going to be fine. Stop, stop worrying or complaining or thinking that the sky is falling.
00:02:56:11 – 00:03:21:21
Michael Krein
Okay. First of all, I’m going to be honest with you, the sky is falling, but that’s opportunity. Okay? I don’t look at it as gloom and doom. Look at it as an opportunity to make more money. Yeah. Smart brokers and smart agents who see the change adapt are going to make more money than they did before. It’s the 80% of agents and brokers that are stubborn, set in their ways, refuse to change, that are in a lot of trouble.
00:03:22:03 – 00:03:46:23
Michael Krein
Yeah, but you’ve got other factors that were already in play. All right. It used to be that the average person changed homes about every seven years, but it’s now at 14 years. Hmm. Okay. And rising also. We just had a massive refi boom. Yes. Interest rates are coming back up. They’re artificially low. They cannot stay this low. Sure.
00:03:46:23 – 00:04:06:24
Michael Krein
Are you going to trade up if you’ve got a 2.8% mortgage right now, a year or two from now, are you going to trade up to a house at 5% mortgage? Right now, it’s called rate stickiness or being rate locked. These people are going to stay in any given time in our market. They should be between about five and 6 million transactions.
00:04:07:02 – 00:04:07:20
Daniel Ramsey
Right. Right.
00:04:08:00 – 00:04:34:22
Michael Krein
Okay. But that’s going to continue to decrease because people are staying in their homes longer. And if nobody’s willing to list their home to sell it, somebody else cannot buy it. The number of transactions is going to decrease. Nor is claiming what, a little over a million members right now. Yeah, okay. However, that’s just realtors. There’s a lot of licensees, brokers and agents that are not realtors that still work.
00:04:35:06 – 00:04:46:08
Michael Krein
Right. All right. And depending on how you count, there’s between about 2.4 and 2.9 million licenses that may or may not be selling homes. And there’s reasons for that. Property managers, people need licenses for things.
00:04:46:18 – 00:04:47:01
Daniel Ramsey
Right?
00:04:47:19 – 00:05:07:08
Michael Krein
So let’s just call it 2 million, four round numbers. So you’ve got 5 million transactions, divided by 2 million people. That leaves you two and a half transactions per right. That’s a problem. And that number is going to drop, not increase. It’s going to drop severely in the short term. But in the long term, people are going to stay in their homes longer.
00:05:07:14 – 00:05:25:13
Michael Krein
There is going to be less activity in transactions. Yep. Now we all joke about the 8020 rule of real estate. It’s been around since before I got it 30 something years ago. Yeah, really? Paratus theorem. And anybody who’s taken some math classes knows it. What you have to see, though, is when you look at certain markets, some of them are 9010.
00:05:25:24 – 00:05:44:09
Michael Krein
You have 10% of the agents controlling 90% of the market. Yeah. When there’s only two and a half transactions go around per. Now, granted, there’s a listing side and a buy side. So if you want to count sides, that’s twice as many. But either way, you’ve got an eight, an agent population that there simply is not enough business for to go out.
00:05:44:19 – 00:06:00:09
Michael Krein
The smart ones are going to take the lion’s share of it. So for real estate, there is you know, I know most of them, the ones you’re talking about, I’ve been on stage with most of them. Okay. Sticking the same events. I don’t get paid for this. I do this for fun, like free broker school. I’ll teach you everything you want to know.
00:06:00:09 – 00:06:30:09
Michael Krein
For free. Yeah. I have no ulterior motive. I’m not trying to get you to pay me. Right. All right, so I’ll tell you the truth. And I’m also retired. I don’t really care. Okay, but what’s going to happen is very simple. The smart agents and brokers who adapt, change and realize what’s going on. They’re going to control a larger segment of that and because of the diminishing transactions and a larger segment going into those top producers, you are going to see a shrinkage of the agent populations and a lot of them are going to be forced out of the business.
00:06:30:09 – 00:06:53:00
Michael Krein
Yep, this is not enough money to go around and you have certain agents and brokers that really know the business and what they’re doing. They’re going to take a higher percentage of it. Now, you compound that with the online brokerage firms, the AI buyer firms, the online auction firms, which by the way, the online auction firms and the online brokerage firms are going to flourish right now because they do everything virtually anyway.
00:06:53:10 – 00:07:05:04
Michael Krein
Right. All right. So they’re going to increase market share during this time, right? I mean, the only ones who will. So, yes, the sky is falling for a lot of agents and brokers and they better figure a few things out.
00:07:05:13 – 00:07:06:01
Daniel Ramsey
Well, let’s.
00:07:06:01 – 00:07:18:21
Michael Krein
Say they do figure it out. They can do very, very well. And the reason they can do so well, if they’re willing to change, is because 80% of realtors won’t. Right. And you can bet on that fact every time I did it for years.
00:07:18:21 – 00:07:28:20
Daniel Ramsey
Yep. Okay. So let’s talk through that because I want this is for our audience, this for our clients. We’re not going to send this out into the world. But let’s talk through.
00:07:28:20 – 00:07:29:07
Michael Krein
I will.
00:07:29:19 – 00:07:32:06
Daniel Ramsey
Yeah. You all right? You’re going to sit it out, okay?
00:07:32:07 – 00:07:33:00
Michael Krein
I’m no problem.
00:07:33:04 – 00:07:58:23
Daniel Ramsey
Yeah, but what? Where do you. And we wrote a blog maybe a couple of years ago about getting business from alternative sources. So we’ve got delisted. Like if your your house goes off the MLS foreclosures is a is another really great one death divorce we call it the 12 D’s curious like where would you focus your time energy right now?
00:07:58:23 – 00:08:04:21
Daniel Ramsey
Because the market’s shifting. Where would you go right now to survive during this changing time?
00:08:05:12 – 00:08:13:11
Michael Krein
All right. Well, we have to clarify that before you answer. Are we talking from an agent’s perspective or a broker’s perspective? Because they need to be doing very different things right now.
00:08:13:19 – 00:08:25:21
Daniel Ramsey
I think I think we’re going to go both because we have a we have about a 50, 50% audience. Half of our clients are brokers running large teams, and half of our other audience is our agents with large teams. So.
00:08:26:04 – 00:08:47:05
Michael Krein
All right, I’m okay for agents in the short term right now. Expect a lot more cancelations. People are going to cancel. They’re scared. They don’t want to commit. They don’t know if they’re going to get their job back or how long they’re going to be out of work. So we’re seeing and again, I talk to, I don’t know, dozens of agents and brokers around the country every day that I coach and work with my group.
00:08:47:05 – 00:09:08:01
Michael Krein
So they use my software because we provide support and training to them and kind of coaching. Yep. So cancelations are increasing mostly out of fear, but also the investors are canceling quicker than anything investor purchases. Why? Because if you buy a house to flip it, you can’t go get building permits. Right now, the offices are closed to get materials.
00:09:08:01 – 00:09:23:18
Michael Krein
You can’t get workers. And we don’t know if you’ll be sitting on that property for six months before you even start on it. Yeah. So we’re seeing a very high cancelation rate and panic. Nobody’s really going to be listing their house right now because they don’t want strangers coming in, giving them coronavirus. They’re not moving right now.
00:09:23:22 – 00:09:24:07
Daniel Ramsey
That’s right.
00:09:24:15 – 00:09:47:14
Michael Krein
So you’re going to be in a stagnation period for the next five or six months. You can’t avoid that. There’s certain things you can do to keep generating business. But when you don’t have any business or you can’t do a deal right now, the most important thing you can do, and this is true any time. Don’t ever worry about the deal right now, but you damn well worry about where your next deal is going to be, right?
00:09:47:16 – 00:10:06:23
Michael Krein
So they need to be focusing on where the next deal is going to be. Now we are going into a recession. GDP will flatten, consumer spending is going to grind to a halt. You’re going to have restaurants and other businesses that are that are going to go under. It’s going to get rough for a while. But again, I’ve always made more money in a down market than not.
00:10:06:23 – 00:10:25:17
Michael Krein
So there are strategies you can use. But what agents should be focusing on is where their business is going to be after this, because this will pass. Yes. So I’d be calling all your past clients and don’t pitch them. Just check in them, see if they’re okay. Could I do anything for you? Need some help? I stop at the pharmacy for you.
00:10:25:23 – 00:10:47:12
Michael Krein
Yeah, those type of things people remember and they will tell their friends about that. It’s so if you can’t do a deal today, make damn sure you’re planning where your deals are coming tomorrow. That’s really what agents should be focusing on. And you have something else. We are going into a recession. All right. 90% of couples, their biggest fight is about money.
00:10:48:04 – 00:11:06:00
Michael Krein
Yes. Okay. Always. I mean, I’m really lucky that I don’t really fight with my wife about money because I’ve always been able to make it faster than she can spend it anyway. I’ve been very blessed that way. Yeah, we’re kind of unique, but understand that a recession and people’s income are getting hit hard. People are going to be losing two or three months salary and income here.
00:11:06:12 – 00:11:25:09
Michael Krein
This whole credit things, it doesn’t mean much. It really doesn’t. So when you go into recession, money gets tight. Couples fight about money. Divorce rates go way, way up. Yes, divorce attorneys were always one of my favorite sources getting with the divorce attorneys. I mean, there’s a whole technique for that. Matter of fact, we’ve got videos on how to do that at free broker school.
00:11:25:19 – 00:11:50:13
Michael Krein
I work with divorce studies to get business. They’re a great source of business. There are going to be people who are going to go into default. The REO is going to increase dramatically. We already know that. Clients have already asked us that we get the Oreo from servicers, etc. to ramp up membership in the NBA. And if you don’t mind to pitch any of you out there who’ve got some decent Oreo experience, please get in touch with us.
00:11:50:13 – 00:11:56:13
Michael Krein
We need more coverage. This is coming. All right. It’s going to be e-com. We want to talk to you. We need the coverage for the clients.
00:11:56:16 – 00:12:18:21
Daniel Ramsey
Actually. Hold on, Mike, because here’s the reality is I think MOD and the RBA can like we can work together and make it seamless so that if you have experience or you need support because we were born in the area where we are your broker, our virtual assistants, we went into all the platforms and did all the reimbursements and all the property checks and all the documents.
00:12:18:21 – 00:12:22:12
Daniel Ramsey
So I think we should just connect up on that for our clients.
00:12:22:20 – 00:12:44:06
Michael Krein
We can. There’s a lot we can do and people need to realize brokers are going to have to cut back on staff right now. Yeah, I’ve been staff agents. You may have to give up your assistant. Yep. That’s what virtual assistants like your company are for. Say, I have three full time admin people or transaction coordinators, but I only need one, maybe one and a half so I can cut to.
00:12:44:16 – 00:13:05:01
Michael Krein
And again, real estate is kind of peaks and valleys. Companies like yours are meant for those peaks. So I don’t have to add a staff person, but I can send the overflow to you and cut my staff right and only use you and pay you when I need you. I mean, that’s what an outsourcing company is for, and that’s the business model that brokers and even agents with assistants should be using, right?
00:13:05:05 – 00:13:13:15
Michael Krein
Yes. Realtors and brokers. You should be cutting your expenses right now, but cut the smart ones. Whatever you do, do not cut your marketing. Well, and especially now.
00:13:14:00 – 00:13:23:18
Daniel Ramsey
This is a whole conversation. Don’t cut cut fat, but not muscle. In your opinion, what are the muscles for real estate company that you shouldn’t be cutting.
00:13:24:02 – 00:13:42:06
Michael Krein
Marketing and branding because this will pass. But once you lose market share or you lose your brand identity, that is incredibly expensive to get back. It’s cheap to maintain. It’s incredibly expensive to reestablish. Gotcha. So don’t touch your advertising, your marketing. If anything, you increase it.
00:13:42:15 – 00:14:02:16
Daniel Ramsey
What about saying what about salespeople like let’s assume I’ve got a team of five and they they can’t close deals because it’s just a pause. They’re all independent contractors. How do I keep them on my ship during this pause so that when we come back out were we’ve got a team of people that are ready to sell.
00:14:03:18 – 00:14:19:14
Michael Krein
Well, a couple answers to that. Your biggest problem is keeping their belief and faith in you. So you better have a plan for them where they’re going to go find somebody that does have a plan. Okay. There’s brokers and recruiting right now, so you better sit down with them and say, okay, guys, this is the situation right now.
00:14:19:14 – 00:14:33:00
Michael Krein
But if we do these things now, this is where we’re going to be later and this is how we’re going to get there. And this is where we’re going, right? Kind of the moving train concept. Everybody wants to be on the moving train, so. You bet. And if you want to lead, okay, you better have someplace to go.
00:14:33:13 – 00:14:49:08
Michael Krein
Take them somewhere. So explain to them what’s going on in the market and you start working on building business in the future. Again, don’t worry about today’s deal, but let’s make sure we got ten next month or six months from now. Let’s work on that because that really is your only option right?
00:14:49:08 – 00:15:09:09
Daniel Ramsey
Well, you you’re also giving away a free gift. I love this perspective of yours at free broker broker school, there’s a form about a disaster recovery plan, and you’re giving that out to our audience. What was your what was your script that you use for brokers to help them recruit agents away from the competition?
00:15:09:24 – 00:15:28:19
Michael Krein
Oh, if I was a broker right now, I’d be recruiting like crazy because all the agents are at home sitting on their ass or watching Netflix. So they’ll talk to me. They’ve got nothing else to do. Sure, but it’d be really simple, you know? Hey, Daniel, I know you work for ABC Realty. This is Mike over it. And that was my company back then.
00:15:29:10 – 00:15:47:22
Michael Krein
Did you know what? I know things are tough and everybody’s scared. But I just want to ask you, what is your plan to stay in business, improve your business during this time? Okay. Hey, by the way, what is your broker’s plan? Have they shared it with you? Right. The answer is going to be no to both. We already know that nine times out of ten, nobody’s ready.
00:15:47:22 – 00:15:58:14
Michael Krein
Yeah, exactly. Well, let me tell you what we’re going to be doing, okay? Because we’re not only going to get through this, but we’re going to end up making more money and taking more market share and getting more deals afterwards. Right. Would you talk to me?
00:15:59:12 – 00:16:01:14
Daniel Ramsey
Yeah, yeah, yeah, yeah, yeah, yeah.
00:16:01:23 – 00:16:16:17
Michael Krein
That’s your pitch. So brokers for recruiting and if you want to know how to recruit and how to do all the things I’m talking about free brokers. Will I give this stuff away for free because I’m retired? Yeah. And I don’t like a lot of the stuff that people sell and actually charge money for because it’s bullshit. Okay, sorry.
00:16:16:17 – 00:16:31:05
Michael Krein
Then I know you don’t like the cursing industry. Okay. So that’s why I decided to do it, because I just don’t like some of the garbage that’s out there. What people charge for recruiting, you have to have a value proposition and you have to have a plan. And if you want people to follow you, you have to have somewhere to go.
00:16:31:15 – 00:16:49:10
Michael Krein
But right now, if you’re a broker, you should be doing nothing but calling agents from other companies and recruiting them. You can double the size of your staff for the next couple of months and your agent population easily because they’re vulnerable, they’re scared, they’re stuck at home. This is the greatest time ever to recruit. It really is.
00:16:49:20 – 00:16:50:05
Daniel Ramsey
Well.
00:16:50:23 – 00:17:00:12
Michael Krein
You should be farming and calling. Okay? Talking to people, just keeping your name there, because whenever a market turns, it’s the last one standing that cleans up.
00:17:00:23 – 00:17:01:05
Daniel Ramsey
Right.
00:17:01:14 – 00:17:03:15
Michael Krein
Okay. That still has a brand, a name out there.
00:17:04:23 – 00:17:19:16
Daniel Ramsey
Turtle. Okay, so get a disaster recovery plan. This is the right time to recruit. But I think you need there’s got to be a shift in how you do business. The technology has to be part of it and being remote has to be part. So how do you do that?
00:17:19:24 – 00:17:39:12
Michael Krein
Well, let’s back up to a disaster recovery plan. Every brokerage should have one. Yes, it’ll be called a DRP disaster recovery plan. Or sometimes you’ll hear a call by business continuity plan. Every brokerage should have one. I can tell you all the people that I work with, both that it’ll be A and REO and all my brokers under me, they all have one because I wrote it for them.
00:17:39:21 – 00:17:58:20
Michael Krein
Because if you want to go after any type of government contract or relocation contract or work for a lot of companies and corporate below you have to have one. Almost all my and RBA members have had contracts and yet had listings because they had to submit that plan. You should have one and now is the perfect time that you should have had one.
00:17:58:20 – 00:18:21:02
Michael Krein
Let’s put it that way. To keep your business running remotely. Yes, right now they’re pain in the ass, too, right? It’s already written. It’s up on free broker school, download it, fill in the blanks, adapt it for your office. Yes. All right. But it’s something you should have had. And if you want to go after a lot of other market segments and the very profitable ones, you should have already have ones you need one to submit.
00:18:21:11 – 00:18:36:04
Michael Krein
But definitely, if you haven’t done that work on that now, it’ll also inside there will give you some ideas on how to keep your business going during this time, because that’s really what it’s all about. Yes, it was free. Use it. Happy to have people. I just want to see people succeed. I’m retired. I don’t care what you do.
00:18:36:16 – 00:18:37:00
Michael Krein
You know.
00:18:37:09 – 00:19:06:20
Daniel Ramsey
We’ve got a link here for everybody that’s listening so you can actually grab a copy of it right now and download it. The other thing is we put together a landing page that’s 100% going remote, having 5000 people 13 years. We are 100% remote company. Other than my US office. Right. So I’m at my home right now. But you know, and for the first time when I first set up, I needed cords and I needed dual screens because I never worked from home for a I’d always worked at an office.
00:19:06:20 – 00:19:25:10
Daniel Ramsey
So we actually built a 13 page guide of what you need to do to go remote 100%. And so that’s on that landing page for everybody right there. And you can edit it and take it and put your logo on it so you can have something to give to your clients, too. We’re going to talk what things? A value.
00:19:25:10 – 00:19:34:24
Daniel Ramsey
What would you give? You know, if you’re a real estate agent out to your community, what things of value would you be talking to your people about?
00:19:34:24 – 00:19:38:04
Michael Krein
Are you talking about like following up with past clients, new clients.
00:19:38:14 – 00:19:39:07
Daniel Ramsey
Past in you?
00:19:39:07 – 00:19:53:18
Michael Krein
Yeah, for past clients right now, I’d literally be calling them all up just to make sure they’re okay. Yeah, because you actually care about them. And if you and technology comes in that if you have a good CRM, which if you don’t, you won’t last in this business much longer. Anyway, let’s face it, that’s how this is going.
00:19:53:19 – 00:20:05:19
Michael Krein
That’s just one tool you need. But you should know the name of their kids, the name of the dog, and everything else should be in there. So I call you up to say, Hey, Daniel, just want to check in, see how you guys are handling the virus. I’m hoping everybody’s okay. I know your son’s name is Timmy. How’s he doing?
00:20:06:08 – 00:20:25:04
Michael Krein
Right. It must be crazy with him stuck home from school. He’s probably driving me crazy. Ah, yes. Anyway, I was just calling to make sure you guys were okay. I always loved working with you. And by the way, you know, I am running out to the pharmacy, and I do have to stop at the grocery store. So anything I can pick up and grab free while I’m out getting myself exposed anyway.
00:20:25:04 – 00:20:37:09
Daniel Ramsey
Okay. Yeah. So you’re your offering. And I what I love about that is you could offer like, hey, me and my team and I are out there, we’re serving our clients. Is there anything you need right now? I think that’s a positive.
00:20:38:17 – 00:20:55:03
Michael Krein
That will be remembered forever. They will tell their friends that you made that offer. That’s about building future business now, and that’s just one example you can do. You know, I’m a firm believer that agents should cold call and should market and should form. Yep. I’m not a believer in the way most of them do it, which is why they hate it.
00:20:55:15 – 00:21:17:12
Michael Krein
They don’t understand. They call up and ask for business. Oh, do you want to sell your home? Oh, blah blah blah. No. You must offer something of value to that person. So it’s not an ask, it’s an offer. And you learn the right scripts for that. Farming, cold calling becomes very productive and actually very easy to fund because most agents hate it and don’t think it works.
00:21:17:12 – 00:21:23:18
Michael Krein
And for most people it doesn’t because they’re doing it wrong. Yep, but it’s always go back to make them an offer, not an ask.
00:21:24:14 – 00:21:42:05
Daniel Ramsey
Right? What is a I mean, what would you do in a cash position for real estate companies right now? Like what kind of cash position do they need to be in right now? What do they need kind of in terms of cutting expenses and being realistic about what’s going to happen in the market?
00:21:43:04 – 00:22:02:01
Michael Krein
Well, depending on what system you’re running like with Real Genesis, we have cash flow predictions and charts in there or automated. So any of my brokers know exactly what the cash flow position will be from now till the end of the year or however long they want to track. It’s built into the system automatically. Unfortunately, most brokerages kind of use the shoebox method of accounting.
00:22:02:14 – 00:22:24:09
Michael Krein
There’s more money in the box at the end of the month, and that was the beginning. We made money. Yep. Cash flow management is going to become very important not only for brokerages, but also for agents. Yep. And you have to cut the fat, not the muscle. You’re correct on that. But what most brokers do is instead of having reserves, they treat their deals in escrow as their reserves.
00:22:24:09 – 00:22:44:03
Michael Krein
Okay. And that’s a problem right now because your cancelation rate’s going to go through the roof. That’s going to happen. So you better be sitting on some reserves. And if you’ve got a home, I would go get a home equity line right now while rates are cheap. We actually advised all our NBB members to do that back in January before this even started because we knew there was a correction coming.
00:22:44:11 – 00:23:04:00
Michael Krein
The coronavirus just set it off early and more severely. Right? But we were already planning for it. So to make sure they had cash flow, especially because they have to they have very large expenses managing properties for the banks. But keep the operation running, keep your staff running. You might want to look into a home equity line because you may need that credit to survive this year to putting up bad this gets.
00:23:04:15 – 00:23:13:19
Daniel Ramsey
Got it so it’s six months of operating expenses enough is three months and a line on top of that like what do you think is important.
00:23:13:19 – 00:23:31:11
Michael Krein
Well normally a 3 to 4 month cushion will suffice. Most brokers and get you through the peaks and valleys because you can have good months and bad months. Everybody does. Yeah. Right now you’re probably going to burn six months. All right. Because deals may not be coming in, your agents may not be producing deals. Things aren’t going to close.
00:23:31:19 – 00:23:37:12
Michael Krein
You’ve got to pay your rent to your staff. Yeah. A lot of you are going to have to lay some staff off right now. That’s coming.
00:23:37:22 – 00:23:51:20
Daniel Ramsey
Yeah. Okay. So you think six months. But the challenge in the real estate world is that when six months of a pause, then it takes 90 days before you get revenue again. I mean, that’s just the reality of closing deals.
00:23:51:20 – 00:24:17:00
Michael Krein
Well, it’s probably going to be worse than that this time, actually. You have to remember, 2008, unemployment hit 10.1%. Yes, margin from the Fed never can pronounce the name right. Pretty much said the other day that unemployment would probably hit over 20% this year. And if you think about it, everybody staying at home and not working right now, unemployment is technically already higher than that at the moment.
00:24:17:11 – 00:24:39:11
Michael Krein
Yeah, anybody in the service industry is unemployed. They got sent home unless they’re an essential business. So all that lost or income, you know, is going to be reflected in lack of consumer spending later. And consumer spending drives economies. This is not going to be over in six months. Okay? It’s going to take a year to three years to fully recover back from this.
00:24:39:20 – 00:24:47:13
Michael Krein
And you already have a shrinking number of real estate transactions, right. You know, I know you don’t like to be preaching doom and gloom. I know.
00:24:47:13 – 00:24:48:23
Daniel Ramsey
In fact, I’m like Art.
00:24:49:03 – 00:24:57:06
Michael Krein
Bell, but I’m a realist and I like that doom and gloom is an opportunity because if I’m willing to change and you are not, I will. So what is.
00:24:57:15 – 00:25:00:11
Daniel Ramsey
Thirties? What are the opportunities to focus?
00:25:00:17 – 00:25:19:01
Michael Krein
Well, you have several things occurring and that is there’s going to be a contraction in the real estate brokerage industry. There are brokers who are not going to survive this. There are agents who are not going to survive. Yeah, not financially, but you already had pressure from the online brokerage and technology is driving all of that. Yeah, right.
00:25:19:10 – 00:25:47:22
Michael Krein
So they’re going to take we know we’ve got a shrinking transaction count going forward just because of rate locks and stickiness, people staying in the homes longer. Yup. Right. And new construction cannot make up for that. It just industry isn’t big enough. Not going to happen, especially now. So you’ve got a shrinking pie. And while this patient with billions of dollars coming in and taking a bigger and bigger piece of it, if you’re a broker right now or an agent, I’m going to tell you right now, be afraid.
00:25:47:22 – 00:26:15:06
Michael Krein
Be very afraid. Unless you wake up to what’s going on, you adapt. There are technology products that can give you an advantage. And here’s the thing that people don’t understand. Big companies for all their money and all their marketing power and all their advertising cannot adapt very quickly. They move slow. They behemoths. If you as an agent or as a brokerage office, okay, you have one person that makes all decisions.
00:26:15:06 – 00:26:34:11
Michael Krein
There’s no board, there’s no committees, there’s no votes. Yeah. You turn on a dime and change. The large companies can’t. That’s your advantage. All right. Technology is out there. I’m one of the providers. There are others. I will tell you, 90% of brokers and agents don’t even know what technology is available to them that could be making them more money.
00:26:34:11 – 00:26:53:10
Michael Krein
Make your lives easier. They haven’t researched it as a whole. We were very open about everything. We have a comparison chart on the real Genesis website to look at it, see what’s out there. Right there is technology out there that will allow an independent or a small brokerage or even a small franchise office or a large one, for that matter, to compete at a technology level with these large companies.
00:26:53:19 – 00:26:59:04
Michael Krein
You combine that with the fact that you can change direction and turn on a dime and alter your strategy when they can’t.
00:26:59:16 – 00:26:59:23
Daniel Ramsey
Yeah.
00:27:00:09 – 00:27:23:22
Michael Krein
Okay. You do have an advantage and you can beat them at their own game, but you can only do that if you’re willing to make up realize what’s happening and make those changes. Because what you did yesterday will not make you money tomorrow. It will make you broke. Right? So it’s not all doom and gloom, it’s opportunity. And I love this concept right now because there’s one thing I can count on always.
00:27:24:07 – 00:27:44:09
Michael Krein
80% of agents and brokers will not change. They are so stuck in their ways and so stubborn because we’ve always done it this way. But the 20% that will change, they’re going to own their markets. Right. Okay. And I can make that better all day long. That’s what made me my money, was being willing to change and adapt ahead of everybody else.
00:27:44:09 – 00:28:09:23
Michael Krein
Some people just told me I was crazy. Oh, you can’t do that. Why not? Well, because we’ve always done it this way. Yeah, that’s a dumb ass reason, right? So if they’re willing to change, there are some great opportunities. There are going to be some phenomenal business opportunities for brokerages to grow, adapt and change. And also with the technology out there, you can switch to a much more virtual environment and actually cut your office expenses tremendously.
00:28:10:08 – 00:28:33:24
Michael Krein
And a lot of agents, if you give them the right tools, prefer to work virtually just like most brokerages go, Oh yeah, we’ve got technology. No, you know, you don’t even know what’s out there and what you could be offering these people, right? They go out if you do nothing today. Okay, please just start Googling, okay? Do some research, do some homework, see what’s out there and you’ll see where the industry is going.
00:28:34:08 – 00:28:40:10
Michael Krein
Yeah. Hey, get there first. And if you’re the one willing to change, you get the market share and you get the money.
00:28:41:04 – 00:28:41:16
Daniel Ramsey
There it is.
00:28:41:21 – 00:28:43:05
Michael Krein
And so. And it’s the salmon.
00:28:43:12 – 00:29:04:20
Daniel Ramsey
Yeah. So if you’re listening right now, we’re in the notes. We’re going to put the link to the 12 D’s, which are basically all the sources of business that are going to be alive and well over the next 3 to 9 months and really extremely change over the next year or two. And Michael, thank you for your time.
00:29:04:20 – 00:29:11:04
Daniel Ramsey
I think it’s great. How would somebody apply for the RBA? Like what would be their their steps?
00:29:12:08 – 00:29:32:01
Michael Krein
NBA.com. We do not take inexperienced RBA brokers. The reason the clients use our members is because we guarantee them a certain level of experience. Sure, we kind of expect you to have your bachelor’s degree where grad school will take you to the next level. Right. The clients driving the business is what we do. But you can apply at NBA.com.
00:29:32:21 – 00:29:51:24
Michael Krein
But you have to have some real experience, right? I’m going to tell you that upfront. If you really want to learn how to make. Here’s the one thing we should all be doing. You can’t change a market, but you can change yourself. Right now, you’ve got a couple of months where you’re going to be sitting at home anyway for the most part.
00:29:52:09 – 00:30:12:09
Michael Krein
Yeah. A binge watching Netflix knock out, you see, knock out your quadrennial do all the nonproductive items that are required to be in business. If you want to binge watch something, binge watch free broker school. I will teach you everything you want to know about real estate, but no one else will ever tell you. I love it because I can see what I want.
00:30:12:11 – 00:30:16:03
Michael Krein
Okay. I’m not charging money. I don’t care if you like me or not, but I will tell you the truth.
00:30:16:10 – 00:30:16:21
Daniel Ramsey
I love it.
00:30:16:21 – 00:30:34:15
Michael Krein
And I’m not telling you anything. But it is there. Use the time to change you. And if you are willing to do that, you’re actually going to make more money than you did before. Not less. It’s only the ones who are willing to change and adapt and rethink who they are and what their career and what their business really is.
00:30:35:00 – 00:30:50:09
Daniel Ramsey
Yep. Perfect. Okay. So we’re going to throw the link in the notes for that, for the free broker school, I think I really want to appreciate on you, Michael, for sharing everything and just being in who you are, man, you’re awesome.
00:30:51:12 – 00:31:09:12
Michael Krein
Thank you very much for having me. Daniel, anytime you need something, feel free. I tend to see all that or hear all the information first. Just because of our relationships in the industry and the numbers I get to see and the fact that, you know, I probably talk to 20, 30 of brokers a day around the country that I work with, so I kind of hear everything first.
00:31:09:20 – 00:31:12:23
Michael Krein
Yeah, that’s my little CIA network. So able to call trends earlier.
00:31:13:14 – 00:31:33:20
Daniel Ramsey
Thanks again for your time. Appreciate you guys. All of these resources and guides are going to be linked in the comments. Definitely check out the blog. We’re doing a lot of stuff right now to help business thrive through this crazy transition and just appreciate you from the bottom of my heart. We also have our book. If you’re listening right now, you can text 31996.
00:31:33:20 – 00:31:51:24
Daniel Ramsey
You can text RSVP scale with virtual professionals. Wildly enough. Michael We wrote this book. I had no idea how relevant it was going to be because it’s how to go virtual. Basically, it’s how to take your business. 100% virtual. You can get that right now. It’s completely free for an electronic. You can get it on Amazon. We’re going to put the link there.
00:31:52:17 – 00:31:56:04
Daniel Ramsey
Thanks for watching, Michael. Thanks for being here. We’ll talk soon, okay.
00:31:56:12 – 00:31:59:13
Michael Krein
All right. Thanks, Dave. Take care.
