Innovation

A Bigger Nest

TWO TOP CHARLOTTESVILLE REAL ESTATE FIRMS JOIN FORCES
–Nest Realty Group Acquires Summit Realty–
CHARLOTTESVILLE, VA (Feb. 8, 2010) – Charlottesville-based Nest Realty Group (www.NestRealtyGroup.com) today announced its acquisition of Summit Realty Company. The move combines two of Charlottesville’s most successful real estate firms and expands the 1-year-old Nest Realty team to 14 full-time real estate professionals. It also paves the way for Nest to expand its services from a primary focus on residential real estate into commercial real estate and leasing.
“While other firms are cutting back, Nest is continuing to expand,” said Jonathan Kauffmann, Principal Broker, Nest Realty. “I believe this is a testament to our top-notch agents, the emphasis we place on technology and our dedication to client service. Our combined resources and expanded services will allow us to better serve our clients, something that is paramount to all of us.”
Founded in 1982, Summit Realty grew to be one of the most well-known and respected real estate companies and brands in Central Virginia. Owners Bob Hughes and Bob Headrick took over Summit in 2007 and are enthusiastic about joining forces with Nest Realty as Associate Brokers.BobHughesTeam.JPG
Bob Hughes has been a full-time Realtor since 1989. He is a consistent top producer, a past winner of the Charlottesville Area Association of Realtors’ Salesperson of the Year award and was named C-Ville Weekly’s Best Real Estate Agent in 2009.
Specializing in commercial and residential property for sale, purchase or lease, Bob Headrick brings an array of experience to Nest Realty. He also offers strong expertise in investment sales, corporate services, and both tenant and landlord representation.
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“We are excited to be part of the Nest team. They are an aggressive, young company with a vision of how real estate will be marketed and sold in the future,” states Bob Hughes, Associate Broker, Nest Realty.
In 2009, the company’s first full year of operations, Nest Realty was awarded the prestigious Most Innovative Brokerage honor by Inman News at the Inman Connect Conference in San Francisco. Hewlett Packard also honored Nest Realty at the National Association of Realtors conference in San Diego with its 2009 Real Estate Technology Award, given to only five Brokers nationwide.
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Nest Realty is known for its use of technology to better serve clients, both locally and nationally. The firm has received national accolades for its cutting-edge web site, www.NestRealtyGroup.com, which features interactive home search capabilities and detailed information for more than 175 Charlottesville neighborhoods. Jim Duncan, one of Nest Realty’s partners, was recently named to Inman News’ Real Estate’s 50 Most Influential Online.
In addition to a strong focus on technology and innovation, Nest Realty agents are held to a higher standard. All agents must have a minimum of three years experience, practice real estate full-time and earn their Broker’s license shortly after joining the firm. With almost $4.7 million in sales per agent and 13.75 transactions per agent, Nest Realty agents more than doubled the production for the average Charlottesville Realtor in 2009.DavidFerrall.jpg

“We pride ourselves in having a team comprised of exceptional professionals, said Kauffmann. “We want consumers to know that if you work with a Nest agent, you are working with a true, full-time professional with high ethical standards. To date, we have had an extraordinary team; the addition of the Summit agents only enhances our strength. The combined experience and track record of Bob Hughes, Bob Headrick, and their entire team is a wonderful addition to the Nest family. We couldn’t be happier.”

Title Companies v. Attorneys

Once a home is under contract, and sometimes even before, buyers will be asked if they have a settlement agent in mind to handle their closing. Some buyers opt for attorneys, others request a title company to handle the closing, primarily to avoid the attorney fees. After all, the insurance is the same after the closing, so why pay any more for the same service?title ins.jpg

Fair question.

I have in front of me a 56 page document that was just released by CRA International, a national research organization that studied the HUD-1 costs across the country and tried to determine how much extra buyers spend on attorneys instead of going straight to the title company and closing it with them.

The argument that settlement companies have made is that attorneys are expensive and unnecessary for these transactions. Without competition, attorneys would force the price of home loan settlement sky high and the consumer would be punished. The attorneys argue that in fact it is the title companies that keep prices high. They claim that title companies may charge less in the form of a “closing fee” but they more than make up for that discount in the price of the insurance policy that they offer consumers. Attorneys are able to price title policies from different companies and that brings price down.

The study looked at 839 financings that occurred in a single 12 month period, and included 366 new home purchases and 473 re-fi’s. In the case of re-fi’s, there are occasions when the lender actually performs the closing. So, in Virginia for instance, 50% of the cases studied were closed by settlement companies, ~30% by attorneys and ~20% by the lenders directly. Across the entire study 60% were closed by settlement companies, 17.4% by attorneys and 22.7% by lenders.

The empirical evidence is that the attorneys are correct that title companies charge more for their policies, but they are wrong that it always costs more overall. The study showed that in states where Attorneys handle all the closings by law and the states where settlement agents are dominant the charges are roughly equal. There does not appear to be any influence that regulations have on the costs of closing a loan. In states, such as Virginia, where consumers have a choice, the numbers that make up the total for closing costs may be different, in the end, the costs are roughly equal.

The CRA study found that “High or low closing costs appear to be at least equally – and frequently more strongly – associate with a wide range of other factors (such as details of the loan, the characteristics of the state or loan area, and the characteristics of the borrowers);” Translation: While different loans cost different amounts to close, it is based on size of loan, credit score, local taxes (GRANTOR TAX!!!) and other factors, not who the settlement agent was.

So, what does an ambiguous study tell us about how buyers should choose their settlement agent? Very little. Instead, it says that the price conscious buyer isn’t going to save money. So the question that a buyer needs to ask is, “How will I best be served?” Given that settlement companies are not allowed to act as attorneys or provide legal advice in the case of legal issues arising, my advice is to stay with a local attorney who can represent you if you need it. The cost of bringing a lawyer on board down the road is much higher than having them with you from the start.

Holy Cow

I was in my car and on the way to a lunch appointment, and I got a text message from my partner, Jonathan Kauffman on Friday at 12:17 p.m. It was, as most text messages are, short and to the point. It read.

WE WON!

Immediately, my phone rang. It was my other partner, Jim Duncan. “Dude, we won. It’s all over Twitter.”

Frankly, I didn’t believe either of them. It was too good to be true, and, after all, Nest is only six months old next week. But it was true. And over the past few days I have gotten excited and downright giddy. I have wondered if I was dreaming. I have bragged. But as of today, I have begun focusing on a different side. It is our reminder that we have accomplished much, but we still have a long way to go, and we can’t rest.

inmanlogo.jpgWhat we won was unexpected, but much appreciated. Nest Realty Group was named Most Innovative Brokerage in the country by Inman News, the real estate industry’s leading news source. Each year, at their annual “Inman Connect” conference, they select one brokerage who is changing the way business is done and honor them. Additionally, they recognize bloggers who are having an impact, service providers, and overall market innovators. But this year, it was Nest who came out on top.

This is not an honor bestowed upon new and up and coming firms typically. In fact, the firms who were finalists with us are some of the most well respected firms in the country.

  • Redfin – The leader in Internet based real estate transactions
  • @Properties – An eight year old firm with the #1 market share in the Chicago MSA
  • Better Homes and Gardens – An international franchise company
  • John L. Scott – A 75 year old brokerage with offices throughout the Pacific Northwest
  • Coldwell Banker – 3,900 Offices across the globe from a firm founded in 1906.

And, Nest Realty Group, a company of 6 agents founded in Charlottesville just six months ago.

So, why did we win? A number of reasons. Inman cited our web site as the number one reason they believe we are changing the face of real estate. What is different is that the web site provides information and a customer search in a way that actually provides value. There are neighborhood synopsis over over 175 neighborhoods. There are videos of many of these areas. There are searches based on amenities, not just price. There are searches by area, not just county.

It is not that the web site is so dramatically different that brought us to the judges attention. It was that the web site was the end result of a firm founded on the principals of transparency and customer centric service. This is not a web site designed to keep the information in the hands of the agents. We offer the most comprehensive quarterly updates of any real estate firm I have ever seen, regardless of size. We are different in our willingness to not just utilize social media, but to embrace it.

In marketing properties, we are the only firm in Charlottesville that provides customized signs. We offer video on every listing. We offer professional photography. We offer floor plans. Some of these may not be high tech. And I certainly concede that there are other agents who offer some of these items. But only Nest provides it for every listing, regardless of the agent. It is who we are, not just as individuals, but as a team.

And for that team, I am eternally grateful. I am proud of what we have accomplished.

Jonathan and I had a chance today to talk for the first time face to face since he returned back from InmanConnect in San Francisco. And the first thing we discussed was what we would improve, and what we wanted to plan for the next year. I have spent this evening searching out partners for some of our plans. And I can’t wait to start implementing.

And, I’m happy to admit that having our Inman trophy around IS pretty cool. InmanTrophy.jpg

The Changing Face of Builders

I had a client in my car last week as we drove through Northern Albemarle County neighborhoods. We were talking about some of the new subdivisions that were being worked on, and we drove through at least one new neighborhood that was did not have any activity at all. As we pulled into Greene County, my client asked about the Ryan Homes that were being built on the Western Side of 29 at Holly Hill. He remarked that they looked just like one of the neighborhoods in DC that he remembered being built several years ago. It got me thinking about Ryan and the landscape of Charlottesville new construction.

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So, I came home and pulled two pieces of information. First off, I grabbed all the new construction that closed between July 1 and December 31 of 2005, and then I pulled the same data for the same period of 2008. Not surprisingly, there were a lot less homes sold in 2008 than in 2005. I did not select only one county or another, I pulled the whole MLS. And what I found was not surprising, but when you look at it visually, it is pretty clear: the builder landscape is changing, and its changing fast.

In the second half of 2005 there were 99 builders that sold property in our area. Ninety Nine… That’s huge given the size of our market. As you look at the graph to the right, you will see that there were only 6 builders who held more than a 2% market share, the largest of whom was Hauser Homes. In 2005, Hauser was flying high with a new sales center on Route 29. They had brought in a new mortgage company to add to their all around sales effort. Bob Hauser was touting a new neighborhood that would be coming along in the next few years that he and Frank Stoner at Stonehaus were working on: Belvedere. Hauser was starting a custom home building division and had two custom jobs going in Old Trail. Further, he was moving into the high end condo / townhouse market with pricey Poplar Glen.

Not far down the list was Church Hill Homes who seemed to be able to do no wrong in the market. They launched the new Avon Park, and all the units flew off the market faster than the builder could put them up. The bought land in Wickham Pond, in Belvedere, in other counties. Church Hill was moving along. But how could they do wrong? It was 2005 and if you built it, they would buy it. There were so many builders in 2005, that 46% of the market was served by 89 builders.

05 to 08-1.jpg Important to note in the list of top 10 builders in 2005 is the absence of any major national home builder. There were rumors that Toll Bros. might be looking at coming into Charlottesville, but it never materialized. In 2006, Ryan Homes entered the Charlottesville game. The builder eyes watched as Ryan opened up shop at Old Trail with 27 lots. They entered into agreements with Kenridge near Farmington Country Club and Cherry Hill in Johnson Village. Everyone watched to see what would happen and whether Charlottesville natives would shun the outsider giant and their production build mentality. After several months, Ryan walked away from almost all the lots at Old Trail. After 3 years, they walked away from the remaining lots at Kenridge. Many could say that Ryan was not successful in Charlottesville.

However, they’d be sorely mistaken. Ryan sold out Cherry Hill, they moved to the Pavilions at Pantops, they built at the Hollymead Towncenter, they built at Holly Hill… and more… They may not have struck gold in their high end practice, but they certainly proved that a national homebuilder can compete with the locals. Maybe Brueggars can’t beat Bodo’s in a head to head, but Ryan is showing some serious strength in proving a strong value proposition for their homes.

When you look from 2005 to 2008 numbers, you notice that once unstoppable Hauser Homes has dropped from a 13% market share down to 4%. While 2005 may have had 99 builders closing on properties in the second half of the year, there were only 72 builders by 2008. And outside the top 10 builders, the market share dropped from a cumulative 46% to 44%. The biggest winner was Ryan Homes. Within less than three years in our area, they went from a zero market share to 24%. I have heard it said that they want a 50% market share in 2009. I can’t say if that is a real goal or simply a rumor, but if it is their goal, I think it is achievable.

In 2008, Church Hill still made the list despite their foreclosures and sale to Eagle Construction of Richmond. This would be the last quarter we will see Church Hill making sales under their own name. Sam Craig, with Craig Builders made the top 10 list. Most interesting of all in my opinion is that Southern Development has managing to hold on to their market share throughout it all, which is a testament to their flexibility.

I find all of this interesting, but what I really look forward to is seeing how the market shakes out when a rebound does occur. Will Ryan just grow faster? Over this period, on a National level, Pulte Homes lost over 60% of its market value, and Centex Homes lost over 80% of its value. Ryan (NVR) lost just under 40%, which may not sound great, but for a home builder in this era, its pretty good.

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