On the move Featured

6:06am EDT September 30, 2005
On the move How Harley Rouda Jr. made Real Living Inc. the fifth-largest real estate brokerage in the nation By Todd Shryock In the real estate business, you are either a buyer or a seller. Which one you choose to be may depend on what changes you foresee in the neighborhood or in the market in general.

Harley Rouda Jr., CEO and managing partner of Real Living Inc., saw changes coming in his neighborhood and knew he had to do something. The difference is, his neighborhood is a little bigger than most — it’s the entire real estate industry.

Rouda, who was CEO of HER Realtors, a company his father founded in 1956, knew in the late ’90s it was inevitable that the industry was going to undergo massive change.

He saw the fragmented landscape of small real estate offices being rolled up into larger regional players, and those, in turn, being rolled into national powerhouses with the financial resources to provide the latest technology and tools to agents to maximize sales. The question at the time was how could HER Realtors best handle this new landscape in the industry. Large public companies were assembling their own real estate empires and offered Rouda the chance to be a seller, but he declined.

“We met with the management team and agents in the market and set forth the goal of expanding beyond our Central Ohio borders,” says Rouda. “Within a couple years of that, discussion began with the merger of HER and (Cleveland-based) Realty One.”

On Jan. 31, 2002, Realty One and HER and their affiliated companies merged. Rouda had decided to be a buyer.

Now he had to find a way to make the new organization into a cohesive unit that could continue to grow nationwide. He knew that would require a strong brand supported by a culture that gives agents the tools and flexibility they need to be successful.

Establishing the brand
The merger united a dozen or so companies that provided real estate-related services, and Rouda wanted to unify them under one name.

“At the time of the acquisition, between the brokerage companies and the service companies, we had a dozen different brands,” says Rouda. “We had a dozen different brands and we recognized the need to consolidate those brands into a related look and feel with the names. The lead brand is Real Living, but we have variations of that by service and/or geographic location.”

The original company’s name usually follows the Real Living name. For example, in Cleveland, the company operates under the Real Living Realty One brand. Real Living ties everything together, with the familiar Realty One brand drawing customer recognition in that market.

Rouda also had some internal branding to do. He needed to create a culture that would foster a unified message throughout the organization and help deliver a consistent service level.

“The culture is very, very important,” says Rouda. “We have individual contractors who have various ways of selling, but they still associate with a real estate company based on image, reputation and the culture of the company. For us, we want an innovative, progressive yet family-oriented agent — not family in the traditional sense but family in a sense that they are a team player in the business unit and represent buyers and sellers at the top of the professional scale.”

Agents also must be able to use the technology and modern marketing methods available to them to create the success buyers and sellers want.

Creating and maintaining this culture requires constant effort.

“It’s a full-blown, ongoing, continuous project,” says Rouda. “I can’t overstate how important it is, not just for us but for any organization. We call it the ‘Real Living Way,’ and it’s integrated into every aspect of our business dealings. From when we hire, whether the employees are new or transferring from another company, they are indoctrinated into who we are and how we do business. Everything we do, from marketing to delivering of service to agents, everything has to support the Real Living Way.

“Some of it may sound trivial and silly, but it is important in the overall scheme of things to consistently treat people the same way and deliver products and services in the same manner so the culture is re-established with every action you take.”

The effort starts at the top. The leadership team meets bi-weekly, and one of the standing items of discussion is professional development aimed at making sure the agents are professional and successful in delivering services.

“The brand is consistent internally and externally, and reaches down from the overall management team, includes the branch offices, the division managers, and further extends down to agents and employees in the organization,” says Rouda.

The message is delivered via Web-based training for professional development at all levels, personal meetings, sales rallies, management meetings, e-mails, intranet communication and marketing.

Rouda and the corporate office have a delicate balancing act to manage. They want consistent service but also want independent-thinking agents. “What we try to do is make sure there is a base level of service provided to all buyers and sellers that is typically scaleable through our online technologies,” says Rouda. “But we leave it to the individual agent and office to further enhance that experience through local venues and support. Real estate is local. You have to develop a marketing plan and service plan specifically by location and by property.

“What we have to do is provide something of value across a network of 4,000-plus people, but also provide the flexibility and empowerment so they can embellish it to meet client needs. Our model is agent-centric. We believe that if we provide the right tools and services for agents to deliver the best experience, we will not only attract the best and keep the best, but the consumer will have the finest experience they can possibly have.”

Providing an arsenal of technology and other tools to help the agents is a key factor in successfully integrating new companies into the Real Living fold.

“We have to answer the question, ‘What’s in it for me?’” says Rouda. “We have got to quickly, at announcement time, get those questions answered for the agents and staff. We’re usually very successful. We bring them tools and resources on that day. It’s not a matter of, ‘Forget how you did it yesterday, this is how you are doing it today.’ We would never say that. We say, ‘You are doing business great, keep up the good work, and by the way, here is some more stuff for you to choose from.’ It’s sort of like the candy store doors are open, help yourselves.”

Additional resources include mortgages (through a partnership with Wells Fargo Bank), title, home warranty and corporate relocation services, all marketed under the Real Living brand.

“It all ties into Real Living by meeting buyers’ and sellers’ desire for one-stop shopping,” says Rouda.

Managing growth Rouda says Real Living must continue to grow. With industry consolidation continuing, you have to keep being a buyer to build an organization large enough to compete on a regional and national scale.

“We’re just now entering the second stage of what is probably a three-stage evolution,” says Rouda. “The first stage was companies like Cendant and Berkshire-Hathaway creating national platforms by buying city brokerages across the U.S. With their entry into the market, the real estate community took notice and said, ‘If we are going to survive in the industry long term, we will have to grow as well.’

“Now you are seeing regional acquisitions going on, and that’s phase two. Phase three will see regional and national consolidations. It probably won’t be for several years, but there’s a lot more consolidating to go.”

Right now, the biggest limitation to Real Living’s growth is capital.

“If we had more capital to do more acquisitions, we would grow at a faster pace,” says Rouda. “That’s part of the challenge. We are service-based, and most investment banks and traditional banks are used to lending on assets. When you move into a service-based business, it gets harder to do.”

He expects the capital to come a little easier as Real Living continues to post successful results. In 2004, Real Living Network companies reported real estate sales of nearly $9.1 billion. Rouda wants to grow fast but also realizes it needs to be done with caution.

“My nature is to want to grow fast,” he says. “But I know you have to have the infrastructure in place to service the markets and new franchises. Your growth needs to occur quickly, and I think that’s part of the excitement of where Real Living is going, but we also have to make sure we franchise right and buy right.”

Finding the right companies to acquire is a challenge, but Rouda has three basic criteria to guide him.

“What we want first and foremost is a company with a compatible culture,” he says. “Second, we are looking for someone that wants to grow with us. If they want to sell the company entirely and take 100 percent in cash off the table, that’s not a good fit for us. If they take even the majority of cash but still do what’s called an equity rollover for a portion of the business, that’s fine, but we want them to have skin in the game.

“Third, it needs to be a market where we want to have company-owned stores. If it meets those three criteria, then it’s somebody we want to talk to.” In the end, Real Living can only be as good as its agents, who are the main point-of-contact with its customers. Some real estate companies are little more than a name, with agents left to their own devices to find buyers and sellers, while other companies try to drive consumers to the brand itself, then give the consumers to agents.

Rouda wants to take the best parts of both of these strategies to give his agents optimum working conditions.

“Our goal is to have something that’s the best of both worlds,” says Rouda. “We want to provide a consistent, cohesive consumer experience, but we want it delivered by a highly developed professional agent. We look to the agents to develop a relationship with buyers and sellers, but we provide the tools and resources for them to be successful.”

How to reach: Real Living, www.realliving.com or (866) 438-7325