A Conversation With Commissioner Lowe

Tricia Covert

Arizona Journal of Real Estate & Business

It’s undeniable that the real estate industry is always in a state of change. An organization familiar with the change is the Arizona Department of Real Estate. As the first quarter of 2016 comes to an end, I asked Commissioner Judy Lowe if she could provide some insight on the Arizona real estate industry. Commissioner Lowe was very kind to sit down with me and share her knowledge about the industry.

Commissioner Lowe, how do you feel the Arizona real estate market is looking in terms of condition and growth – reviewing 2015 and the year ahead?
The real estate market in Phoenix metro and across the country is changing dramatically. There is shrinking inventory, a lack of qualified buyers and a perception that potential buyers would prefer to rent. As our homeownership rate declines, it raises concerns.

With that said, it feels to us here at the Department that the Arizona real estate market has stabilized. We would like the market to grow more rapidly – we’ve seen a less than satisfying home inventory, a bit of an increase in the buyer pool overall, but a stabilizing appreciation value. That’s all very positive compared to where we were a couple of years ago. If we continue to stabilize the market, enhance our population growth and attract industry to a pleasant economic environment, I think 2016 is going to be a great year.

Historically, Arizona has been known to be a real estate, state. Do you feel that’s still the case?
I do think Arizona was and continues to be a real estate driven state: including real estate, construction and new developments that encompasses the whole industry. Now, we’ve also added the investor and investment properties which feeds the rental market – it also creates a higher need for licensed property management companies to handle investor ownership.

What new trends did you notice in the Arizona real estate industry in 2015, if any?
A major trend that I have noticed is a younger segment of the population attracted to the business. This group is excited about real estate as a profession. Due to this trend, we will see the average age of the real estate licensee begin to decline.

These new applicants are also technology-savvy: they grew up with technology throughout their teenage years and simply need to apply it to real estate. This group is very vibrant and focused on succeeding. At the same time, they want to get through the process of getting licensed very fast, which could be a downfall when it comes to getting adequate training. However, once these applicants are in the business, they may be the type of individuals who will knock themselves out to become successful – which is what it takes when you first get started. Overall, I believe this trend is a positive indicator for our industry.

Another trend we’ve seen is that fewer individuals want to be self-employed.

The team concept has been gaining momentum over the past several years. Interestingly, for the first time, we are seeing new licensees coming into the business wanting to join a team when they get started. There are positives to this trend and some very, very strong negatives to take into consideration.

The number of broker license applicants is also down – that’s a concern. Qualified salespeople may not want to take the time or realize the benefit of becoming a broker. We need to educate the industry on the value of the role of an associate broker – there’s a knowledge and credibility that the salesperson gains with this title. We will also be educating the public and consumer more on the value of hiring a broker.

Real Estate Commissioner Judy Lowe

Arizona Department of Real Estate

What trends are you expecting for 2016?
A prominent trend that comes to mind is the formation of different types of real estate business models. Some include:

Sellers who are real estate licensees representing themselves as owners of the property and capturing buyers. In contrast, real estate licensees are becoming buyers: they’re interested in the initial home contract, mark the property up during the escrow period, resell it during the escrow period and take the escalation in the sales price as an assignment fee for themselves – this process involves much risk.

Real estate companies are now also willing to buy properties and approach sellers. The company tells the seller they can give them the value of their property within a few hours, make an offer based on that price and close within 3 days. Once the real estate company owns the property, they may put it right back on the market at a higher price – a quick “flip.”

The global business model is growing. The international ownership of real estate companies is becoming more common in our state – especially within property management. These companies run with no boots on the ground in Arizona – international owners conduct business via technology from places like China or Canada.

These new business models are different than what our statutes have been written to accommodate. This is an important issue we’re not denying, but we’re taking a step back to evaluate them in order to better understand and serve them.

What developments implemented by the Department in 2015 were designed to benefit the industry?
Our new online real estate license application process was a big initiative. The new licensee completes the required 90 hours of education and takes the school exam. When they register for the state and national exam they are now setting up an online profile with the Department. Almost immediately after passing the state exam, a congratulation email is generated from us and we then ask them to upload their package to the Department. Out of all of our license applications, a little over 80 percent of them are now completed online. We are one of very few states in the country that offer this online service – it’s been a huge success.

Another achievement was adopting our new Governor’s Lean Management Policy. We’re taking all of our internal processes, one at a time, and determining how we can do it more efficiently, better and in a shorter period of time for our consumers as well as customers.

An example of our efforts is our first initiative with building and development. Knowing our state’s building and development industry is growing so fast, we reviewed the public report application process first, and looked at how to shorten the timeframe for processing. When we started the review, the processing timeframe was around 30 days. As of the end of January 2016, the timeframe has been reduced to 3.5 days. We now can accept a non-deficient package that comes from the developer, builder or their sub-contractor and process it within a few days. The development industry can now take lot reservations and sell properties within 3.5 days.

We have moved on to working on auditing and investigation – looking at the process from the minute an audit letter goes out to brokers and the time when they know what they did wrong, didn’t do wrong, how great they did or what they need to improve on. We’re reviewing the broker profile, the various broker styles, office environment scenarios, etc. It will give our staff the awareness of the feelings brokers may have during an audit process so we can better partner and interact with them.

We now have “lunch and learn” with builders every quarter to create that same level of understanding for our staff within that group.

Are there new developments planned for this year?
We will continue with our lean process evaluation, modification and transformation. Governor Doug Ducey is making sure that his government agencies are focused on business. As a result, we have stringent performance requirements both for our internal team, our staff as well as my performance goals for the Governor’s staff. At the same time, Governor Doug Ducey is working toward his performance goals for the people of Arizona. We will be focused on delivering what has been promised to the constituents of Arizona.

What is the current count of Arizona real estate licensees?
I’ve been in my position a little over 6 years coming into the Department in 2009, at the time we had 93,000 licensees. We went through our trauma time and ended up with about 78,000 – that number bounces around. The 78,000 number is comprised of active real estate licensees: designated brokers, self-employed brokers, associate brokers and salespersons. The figure for the active salesperson and associate broker who “hang” their license with a broker is around 55,000.

Do you feel growth will continue for real estate licensees in coming years?
Yes I do. A few years ago there were 700 to 800 licensees leaving the business every month – that has slowed down. The attrition rate now is about 400 to 500 a month, so we’re not seeing as many people leave the business. We’re also seeing a higher number of new people coming into the business at rate of 450 to a little over 500 licensees per month. It will take years for substantial growth because we had an economic market that made the attrition rate decline so dramatically. But yes, I feel that real estate is a lucrative profession that appeals to many, many segments of the Arizona population.

A common question we receive from people interested in entering the real estate industry is whether the Arizona market needs more salespeople. What are your thoughts on that?
We need better. What I mean by that, is we need individuals who treat the profession as a profession; who see the consumer as a customer who must not only be served, but protected for each real estate transaction. Better is a well-educated, very knowledgeable, diligent individual that adheres to the statutes in place for the state of Arizona pertaining to real estate licensing.

Do you have recommendations for new licensees coming into the business?
If you are a new licensee, make education your first year a priority. Education is something that has to be done in order for the new licensed agent to prepare themselves for the requirements and expectations of the consumer and the industry. Some steps to consider include:

• Do what’s necessary to prospect and build your business.
• Choose a broker who acts as a mentor or choose a company that has a good training program.
• Get your 24 hours of continuing education requirements within your first 6 months after you become licensed – that’s an education in itself. Once you have your 24 hours, continue to take classes often for the information aspect to build your knowledge base.
• Be very selective in where you go for your education – don’t just be attracted to the free classes.

Our upcoming seminar on March 18 is focused on teams. Do you have advice or comments to someone in a team or wanting to join a team?
In the formation of a team, I would recommend that agents consult with their designated broker. Remember the designated broker is still the authority of the team and that authority cannot be delegated to a team leader.
As your team grows, make sure that the role descriptions fit within the statutes of Arizona. It’s very clear what an unlicensed assistant can and cannot do – as a team develops they can refer to our substitute policy statement online which will help them know the requirements for various roles.

We have to also remember that all compensation for real estate activity must go through the designated broker. We’re seeing too many violations surrounding compensation and how it must be dispersed as it pertains to teams.

For new licensees coming into the business this year, refer to your designated broker, read the team agreement and look at what type of hands-on training you’re going to get – not just one element of your role on a team, but the whole package of serving a consumer. Many times new licensees joining a team are not getting the well-rounded education that is so vital.

Advertising is another area of focus for teams. It’s understandable the team wants to be recognized by their consumers as the go-to Team. However, the name of the employing broker as it’s licensed with the Department must be clear and prominent on every ad, as well as every piece of material that’s used to solicit business.

Are there other comments you would like to share with our readers as we’re settling into 2016?
I would like to recommend that the professionals in the Arizona real estate industry read the National Association of REALTORS® D.A.N.G.E.R. Report. If they haven’t read it, real estate licensees should definitely get a copy and read it thoroughly, especially if their putting together a team.

Additionally, the Arizona Department of Real Estate’s primary goal this year is partnership with all aspects of the industry; whether it be commercial, builders, escrow etc. Our second goal will be partnership with the consumer mainly through education. Preparing the consumer to have a successful transaction: whether it’s property management, selling their home or buying. We want to allow the consumer to make their own decision, but to educate them on what their decisions should be based on. We’re eager to partner with the industry and the consumer.