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Tuesday, Aug 16, 2022
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Housing Frenzy Brings Changes

Housing Frenzy Brings Changes By SHELLY GARCIA Senior Reporter Real estate brokers are working overtime to find properties to sell. Mortgage lenders are providing stress reduction workshops for overworked staffers. Escrow companies are reorganizing to handle the added workload. A residential real estate industry unlike any that even seasoned veterans say they’ve ever seen before, has all those involved looking for new ways of working. The dynamics record low interest rates and a housing stock in short supply are not brand new to an industry that has weathered many cycles both up and down. The difference this time is a matter of degree and of duration. “You take an industry that, prior to one and one half years ago was geared to residential resale, and then you double your business,” said Bob Elliott, senior vice president and Los Angeles County manager for Old Republic Title Co. in Glendale. “There’s just not double the staffing out there. “There aren’t people sitting out there waiting to be an escrow officer or an appraiser.” Interest rates, which began falling several years ago, have dropped so many times in the past two years, that many homeowners have refinanced two times or more since then. Mortgage lending has ballooned as a result. Mortgage lending in the U.S. is expected to reach $3.4 trillion this year, a 36.5 percent increase over last year, according to the Mortgage Bankers Association of America. About 75 percent of that total will come from refinancing fueled by record low interest rates. By comparison, a typical year historically has seen the ratio of refinancing loans at about 20 percent to 30 percent of total mortgages. “I’ve been in this business for 25 years, and the duration of how long this has lasted has far exceeded any in the past,” said Craig Peskind, president of StoneRidge Escrow Corp. in Encino. The sheer volume is not just taxing the mortgage lenders and brokers who provide the financing. Each transaction also involves a team that includes the escrow and title companies, appraisers and others. Many of these companies report they have increased their workforce by 20 percent and more in the last one to two years, and it’s taken a considerable amount of creativity just to handle the logistics of housing these additional workers and the paperwork they generate. On average, a single refinancing transaction generates a file that is literally five or six inches thick. The file stays active for 30 or 60 days, which means that the number of active files can double or triple within that same period. Metrociti Mortgage LLC is one of the few companies that have made the decision to move to larger quarters. The mortgage lender will add about 40 percent more space in its new offices in the Sherman Oaks Galleria, although the company is quick to point out that the move is geared to long-term expectations, not the current burst of business. Old Republic is staying put in its Glendale offices, but the company has also gone out and purchased new storage cabinets in addition to the outside vendors it uses for long-term storage. “An average title officer has 100 to 250 active files on his desk,” said Elliott. “An escrow officer probably has 300 active files. It’s very orderly, but the volume is immense.” At StoneRidge, two full-time employees do nothing but travel back and forth daily to the warehouse that stores the company’s files. Volume of calls “For a company like ours, it is not just the volume of files, it’s the volume of phone calls that the files generate,” said Peskind. “In a couple of offices we actually have two receptionists handling the volume of calls.” For many companies, the only way to get more productivity out of their fixed space is to go to multiple shifts. It’s not unusual to find these offices humming well into midnight. It isn’t just space preventing companies from taking on more help. First and foremost, qualified help is scarce. Most of the businesses that service the residential real estate industry are set up for a volume of work that is just a little more than half the current levels, and there simply are not enough skilled workers to take up the slack. “We’ve had a number of loan officers come and say can I work with you?” said Harry Geozian, president of Chase Financial Corp. in Granada Hills. “As you add more loan officers, you have to add more loan processors, and you have a lack of qualified talent in the industry. Escrow, title and loan officers are highly-skilled workers not only in the technical aspects of the job, but in terms of the relationships they have developed with others in the industry who often send them business, and with their customers. Many have been with their firms for several decades and more. Even if these officials could find the talent, the memory of the last real estate bust in the 1990s and the painful downsizing that followed, makes them reluctant to take on new workers. But that hasn’t stopped a number of companies from trying. And while many workers seem cognizant that a new employer might not have much loyalty when the cycle turns around, the recruiting efforts are sometimes hard to dismiss. Nearly every top executive has a story of rivals rolling up the money truck in hopes of luring their best and brightest. “I gave out $60,000 in bonuses at the end of June,” said Dan E. Levine, executive vice president at Celebrity Escrow Corp. in Northridge, which doles out bonuses quarterly. “I have somebody who was offered $35,000 a year more than we’re paying to go down the street.” In these times, no one can afford to skimp on bonuses. “We paid out bonuses, not only regular commissions but bonuses against pre-tax profits,” said Elliott at Old Republic. “I’m setting aside a certain amount of dollars for bonuses at the end of the year, and it helps. But you know what? We lost four escrow people 12 months ago, and they have changed companies three times since then. It’s a bidding war.” Junior hires Many companies have tried to attack the staffing problem by reorganizing in ways that allow them to hire at more junior levels which can be more easily adjusted when the cycle turns downward. Some, like Old Republic, have reorganized jobs so that the escrow and title officers can concentrate on their most critical functions. “We’ve streamlined by taking three or four of those functions away and centralizing them at an opening desk or a closing desk, which can be handled by entry-level people,” said Elliott. “And we utilize the officers’ time dealing directly with the client.” Others have added temporary workers. “We’ve added temporary workers,” said Paul Wylie, CEO of Metrociti, who estimates that the company’s worker roster is up by 33 percent from a year ago. “We’ve brought on additional recruiters to hire more people. We’ve trained more people so we can get them to do more valuable functions.” Still, the most prevalent solution to the lack of qualified help is a dramatic increase in overtime pay. Most say 60-hour weeks are the norm. So is stress. “The brunt is falling on skilled loan officers and underwriters, that’s where there’s the finite amount of labor,” said Wylie at Metrociti. The company has established a number of programs to help workers manage in these times. Metrociti caters breakfasts and lunches, it offers employees free movie tickets and subsidizes memberships to 24-Hour Fitness, which has a branch in walking distance to the offices. Metrociti also offers weekly stress reduction classes and makes available a condo in Cabo San Lucas for employee use. They book it in advance through the company and only pay the cleaning fee. “We want people to take vacations,” Wylie said. Even real estate brokers, who have not seen the kinds of volume increases those who handle financing and related services are experiencing, say the current market has made their jobs much more stressful. “You have buyers who want to buy but they’re afraid to put their house up (worried that if the house does sell, they may not be able to find a new house),” said Diana Brookes, senior vice president at Coldwell Banker who manages 24 offices from Santa Inez to Santa Barbara. “Even if you find the right house, you’re going to be there with 15 other offers. You have the stress of getting in there, getting approvals. There’s always a time crunch. You think you’re going along smoothly and all of a sudden a glitch comes along because the appraisers are so busy. Everything backs up.” The number of listings in the San Fernando Valley has been rising steadily, from 25,206 in 2000 to 26,412 in 2001 and 26,737 last year. But the increase in unit volume isn’t rising nearly as fast as the number of potential buyers anxious to take advantage of the low interest rates. Fewer choices “When I would go out on caravan (a brokers’ preview tour) before, I’d come back exhausted,” said Sonny Fox, previews director for the estate division of Coldwell Banker, who handles homes from entry-level to the millions. “I would have seen 10 or 20 houses. Now if I see half a dozen, I’m thrilled.” With fewer choices available, brokers say they are doing far more hand-holdings with clients. Often buyers have to compromise on what they settle for, despite the fact that they are paying top dollar for it. And the kinds of negotiations that used to be the norm, have fallen by the wayside. “When they’re paying a high sum, and then they have a home inspection and it shows certain defects, they’re asking for the defects to be repaired,” said Fox. “But you have to choose your battles carefully.” Especially when there are typically a handful of other potential buyers waiting in the wings. The pace of business has also escalated tremendously, meaning that when homes do come on the market, brokers must be ready. In past years, they may have checked the computer for listings once daily. These days, they are more likely to check five or six times a day, in addition to the networking and other contacts they maintain to make certain they hear of so-called pocket listings (not posted on the multiple listing service). Just a few years ago, Barry Burnett, realtor and the owner of Barry Burnett Realty in Burbank, made due with a cell phone plan that allowed him 1,800 minutes a month. Now, “I use my cell phone about 4,300 minutes a month,” Burnett said. I’m either in face to face or telephone meetings eight hours a day.”

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