Expecting an earthquake in Herzliya
Guy Liberman speaks with a real estate agent who loves his work, but is bracing for a nasty shock.
The next 12 months may be the toughest of Uri Tal's career. That's because it may be the most difficult time the property market in the seaside city of Herzliya Pituach has ever known.
Tal, 66, freely admits that before his last deal, he hadn't managed to close a deal in three and a half months. There's a glut of sellers, the foreign residents are hunkering down at home, wherever that may be, and the buyers are few and far between.
"They want the property owner not only to lose his pants but his underwear, too," quips Tal, speaking about his stamping ground - Herzliya Pituach. And these are just some of the issues that have created utter turmoil in this market, which had been the province of the richest players in Israel.
"During the three years before the last nine months, prices shot up by as much as 70% to 100%," says Tal. But then the up-trend not only stopped, it reversed violently. "Now we're in the midst of a trend of prices falling hard," he describes the Herzliya Pituach scene.
The homeowners in the city just north of Tel Aviv don't get it yet, says Tal: If they want to sell, they have to drastically lower the price because there just aren't any buyers out there. The financial crisis has affected not only resources to acquire property, but the whole nature of the game.
"In the past, buyers could come without a penny in their pockets, then once a price had been agreed upon, they'd go to the bank, get a mortgage and close the deal. Now just try to squeeze a mortgage out of a bank - you have to bring endless securities," Tal says.
In short, the buyers are offering drastically lower prices, but the homeowners have yet to accept that this is how it's going to be, says Tal.
By how much do you think property prices will drop in your beat?
"Even though most of the Israeli real estate market has shifted to shekels, over here the prices are in dollars. So something interesting has been happening. If there had been a property offered for $2 million at an exchange rate of NIS 3.50, then the owners would have received NIS 7 million. But today they're asking for $1.8 million and the exchange rate is more than NIS 4 per dollar, so actually, they're getting more [in shekel terms]. The drop [in dollar terms] is offset by the appreciation of the dollar, no more."
But they have to drop a lot more than 20% in price to sell a property these days, Tal says.
But if the market stabilizes, then rebounds, could prices regain the record levels they'd reached?
Not in Tal's opinion. He sees the Herzliya Pituach real estate market as a microcosmic emblem of the global situation.
"I think that prices reached very high levels, exactly as the entire world economy did," he elaborates. Prices had become unnaturally bloated, becoming distending beyond their natural proportions. The natural proportion for Herzliya Pituach prices is rather below their record levels, he feels.
Tal has been in the real estate sector for 11 years, after a long career in selling textiles in Israel and abroad. He worked at a number of companies, including Aderet, Tsemer Hahasida and Polgat, and even set up a company of his own together with partners. Having decided that the textiles industry had lost its glory, by which he means abandoned Israel to manufacture more cheaply elsewhere, he decided to try new directions.
"I decided to try property mediation. I had family in Herzliya Pituach and decided to work here, because I thought it was a good starting point, though I didn't know much about the business," he admits.
The local branch of Anglo-Saxon declined to accept the new realtor. "Apparently it was a slow period. They didn't need agents and treated me derisively," he remembers. He tried his luck at Re/Max, which at the time had just 13 branches in Israel. Today it has more than 80. Tal has been working at Re/Max on the Sea since then.
He didn't have an easy start. "I didn't close a single deal for eight months. One of the main reasons for the high churn rate among real estate agents is that they get into the business, and give up after half a year of nothing," he says. "They need to make a living. To set up an agency is cheap, because costs are low, but there's one thing that costs - until you make a deal, nobody pays you a salary. That's the difference between broking real estate and everything else."
Asked if Israel has "super-agents," Tal smiles. "Maybe there are. I don't know. If there are any, I don't know them." Asked if he's among that group, he prefers not to answer, but the numbers speak for themselves. In each of the six last years he, sometimes with other agents, has been chosen the most profitable agent in the Re/Max group.
In each of the last two years, as the financial crisis gained momentum, he still managed to take in fees amounting to more than a million shekels. Not bad for a person only 11 years in the business.
What was the first deal you did?
"My first deal was renting a house. Today rental prices in Herzliya Pituach range from $3,000 a month to $30,000. My first deal was for $800 and afterwards, the woman I rented to sent me more clients.
"It's hard work, unbelievably wearying. I'd go with my wife at 10 P.M. to distribute brochures in the neighborhood. At Re/Max they say, money is lying on the floor, you just have to bend over to pick it up, but that doesn't work for everybody. For example, it doesn't work for a manager who'd been accustomed to status symbols and to a secretary. But I believe that if you work hard, you'll succeed. If you're willing to make that movement and bend over, you'll succeed. As for the brochures, later, other people distributed them for me," he says with undisguised pride.
Tal is also proud of his working methods: "I've let a lot of deals go, because I wouldn't make them. They contradicted my professional ethic."
What do you mean by professional ethic?
"Professional ethic is that the client's interest comes before your own. For instance, if both the owner and the buyer are your clients, and you could get a 4% fee [2% from each], would you press through the deal even though you know that the buyer could get another house where you don't have an agreement with the seller?"
Tal offers real life examples. "A few years ago, I received exclusive rights to sell a house, and after a few months without good offers, I received an offer for $660,000, toward which the owner was leaning. But an hour later, another realtor called me and said he had a client with a really high offer. I said that if it was a fairly similar offer, I wouldn't get in the way of the deal taking shape. But if he could bring me a significantly higher offer, I'd hand over the homeowner and let him decide. If I'd been looking out only for my interest, I wouldn't have thought to call the homeowner, because the deal had been practically done.
"Shortly afterward, the other realtor called and said his client was offering $690,000. I called the homeowner, who accepted the new offer. At the end of the day, the client has $30,000 more and Uri Tal has $15,000 less in his pocket, because I had to share the fee with the other realtor. That's the difference between the client's interest and the broker's. I can't say all the agents work that way. Some do, some don't."
More agents, more deals
During the boom years of the Israeli real estate market in general and Herzliya Pituach in particular, the business of mediating property deals boomed, too. Agents sprouted up all across the land. Now 20 agencies operate in Herzliya Pituach alone. Surprisingly, Tal is pleased about the number of competitors.
"My system, the Re/Max system, is based on cooperation," he explains. "I sell a lot of houses, and 70% of them aren't for my own clients but for the clients of other agents. The system says, 'take a house exclusively, then offer it to all the agencies that will bring buyers.'
"I work with 60 different agencies in Israel. The tremendous exposure the house gets means that every day I get clients I wouldn't otherwise have reached. Naturally, I only get half the profit, meaning the fee from the seller. But I have no problem with that. Our office at Re/Max on the Sea has nine agents today and I say there will 15 or 20."
When a new agency opens up in town, says Tal, he's the first to knock on the door, wish them every success, and offer cooperation. "When there are more agents, each has his niche. Cooperation increases the chances of making a deal," he says.
Do you have more advice for people in the business?
"Trust is very important. Generally speaking, clients don't have faith in agents. They figure they're all crooks. When a client meets with an agent who shows him the drawbacks of a house, it creates trust, because he feels I'll take care of him.
"Another important point is not to try to represent both sides at any price. There are a lot of agents who feel it's important to work with both sides. But in my opinion, that can damage the property owner's interest. It's important to create trust. I believe that integrity is one of the factors behind my success."