with franchises A real estate edge About HomeVestors MISSION

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1 A real estate edge with franchises MISSION HomeVestors of America, Inc., also known as the We Buy Ugly Houses people, is an all-cash home buying franchise founded in Seeking to identify and prove the business advantages that franchise real estate professionals hold over those who operate independently, HomeVestors itself one of America s top real estate franchises recently interview more than 8,000 professionals nationwide. This research was conducted to realize the company s desire to: Prove the competitive advantages held by real estate professionals who affiliate with a franchise Build awareness among independent real estate professionals or those considering a career in real estate of the sustainable advantages experienced through franchise affiliation. About HomeVestors HomeVestors of America, Inc was founded in 1989 and began franchising in Known best as the We Buy Ugly Houses people HomeVestors is an all cash home buyer. They have purchased over 50,000 homes making them the #1 home buyer in the United States. HomeVestors has independently owned and opperated franchises in more than 37 states and counting. If you re interested in finding out more about starting your real estate business contact HomeVestors or visit their website:

2 OVERVIEW Real estate is a cornerstone of the American economy. Through every market cycle, the financial health of the U.S. has been driven by the real estate market and its many ancillary components. Moreover, just as the health of the real estate market drives the health of the U.S. economy, so does it serve as the means by which thousands of people who buy and sell real estate professionally earn a living. And increasingly, given the market s volatility since 2008, those professionals are seeking franchise support. But the question remains: With real estate franchises comprising an ever-larger share of the Entrenpreneur.com Franchise 500 list, are franchises meeting the needs of their professionals? What s more, does affiliating with a real estate franchise truly give real estate professionals a competitive marketplace advantage? METHODOLOGY The survey was given to 8,000 participants across the general population of the United States. Among participants, only those who indicated they were associated with an independent or franchise real estate business were asked a follow-up question. All questions were multiple choice, asked in random order, and each respondent was asked only one follow-up question following their screening. Research Summary The findings identified 4 key findings related to franchise-affiliated real estate professionals: Franchised real estate professionals are unequivocal in their support of franchise affiliation, and believe that being part of a franchise gives them a distinct competitive marketplace advantage. Franchised real estate professionals believe they are trusted more by clients. Franchised real estate professionals perceive that they experience fewer roadblocks than do their independent counterparts. Franchised real estate professionals can focus more on professional development and closing deals and they experience fewer pressures related to marketing support, lead generation and operations administration than do their independent counterparts. Group Response Non- CPS Bias response Male 48.0% 42.6% 48.4% -0.4% Female 52.0% 57.4% 51.6% 0.4% % 7.8% 14.8% -6.4% % 10.7% 20.1% -5.9% % 13.2% 19.2% -5.9% % 22.5% 19.7% 4.2% % 31.6% 15.4% 13.4% % 14.2% 10.8% 0.7% Midwest 34.1% 28.7% 22.2% 11.9% Northeast 12.5% 17.9% 18.7% -6.2% South 30.4% 29.2% 35.5% -5.1% West 23.1% 24.2% 23.6% -0.6% RMSA score 3.2%

3 DO REAL ESTATE PROFESSIONALS VIEW FRANCHISE BUSINESSES AS HAVING A COMPETITIVE ADVANTAGE? Overall, when real estate professionals were asked if they believed franchise businesses held an advantage over independent businesses, 29% said definitively yes and 29% said definitively no. However, of those remaining, 20% of participants believed that perhaps franchises held an advantage. While franchises haven t yet sold a simple majority of real estate professionals on the definitive belief that there are advantages to affiliating with a franchise, a vast segment of real estate professionals fully support the benefits that franchise affiliation provides. Franchise vs. Independent Real Estate Professionals: Independent respondents were more likely to respond that there was no advantage to franchise businesses, but only slightly. Significantly, the number of not sure responses was markedly higher among independent professionals an indicator that even real estate professionals in an independent business may simply be unaware of the benefits and rewards that franchise affiliation can provide. In fact, those in franchise business were much less likely to be unsure of the advantages to being in a franchise since they experience those advantages every day. What s more, real estate professionals already in a franchise were more likely to say there may be advantages to a franchise business. This seems to indicate that the more educated real estate professionals become about the challenges and roadblocks inherent in the real estate profession discussed in subsequent sections of this report the more likely they are to understand and believe the advantages that come with franchise affiliation.

4 WHY DO DEALS FALL THROUGH? When asked: What is the most common reason a business deal falls through? the opinions of real estate professionals were fairly evenly divided among the options presented. No single reason stood out; rather, a common theme emerged focusing on the necessity of process improvements and training/mentorship as being important to ensuring that deals go through. That said, the most common response as to why deals fall through was too many roadblocks, with a 30% response. Real estate deals can be hamstrung by a multitude of issues timing, financing, larger market forces that can change in an instant. Moreover, much of the public still distrusts the real estate profession in general (including its ancillary partners like banks, mortgage brokers, home inspectors, and others) in the aftermath of the 2008 subprime mortgage fallout a distrust that continues to slow down deals to this day. Interestingly, the second most-common response was Not enough trust or brand awareness. This sentiment seems to indicate that real estate professionals recognize the important relationship between brand strength and marketplace trust toward breaking down barriers with their customers. Similarly, the third most-common answer was Unrealistic client expectations. Certainly, real estate can be confusing, and plenty of misunderstandings and myths abound among the public. Take market pricing: A real estate agent might find that a buyer is offering far beneath the asking price; however, an unrealistic offer is going to create a gap that negotiations just won t bridge. Franchise vs. independent real estate professionals: Among franchise professionals, the response rate for Too many roadblocks decreased significantly. The reason is simple: Franchises have the benefit and support of large networks to cut deals, with 3rd parties and established, trusted relationships that are vital for breaking through roadblocks and getting deals done. And while many independent real estate professionals saw Not enough trust or brand awareness as a defining factor in deals falling through, for franchise professionals that reason doesn t loom as large. Obviously, a franchise benefits from pooling money for advertising and branding providing yet another reason why real estate professionals who understand the market also understand the benefits of being affiliated with a franchise.

5 WHAT DO YOU NEED TO GROW YOUR BUSINESS? Branding, Process improvement, and Training appear to matter much more to real estate professionals than does lead generation a stark departure from what we expected. Branding makes sense since as discussed, it helps real estate companies develop a trust with clients and remove barriers. Even more than branding, however, real estate professionals are looking for process improvments, or systems that will help them to streamline and increase efficiency. Most notable here was the demand for training. Almost as many respondants believe training to be the most important factor to grow their business as did those who need leads. Without question, franchises hold a huge advantage here given the level of time and resources they can put toward collective team training. Independent real estate professionals often caught up in the day-to-day administrative grind of running a business and generating leads may not have the capacity to compete with the robust training programs franchises can offer. Franchise vs. independent real estate professionals: Among our survey results, the variations in response to: What do you need to grow your business, were where the biggest differences appeared between independent and franchise professionals. First, independents who don t benefit from pooled local marketing or national advertising as franchise professionals do overwhelmingly said they wanted more marketing. As with any independent business, an independent real estate professional is much more likely to be responsible for things like accounting, process development, and a host of administrative minutiae. So, given that a lack of brand awareness often translates into a lack of trust a key roadblock for independents it makes sense that marketing is at the forefront of the independent real estate professional. What s more, the overhead of running a business appears to be a greater challenge for more independent businesses than it does among franchise professionals. While both groups responded with branding as the 3rd most- and training as the 2nd most-requested needs to grow their business, it s also more common that independent businesses value accounting as a need yet another example of independent real estate professionals needing to spend more time on operations and less time on closing existing leads and asking for more. That s what sets apart franchise professionals in this category: With marketing, training and administrative needs taken care of, franchise real estate professionals can focus

6 RESULTS The survey results were surprising in some aspects and predictable in others. First and foremost: Franchise professionals agree that franchise affiliation helps break down barriers to closing business. Plus, without the time-consuming distractions of running a business combined with pooled lead generation, marketing, training and administrative support franchise respondents seemed to fully understand and support the benefits that franchise affiliation provides them. Finally, in categories where respondents weren t sure about the specific advantages of franchises, many seemed open to the possibility that franchises held the advantage overall but simply didn t know enough about the issues to make an informed decision. So, what s the bottom line? What are franchises doing that independent businesses are not? There s no clear answer, but overall, franchises seem to have 3 distinct characteristics that more effective overcome what plagues all real estate professionals the multi-variable roadblocks that prevent deals from closing. Those key advantageous characteristics include: The strength of strong, consistent branding A routinized platform of systems and procedures for training and administrative tasks Franchise networking and the ability to pool resources for marketing support and lead generation Regardless of franchise affiliation or independence, real estate professionals across the board will always need to work through an often lengthy sales funnel and navigate a diverse, ever-changing real estate landscape. The research shows that professionals who can tap into a resource that gives them a funnel of qualified leads, trusted marketplace branding, and ongoing systematic training, can feel poised to succeed in 2013 and beyond. HomeVestors of America / We Buy Ugly Houses 6500 Greenville Avenue #400 Dallas, TX BUYER