Speaker 1: 0:30

My name is Joe Kernis and I work with REMAX Executives and Castle Property Management basically doing real estate sales and property management services for folks in Northern Virginia.

Speaker 2: 0:42

Love that, and could you go into detail a little bit about what are the types of services that you provide on the property management side and then on the other business side, just what are clients coming in for? Ideally?

Speaker 1: 0:53

Sure, what are they looking for? Yeah, I've always said they're very different businesses and I started with the real estate side, started selling real estate in 1998. And I did that for well, I still do it. But up until 2007, the market was great. I mean, I got into the business, started off with teaming with another really senior person, broke off on my own about a year later and it was a blast.

Speaker 1: 1:19

The market was great in early 2000s. We had the dot-com boom, so many things, and the market around here was great. Then, in 06, the market crashed. We had the financial crisis and my business on the real estate everybody's business took a big hit. So at that point I had to figure out what am I going to do to get things back to where they were? The market was the market. I was spending a lot of money on advertising in the local market, couldn't afford to do that anymore. There was really no point to it because the market just couldn't sustain it. So I decided I needed it to diversify and I looked at whether the different markets I can get into. And I looked at whether the different markets I can get into and I went into two, actually three the distressed sales distressed meaning foreclosures and short sales because people values were going down, people were losing their homes, but they had to be sold and there's different ways of selling. So I went into that business and then I also in 2008, started Castle Property Management and that was.

Speaker 1: 2:17

I started that also because of the distressed sales, because the way I looked at it was that people they had, if they had to leave the air, if they had to leave their home, they had several choices to make paid $500,000 for their house and now it's worth $400,000. They either had to sell it and write a big check to get out of it, or they had to just leave the keys on the counter and let it go to foreclosure and affect their credit. The other thing they could do would be a short sale, where you actually work with the bank and try to get it sold and get the bank to forgive you the difference. Or you could keep the property, leave, rent it out and wait until the market gets better to sell it. So I kind of got into all those different options that people had at that time and it really worked out well.

Speaker 1: 3:09

I mean it was tough getting into the foreclosures REO is what we call them REO side of things, because you have to make relationships with the banks. So it took a few years to do that, but that turned into a very good business. And then the property management. I always say the property manager is just a total different animal because you're dealing with tenants and owners that are landlords, and some of them didn't plan on being landlords but here they are. So working through all of that, but from a business perspective it's worked out really well many years later.

Speaker 2: 3:39

Wow, that is intense and it is another, as you say, animal. There with property management, you are dealing with tenants, so that can be a little bit of a challenge sometimes. I would like to know a little bit about your background. I know you said you used to be in IT. Just I know you gave us a brief summary there as well. But just go into that and how that transition period was like, and did you have a mentor, a coach? How did you gain all this insight?

Speaker 1: 4:01

Oh, great question. So, boy, a lot of stories I could tell with that. So I came here a give it away in the early 80s, got to Northern Virginia so I'm not a young guy anymore and I was in IT and defense contracting basically, and IT was even different back then too. There was no internet and that type of thing, so a lot of mainframe computers and things like that. But I was doing that. And then in 1984, I want to say I owned a townhome in Sterling and I was.

Speaker 1: 4:35

I wanted to sell it to get into another house and I decided that I didn't have a real estate license or anything at that point and I decided I'm going to try to sell it myself and save the commission, you know. So I stuck a sign out in the yard, you know, for sale by owner, and I think it was I don't know how many weeks later nothing was happening and I literally got a knock on the door from a real estate agent. He was the manager of one of our local companies here. I'll even name them because I still love this guy to death Jack Law of the Realty. So I get a knock on the door from the manager there and he's like how's the house sale going? And I'm like, well, it's not. And he goes let me do it for you. He goes, this will be my rate, I'll get it done. So I'm like, okay, do it. So I list the house with them.

Speaker 1: 5:18

And then he asks me. He said, hey, since you're trying to sell your own house, did you ever think about selling real estate? I'm like no, I said that's not me. I said because I got a solid job, I don't want to do it. He goes, it's. He goes come in and talk to us. He goes there's no, you could do both. You could do your your it job and still do real estate and have the best of both worlds. And I said, yeah, but I really don't want to interfere with my full-time job. And he said it won't, no mandatory meetings, any of that.

Speaker 1: 5:50

So I went in, I met with Jack, the owner of the company, and I said, okay, I think this could work. So I went and got my license. This is 1985 now and it was interesting I get my license. I'm all excited. The first thing I did is I made up a flyer. Back then there was no fancy stuff, right. So I just made up this black and white flyer made. Copies of it literally went to Sugarland Run in Countryside some communities close to where I lived and I put them on doors. Within a month I had five listings Look at that.

Speaker 1: 6:24

Oh, it was awful though.

Speaker 2: 6:26

Hey, it's something you got to start somewhere.

Speaker 1: 6:28

No, it was great from a business, but it's like I still got this full-time job. I'm a brand new real estate agent, no clue. Jack helped me through it. Okay, he got me through all those sales and I said I'll never do that again because I couldn't handle that kind of volume, you know, as a full-time person somewhere else. But it got me into the business and from there and really for a long time from that, from the mid eighties to the late nineties, that's all I did was real estate part-time. I did a few deals a year. My friends, people I knew so they knew my work schedule, they knew what my other commitments were.

Speaker 1: 7:03

But it kept me in real estate that whole time. So I remember all of the markets from the eighties, nineties, what have you, and people that I came across through all that time. Other agents would say, why don't you get into real estate full-time? And I'm like, same thing, it's the commission. I don't want to do commission only. And then in my IT career I was more on the technical side of things. But then in the mid nineties I kind of got early to mid nineties I got into the more of the business side of things business development and things and I kind of enjoyed that. And what I learned from that was I had and what really kind of took me out of my comfort zone to bring me into real estate is that because I was always afraid of the commission only job.

Speaker 1: 7:47

And when I transitioned from my you know, my straight salary in IT and went into business development, part of that compensation package was I had to take about a 50% pay cut. But I had a target If I did well on the business development side, the potential was to make more than what I was making. So I took that chance and I blew it out of the water and kind of what I learned from that. It kind of, after you think about it, it's like the more risk you take, the more potential there is for, you know, to make money or whatever it is you're trying to do, and but you got to take that risk. If you want something nice and cozy, it's just like investing right. If you want a 4% interest rate, go get a CD and you're done. If you want to invest in the markets, there's a bigger upside, but there's some risk. So I took the risk and it worked out well.

Speaker 1: 8:38

So then we got to 1998 and I was thinking you know, this might be a good time to try real estate full-time and I'll do it for a year. I said I'll try it for a year. If I go down in flames, I'll just go back to IT. I've done this forever. I know what I can do and of course, that first year was tremendous. I did that with somebody that I went on my own, used my own ideas, and it just skyrocketed. So that's kind of what I learned during that era, if you will, about taking risk. And the more you put in, the more you work hard. If you do things the right way, you'll get the return.

Speaker 2: 9:15

Yeah. It sounds like you're a big risk taker. Sometimes that can be scary, because you really don't know what the outcome will be, and it's nice that you had your job to fall back on too, right.

Speaker 1: 9:23

Yeah, I mean it is scary, there's no doubt about it. And even, like I said, and there's things you don't control all the time I mean, like I said, I was fortunate in my timing too, because the late 90s, early 2000s we had a really robust real estate market here. So I got in it at the right time, yeah, and so I feel fortunate in that regard. And the things I did worked. Yeah, the different marketing and again when I got into it, the Internet for real estate was just getting started. You know I remember some of the websites out there. I was still doing a lot of my advertising in the local newsletters and the loud and Easterner and paper things and that kind of stuff. I know I did cable TV ads stuff like that, but not much internet marketing.

Speaker 2: 10:09

Now things have totally changed, oh for sure. Speaking of the market, I'd like to ask you about the market. Where do you think it's going with everything that's happening I guess elections, the market rates right now? Talk to me about where you think it's going.

Speaker 1: 10:21

Okay, well, we'll start with where it is right. So, first of all, the markets and people that might see this might be in different markets or know different markets. Real estate's local and what I mean by that is every market is different. I also own a home in Florida, south Florida. That market there totally different than this. I can get into it but I won't. But it's really different as far as how things have happened over the last few years. But as far as Northern Virginia, what we've seen since COVID let's say seen since COVID, let's say is we all saw interest rates go down to 3% and lower and virtually everyone that owned a home refinanced and that has been a game changer in how it's affected our local market, because people that are in those interest rates don't want to lose them, so they want to keep their homes. So what we've seen over the last four years is historically low levels of inventory, and so basic Echo 101 supply and demand. You have low inventory, there's still a demand, prices are going to go up and that's what's happened. So we've had some pretty dramatic price increases over the last three, four years because of this low inventory, even combined with what's happened with interest rates. So interest rates have gone to for the longest times, even before they were in the twos and low threes, we were in the three, four percent for a lot of years and now we're at six, seven plus percent and we've been there for a few years now. Yet through that people are still buying homes and the prices are still going up. So it's more expensive than it's ever been, but again the market's staying steady as far as robust in the sales side because of low inventory. So the question becomes when our inventory is going to go up, because that's the only thing that's gonna change this dramatic rise in prices. I believe the inventories will start to increase slowly, nothing dramatic, as rates come down, because then people that are sitting on the three percent, three or four percent rates will say okay and go buy another home. It's not gonna be, you know, seven percent, it'll be something a little more reasonable. The other thing too, I think will happen as prices keep increasing, and I still think it's slowed down a little bit, but I still think we're going to see increase in prices At some point. People are going to cash out. They have their 3% loan, but now their house has went up hundreds of thousands of dollars and they may think it's just a good time to cash out. That will add inventory to the market. Once we get the inventory back, that will stabilize prices. So I think it's not going to be dramatic. I think it'll be a slow buildup but I think that will start happening over the next few years. So we'll start to see the big rise in price stop and kind of steady.

Speaker 1: 13:19

Who knows what the you know we all try to look in a crystal ball. What's it going to be two, three years from now? It really depends on rates, economy. I mean we just had a transition downtown. What is that going to bring? There's so many factors that can come into what happens that it's really hard to predict. I think you've got to kind of look at it on a year-by-year basis and kind of see what's going on For sure. Yeah.

Speaker 2: 13:43

And now I'd like to ask you about the NAR lawsuit and what that entails for you, and was it a challenge for you?

Speaker 1: 14:05

Because I know some people say Virginia has been doing it for a while. And was it a challenge for you? Because I know some people say Virginia has been doing it for a while. But some people, yes, were more knowledgeable estate almost in an antitrust mode where they were forcing up prices. By the way, they made sellers pay buyers commissions. So basically, when we would go list a home and I'll say right up front, all commissions are negotiable, right, but we'd go in and we would sit down with the seller and say, okay, this is what your fee is going to be and it'd be a total. And just for ease of conversation, let's say that number was 5%. It would be a 5% commission and as a listing agent, I'm going to get this part of it and I'm going to offer this percent to the buyer's agent. Part of it and I'm going to offer this percent to the buyer's agent. And then that percentage to the buyer's agent would be put in MLS so that when a buyer's agent would be looking at homes, they knew what they were going to be compensated because that's what the seller was offering. Basically, that's gone away. And on the buyer side I mentioned the seller side just to circle back to the buyer side.

Speaker 1: 15:16

In Virginia and I'm not sure it was like this everywhere and this might have caused the problem In Virginia when a buyer signed an agreement with an agent to help them find a home, it said in there essentially that the buyer was responsible for that commission. However, if the seller was offering a commission, they could use that towards what they had to pay. So typically a buyer wouldn't pay any commission because in their agreement, if the buyer had an agreement with the agent to pay two and a half percent and the seller was offering two and a half percent, it didn't cost the buyer anything. So that's how it worked and it worked well. We thought okay, other folks didn't agree with that, so now it's changed. So how it's changed. And it's funny how the media reported this in the beginning and oh, home prices are going to drop because commissions are going down. I was like what are you talking about? It's like that is not going to happen and it didn't.

Speaker 1: 16:08

The biggest change really more. I don't think it's for the consumer, I think it's the real estate professional that's really seeing the change. And the change is that when we sit down with a seller now we have to tell them hey, this is my fee for a listing. And the buyer when they write the contract the buyer's agent they're going to list in there what they want for as a commission. We never did that before. It's never part of the contract. It was agreed to upfront, not part of the actual transaction. So now when a buyer agent writes a contract for a buyer, it's saying in there, this is what I want for a commission and it becomes negotiable right there during the offer.

Speaker 1: 16:47

So that's a big change. Interesting, it's so on the buyer side also. Now when you're signing up with a buyer you're saying hey, mr or mrs buyer, you know my fee to work with you as a buyer agent is going to be x and we're going to write that in the contract and request that the seller pay for it. But again, if the seller doesn't pay for it, then it falls back on the buyer and my own feeling is that it's going to be case by case. But a lot of buyers aren't in a position to pay that. So that makes for a very uncomfortable discussion between the buyer's agent and the buyer and how to work that out.

Speaker 2: 17:37

But that's on a other side when they need to sign, will kind of put them at ease, or do you think it's just like you said case by case?

Speaker 1: 17:45

It's case by case, I mean, and every agent will decide how they want to handle their business differently, their business differently. I think what's going to happen, though, is depending on the market that will drive how the compensations go, and here's what I mean by that If, like we've seen in the last few years, you put up a house for sale, it's going to sell in a week, get 10 offers, get bid up. You know, if you've got as a seller, if you're looking at all these contracts and now there's buyer agent commissions in there, you may say Nope, don't want them. Okay, you don't have to pay them. And then, of course, that puts it back on the other side to accept that or not, cause it's negotiable.

Speaker 1: 18:26

Okay, so buyer agents, you know, in a hot seller's market, could really lose out. Okay, because sellers don't want to compensate them. They don't feel like I have to. On the flip side, when the market shifts, it's going to go just the other way around. Sellers are going to say I'll pay you whatever, sell my house, so you can come in and ask for three, whatever percent, and they'll pay it because they want to sell their house. So I think the market will evolve based on, or the commissions will evolve based on market conditions.

Speaker 2: 18:56

Yeah.

Speaker 1: 18:56

And I think agents just have to be aware of it. So right now, if you're in a hot market, you want to be on the listing side right, and that's no different than it's always been, you know. But I think most important here is because markets change. I know there are some agents that specialize in listings or specialize in buyers agents. I think you want to do both I've always done both because you want to be able to shift with the market and also just help both sides. You have clients with needs on both sides. So do it all, Just like property management do it all.

Speaker 2: 19:30

Exactly, and back to that on property management. So you're a real estate agent, but now you're also the owner of your own business with property management. Talk to me about the importance of diversifying you just touched on it a little bit here and tell me what have been some of the, I guess, challenges for you from being your own, I guess, like your own boss, but you still are your own boss, but now you've got like employees, I guess, to oversee and talk to me about. Talk to me about that.

Speaker 1: 19:56

Right, okay. So Castle Property Management, which I started in 08, which kind of again came of the I need to diversify. One thing I'll mention too, talking about diversification, where it helped back then. But I think if you talk to most real estate agents, the last two years and not everyone but the last two years have probably been their most challenging years in sales. I mean, the bottom line is transactions. Forget about prices. Most people think when people come to me, it's like, hey, the market's great, isn't it Joe? It's like because prices are up. It's like I don't really care about prices From a business perspective, I care about transactions. Okay, well, transactions are down over 50%. So that affects real estate sales, mortgage companies. Anything around real estate is going to be affected by that. So most of us have been really affected over the last couple of years. We've seen our income go down, yeah, but on the flip side property management what are people doing instead of selling? Now they have their 3% mortgages, so they got a nice, you know low mortgage payment. Rents have gone through the roof. Now, when they need to sell, what are they doing? They're renting their house out. Guess who they're calling Property management. So that business over the last two years has gone through the roof, wow, okay. So, again, it's good to be in different places because the market's going to do different things, but you're ready for it and you can take advantage of that, so that's gone really well.

Speaker 1: 21:23

You know, as far as the challenge, what I said about the market being a very total, totally different business property management you're right. You have your employees to manage, so you have that difference. You really have to be aware of landlord-tenant law, all the things that go with that, available 24-7, or set up services that allow for that when things happen. You've got to do all of those things. The difference in the business is real estate. Again, from a revenue perspective, always up and down, you'll have your great months, you'll have your bad months. With property management, a very steady revenue stream once you get that business going yeah, because you're just getting. It's a small amount per property, so it's more of a volume business, but once you have it set up, it's pretty steady, yeah, so you have less volatility in your income as well. So, again, that's why I think that worked out really well.

Speaker 2: 22:14

Yeah, no, it sure did. And then, with all your experience under your belt, like sounds like you know what you're doing.

Speaker 1: 22:24

I learn every day, though I swear I mean been in this as long as I have, and you, almost all the time you run into a new situation. So so you're never, you're never not learning in this business for sure.

Speaker 2: 22:34

And then, um, I know you're so busy, like you've got your real estate, and then, like you said, 24 hours a day, like you have to be like kind of available to the people who need you. What do you do to set boundaries or what might be something that you maybe you're working on, or how do you like to unwind and reset yourself, because you know, when you're not at a hundred, it can affect everything else?

Speaker 1: 22:58

right, that's a great question how do you set boundaries? It's probably one of the things I don't do real well. Hey, it's a work in progress, right, because you want to be. You want to be everything to everybody you want. You want to provide great service, right?

Speaker 1: 23:12

I think where you set your boundaries is you how do I say it? And the people are different too. I think some people respect your time and some people don't. So really, the only thing you can do sometimes is and I know some agents do this they'll say you know these in their voice messages you know I'll return calls between this hour and this hour. I don't do that. Other people do, but that's one way of doing it to actually say hey, this is when I'm available. I try not to. I try not to unless it's really important, obviously, if I'm working a deal. You know, in fact, I've joked agents have heard me say this all the time.

Speaker 1: 23:55

I call it midnight realty because we're doing real estate at midnight. We're working deals. You got to get it done, but you're just your basic, just question, or things like that. When the email comes in at 9 pm, just don't respond to it. You know, save it till the morning. That's right, because otherwise Don't respond to it. You know, save it till the morning. That's right Because otherwise it'll just it'll keep on going, and I haven't.

Speaker 1: 24:17

My assistant is awesome. Just the other night a tenant emailed in at like 10 o'clock and she had a back and forth going for an hour. Wow, and I'm like don't do that. It's like because I want her to have her boundaries too. Yes, and it's hard because, again, you want to provide the good service, but you also need to have a life. So it's just a balancing act. I don't know if I have the total secret, the solution to that yet, but you want to have the work-life balance though.

Speaker 1: 24:48

But in this business, anybody that knows it. I mean, if you're on vacation, yeah, you're going to have to take that call every now and then or stop and do something, hopefully. I think it was one of the things we didn't touch on. But one of the things I did early in my real estate career in early 2000s is I formed a team and it's gone through. It was as big as five or six. Now it's at four. It's gone up and down, but having that team is huge because this is where you can. It's like, hey, I'm, I got to do something for a day cover for me and you have that, yeah, and that that was huge for me to have that.

Speaker 2: 25:27

Thanks for sharing that. Yeah, no, um, is there anything perhaps that I have not touched on that you would like to get out there for listeners to know about you, whether it's about your personal life, your business, the community, anything at all?

Speaker 1: 25:43

Boy, that would double the length of the podcast. So I would just say about me personally no, I mean, I think through what we've talked about is I really strive for great service. It's a sales business, but I look at it more as a service business. The sales just come if you provide great service. That's the way I look at it in both lines of business, whether it's real estate or property management. I think this market in Northern Virginia is a fantastic market to be in. As everybody knows, we have the federal government here, we have, you know it, businesses. It's it's almost recession proof, so it is really a phenomenal place to be for you know, to do this business, or most businesses, yeah. So I feel fortunate to have come here. When I did originally came from northern New, I got my street smarts up there and brought it down to Northern Virginia Love it no, so it's worked out well.

Speaker 2: 26:39

Well, that's great to hear. My final question is going to be do you have a quote, a saying or a mantra that you like to live your life by? Or maybe somebody told you something that stood out in your life. Would you mind sharing that as a goodbye message?

Speaker 1: 26:55

Wow, you didn't prepare me for that. I did not, no, so that's a good one, I think I would say my mantra have fun, but be fair and treat people how you want to be treated.

Speaker 2: 27:13

Yeah.

Speaker 1: 27:14

But enjoy life. Tomorrow's not guaranteed, Um, but just you know, live it the right way. Yeah.

Speaker 2: 27:21

Yeah, well, thank you so much for sharing that message and thank you for offering a lot of insight and wisdom into the industry for real estate, and thank you.

Speaker 1: 27:29

You're very welcome.