Data Driven Real Estate Podcast #17 – The Importance Of Brand Real Estate Investor Trends with David Hicks, CEO Of Homevestors. DDRE#17

The Importance Of Brand with David Hicks, CEO Of Homevestors. DDRE#17

David Hicks is CEO of Dallas-based HomeVestors of America, Inc., the largest professional house buying franchise in the U.S. with more than 105,000 houses bought since 1996. He joined HomeVestors in 2005 as Director of Franchise Systems and developed a process for coaching franchisees. From 2006-2009, he coordinated franchisee support as VP of operations. In January 2009, he became co-president of the company and was named CEO in 2017. The company now has 1,100 franchisees nationwide. David Hicks is CEO of Dallas-based HomeVestors of America, Inc., the largest professional house buying franchise in the U.S. with more than 105,000 houses bought since 1996 and over 1,100 franchises nationwide. This week, David helps explore how Covid has impacted real estate investors, how HomeVestors leverages massive data to advertising and marketing success, how Realtors and investors benefit from working together, and how ibuyers are not a true competitor.

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Show Topics

00:00 The Data Driven Real Estate Podcast Welcome David Hick, CEO of HomeVestors Inc.

04:19 How the HomeVestors franchise works

05:51 The concept of the Ad Council and how franchisees pool resources for effective, hyperlocal marketing

10:39 How has marketing changed over the past decade?

12:43 What is the data showing on the impacts of Covid?

19:47 Are that institutional buyers like Invitation Homes raising billions to buy foreclosures?

25:51 Why HomeVestors prefers newbie investors.

32:18 Will Opendoor, Offerpad, Zillow Offers or RedfinNow ever consider working with HomeVestors?

37:30 Are ibuyers driving up marketing for real estate investors?

38:33 The trademarks of HomeVestors and We Buy Ugly Houses and what some real estate investors don’t understand about trademark law

41:18 Does direct mail still work?

47:11 Why radio advertising is out and the TV and billboard combo is powerful

50:25 Are real estate investors buying houses virtually?

53:06 Why investor inventory is selling so quickly.

Show Transcript

Aaron Norris  00:03
Welcome to the Data Driven Real Estate Podcast episode 17. This week we've got the CEO of HomeVestors of America, David Hicks. This week we talked about a bunch of different things, including Wall Street verses Main Street and how the HomeVestors brands are differentiating themselves from some of the Wall Street players like iBuyers coming in competing in the market, some of the impacts of having to compete with the iBuyers, lots on the data and the different research that the HomeVestors brand does for their franchisees and then of course, a little bit about the franchise model. If you're not familiar with it, we cover all that and much more up on this week's episode. Don't miss out. Everybody, welcome to the Data Driven Real Estate Podcast, the podcast for real estate professionals dedicated to driving business using data. I'm Aaron Norris with cohost Sean O'Toole with PropertyRadar. And today, we're very excited to have the CEO of HomeVestors of America, David Hicks. Welcome!


David Hicks  00:55
Thank you.

Aaron Norris  00:56
Now I was reading your bio. And it says that you started with HomeVestors in 2005. Please tell me that's not your entry into the real estate market?

David Hicks  01:03
Oh, no, it is in fact that I bought my first investment property too many years ago, back in probably 1978. So it had off and on during the year. So

Aaron Norris  01:17
How did you get introduced to the HomeVestors brand?

David Hicks  01:21
It was interesting. I was president of another company. And that was in a different totally different industry. That was right after 911 was really hit hard. And in 2005 I had a good friend that was new HomeVestors and new the then CEO at the time and he recommended I go meet with him. And that was kind of the beginning of a long history and fun ride.

Aaron Norris  01:54
Well, maybe you can talk a little bit about Oh, Sean, go ahead.

Sean O'Toole  01:57
No, No, go ahead.

Aaron Norris  01:59
Um, maybe you could talk a little bit about the HomeVestors brand. I think you're best known for the We Buy Ugly brand, but behind the scenes you've got HomeVestors, tell us a little bit.

David Hicks  02:06
Yeah, absolutely. Of course the company was started in 1996 by Ken D'Angelo. He was the founder of it he was a realtor went on a listing appointment trying to list the house and lady said you don't understand I want to sell my house today. So he bought the house and and he fixed it up and resold it and he said you know this is kind of neat he made more doing that than he did on listing houses and so he started buying houses and then say you know this is seemed like a can be some we could get teach others to do because that's part of what his passion was. And so he started the the HomeVestors brand in 1996 started with the franchise at that time. But his advertising it was we buy houses and he get all these calls of people wanting to list their house and the reality is you know he was that so the the We Buy Ugly Houses came out of that. How to define what people really want. We don't want new houses that they ought to we work with a real estate agent we want the houses that need significant repair. That's what we buy. And so he started he was kind of a genius if the deal every advertising people says don't do that, that's big you've ever done that. You don't want it he said it's gonna work anyway. So he did it work and that's kind of the beginning of a long story so well,

Sean O'Toole  03:45
it's a brilliant you know, it is all at the end of the day about finding your your niche right, and everybody wants to try to boil the ocean and do everything. And by doing one thing well and one thing better than the rest. You can see a much better long term success you guys have been at it for quite a long time.

David Hicks  04:02
Yeah, absolutely. And that's why we've grown so much because there are so many people want to get in and do real estate within say how to find the houses. And that's what our brand and our advertising or marketing guys, we get people to call us.

Sean O'Toole  04:19
Walk us through how that works. Right it as I understand it, you guys aren't buying the houses yourselves, right? And you're working with partners or franchises something along those lines, kind of walk us through big picture, how your model works.

David Hicks  04:35
Yeah, the big picture we have the systems we have everything from the marketing plan and how that works. We've got the the whole system on how you price the house, how they go in and look at a house all the way down to how you you know what repairs we've got an app that works on an iPad. So a branch has to go in and just really mark based on the size of the house what it needs, and it gives them a recommended price to buy the house. But the way the whole system works is we are the brand and we are the whole system's with it. And then the local person is buying houses in their neighborhood in their city. So we are a nationwide organization of local, independently owned and operated franchises. Okay, all they know their neighborhood, they know their city, and they know what price they can buy that and make it work. And so it all works.

Sean O'Toole  05:41
So you do use the actual franchise model .

David Hicks  05:44
Absolutely .Yeah, everybody, we are franchisee all the franchises and they buy the house. We don't buy the franchise by the house, they fix them up and they resell.

Sean O'Toole  05:52

Aaron Norris  05:54
And I'm familiar with the Ad Council concept where locally, you have these Ad Councils. Can you talk a little bit about how that works?

David Hicks  06:01
Yeah, absolutely. And are something a little unique about our what our system most people buying houses, they're very, they they don't want to tell you by what they're doing. Our ad councils work as a team, and they all work together. And literally, they help each other. But they all woman Ad Council for example, here in Dallas, they're about Dallas Fort Worth, I think it's about 40, 45 franchises, and they all pull their money advertise wise they, they basically vote on how they want to spend it. And then they spend it as a group. And then when a call comes in, it's rotated between them based on what each person spends.

Aaron Norris  06:46
Interesting. So it doesn't even have to be even with the money spend.

David Hicks  06:50
It's, so, Aaron can be based on he can do his thing based on what his goals are. And then Sean's, if his goals are higher, he can spend more. And so there's no requirement whatsoever, they just literally stand level they want to.

Aaron Norris  07:07
So you came in in 2005 at a very interesting time, right before the biggest greatest recession. What have you that journey and what that was like, holy cow.

David Hicks  07:17
Yeah, it was interesting. It really was, in fact, we were changing our model a little bit into but 2005 was the, towards the end of the biggest run real estate, probably in history. And then we had the biggest drop that's ever happened in 2008, and nine, but surprisingly, our franchises did fairly well through that time period. And we bought a lot less houses and so the companies struggle a little bit but the franchisors didn't well, because they the reality as long as you're buying and selling in the same market, you can be well you just when price drops, you just buy it from us. And our our market we are selling to our the people that we're selling to are typically first time homebuyers because we're in that you know, under the median price and and investors and the reality is they're always first time homebuyers there were first time home there were people buying houses you know market in eight to nine and ten and they because there are always people wanting to get in in fact there are a lot of people come and say hey, this is a great time to get our first house. And so back to our franchise during that timeframe did, did fairly well.

Aaron Norris  08:36
In the entire time during the downturn you guys were still going with the direct model. You were still doing billboards and ads and driving people in buying direct.

David Hicks  08:44
Absolutely, absolutely. That's exactly what we did. And now they had to advertise less to buy house but then they made less when they did but they bought more and so it it you know it all evens out. Now in the market is more competitive, they have to spend a bit more by house, but advertising wise, but when they do they end up making more because there's also a lot of people wanting those houses.

Sean O'Toole  09:13
Right, because the sales side is super strong right now.

David Hicks  09:16

Sean O'Toole  09:17
Yeah, for sure.

Aaron Norris  09:18
Did the the character come along? When the brand started or that come later in the brand cycle

David Hicks  09:25
That was later. We bought the house that was furnished I think it's about 1999. Shortly after that, a year or two afterwards, they were looking for a you know something a symbol and Ken D'Angelo came up with an idea the Ugh the caveman. We, they hired several people to draw several firms to go do the artwork for it to create what he was gonna look like. And our legal counsel, who's now our Vice President, Bonnie DePasse, her daughter who was in high school at the time. And she said, well can I enter? And so she entered it. And believe it or not, she's the one that everybody liked. And she still does the drawings.

Sean O'Toole  10:12
That's great.

David Hicks  10:14
Because our artwork, and even now, and she is an artist out in California right now. And that's what she does for a living, but she still draws Ugh.

Aaron Norris  10:25
I know you guys win, sort of, a lot of awards for Best franchise model, but I think the brand that you've created is so incredibly strong and consistent. I know here in the Inland Empire, where I'm based out of you know, I still see billboards. How has marketing changed for you guys over the last decade? I mean, during the downturn, you mentioned, you didn't have to advertise quite as much. And now with digital marketing getting so difficult, how has it changed?

David Hicks  10:51
Yeah, it has changed a lot. In fact, we have a whole firm that spends the time doing that used to be, of course, most of our leads will come from phone calls. Now, about half of them come online and come digitally. And there's just our brand and what not just the brand, but also the data, because we have, you know, 20 to 23 years worth of data that we have on where we buy houses on identifying those houses, what houses we bought, which ones we do the best game, and and who is selling houses to us. And so we track that data, we have a huge database tracking who it is we're buying and are the people that are selling houses to us has shifted over the years. And we have gotten better and better at identifying that person. And then digitally online going and finding them and marketing to them online. We do a lot with that. So but about half our leads now are coming online.

Aaron Norris  11:59
Interesting. And I pulled your original bio off of an Inman article that I was reading that you wrote for Inman on the institutional buyers. And I said, is this is this bio correct? And when you corrected it, the number of franchisees that you have nationwide is pretty impressive. Where are you at these days?

David Hicks  12:18
We're over 1100. I think we're 1150 or something now. We've got in 2009, from 165 to 1100 and plus today. And pretty much a consistent steady growth on doing so.

Aaron Norris  12:35
And the amount of data to that you get to see what's working across all the market holding that.

Sean O'Toole  12:41
From that many investors, yeah.

David Hicks  12:43
Yeah, absolutely. It's interesting watching with the COVID, you know, what's happened this year, it is the data and the analytics and how we're tracking has helped us go through this because very quickly, we can help our franchisees determine what's happened with the houses, which ones are selling, what's selling, what isn't selling, and be able to adjust, it makes it to where we can adjust very quickly, and, and help our franchise our whole goal is to help our franchises be more successful. And that's what our focus is how do we help them become more successful, more popular, buy more houses and make sure when they buy a house that they sell it for profit?

Sean O'Toole  13:29
When you look at that 1100 or so franchises, walk us through what it looks like for them typically, is this typically a side hustle, you know, by, you know, husband and wife team? Are these large teams, does it vary? And what are their how many deals do they do?

David Hicks  13:48
It varies and it varies a lot based on their goals. A lot of them Sean will start. Maybe it's part time. Most of them very soon become full time with us. Some of them with their goals, they like being single operator, and they that's what they want to do. And they want to buy, you know, 8,10, 12 houses a year and they're happy with that income.

Sean O'Toole  14:14
So your operators are doing roughly a deal a month to one or two months kind of

David Hicks  14:20
That's probably our then we have a lot of husband wife teams and a lot of partnerships, that obviously they do more. And then it goes all the way up. One of our top franchises out of Houston, he came in buying it for his son. In fact, he owned the bank, and he bought the franchise for his son. And now now his old family is in it. He is his full time is all three of his boys are in it all literally it's not just the whole family. He's got a huge operation and they bought they buy over 100 houses every year. And so it can run the gamut The good news about our model is the franchise can make what they want to add on to make it a bigger business with a team doing it, they can do that, if they're happy by 18 houses a year, and that's what the income they want to do. And, you know, I know some guys that they like the lifestyle and be able to pick up their kids from school every day and, and they don't want to go build that big, you know, that's perfectly fine with us.  Is there, you know, when you look at there's so many different markets around the US right, you get the high priced markets like you see in California, and very low price markets. You know, probably a little harder to sell in some of those markets a little smaller margins and some of those markets. Is their, you know, what's the the sweet spot for the We Buy Ugly Houses brand and HomeVestors? I do it the sweet spot, though, depends Sean on the market. We have very successful franchises in all those markets worth 170 cities across the country. So whether it's a high price market in Boston, our franchise do really well there but they do different. And the ones in Boston, they're not doing rental prop, in rental prop, you just don't doesn't work in that market. Birmingham is a great rental property. Okay, they have to buy more houses to do well. But they can they have lower margins. So at the bottom or but their their rental properties really worked in a lot of those markets that California,

Sean O'Toole  16:38
What rental properties are some of these folks then buying to hold rather than buying to flip?

David Hicks  16:43
Absolutely a whole lot of in fact, most of our franchise will end up with rental properties.

Sean O'Toole  16:50
Okay. Now, I always assume the brand was all about flipping and, you know, fixing up and reselling, but so they are buying fixing up and holding as rental as well?

David Hicks  17:00
Absolutely, absolutely, probably somewhere between 12% and 14% of the house our franchise bought and keep as rental properties. And many of them have that goal is they want to create a rental portfolio that becomes a retirement plan.

Sean O'Toole  17:15
Got it. So is is a Colony Homes and some of the big or any of the big institutional folks, franchise holders franchise holder?

David Hicks  17:23
No they're not. Most, most of those big institutional, they're looking for newer houses, they want newer houses that they don't have to worry about repairs, they don't have to do that. And are franchiser buying older houses, they're there, you know, I think 80% of our houses were built in 1985. And before and 80% of the smaller houses. And so we're just a different type market. But you know, if you have your own rental portfolio, and you're working with 10, 20, 30,40 houses, you know, it's different when you're a Colony, they want to buy newer stuff, they don't have to do the repairs, because what kills them is having a there many, have some a manager managing the properties, and then they have to pay a percentage and all repairs and a percentage, the math just doesn't work. When you've got your own rental properties. And you get a call from a tenant and you can go send your local contractor there that you have relationship with you can make the money work in a lot different way than the college does. It's just a different model.

Aaron Norris  18:31
I loved the story you write on Inman on institutional investors several years ago. I don't think they thought it was going to be as difficult as they did. And but they're still here. How have you seen that model sort of progress over the last few years?

David Hicks  18:48
Yeah, again, I think they started trying to buy everything and do everything. And the reality is, again, a local investment, having local people they can, you know, and you know, he can go handle some of it himself. It's just a different model. A local guy can make those out. And some of the houses work that a Wall Street, when you when you're trying to borrow from Wall Street, you have, again, you have to go hire somebody to manage it locally, because then you have to hire contractors locally and you have to it just a whole different ballgame that you have.

Aaron Norris  19:29
Not easy to scale.

David Hicks  19:31
It's not easy to scale. It's easier to scale when you have an apartment building with 100 apartments. You can put a manager on, but when you have houses scattered all over the city, it's a different game. It just really is.

Aaron Norris  19:47
There's a lot of rumors that a lot of these Wall Street companies are, you know, raising millions, billions of dollars again to do the same thing, but we're in a very different place than we were in 2007 to 2009. What do you say? For those institutional buy to rent investors over the next few years?

David Hicks  20:04
It's interesting, because where they started was when they were getting deals, right? After '08 and '09, and those deals are around. And they just can't. So a lot of them are trying to buy or buy in higher priced houses. And I worry that their margins are going to shrink more and more. And, you know, so but I think, again, if they can do like scale, they can be successful at it. But it's a, they have to be, we worry, we see some of the prices, they're paying for some houses, and our guys don't understand how they could they could make those questions work, our franchises couldn't, they wouldn't try to because they weren't by themselves. So

Sean O'Toole  20:48
One of the reasons that model worked, right, is that their cost of money is so much lower, right? And so with the cost of money, so much lower and their ability to use, leverage in ways the small investors can't right. Especially when they came in to the trustee sale market in 2010, let's say. You know, they were able to pay considerably more, and still have that work in their financial model. You know, that's one place where I see risk, have you guys looked at, you know, figuring out ways to leverage Wall Street money to, you know, across because you have a large enough investor network, you probably could attract Wall Street money in and, you know, make that available to your customer base. And that would be a good advantage or differentiation for you versus somebody going out on their own if they had access to much cheaper money.

David Hicks  21:48
Yep, absolutely. We have live we have with our franchise, we have created a lender portal, that we have a lot of different. And we have seven different lenders right now that are competing with each other to get our franchise business and our franchise to where to put the house there. And it is the rate our franchise pay has gone down and down. Because they because of that, just the volume and the ability that they're competing to get the business. And so they have to do lower and lower rates.

Aaron Norris  22:26
Did COVID impact, I heard some of the Wall Street lenders sort of backed off really quickly. Did that impact your franchisees?

David Hicks  22:34
No, it didn't because we have enough lenders that have watched our franchise perform. And in fact, our best lender is one that started with this in 2009. And he went and researched all the loans that were done during the downturn and found out that they were pretty safe. And so he lives they live in this, this lender, not only did they not back off, they actually increased the lending to our franchise during that time. Now they were doing lending to other investors outside our franchises. And they in fact, I got a call one day and said they have right after this happen. And they said they have shutting off every other investor except HomeVestor franchises. Because they want to make sure they have enough money for our franchise. And so they I think they tripled their portfolio during that 90 days last 90-120 days.

Aaron Norris  23:35
The franchise model is very interesting. I mean listening to you talk about the Ad Councils the technology access to this kind of lending, when somebody is buying into a franchise. There's a lot that's they're buying into.

David Hicks  23:48
There really is. Absolutely.

Aaron Norris  23:50
Do you have a threshold? Do you say No to somebody who wants to be a franchisee? What does that what's the process look like for somebody who wants to become one?

David Hicks  23:59
Yeah, we do say No We've got several revision approval process. First of all in market, we also limit up to a certain point, we limit the franchise based on the advertiser within the market, because we want to give our franchises the ability to grow. And so we kind of limit within we've probably got a dozen markets across the country that we're not adding franchises now. But even outside that we have a pretty strict approval process. We you know, we do they have an application, we do a credit check the background check, we want to make sure we're getting good character. Our reputation for HomeVestors is very important to not only us, but all of our franchisees. So we want to make sure we were getting a good team members to join. We have a very team oriented model. And so we let people know when they're coming in that they're not They'll be able to play well as a team member, they're probably not gonna do better. Yes. Because and so that's part of what we do to help them understand what kind of culture they're getting into. That it is a team or a culture in there. They because the ones that come in, in fact, tears down the new franchisee I'm surprised how many how open people are to help him. And that they'll come in. And if a new franchise in the market, our friend current franchise, one of them says, succeed. And if they're having trouble with area, they'll take more fun which weapon, they'll go with them on appointments, they'll do things to help them that you normally wouldn't see a bunch of entrepreneurs, but they do with us, because it's important that they all do well.

Aaron Norris  25:51
Do you discourage newbies from getting into the business if they don't have any real estate background?

David Hicks  25:56
No, not necessarily. In fact, our history earned is we prefer them without a Real Estate background.

Aaron Norris  26:03

David Hicks  26:04
Now, it's interesting because those that have too much background, they tend to where they don't adopt our models, they go try do their own thing. And they now we have doesn't say we got more and more with them. So history, but those that have experience, we have a pretty good talk with them beforehand and say this, if you're just going to keep doing what you're doing, but try to use our leads, you're probably not going to be as successful as if you really adopt all processes. And so they the ones that do that they do well. In fact, some of our some of our top people, one of our top guys in California came, they had a great experience. After they joined us they very quickly in fact I think they sold $12 million of houses their first year with us. And they had they really did well. But they came in at 20, the newer four brothers that they came in, and they we sat them down with our training and they said they're gonna quit doing everything they're doing. They're gonna, just for one year, do everything we said that and they did. And you know, if they'll do that, they'll be successful.

Aaron Norris  27:14
Now, what's the reason that you see people fail in this business? Some of the most common reasons?

David Hicks  27:21
Yeah, the biggest reason is it it is, there is a learning curve. And it's a pretty big learning curve. The biggest ones with us fail. In fact, we've done a lot of research on that. 71% of them, buy two houses or less. They never get started. They never get up over that learning curve hump. And we tell Aaron, when they come, in that said, you know, you really don't believe we can buy a house below retail. And you're not gonna believe that until you do. And then you go, what if I can't sell it? And then you're not, you're not gonna believe you can until you do. And then you will wonder if that was an accident, or what am I doing again? And once you do it a couple times, [   ]. Okay, but there are some people, the houses we buy, I mean, they smell, they're there, they, you know, they smell like dogs, they, you know, they have over two cats, they, they, you know, they're in bad shape the effect, its uses some people, you know, they go in a house and they walk out they will go take a shower, you know. And they're just some people that don't want to do that. And that that won't go through that. And so we always say that how you deal with it. When they really smell you that dog. That cat piss smell. You know what? We know what that smell is?

Sean O'Toole  28:49

David Hicks  28:50

Sean O'Toole  28:55
Yeah, I've got I definitely have some stories. I had one that that the first cleanup crew I hired. I got a call. And I hear this wretching noise in the background and the cleanup crew is all in the yard and they're all retching. And they're like, we quit, we're not doing this job. And I finally had to have a crew come in basically in hazmat suits.

David Hicks  29:23
We've got those stories. Absolutely. Yeah.

Aaron Norris  29:26
Yeah. This is a fantastic transition into the iBuyer conversation. There's a few different models going on. But the iBuyer model has been very interesting to follow. I saw you live on stage...

Sean O'Toole  29:39
Aaron just for the folks at home, what is an iBuyer?

Aaron Norris  29:42
iBuyer, Wall Street companies with a lot of money, Zillow, Redfin, Opendoor, the top three right now, but there's real estate brands like Keller Williams talking about getting into where they do the fast-cash, as-is model. However...

Sean O'Toole  29:54
They buy the house directly from the owner. Yep, do a little bit of fix up and then Then put it on the market to sell rather than a typical model of taking a listing. Correct?

Aaron Norris  30:05
Correct. So we've got these iBuyers. And when I saw you at the National Association of Real Estate Editors, your panel was first and Opendoor and the Offerpad and I think Redfin was the panel right after you. And I approached Opendoor, and I said, Why aren't you working with HomeVestors? You've got to be spending hundreds of thousands of dollars marketing from scratch? And if you say no to the deal, where are you sending them? And at the time, they were so worried about their brand, they're like, Oh, we can't work with anybody, we have to have complete control. So when Opendoor released their IPO information, I just don't think it was the full story, the amount of money that they have to spend, maybe you can give us some insight into that. How much do you think that they're spending when they open up a new market every month?

David Hicks  30:46
Well, I don't know. I mean, it's a lot. And that's the question, because I know what we're spending. Our franchisees are spending 6, 7 million a month in advertising. Okay, and so it takes a lot of money to generate leads. So they're spending a lot. But again, they're targeting a different market, and it is that we've got a niche, and they there are niches one the houses we buy, I mean, I think they'd walk in and walk out, oh, they won't even look at that, they that they do that Realtors don't want our houses.

Sean O'Toole  31:22

David Hicks  31:23
They really don't, because a Realtors understands either cost, they would have spent twice as much work, selling a house is gonna sell for half as much. And why not go sell a pristine house, that they don't have to do it? And in with the house that we that we buy, the realtor would take all these costs onto them to clean it out. Once you get them to get rid of that, you know, because that's, that's just what we buy. And so we got a niche, there is a great niche with us. And it is our franchise do well with those houses, they did, and then Opendoor and the iBuyers. The reality is they they're I think their margins what 6, 7%. And that includes repairs in it? And, so they can't be doing much repairs? No, they just can't. And so...

Aaron Norris  32:18
Have they have they started contacting any of your franchisees about the houses that don't fit their buy box?

David Hicks  32:25
Not really fact I've talked to them. I've talked to some of the key people and we'd love to do some stuff with them because of that. But I think they're they, as you've said, they're worried about their plan, and they're worried about what they're doing. And so, you know...

Sean O'Toole  32:41
It just seems so it seems so manageable, though, right to say, Hey, listen, you know, we're not in a position to buy your house, right? You know, and you have a few options here, right? We can refer you to somebody for a Realtor that can work with you, you know, we can refer you to HomeVestors, We Buy Ugly Houses, right? And, you know, that just seems like such an easy it's a you know, they've already spent the money to attract that lead not to convert it into some sort of downstream fee doesn't make a lot of sense. I'm sure they're gonna do that.

David Hicks  33:20
I agree. And one of the things that we do we get a whole lot of leads that are to go to Realtor. And, you know, we were trying to see if we can set up with some real estate, chains real estate, you know, different national chains to do some things that are even our buyers, because we refer leads all the time to ibuyers that it just doesn't make sense. We one of the things we do, Sean is we come in and the first thing our franchisees do is they'll tell them up front, every house doesn't make sense for us. And if it doesn't, we try to refer them to somebody that does that. And they, so it, we're working on that. Now what happens with a lot of franchises, they end up working with a lot of Realtors locally, because they'll get Realtors that will tell them that, you know, and they'll tell the Realtor if you ever walk in house and you'll just buy the smell of the house you can't sell it.

Sean O'Toole  34:14

David Hicks  34:15
Refer that to me because I have houses all the time that that literally they need a Realtor and we'll trade leads and so most of them end up getting a local Realtor in that neighborhood that they work with that they trade leads and in our franchise will tell them if I buy a house from you, I'll fix it up and listen with you and so you're gonna get the same listing but you'll make you know, you make it on a retail listing not on a lower price. So

Aaron Norris  34:45
as I said, Go ahead Sean

Sean O'Toole  34:47
It's such a great, you know, that the referral piece is such great model and so profitable, you know, like, obviously my background public records and using that and I'm not doing a lot of flipping right now but I occasionally want to add something to my portfolio and the way I do that is I go out and talk to everybody who has one of those things an apartment, whatever it is. And, you know, typically I'll find four or five sellers, right, and I'll buy one of them. But that leaves, you know, a handful of others. And if I refer those off, and as a broker, I can take a referral fee often 25% that's real money. And that pays for all the more, you know, all the outreach that I did to buy the one thing I was looking for, how many of your folks end up getting licensed, you know, just to take advantage of that,

David Hicks  35:39
Probably half of them.

Sean O'Toole  35:41
About half of them?

David Hicks  35:42
Probably half of the end up, end up being Realtors, and have a license. Now, even if they don't have a license, Sean, virtually all of them end up working with Realtors is on a referral basis training the leads and that kind of thing. In fact, your franchise is typically fine, they do better with trading leads than they do try to list them.

Sean O'Toole  36:05
How many of your folks with the licenses list their own properties? Or do they usually list them with somebody else and they're flipping.

David Hicks  36:15
Little bit of both, I would say most of them really get to where they know Realtors in a local neighborhood. And they try to go find a Realtor that is the best in that neighborhood. Because that's our experience they'll make they'll make a little bit more money rather than trying to list all on themselves.

Sean O'Toole  36:34

David Hicks  36:35
[  ]. But the reality is we we teach them and train them to go help find that Realtor, this can help you sell the house, the quickest in that neighborhood, and do the best in that neighborhood. Don't try to be cheap, and save you, you know, keep the realtor list yourself. Of course in the market right now, there's so much demand for houses that sometimes you just have to list them and there are people competing to buy. In that case, they may be less than more right now.

Sean O'Toole  37:08
I found when I've had a decent volume of of homes to sell, I can negotiate a pretty good commission. It's really not costing me very much. And then you pick up you know, insurance and that kind of stuff, which puts puts at least a layer between you and the other folks in terms of lawsuits and stuff. And so a lot of value to using Realtors.

David Hicks  37:28
Yeah, no question.

Aaron Norris  37:29
Do you have franchisees in markets where the, especially when there's more than one of the iBuyers competing, so Sacramento as an example, I have an investor up there who reported during COVID, the cost of digital ads dropped because Opendoor and Zillow stopped buying. And as soon as they started coming back on, they were bidding up the terms the you know, We Buy Houses kind of stuff. And then also her her brand names tripled in price because they were bidding against her names. So do you have your franchisees complaining that they may be popularizing the model a little bit more, but they're also increasing costs for marketing?

David Hicks  38:05
Yeah, that is true. And they course we track what they're bidding on because our marketing firm tracks that what they're doing and and you can see what not just them but all the others who were there is more competition in the market, not just our buyers. The reality is iBuyers aren't competing with us. It's a lot of the other investors that are competing with us and are trying to do that. And we have, we spend a lot of time protecting our trademarks that we have, you know, we have over 50 trademark to our ugly houses. And that's one of the challenge a lot of the local investors thinking, you know, they could advertise I buy ugly houses too. And no, you can't. And because you know. It's trademarked.

Sean O'Toole  38:56
I was actually gonna bring that up because I definitely I actually personally know investors who've gotten cease and desist letters, right. So, um, you know that. Aaron, you'd happen to you?

Aaron Norris  39:07
Yeah, and I have to tell you, this is an important thing to cover. I had hired an outside PPC company to run ads. They said that they their specialty was this space. They did not tell me that they were using the We Buy Ugly Brands in their meta descriptions and buying and I got a letter. And I was really upset because I knew that I knew not to do that and that was trademarked and I was really irritated because I got that. Yeah, so you could outsource and not know that this is even a thing.

David Hicks  39:36
Yeah, absolutely. So, so important. The the whatever firms they use them you need to make sure they need to make sure that even though Aaron you're you hired them they're supposed to do you're still responsible for what they do.

Sean O'Toole  39:53
Most people do most people comply after a cease and desist letter. And that's the end of it. You send one letter, you're done.

David Hicks  39:59
Most of the time, that's exactly right.

Sean O'Toole  40:01
Yeah. Have you had? Have you had to go farther than that?

David Hicks  40:06
Oh yeah, we have. And, you know, second time we filed a lawsuit most of drop real quickly. And if the third time they're gonna pay us money and significant money, because then it's not an accident. And we've had people that, that do that. And the reality is that, you know, most people are tried to do the right thing. Yeah. And I believe that most people do that there are some people around that just want to ride off for somebody else advertising and those people, we're gonna stop them, we can't afford not to protect our brand.

Aaron Norris  40:43
David, I don't think a lot of people understand how trademark law works as well, if you don't protect the brand, you sort of lose the trademark, correct?

David Hicks  40:50
That's correct. you have to protect brand. And we spend a lot of money doing that every year, as you all both know.

Aaron Norris  40:58
When you spend that kind of money on advertising and brand, I completely understand, actually, just so you know, the attorney...

Sean O'Toole  41:06
David said, $6 to $7 million a month. So you're right. That's that's pretty serious, pretty serious amount of advertising.

Aaron Norris  41:15
Do you still love direct mail?

David Hicks  41:18
Yeah, absolutely. And I'll tell you what, direct mail has changed dramatically over the years. But it still gets the most predictable response that we have. But a lot of that's because we have so much data, we know we can identify what houses are likely to sell to us. And we can make sure we're there. And, but not only that, what we have discovered, direct mail works very closely and very well with the other video. In when we send direct mail out, we watch our online traffic go up. And we can bid on terms that we know which letter creates what terms online they searched for. And so we can we spend the so just we know when we have billboards, when we put billboards up, our direct mail response goes up about 50%. So they're, they're seeing the billboards, but they're calling off the letter. And so it all works together. We know on TV, when we go on TV, we know what words they bid on online. And, you know, we can, we're bidding based on around our TV commercials. And so it just, it's amazing how the data and how you use that data can increase your results.

Sean O'Toole  42:41
We talked about you kind of the investor journey, we've got this this picture, it starts off like the evolution of man, right, kind of from a caveman to like $6 billion man with like, bionic parts, right. And we talked about that in terms of like, the real estate investor journey, right? Like, at first, like, you're out there with the club, and you're just trying to club down a deal, right. And at the other end is, you really have to be doing multi channel you have to be doing, you know, if you're kind of ad spend, you know, you know, $70, $80 million a year, you've really got to be up at that, that level where you're automating, and getting that feedback loops, and that kind of stuff.

David Hicks  43:26
Absolutely. And, and going in, and then we're doing a whole lot right now even on on the social media on identifying who it is that we that is likely to sell to us. And then how do we go not only who is likely to sell to us, but who are the influencers of that person? Because right now, we're discovering it's not the Baby Boomers, it's the next generation, that's the kids that are influenced their parents and, or that are inheriting that house. And we're tracking you know who it is that is that is actually buying our house and when and, and it to me, I too, it's fun watching the results and the data. And what happens so we have tracked it over years. And it is it's it's just amazing what you can do to and then how you can track that person and online see where now how do we advertise and advertise and hit them on? So when Aaron is searching for something, what is it he's searching for, and how can we identify him and then present our ads to him?

Sean O'Toole  44:37
Yeah, it's it's an interesting point. I have a friend who advertises to successful you know, Gen X folks, right but who have older parents, because at the end of the day, those folks are too successful to go deal with the house after a death and they would much rather take a discount and Sell it quickly. So. So it's the opposite of what you said, like, Oh, I'd never get a deal from somebody who's successful and you know, wealthy and bla bla bla, and it's actually you're more likely to get a deal from them.

David Hicks  45:12
Yeah, absolutely. In fact, we know, it's amazing how many of ours are, you know, not just college educated, but we know the income of people selling to us. And it's amazing. You know what that is? We think a lot of that is driven by their inherited houses.

Sean O'Toole  45:31
Yeah, yeah.

Aaron Norris  45:32
Sounds like a lot of public records data.

David Hicks  45:35
Yeah, absolutely.

Aaron Norris  45:37
Do you put together like an annual event where you're pulling? I mean, this is a lot of really powerful information nationwide, from a marketing perspective. Do you sort of create a report for your franchisees every year talking about the state of the industry?

David Hicks  45:50
Absolutely, very much. So. we do a lot of Now we also are, but we're, we're very protective A lot of it too, because a lot of it is we were not going to give everybody what all the see all the secrets.

Sean O'Toole  46:03
Not even even your own franchisees, right?

David Hicks  46:05
Not even our franchises, that's exactly right.

Sean O'Toole  46:08

David Hicks  46:09
Because it's amazing how many franchises have a good friend and they happen to show up too, you know, and so, but we are getting more and more sophisticated. As we do that, we'll get more and more protective of how we go and do that. Because our goal is to make sure that our franchises can't ever leave because they can't ever get use that day, and they can't ever get to the game. They can't, they can be marketing is more effective than what they can ever duplicate outside. And once they figure that out, to ease, we rarely lose franchises, in our experiences.

Aaron Norris  46:47
I've been watching the marketing mix and the consumption of information by the consumer. I follow that every year. And it's been really interesting to watch things grow in categories that I'm surprised like TV and radio hasn't gone down. Are there any channels that have really lost their luster, and you just don't believe in them any more whether it be TV, radio, newspapers?

Sean O'Toole  47:10

David Hicks  47:11
We, we don't do a lot of radio. The reason we don't is because the people that are listening to radio, also see a report. So we can we by going into TV, we hit a different audience than we do, the billboards. And so we we can drill in to radio, but right now radio is almost as expensive as TV and you get a different see the you get more bang for the buck, we do, on TV than we do on radio, right now.

Sean O'Toole  47:52
That's super interesting. And the radio billboard thing, I guess, is because people mostly listen to the radio in their car. And if they're in their car, they're seeing the Billboard.

David Hicks  48:01
That's correct.

Sean O'Toole  48:01
That's why those are equivalent to ad audience.

David Hicks  48:04
And so it doesn't have as much of an impact and a draw for us as TV does.

Sean O'Toole  48:11

Aaron Norris  48:11
So I never would have thought about that. How about newspapers?

David Hicks  48:16
Yeah, we do some, not a lot of newspapers. We do. I think we do more newspapers, because the online stuff, but it's not newspaper. I don't know about y'all, but I don't get paid for newspapers anymore. I read the paper every day. He but I never, you know, I haven't gotten a paper in years. And but yet, our ads when you go, you might see one of our ads in your paper, but it may not be placed with the paper.

Aaron Norris  48:45
That's true.

Sean O'Toole  48:46
Right. Right. Because of the network's. So I'll just jump back to COVID real quick and what you saw there. So you're in a lot of different markets all over the nation, right, you're in some dense areas, you're in some more rural areas. Did you see what have you seen so far in differences between different areas, you know, higher income, lower income, dense versus rural or suburban, you know, etc.? What do you guys see in there so far in the data?

David Hicks  49:15
It's interesting, watching it because our lead flow dropped quite a bit, fairly quickly in March. April came back, quite a bit, but we're still lower. Our lead flow is lower. We're getting less people respond to our advertising, but yet, we're buying a higher percentage of the calls than what we were before. What the data is showing us, Sean, is we're getting less tire-kickers now. Because we're getting less people are just to call and they come out and "Let's see what my house is." If they call us they choose. A lot of one of our franchise says it's kind of like Christmas. Say What do you mean, when you get a call on Christmas day you better enter your home. Because that person is serious, they're going to sell their house, you'd be the one be the one buying it. And so when they call now, they're less of them calling, but we're buying a higher percentage. And it kind of makes sense. Because the reality is, you don't want somebody traipsing through your house unless you're really serious about selling.

Sean O'Toole  50:24

David Hicks  50:25
Right now, especially the older people there, they don't want someone in the house. The other thing that we notice, we might talk about how we can do the house virtually, we're buying a lot of virtual houses, that to amaze me, the house, our franchisee bought, they never even seen it haven't been inside it. And that there, we got a process where they go around and they can see it and they're showing them stuff. And they're buying it that sight unseen, but yet they are seeing it because the process is doing it. And but we found that a certain percentage of the people don't want anybody come in the house for any reason. Okay. And if you take that off, we're make it okay. And that's what some of a lot of our advertising is doing is that then they'll call and when they're hesitant that you come out there letting them do that. So that's probably what we're we're seeing more of that.

Sean O'Toole  51:29
I've been advising some of our trustee sale investors, because our trustee sale investors never get to go inside our houses. I'm like, you guys are uniquely positioned right now, to go out and do deals with folks that don't want people in their house. Like, you know, this should be a boom time for you. And so few are like taking advantage of it right? They're like just sitting around whining that there's no foreclosure auctions, because a moratorium, so I'm like, come on you you've got a unique value add right now.

David Hicks  51:55
And we we kind of watch it because your California was on of the slowest state to come back, because it's the most restrictive to that. Okay. And they have over the last 45 to 60 days, we're seeing the response rate goes up and net results go up. But that's been the slowest ones, states that it's hurting, you can almost watch them as they close down and the Covid goes up, the response rates go down a little bit. And but our buy percentages are increasing at almost the same time. And so, you know, so to answer your question, it is it is vary based on areas, the suburbs tend to be better, then some of the inner cities part because there are people a little bit more open to people seeing the houses and company.

Sean O'Toole  52:53
What about on the sales side? Are some of the folks you know, like in the in the more urban areas are having a hard time getting rid of their inventory? And maybe they can buy the inventory? They can't sell it? Are you seeing anything along those lines?

David Hicks  53:06
We're having a hard time keeping inventory, it is selling so fast. It is I mean, and are

Sean O'Toole  53:12
Across all markets?

David Hicks  53:13
Across the market? I mean, and it doesn't seem to matter... how, in fact, it seems to help quicker, the more restrictions there. And part of what we're thinking that is, Sean, is that all virtually all of our houses are empty. And so I know are people looking to buy houses, but in markets, the more restrictive, people are hesitant to go in. So buy a house that they're living there. And if you're living there, you list your house. And so listings go down, the more restrictive, but houses are all empty. And so they're selling. I mean, it is it is and their average sales price about 18% over last year. The same, basically the same houses.

Sean O'Toole  54:03
You guys are buying at the low end and the low ends, you know, yeah, definitely moving up fast to the high end. You know, this is one of the problems we always read about median price and medium prices so meaningless because it's so different at the different, you know, levels of market.

David Hicks  54:18
Yet we had one of our franchises tell the story. I think he's in Boston that he had, he listed a house on Thursday. And on Monday, he had 50 offers.

Sean O'Toole  54:30
That's almost too much work. Like I don't like getting that many offers. It's too much work. Like how do you even go through them all and compare it to build a spreadsheet? It sucks.

David Hicks  54:38
Yeah, exactly.

Aaron Norris  54:39
So HomeVestors is going to start an auction company so everybody can just show up. Okay. You might have some...

Sean O'Toole  54:46
Whatever happened to there was multiple companies out there working where you like submitted your offer through the website, right so that you could like I don't understand why that hasn't taken off like...

David Hicks  55:00
Mostly used back with the foreclosures and sell the foreclosures to those most of those sites were developed to sell them to the institutions to sell to teachers. And the reality is most of that inventory has gone away.

Aaron Norris  55:15
So, you have many franchisees asking you to expand into more rural markets because of COVID driven demand?

David Hicks  55:22
We're we are expanding, not just in the world, I tell you what, we have had more demand for franchise sales in the last five or six months than ever, I mean, we have sold more franchises per month in the last five or six months that we have in any five or six month period since I've been here. And we're selling at a record pace every month. And a lot of that, I think, is driven by a couple of reasons. One is what you just said, a lot will get a lot of demand in more rural markets, we're adding markets we haven't been in before, outside their us think the second thing is that a lot of people are in today's market, they don't want to be traveling the corporate traveler, they don't want to be they want to, this is a good time to get in your own business, especially in a business like ours. And, and ours is kind of shown to be resilient. Our franchise has done well through this. And so there are a lot of people that say and you know, I've always wanted to get real estate, there's a good time.

Sean O'Toole  56:28
Is there, I imagine you guys have markets where you'd like to see franchises where you don't have them now, what right now would be the hottest market where you'd like to get a franchisee that you don't have one right now?

David Hicks  56:40
We don't have I'd have to look at what we don't have. We've got most of them, Sean, we have a lot of markets that we have a lot of potential. Chicago is a great one to do that. A lot in the Midwest is that we have that we are growing pretty fast in New York, New Jersey, our market by now one at once we're adding a lot in Seattle, we've added a lot. Several markets, California, we've added quite a few California franchise in the last few months.

Sean O'Toole  57:14
Where, what's next? What's next on the horizon for HomeVestors? What's the next big thing are going into Canada and Mexico and Europe and  what's next?

David Hicks  57:23
We look to Canada we are in fact, we were about to go into Canada when COVID hit.

Sean O'Toole  57:28

David Hicks  57:29
And so we didn't because, you know, I don't know that others want to travel to Canada right now. So I think that's the next thing coming that will do will be in Canada.

Sean O'Toole  57:43
We may want to travel to Canada, I'm not sure they want us

David Hicks  57:46
Maybe, maybe, I don't know. But that we're also looking we've done a huge upgrade in our software over the last year and stuff, we are continuing that trend on doing that. But those are probably the biggest things.

Aaron Norris  58:02
I'm very surprised that HGTV has not called you for a TV show is that coming?

David Hicks  58:09
I don't know if they have we have had different times than doing that. One of the things they do, Aaron, is they always want you to talk about how much money you made on house. That's not in our we don't like that kind of marketing. And we just don't do that. Because you know that show and checks and what they did and all that and it's not in our DNA on what we used to we but that's what they always want.

Sean O'Toole  58:41
It just leaves that seller you know wondering what if and it starts you know why create bad feelings with the person you know, you want to leave them with great feelings that they had an easy deal on whereas not not looking at watching it on TV and going man, those guys made a lot of money on me and feeling bad about themselves.

David Hicks  58:59
The flamboyant person that the personality on TV show isn't the kind of people we attract. We attract the people who want to help people and and are willing they want to make some good money but they're willing to do it with a lot of work. Our mind our business is not a get-rich-quick scheme. It just not...

Sean O'Toole  59:20
This entire business is not a get rich quick scheme or anybody not just you.

David Hicks  59:24
It isn't it's not a get rich quick scheme and those that try to portray it as such. Do everybody a disservice? Because the reality is a trend a real estate transactions gotta be a win for all parties. And if it's not, it's not a good transaction.

Sean O'Toole  59:43

David Hicks  59:44
I don't know if y'all see saw the there's a article y'all look up you can probably see it. One of our franchise real proud of in Chicago. There's a big is that in fact he was on in People Magazine and then a lot of different stuff, you will find it. He closed our house bought the house, they bought it with furniture in it like they did. He started cleaning it out and he started finding piles of money. They found over $10,000, in envelopes in cash hidden behind furniture, under books, in books, all sorts of it. But of course, and this is goes back to what the kind of franchise we did. He is obvious what he did. He wouldn't call the person who bought the house phone and return the cash.

Aaron Norris  1:00:35
Wow. I will look for that story. And I will post it in the show notes. That's good.

David Hicks  1:00:41
That's the kind of franchise we have. And that, that that does not surprise me at all. Because that's the kind of people we have with us. And that's kind of what we attract.

Aaron Norris  1:00:53
Well, this hour went very quickly and how should people follow the HomeVestors brand? Where should they be looking?

David Hicks  1:00:59
That probably a couple of ways go to, or Yeah, if you have a house to sell, go to If you wanna, if you want to find out about a franchise, go to

Aaron Norris  1:01:15
Okay. Very cool. David, thank you so much for your time. This was amazing.

Sean O'Toole  1:01:18
Yeah, David, appreciate it. Thank you.

David Hicks  1:01:20
I enjoyed it. Thank you.

Aaron Norris  1:01:21
All right. Thank you for listening to the Data Driven Real Estate Podcast, you can find show notes and links to some of the resources mentioned in the show at Click that, join the community. And you'll be forwarded to the PropertyRadar community where you can ask questions about the current show and even see upcoming guests and ask questions there. We'd love to engage with you in the community. So check it out. Please don't forget to like favorite, subscribe and share on your favorite platform where you're listening to the show. It helps us out a great deal. Thanks for listening and we'll see you next week.

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