How Sothebys Holds Brand Standards and is Consistently Profitable with CEO Philip White

Brokerage Insider

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With more than 40 years of experience in residential real estate, mostly at Sotheby's International Realty, Philip White has steered the company through major changes in the industry and expanded the brand to 75 countries and 1000 offices around the world. Through this process, Philip has led a company that holds the highest brand standards. Because of this, the organization is Realogy's most profitable organization. Listen in as he describes how Sotheby's has thrived.

TRANSCRIPTION

📍 Hi everybody. And welcome to brokerage insider the podcast where we interview the leaders in real estate and technology. I'm your host, Eric Stegemann and I'm the CEO of TRIBUS. We're one of the largest independent prop tech companies in real estate and provider of custom brokers technology to medium and large sized brokerages in the United States, Canada.

And even around the world today, I am very pleased to say that we have Philip White Phillips, the president and CEO of Sotheby's International Realty. Now you probably heard of Sotheby's International Realty before, but just in case you don't know much about them, they span nearly the entire globe. And they're focused obviously on luxury real estate, just like the auction house of their namesake.

The company recently announced that it had did over $150 billion of sales in 2020, which was a 32% increase over 2019. In addition, the network has grown during that time and is now over a thousand offices in 75 different countries. Philip, thank you so much for joining us today. Thank you, Eric. It's great to be here.

Now Philip obviously we always do lots of research on everybody that we're going to be interviewing for this podcast ahead of time. And I found this kind of consistent thing with people that we've interviewed recently, I had Joan doctor who's the. President of Fox & Roach realtors and like you she also is a real estate lifer or what I call a real estate lifer.

You have 40 years of experience in this industry. So let's start with what got you started in becoming a residential real estate agent.

Okay. Thanks Eric. So just, the short form, answer to that actually out of college I I went to the university of Virginia and I have a degree in finance.

And so I was hired by a bank in Atlanta, Georgia, which is where I'm from SunTrust bank, because they've now changed their name. And it's in a, it's a great bank is a great bank today. But I had actually studied a bit in London. And I got to know the Sotheby's auction house through a friend of mine, a friend of mine's sister worked there and their French impressionist department.

So I had a real fascination actually with Sotheby's the auction house. And then I moved back, went to work at the bank. And then later on I noticed that Sotheby's had started a real estate company. And so I was in New York on some business. I ended up kind of cold calling on the chief operating officer there.

And us was in his office for about two hours actually. And he introduced me to the chairman and the president of the real estate company. And one thing led to another and they hired me and I moved to New York and got licensed there. And. We had a little bit different business model than we have today, but we worked with independent real estate companies and I actually handled New Jersey and Fairfield County, which is Southern Connecticut.

We listed and sold luxury properties in the region. Then I moved to Palm beach and worked in our Palm beach office which was fascinating. And then, my career moved on from there. But that's how I ended up in real estate. It was a combination of, the Sotheby's brand and, I really saw a great opportunity that.

That Sotheby's could bring to the real estate market. So that's how I ended up in the business area.

And here you are, years later and still enjoying it it seems like which is great. It certainly helps them personally. I think you lead one of the most iconic brands in.

Residential real estate and frankly from the auction house as well. And when I travel back when we could travel, but back when I traveled. We see agents all over the place where the brokerage brand has been entirely wiped away by the agent's own marketing, their teams, et cetera. And I use the example, a lot of KW, where if you look at KW agents, you almost have to play where's Waldo to try to find the KW logo on some of their marketing, but Sotheby's, isn't like that at all.

And if you pay attention to Sotheby's agent branding, It's always focused on Sotheby's. And it seems like there's just inherent value in mentioning the brand name of Sotheby's. And so how have you been able to engender that value over your tenure at Sotheby's and hold firm to having agents be focused on the brand where other companies like KW have had to shy away from it?

Eric does an excellent question. And. I think when we, we entered into a license agreement with Sotheby's auction house, what 17 years ago, 2004. And that's when I rejoined the, the, the, when we were starting it up. And so I always thought we had this, great responsibility.

To obviously grow the business, any business you've got to grow it. But I was really felt like we had to grow it. In a qualitative way. And the worst thing we could do would be to dilute this 270 year old brand name. And so I had, I had a lot, I felt a big deep responsibility.

And I shared that with our team, as we hired people, to protect the brand standards. Because over the years I heard Sotheby's is really just an, is a function of the brand name and really the people that work there. That's was always in my mind. And so when we started it, we create identity standards.

Any franchise system has that. But the important thing is is you have to, make sure that people comply with those standards. So I'm the first to say to people, Hey, Sotheby's International Realty may not be right for you. We're, we're not necessarily all things to all people.

I think. Part of that is, is that, I wanted the consumer and this is a pretty big point here, Eric. We'd we, when we decided, when we started this, we decided that our client. Was going to be the consumer. Obviously the real estate agent is in the center of the transaction. Certainly not minimizing that but we wanted the client, the buyer or the seller of the house.

We wanted them to be our client. We wanted to resonate with them. We wanted our marketing to reach them. And the reason that we made that decision and I felt very strongly about it. Is that to the extent that we could I wanted to deliver to our agents and brokers, somewhat of a pre-sold brand. Now I'm not minimizing the competition out there, which is fierce, but if I could give our agents, and this is what I kept in mind, if I could give them, an edge, where that.

Where they go in, make a competitive presentation and that client is somewhat predisposed to do business with Sotheby's International Realty and try to make their job a little bit easier. So I think that, coupled with, our diligence on making sure that the brand had consistency, the other thing we thought about.

Is really that again, that tying it back to the buyer, the seller, and in my mind, I, I just visualized that we wanted them to have this same experience, whether they were buying a house in Sydney, Australia, or Auckland, New Zealand or Taiwan or Paris or London, or destined Florida or Orlando or Palm beach, we wanted them to.

The see the same real estate sign, the same yard. We wanted them to see the same business card, the same format. So that's hard to do, when you have a business that, for us now with over 20,000 sales associates, many of them are independent contractors, certainly in the United States, that's the case.

I think that. To whatever extent we've been successful. I think a lot of it is that consistency with the brand. And, I meet with the auction house. The, see I was with the CEO recently and, they're very complimentary of the business that we've developed and the brand standards.

And so that gives me great pride that they have respect for what we've done.

And you should and at the risk of being very effusive about the Sotheby's brand, I've always been very impressed. How Sotheby's International Realty has held firm on that. I use the example in a presentation that I do.

It's called agents run a muck and I use examples of headshots and bad advertising that agents have done. And I have an example from many of the franchise brands that are out there. In fact, one of them the agent uses the phone number four, one six, punch me as their phone number.

And I always cringe every time I see that yet. I've never cringed at that. Anything that I've ever seen from any Sotheby's agent because of those brand standards that I feel like you guys have set. But I think there was something else that you alluded to there that's really important. I'd like to dig in on I bought a house last year from a Scenic Sotheby's agent and her name was Sarah Timmons.

Mentioned to me after we started working together that how rigid the recruiting is at Scenic Sotheby's, you don't pick up the phone and say, Hey, I want to be a Scenic Sotheby's agent. They have to call you and talk to you. And then there's many meetings that happen. Is it the brand.

And the specifics that go along with that, that allows a brokerage like Scenic Sotheby's to be selective in who they pick or is there more to it?

I think there's more to it, Eric. It's, and I talk about that because w was, back to the consumer, as I mentioned, the buyer or the seller and the notion that, It, at least in my mind, I've tried to, develop that, where the brand is.

Pre-sold a certain level of clientele. And then therefore that whole process requires exceptional service. And that's. And I say that because the, that's what, people expect from Sotheby's International Realty, a client, they have an expectation that they're going to get exceptional service that holds true with the auction house as well.

And that's, that's a big responsibility. And I talked to the companies before they join us, in my, my affiliate, my franchise business. And, it's one of the first things that I talked to them about. And I'll say to them, are there times where you actually may have to.

Re you know, I'm not suggesting rebuilding your company, but you do have to really think about it because this is not just some franchise you're joining. This is something much different. And there may be some agents in your company. That might not understand it. And frankly may never understand it.

And there may be times where you just have to part ways, so Eric, I could go through many companies that have joined us and they did have to disassociate some agents. And because we do have the requirements that you're talking about and not just the brand standards, the service and many of our companies are very focused on productivity, so per agent productivity.

And I think, you can agree with. With me that, the agents that the industry suffers a little bit with, a lot of agents actually not doing, much business. That is a drain on our real estate company. So I think many of our companies really are very focused on.

Not only having productive agents but hiring agents, like the one you just mentioned in Destin, I think Sarah Timmons is newer to the business. They want to invest their time and Sarah's time into making her as productive as she possibly can. I think it is part of our DNA.

It's part of our culture. And so I, I do think it's intentional to your question.

And that I think is part of it, I think. Yeah. All too often in any brokerage and franchise networks that are out there, the brand is almost just there as a thing. But it's more about the agents than it is about the overall network and the brands.

Yeah. Cheers to you for holding firm and not only the Britt and standards, but the agent standards and the standards of. Practice and what's provided to the individual consumer cause I've never heard anything other than the best about Sotheby's,

you know what's interesting about my job, Eric, along these lines is, and it's really quite surprising is that, from time to time, obviously I'm going to get a letter.

Complaining about something. But I get more letters of appreciation about agents than I do complaints, which I think is probably quite unusual.

Yeah, that's a, and that is definitely the case of listening, caring, getting back to them. But it's certainly seems that it's rare. I think anytime you run a business, you're going to have some percentage of people that are unhappy, no matter what or how hard you tried work. And certainly we've experienced that at TRIBUS.

Sometimes it's. It's just doesn't work out for whatever reason, but some people you

just can't please is what

juicy. Exactly. Exactly. Okay, so let's talk about the International side of Sotheby's International Realty. As I mentioned before, You guys have a presence around the globe, you're in 75 countries.

And frankly you sell some of the most expensive real estate in the world. If you name a country, it seems like there's always a Sotheby's that's there. And frankly, like many Sotheby's agents I've actually taken my picture in front of a few Sotheby's offices around the world, including.

The one in Monaco. I took my picture in front of back when you could travel a couple of years ago. I know you recently opened up in Oman as well now, obviously 2020 was a difficult year for lots of folks, but in real estate it was obviously a standout. How has it done around the world? Outside of just the United?

Yeah.

Eric, I talk about our international business, it's really been a labor of love for us. Just because, we, our first deal I don't. I think it was the, I think it was probably Western Canada is neck and neck, either France or Western Canada. And so our business model is we sell the rights.

We have a long-term agreement. We sell the rights to either a country, part of a country or a province or territory. And we started that early on. We always. We built Sotheby's International Realty to be from the very beginning to be an international company. So it was not an afterthought.

Everything we did, we thought about how it would resonate internationally. And there were a lot, there was a lot of extremely heavy lifting in the beginning particularly when we built our web, our global website and the taxonomy involved, which is location orientation. And, we had to go through so many different things, language translation.

And so forth. That's why I say it was a labor of love because it was, it's very complex because real estate is practiced differently in all these different countries. And it's practiced differently even in different parts of the same country. We had to go through a bit of a learning curve ourselves.

But in the same time we built this really strong global referral system. And I'm very proud of what we've accomplished. But in some ways what's interesting is we're just getting started with it. Because now we have this great opportunity to help our local companies, wherever they may be.

We're now in a point where we can help them grow. Many of them are very, significant already. And then we've never had as strong of an International, we call servicing teams. So we've broken the world into three regions Europe, middle East, Africa, and India. Calla, which is the Caribbean, Latin America, Caribbean Bahamas, Bermuda.

And then we have, Asia, the Pacific rim APAC as we call it. And we have a team dedicated to those. Affiliated companies in each of the three regions. So in country, if you will, and we have a designated marketing director, a head of region and an additional support people for each of the three regions.

So that keeps us very close to the two. There are companies there, I think the other difference, Eric, and this is. Probably not something everybody realizes, but most other real estate companies operate what they call a sub frame. The companies are free to sell offices to, to whomever they choose.

So back to your. Standards question. We actually don't allow that it's a, what we call direct franchise models. So we actually vet every owner of every office that's in our system. And I even, I meet I've met every, everybody. I was one asterisk. There's some people I haven't met in person because of COVID last year.

But prior to that, I'd met every owner of every company internationally. I think that. You know that business and our referral business globally was up 42% year over year in 2020. And that's a function of having a thousand offices, literally in the best locations around the world you happen to have been in Monaco.

And that's obviously, a very unique real estate environment as well. That's certainly a landmark office for us right there.

And obviously let's talk about COVID for just a second. You mentioned that you hadn't had a chance to meet some folks that came into the network because of that.

Obviously markets like Italy, Spain, France these were. Markets where you have operations in and were hurt extensively and have not recovered in the real estate market nearly as well at, or as fast as what the United States has. Do you think that when we get back to traveling again, do you think that we'll see recovery in those markets, particularly in the luxury, second, third, fourth home buyer market.

Yeah. Eric, I, like we did do I'm not sure if it was a record or not, but we did our company in France did a 2020, did do a billion dollars and and euros. So that's about 1.2 billion in sales volume. Out of their 54 offices in 2020 1.2 billion USD. And Italy, given the wonderful markets that they're in there was a similar situation where people were, buying different properties, with space and the amenities that we were looking for.

It's, it was not across the board. Slower to bounce back than the U S because we did have certainly some markets that, outperformed and even in Sydney we did a billion dollars in Australia, Australian dollars there in 2020 with some very high price point.

Houses, I do X, I know your question here is what the expectation is. Going forward with, post vaccine, travel, coming back to some degree of normalcy. And I think we're already starting to see it with the year starting off strong even International Sierra International numbers are up pretty significantly through February year, over year.

I do see it and I do expect that international travel back to the U S will be a positive, certainly in the real estate market as well. I think cities like New York will, I expect that they'll be, continued activity and speaking of New York, it's.

Even though yet last year was a pretty tough year. I started seeing the market healing PO when the vaccine was introduced. And then the last eight weeks in a row, they've been 30 deals or more over $4 million in New York city. So that's coming back. And I think you'll start to see more international buyers coming back into the city as well.

That was actually a,