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Michael and Harvey Kalles
Michael and Harvey Kalles

Report on Small Business magazine

The new king of the castles Add to ...

As we drive leisurely through the uptown Bridle Path neighbourhood, consisting of about 80 spectacular houses on two-acre lots or more, she points out her past inventory: "I sold that one. ... I sold that one. ... I sold that one twice." Over there is the home she sold to (the Artist Formerly Known As) Prince for $5.5-million, and here, spread over four acres, financier Robert Campeau's former home. More than 95 per cent of her business is referral, and her card gets passed down the generations.

We pause in front of a mansion that exemplifies how she builds her business: In the last few years, she explains, she sold a bungalow in the Bridal Path to clients who tore it down and built this house. The people who had lived in that bungalow in turn bought a luxury nearby condo through her. They didn't use it for three years, and she kept calling to see if they wanted to sell. In late July, they agreed, and she sold it the first day it was listed, to someone she had waiting for just such a property. Meanwhile, the people who built this house have now engaged her to sell it. As for the condo couple, they're moving out of town. "I trust when they come back and they need a pied-à-terre, they'll call me."

Investing in relationships is the core principle of real estate sales. The Kalles even handle home leases, on which they lose money, because it introduces the company to potential future buyers. And while the average price tag of Elise's properties is $3.5-million, the brokerage's average is around $1-million. That's still 2-1/2 times the Toronto Real Estate Board average in September, but not the elite stratosphere the Kalles brand has come to imply. Some Kalles agents, in fact, specialize in the lower end of the market, and one of the firm's top performers has never sold a house over $600,000.

The Kalles need to embrace the middle class for other reasons. For one, properties under $750,000 represent more than 90 per cent of the GTA housing stock. As well, the lower end is more liquid these days. "The mom and dad and kids [market]is more affected by mortgage rates [than the stock market]" says Richard Silver, an agent with Bosley Real Estate, another family-run brokerage in Toronto, "and that middle range of $500,000 to $1.5-million is still very, very busy."

Another reason the Kalles need all the clients they can get is that the Internet is transforming the relationship between agents and home buyers. Michael Kalles estimates that nine out of 10 prospective buyers research homes online at some point, mainly on the realtor-operated Multiple Listing Service. Back in 1996, when some MLS data was put online for the public, "the fear was that if we opened all this information we've been controlling, buyers will buy directly from the Internet," he says. "We haven't seen that. Buying a home is not like buying an airline seat." Homeowners still want professional help in navigating the legal and negotiating hurdles involved in real estate transactions. "If the business was going to be taken over by the Internet, it'd have been by now."

James McKellar, academic director of the real estate and infrastructure program at York University's Schulich School of Business, thinks Kalles is significantly underplaying the threat. "Any process in which there are so many intermediaries is subject to technological change," he says. "These people are brokering information, and technology is going to erode their ability to control it."

From websites and social media - which let people advertise their properties - to Google's Street View feature that enables buyers to explore homes and neighbourhoods by simply typing in addresses, consumers are gaining more and more power over the process. "It's like going to Ikea," says McKellar. "If you can do some of the work yourself, you'll save money."

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