Disasters strike Wisconsin communities every year, sometimes without warning, causing injuries to citizens and widespread destruction of homes, farms and businesses. A real estate brokerage and its agents may face a variety of hazards:
- Natural hazards like floods and tornadoes.
- Human-caused hazards including gas explosions, fires, accidents and acts of violence.
- Technology-related hazards like power outages, equipment failure and cybersecurity breaches.
Everyone assumes disasters are catastrophes that happen to someone else, but real life brings vivid examples showing that is not true. The Sun Prairie gas explosion and fire on July 10, 2018, took the life of Sun Prairie Volunteer Fire Department Capt. Cory Barr who was a real estate agent with Keller Williams Realty (Barr Realty). Several businesses were leveled during the explosion, including the Barr House restaurant and bar, which Barr owned with his wife, Abby. Other nearby businesses burned down, including the office of American Realty. A construction contractor apparently struck a four-inch natural gas main, causing a gas leak that led to the explosion and the fire. This was a completely unexpected and devastating tragedy that these business owners could never have prevented.
The offices of the Southshore REALTORS® Association were flooded in July 2017, and the association was forced to operate out of a trailer for several months. July 10, 2017, brought five inches of rain, and the office and surrounding roads were flooded, making it a challenge to reach the office. Jan Stroud, the Southshore association executive, made that journey only to discover four feet of water in the street in front of the office. Once that water receded, she learned there was four to five inches of water in the office, and everything was saturated. Efforts were made immediately to extract the water and clean up. Jan and Southshore thought they were on the mend; then came six inches of rain on July 12. The entire building had to be gutted. No one is immune; everyone is vulnerable.
Planning
Disaster preparedness planning requires a real estate business owner to protect his or her personal safety and the safety of the agents in the firm, clients and customers, the firm’s files and information, the brick and mortar office, equipment and furnishings. There is much a business owner can do to prepare for the most likely hazards. The READY website and other resources include checklists to help make sure nothing is overlooked. According to estimates by the U.S. Labor Department, approximately 40 percent of businesses struck by a natural disaster never reopen their doors. Having a written plan of action ready to execute when disaster strikes is a critical component to business survival.
Whether dealing with short- or long-term outages, real estate firms simply cannot afford the down time. Here are a few key considerations:
- A disaster preparedness plan should address the physical safety of the brokerage staff and licensees and any customers or others on the premises. Consider implementing safety drills, having an outside consultant conduct a safety seminar, and establishing a phone tree for communicating safety alerts during an emergency. Fire safety is about having smoke detectors and fire alarms that are working properly.
- With the help of an IT professional, develop a “Business Continuity Plan,” to address electronic data and systems recovery following a catastrophic event. This plan should address minimization of systems downtime, a secure off-site backup, and staff responsible for ensuring that critical IT is protected.
- Have a course of action for securing physical facilities and critical hardware including portable devices such as laptops and mobile phones, and make sure they are insured.
Business continuity plan
Today’s real estate companies must adopt long-term solutions to meet their clients’ needs for business continuity following disasters. This requires remote access to transaction files and documents, the business website and social media accounts. A modern business continuity plan creates options when locations or public infrastructure are down and allows business to continue by enabling remote operations through technology.
Private clouds: Most companies cannot afford the infrastructure needed for their own data network, server and storage platform, but there is always “the cloud.” Several different private cloud services offer customizable electronic file storage space that protects a firm from on-site events and network failures. Private clouds are cost-effective and provide access to business files and data from anywhere at any time, on any device, for both internal and external users. A secure cloud storage system also helps protect files should there be a cybersecurity breach. The Southshore REALTORS® Association had just the year before it upgraded its technology, scanned all files, documents and forms, and saved them on the cloud. American Realty had all its transaction documents, files and trust account records in the cloud as well. This allowed American Realty to provide quality brokerage services with virtually no interruption.
Generators: Home generators enable telecommuting when power is out, travel is not possible, or the office is not available. Consider on-site natural gas or diesel generators with auto-transfer switches to keep offices powered and open for business.
Mobile communications: Phone trees, group texts, automated phone messaging and email blasts keep agents and staff in the loop during critical times on their mobile devices. Wi-Fi locations, such as internet cafes, coffee shops, libraries and other public spaces, may allow agents to maintain their productivity and supplement wireless hotspot capabilities on smartphones. Cellular capability on tablets frees users from searching for a Wi-Fi connection since the devices will work anywhere a cell phone does. Portable power packs and recharging systems for smartphones, tablets and cameras are critical during times of outages. The Southshore REALTORS® Association had a new phone system so it could switch incoming office calls to staff cell phones and access files, documents, and forms on the cloud. Southshore stayed in contact with members through its email system and kept the association functional, helping members with association and MLS issues.
Essential supplies and equipment: Take an inventory in the office and make a list of items your business can’t survive without. Then think about which items and information you could not do without if everyone is forced to be away from the office. What hardware, software or pieces of equipment are used all the time?
Insurance: Review insurance coverage. Make sure it includes coverage for all physical assets as well as business interruption and other applicable coverages. The Southshore REALTORS® Association had federal flood insurance with more than enough coverage for the building and contents, but there were constant negotiations over the items the insurance provider said it wouldn’t pay for. The flooding happened in July 2017, but the association and insurance company didn’t agree on a settlement until February 2018. That is why Jan Stroud recommends having adequate reserves to keep the restoration process moving. “Materials have to be bought and workers have to be paid until you get that insurance settlement. It’s another way to not panic and feel that you have to settle for much less than what you deserve in the insurance settlement.” American Realty has business insurance, which should cover its electronics, furniture and memorabilia, but is waiting to gather a comprehensive list before filing its claim.
Financial and tax records: Plan for how commissions, trust account disbursements, business expenses, tax records and other financial and cash flow needs will be handled during and following a major disaster. It may be beneficial to establish an emergency reserve fund, perhaps with a second bank in case your main banking facility is affected by the disaster, insurance checks are slow to arrive, or there are other unforeseen obstacles. The biggest regret of American Realty is that it had not paid $50 a year to have QuickBooks with its tax records and personal rental files stored in the cloud; these records will have to be recreated as best as possible. Broker Patrick Schaefer, co-owner of American Realty, also suggests online banking and the use of electronic checks or eChecks to keep necessary payments flowing.
Recovery
Real estate businesses need to continue their operations as seamlessly as possible.
Organize your own accommodations first
Make sure the real estate firm’s agents and staff have safe places to stay in the event the disaster impacted homes in the area, for example, a tornado or flood. Think of it as putting on the oxygen masks on a plane before you help anyone else.
Clients and customers/transactions
For pending transactions, the first question is whether any of the subject properties were impacted by the disaster. Stand ready to help sellers as they document damage or loss in writing and with photos and video, file insurance claims, find alternate accommodations, provide lists of contractors for repairs, and keep records of everything spent on repairs and replacements. Buyers should also ask lenders about any additional costs and extended time frames as a result of the disaster. Sellers should inquire about any new instructions regarding mortgage payments or mortgage forbearance.
If clients’ properties are not impacted, talk with your clients and customers as soon as you are reasonably able. Depending upon the circumstances, these communications may be routine or information about the disaster and the firm’s status. Patrick Schaefer of American Realty said his agents, for the most part, did not address the tragedy because clients and customers are in the midst of important transactions and may not be sympathetic to the firm’s misfortune, and hearing of the disaster might only make them question the firm’s capability to provide quality brokerage services.
Finding a temporary business location
The Southshore REALTORS® Association worked from a trailer while its offices were restored but also had to find locations for meetings, hearings and education classes. Jan Stroud reports that real estate and affiliate offices gladly stepped up and offered the use of their facilities. American Realty took advantage of one of the offers from other real estate brokerages to operate out of a nearby real estate office for the interim and is expecting to find a new space and relocate permanently in a couple months.
File insurance claims
Document the damage and file insurance claims.
Reach out and help
If a disaster strikes and your real estate firm and its clients and customers were not impacted, reach out and help those not so fortunate — whether it be other real estate firms or other property owners in the community. Show up and help. Patrick Shaefer was gratified that good people from local real estate offices reached out and offered to share office space.
Words of wisdom
Jan Stroud advises, “Prepare to be mobile and work from anywhere. Be able to access files from wherever you are. Stay in constant contact with staff, members or clients. Keep up to date on technology. Little did we know when we upgraded things the previous year that we’d have to solely rely on it to keep functioning. Members depend on us to help them.” The American Realty website says, “We want to assure you that our service to you has experienced no interruptions and we will continue to work hard to provide the best service possible.”
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.
Preparedness planning resources