Melissa Murphy started her career as a Realtor at the height of the residential real estate market in Spokane in the mid-2000s, then founded her own brokerage when that market troughed out about five years later.

After five years in business, Prime Real Estate Group has 30 agents between its two offices, one in downtown Spokane and the other in Coeur d’Alene, and five full-time staff members. 

We sat down with Murphy recently to talk about her company’s growth, the Spokane real estate market in general, and her foray into publishing with a quarterly magazine called Prime Lifestyle. 

Journal: You started out as an agent and still list properties. How does your day break down, in terms of what you spend your time on? 

Murphy: Each week is different. I do wear many hats. I work with clients on the buying and selling side, as well as help manage the offices and grow and recruit and retain agents. 

I’m not at nearly the capacity I used to be at the peak of my production, but I still will do 65-plus transactions a year. The average agent in Spokane does five or six. My best year, I did over 100 transactions, so I’m down from where I was because I’m expanding into other things. But I’m still producing at a high level by comparison. 

Journal: What year did you handle 100-plus transactions?

Murphy: 2014. 

Journal: You were an agent before starting Prime. What was the logic behind starting your own brokerage? 

Murphy: When I was at a big-box brokerage, or a national franchise, you didn’t have as much of an ability to move with the market and make adjustments as needed in service delivery or pricing or branding that as an individual broker, I was able to do. Because you don’t pay the franchise fees, you have more of an ability to be versatile and adapt.

When I made the move, it was pretty close to the bottom of the market, which was 2012. We’d seen a shift in the number of agents. When I first entered the marketplace, it was 2005, and there were roughly 2,600 agents in the marketplace. By 2008, I was the No. 2 agent in all of the MLS (Spokane Multiple Listing Service) based on sales. By 2010, we dropped down to 1,400 agents. 

You can imagine how offices felt. There was definitely a shift in the industry. These big offices were pretty much empty. I saw the opportunity to build a smaller office with less overhead, allowing agents to pop in, do some work, drop paperwork off, and go. When I built this office, I built it knowing that most agents are in the field anyway. 

I was able to adapt to the market, adjust fees to where they were most advantageous for an agent, because that’s where I had most recently come from. I wanted to offer something that would be appealing to top producers, but also start an environment where we pride ourselves on education and professionalism and an exceptionally high level of customer service. 

Journal: When you talk about wanting flexibility, are you referring to fee structures?

Murphy: When I first made the move, I looked at a couple of ways in which clients could compensate their agents. What I found is that model wasn’t precisely what fit our market demand. It did give me a chance to adjust on the broker side what I offer my agents.

When I look at the changes I made, I did no desk fees, no monthly fees. Basically, my policy is, you don’t pay us unless you make money. That was a better opportunity for our agents, specifically at that point in the market. 

Journal: Have you found, then, that the traditional 6 percent commission compensation works best in the Spokane market? 

Murphy: Yes, it does. It seems that buyers and sellers understand the value of an agent when the inventory isn’t moving so quickly. Commissions weren’t pressured downward like they are in a hot market. When you turn to a hot market, there tends to be a little more negotiation, so some of those fees tend to be a bit more negotiable. The converse is true in a depressed market. 

Journal: With the philosophy of, “We don’t make money unless you make money,” does that require you to be more selective about whom you bring onto your team?

Murphy: It does. It does. I almost wish it were harder to get a real estate license, because the barrier to entry is so low. For $1,500, you can take your real estate exam, get a keypad, and practice real estate. 

Myself and many of our agents have professional backgrounds or degrees. I’m not saying that’s a requirement for being a part of our company, but it just goes to the culture that we instill in our agents of training, being exceptional at what you do, and treating it like a career, rather than treating it like an opportunity to get rich quick. 

Culturewise, our ideal agent would be one who embodies the professionalism, the educational commitment, and a local component of giving back. 

As the market has shifted and more consumers get their information online, it has eliminated the barriers to entry that a lot of brokerages used to face competing with big, national franchises. Since you can get most of your content using a Trulia or Zillow app, the need for that national brand has subsided quite a bit. People will work with those they know and trust. 

Also, because we aren’t sending fees to the East Coast or Texas or other marketplaces where those franchises are, we keep all of our money here locally. We don’t have anybody that we have to pay money to stay in business. 

Journal: What is your assessment of the current residential real estate market in Spokane?

Murphy: This is a unique market. I have the opportunity to analyze this market versus the market in 2005 and 2006. 

Journal: The hottest market we’ve ever seen.

Murphy: Arguably, the hottest market we will ever see. What was different about that market from this market, I would describe this way. That market had what we call irrational exuberance. People would buy anything at any price at any location in any condition. Now, there’s confidence, but it’s not irrational confidence. 

Back then, buyers would come to you without a pre-approval, and that’s the last thing you worried about because anybody could get a loan. Today, it’s different, because those buyers do qualify for a loan. They have good jobs. Not everybody is qualifying. 

The banks, in 2008, basically closed their doors on lending and tightened regulations. A slight loosening by the banks makes it possible for a few more buyers to enter the marketplace. We arguably overcorrected on the lending criteria in 2008, and there’s still some room for improvement there. 

A couple of other factors set this market apart from that market. We have to look at large demographic trends. Right now, millennials are the largest demographic of home buyers. When we were at the bottom in 2008 to 2010, we were at a period where millennials weren’t buying, where people whose homes went into short sales or foreclosures were timed out of the market so they couldn’t buy back right away. Now that the demographics have shifted, we have the culmination of millennial buying and the boomerang buyers who lost a home to a short sale or a foreclosure who are now timed back into the market. 

We have fewer foreclosures. Raw land is almost scarce because it isn’t being developed at the pace it was. We have builders scrambling for inventory. 

Because of all of those factors, we have the highest demand we’ve seen in 10 years, which is leading to us having less than two months of inventory, which leads to a very, very hot market. 

Journal: Another characteristic we saw at the market’s zenith was the height of the home flipping market, or people trying to invest short term in homes, fix them up, and sell them at a profit. What’s that market like right now?

Murphy: We’re starting to see investors move back into the marketplace. However, it’s not a trendy as it was. We used to joke that if you had a truck, you were a builder, a contractor, or a flipper. That was pretty much the case, right? 

A lot of times, people will ask me who I recommend for a home builder. I say, anybody who is still around. Anybody who is still building homes today had to make it through that downturn. They’ve made it through that trial. 

There are fewer investors than there were before, but that’s slowly rising as the market stability is improving. 

Journal: Do you see that as a good thing or a bad thing? 

Murphy: As we see prices increase, I think we’ll see more people jump in and try to catch that quick buck, if you will. Investors have to be ever so cautious right now because prices are pushing the limits of what would be deemed profitable unless you truly understand a niche and have a good grasp on what to do to turn a profit. 

Journal: How concerned are you about the interest rate environment?

Murphy: The interest rate environment is positioned to go up, and that’s always been a perennial threat. If you look historically, I don’t think it’s anything that will cause significant concern for the purchase market. It will hurt a lot of lenders on their refi business and a lot of people who have been accustomed to that every-two-year refi to drop their rate. They won’t have that luxury. 

We don’t expect interest rates to push much higher than in the 5 percent range. Even if they pushed into the 6 percent point, that’s still not as high as we saw at the peak in 2005 and 2006. 

Journal: Shifting gears, why did you start Prime Lifestyle magazine? 

Murphy: We started that a year ago, and the reason we started it is, naturally we know a lot of consumers will find their information about real estate online. We know, though, that there’s a certain demographic that may not be searching for Spokane or Coeur d’Alene, and we would have an opportunity to introduce them to us. 

We call those our feeder markets. Our feeder markets are Southern California, Scottsdale, Phoenix, Las Vegas. Those are the areas where we see a lot of people migrate to this area for the quality of life. 

I’m emulating another broker in another city. He mentioned his use of a magazine similar to this. He specifically mailed it out to certain ZIP codes in certain feeder markets and had a tremendous response. 

When we look at our magazine, it really is us telling the story of the quality of life here. We self-publish it. We have about 7,000 on our mailing list, and we distribute another 3,000 out through different trade shows and our agents’ networks. But most of them are direct mailed to ZIP codes with a certain tax-assessed value in that area. 

Journal: Is it a direct revenue generator for you?

Murphy: No, it’s not a revenue generator. But when we look at our marketing budget, our exposure is significantly more, and the exposure for some of our homes is significantly more than it might be in other publications. 

We want it to be perceived as more of a coffee-table publication.