Helping Hispanics Buy Their Homes

February 3 2007
By JANICE PODSADA

Robb Heering, founder of Casa Latino Franchise Corp., believes his 2-year-old company can correct the injustice that's been heaped upon the Hispanic home-buying community - and make a bundle.

Too often Hispanics, especially newcomers, fall prey to unscrupulous real estate brokers and lenders who induce them to buy homes they can't afford, said Heering, a Connecticut real estate attorney.

Heering, 47, has developed a real estate franchise business that he says will enable the nation's Hispanic population to realize the American dream.

"We're trying to help create the Latino middle class in America," Heering said. "That's best done through homeownership. Our goal is, we can do well by doing good."

His remedy is simple: Clean up the market and the money will follow - the close-knit nature of the Hispanic community is your best ally.

"Get it wrong and bad news will go through the bodegas and we'll be out of business," Heering said.

His goal is to establish a nationwide network of Casa Latino real estate franchise offices staffed by bilingual agents and brokers, willing to translate documents and take the time to explain the home-buying process to clients.

The first Casa Latino franchise, in Las Vegas, opened Thursday. The second is scheduled to open today in Phoenix.

In 2000, Heering founded Fortune Lending Group LLC, a Southbury-based mortgage lender.

"As an attorney I had represented more than 50 lenders. I decided to get into the business," said Heering, who speaks Spanish, but whose Hispanic lineage is limited to a great-grandmother from Argentina.

He was inspired to found Casa Latino after several Hispanic mortgage clients returned to him with "horror stories" about their experiences, which ranged from the culturally boorish to the out-and-out predatory.

There was the condominium buyer who was showing off his purchase to a group of relatives when his agent took him aside and told him, "They can't all live here," and the Realtor who convinced a Hispanic family with an annual income of $30,000 to make an offer on a $410,000 house. "They could barely afford $200,000," Heering said.

"This isn't about selling houses; it's about helping Latinos achieve the American dream of homeownership," said Raquel Garcia de Colby, Casa Latino's senior vice president.

"But you can't do that," added Heering "by selling them homes they can't afford."

McCasa?

Social benefits aside, if his franchise empire unfolds as planned, Heering said, he expects Casa Latino to be worth $100 million in five years.

Heering likes to say that "it took an entrepreneur from Connecticut to do this."

For now, the empire he speaks of hasn't materialized. The company can't provide potential franchise owners with information about what to expect in terms of average annual gross sales. It's too new.

Since franchises went on sale in November, Casa Latino has sold seven at $12,500 each.

"It sounds like they've got a great idea," said Joe Mathews, founder of the Franchise Performance Group, a consulting agency in Litchfield.

"But the franchise graveyard is filled with great ideas," he said. "There's a big difference between running a real estate office and being a franchisor. Every year about 250 new franchises come on line, and about the same number fail."

Heering, however, is optimistic. "We've looked at the demographics," Heering said. "We've got a tiger by the tail."

Casa Latino and other businesses out to capture the Hispanic market are relying on recent consumer studies that suggest Hispanics are one of the most brand-loyal groups. They are also relying on the numbers.

Hispanic home buyers are on the rise, according to the U.S. Census. More than half the nation's 12 million Hispanic households were homeowners in 2005, compared with 48 percent of 9 million Hispanic households in 2000. The National Association of Hispanic Real Estate Professionals estimates that in 20 years, 40 percent of first-time home buyers will be Hispanic.

Richard Wulff, a Phoenix entrepreneur, purchased four franchises, including the one scheduled to open today. The remaining three will open in the Phoenix and Tucson areas in the next two months, he said. Like Heering, Wulff said, he is betting that word-of-mouth will bring in clients.

"Hispanics are very loyal and very referral-based. Get them the right property and follow up with them after they get their home and they'll recommend us to their brother, their sister, their cousin," Wulff said.

"This is an underserved, abused community," Wulff said. "But is it my mission in life to correct all that? Certainly not. I look at this as a financial opportunity."

Potential franchise owners must be willing to invest between $30,000 and $100,000 to open a Casa Latino Real Estate office, Heering said.

Two Casas

Casa Latino may be one of the first real estate franchises to target the Hispanic home buyer, but it isn't the only brokerage firm interested in courting the Hispanic community. Casa Latino may soon be facing competition from a major player.

In the San Francisco Bay Area, Coldwell Banker recently opened 31 offices of Casa Coldwell Banker. Heering claims they "borrowed" his concept after he rolled out his franchise model at a real estate industry trade show in November.

Coldwell Banker executives, however, said they've never heard of Casa Latino.

"We developed the idea for Casa Coldwell Banker last spring," said Sandra Ramirez, Coldwell Banker's Hispanic network coordinator.

Casa Coldwell Banker offices aren't available as a franchise option, but that could change. "It's still a work in progress," Ramirez said. "If it's something that picks up in other regions that's great."

Which came first, Casa Latino or Casa Coldwell Banker? Perhaps a better question is: Why the sudden interest in the Hispanic community?

At 42 million, Hispanics are the fastest-growing segment of the U.S. population. By 2050, a quarter of the U.S. population is expected to be Hispanic. The majority of that increase is being fueled not by immigration, but by birth rate, according to the census. Of the nation's 27 million Mexican Americans, for example, 16 million were born here. Given the demographics, a rise in homeownership isn't far behind, Heering said.

"A lot of people, when they think of someone who's Hispanic, they think of an illegal immigrant or a lettuce picker," Heering said. "Out West it's a different world. The third- and fourth-generation Hispanics are the brain surgeons and police chiefs."

Meredith White of Charlotte, N.C., recently purchased a Casa Latino franchise. Another franchise real estate brand might have cost three or four times as much, White said, and require that she pay higher monthly fees. Once her office opens, she'll pay $200 per real estate transaction or $150 per agent per month to Casa Latino Franchise Corp. White, who speaks Spanish and has worked with several nonprofit Latino organizations in Charlotte, plans to offer home-buying classes to her Hispanic clients.

Both Casa Latino and Casa Coldwell Banker expect a franchisee to play a dual role as both Realtor and teacher, educating their clientele about the home-buying process and its costs.

That secondary role is an additional expense, but to build the brand name and earn the community's loyalty, the educational component is imperative, Heering said. Part of that education involves overcoming the Hispanic community's misconceptions concerning homeownership. Like the European American and Asian American populations, the Hispanic American community is not a monolithic group.

In Puerto Rico, the home-buying process is similar to that of the mainland United States. In some South American countries, only the super-wealthy can buy a home.

Equally challenging is the difficulty of documenting income, often an issue for Hispanic or other immigrant families - 22 percent of Hispanic families don't have credit scores, said Janis Bowdler, senior housing policy analyst with the National Council of La Raza, a Hispanic civil rights organization.

"An immigrant family might have two or three sources of income and they might be seasonal. That's not as neat and clean," Bowdler said. "There are loan products to accommodate that, but they take longer to process and they can be more costly."

Recently, however, there has been interest in developing alternative credit scores - including interest by Fair Isaac Corp., the developer of the widely used FICO credit score, said Allen Fishbein, director of credit and housing policy with the Consumer Federation of America. "I think the mortgage industry realizes they may not be serving many credit-worthy borrowers who could become homebuyers," Fishbein said.

Heering's goal is to sell 40 franchises by the end of the year. To get a solid start, he's weeding out potential franchise owners who don't meet the company's profile.

"We're turning down one out of every three people who want to buy a franchise," he said. "They either don't grasp our mission or they don't have the financial wherewithal to open a business."

But can Casa Latino flourish?

"One of the challenges they're going to face is going head to head with the big guys," said Mathews, the franchise consultant. "If it works, they're going to come down on him fast - consider the resources of a Coldwell Banker, a Century 21, they have the infrastructure in place."

The arsenal required to stave off the big guns is considerable.

"You've got to be brilliant at recruiting the right franchise owner. You have to have a brilliant training and coaching staff," Mathews said.

"We do understand the challenges," Heering said in response. "We're here to provide the necessary support system."

Source: Hartford Courant