RISMEDIA, June 30, 2009-That’s the name today, but when I started out in the real estate business back in 1978, we were just referred to as “warm bodies,” or my personal favorite, “fodder for the machine.” We were new recruits, in every sense of the word. We were conscripted into the cause to fill the ranks of those who had fallen before us.
The criterion, as I would come to learn, is that we could make steam on a mirror. So, before you fall in love with all of those brokers courting you, that’s what they do. Their business model is actually based on recruiting rather than retention.
Agents who succeed get much higher splits and are often unprofitable for the broker. Fortunately, for the broker, when it comes to real estate, failure is far more common than success. (Boy, am I going to get the e-mail for saying that.)
I know, nobody ever told you. Me either. Not one word was ever said to me about the almost certain likelihood that I would fail out of the business within a year. No one told me that there were five times as many practitioners as the pace of closings can support.
According to the “2009 National Association of Realtors® Member Profile,” Realtors® with three to five years of experience earned $27,100, while those in the business for two years or less earned a median of $8,600. That’s the median. Half earned less. The good news is that you’ll probably qualify for food stamps and low income housing.
The median income for all members, both brokers and salespersons, regardless of tenure, was $36,700 in 2008, down from $42,600 in 2007.
Members licensed as brokers earned a median of $49,300 last year, while sales agents earned $28,400. For six to 15 years experience, the median was $42,400, while members in the business for 16 years or more earned $53,900.
Add it all up and there is one inescapable conclusion; almost all of the money goes to those with tenure and experience.
And don’t be confused into thinking that getting your brokers license will make you more money. Brokers make more money because they have more experience and have survived the lean years. If anything, it will simply distract you from doing something that is certain to be more lucrative such as burger flipping.
To get business, you’ll have to take it away from the experienced agents who are doing it now. They are your competition. They got here well before you, got a foothold in the marketplace and you have to quickly be able to do what they do substantially better. But, most never make it that far. Almost 90% are gone within the first year, and only 7% ever complete their four year renewal.
After over three decades in practice, that statistic has taken on a special meaning as I have watched people eagerly jump in and then leave. It got me to thinking; what if I were just starting out today? Knowing what I know now, what would I do?
View It as a Business
Your success in real estate will be predicated on the choices you make, not how “hard” you work. Everyday you will be forced to make decisions regarding your business. Self-employed workers do what they want to do; business owners must do what is in the best interest of the business even when it is in conflict with what they want. In terms of demands, a business can be a jealous mistress.
There is nothing “hard” about the real estate business, so you won’t gain any advantage from your willingness to work hard. It is nothing more than engaging with people, cultivating relationships, earning referrals, and having systems in place to increase, monitor, and market to your targets. Now, people are challenging, I’m not denying that. Most will always do what they perceive to be in their best interest, without regard to how it will affect you.
That can be emotionally hard, but you won’t be exerting any more ergs. You may have some difficulty dealing with the gap between your expectations for people’s behavior and the reality of it, but being able to bridge that gap is essential to building your business. Get over the idea of fairness; its business and that is the only hard part. However, if you make an effort to determine who your best client is and market to them, you’ll be less likely to encounter bad behavior, and you will be proactively building your business.
Peter Drucker passed away in 2005 at the age of 97. If that means nothing to you, it is important that you continue reading. You are in business, and Peter F. Drucker is to business what Billy Graham is to religion, what Mozart is to music, what DiMaggio is to baseball-a legend for the ages in his field of endeavor.
The “Druckster” was the A – #1, Mac-daddy of the business world, and when he spoke, king-makers listened. And, speak he did. For over 60 years, he influenced generations of business people as a teacher, writer, and business leader.
He is widely regarded as the father of modern day management philosophy. And, his basic premise is more relevant to our business today than fifty years ago, when Drucker wrote, The Practice of Management, in which he raises the question of the very purpose of a business.
And, this is the important lesson for us…Drucker says, “There is only one valid definition of business purpose: to create a customer.” He notes that profit is the by-product of doing that well.
Drucker stresses this point. “Markets are not created by God, nature or economic forces but by businessmen. The want they satisfy may have been felt by the customer before he was offered a means of satisfying it. There may have been no want at all until business action created it.”
For your business to grow, your focus must be on creating customers.
Select the Right Broker
The first and most important decision you will make is to select the right brokerage. There are many things to consider when evaluating a brokerage, but here are six important elements to examine when choosing a broker affiliation.
1. Stability. A lot of offices have closed, scattering experienced and new agents in search of new accommodations. The last thing you want when you are just starting out is to be forced to start over at a new brokerage.
2. Reputation. Let’s face it, coming into the business as a new agent, your reputation, to the extent that you have one, will be for being inexperienced. No matter how much your friends like and trust you, they might be uncomfortable appointing you the agent for a rather sizable transaction. While you cannot immediately overcome the stigma of being new, you can diminish the apprehension of potential clients by associating with a brokerage that has a strong, local reputation.
3. Training. Learning the real estate business is like a long, slow walk down a country road. There are no shortcuts, and hurrying won’t help; the destination is the journey. Training is the difference between going on the journey with a seasoned guide to point out the things that lack of experience might obscure, or going it alone. Finding the Chocolate Lily is about knowing where to look.
Training is a process, not an event, so it should be ongoing, regular, varied, and relevant to the needs of the individual at different career levels.
4. Location. There are many aspects to location. To the extent that initially you will be leveraging your brand by co-branding with the broker, you’ll want your potential clients to have the brand reinforced through repetition. Is there signage that can be seen by residents going in and out of the community? Is the location convenient and are there other services nearby? Is there ample easily accessible parking nearby so clients aren’t stressed and cranky.
5. Experienced leadership. Real estate companies come and go in sync with the rise and fall of the volume of business. You want to associate with someone who has been through the challenges, as well as the easy money. They cannot teach what they do not know.
6. Listings. From the time that you actually announce your entry into the real estate business until your marketing efforts begin to produce results, you will be dependent upon “leads”. Your long term goal is to generate referrals from the people in your data base, but until that begins to happen, you’ll have to sift through a lot of warm bodies hoping to find something that might result in earning a fee.
A well located office with a substantial number of listings could provide the opportunity to hold open houses, and to meet walk-in or phone-in prospects.
Create a Business Plan
This needn’t be elaborate or difficult, but is simply a means of answering a series of questions leading to the action steps that break down into your daily activities.
What do I want?
When do I want it?
What needs to happen between now and then?
What do I do first?
When do I do it?
How will I do it?
How am I doing?
The worst plan, faithfully administered, is far more likely to succeed than no plan at all.
Identify and Develop Your Unique Skills and Talents
Everyone has unique skills and abilities. These are the key to unlocking your full potential. They are also necessary to creating customers; the perfect customers for you.
The number one priority of a real estate business is meeting new people. That means get up, clean up, and show up every workday. If you meet one new person everyday, five days a week, for the next five years, you’ll be earning a lot more than $50,000 per year.
How you meet them is just as important to the potential of your business. Do what you love to do and do it with others in a way that allows you to get to know the other participants. Everything from taking classes to participating in exercise programs, provide great opportunities to cultivate relationships that lead to referrals.
People who share your interests generally share your values. Within their spheres of influence are more people who share your interests and values and these ultimately will be your clients.
Analyze Your Market Place
What is the sales volume, how many listings are there, how many licensees, (your competitors), are in your area?
Focus on Listings
Listings are hard to get. They tend to go to agents with greater tenure in the business. They generally are the by-products of referrals. But, they are the foundation of your success in real estate.
Unqualified buyers are easy to get. Therefore, newer agents tend to spend a great deal of time trying to find ways to help unqualified buyers.
If you are doing what everyone else is doing, you’ll get the results they’re getting-another career adjustment. You need to distance yourself from the herd of look alike, talk alike salespeople.
Find a niche, or a couple of niches, learn everything that can be known about those niches, and selectively market to their members.
Develop Your Brand
By developing your own brand and image, you can position yourself ahead of any company image. People relate to other people more than they do brands and totems.
Build a Database
Utilizing modern communications technology you have the ability to influence the thinking of hundreds of people or more. You don’t need to advertise to the whole world, just a 100 to 500 people that you select.
Implement Systems to Insure Consistency
Once your database is in place, routine marketing and follow-up can be systematized to free you to spend time with clients.
Submit to Coaching/Consulting
To move beyond your current performance, you will have to adopt new thinking and perfect certain disciplines. This can only be done with the help of a coach and consultant.
The masters of any endeavor invariably have a coach. NFL pro bowl quarterback, Drew Brees, has several specialized coaches who work with him on individual aspects of his performance including: bio-mechanical efficiency, vision, optimum nutrition, and strategic thinking.
The point of coaching is to help an individual attain their personal best. The competition in the NFL is so great, like real estate, that committed players want to leave nothing to chance, and are always seeking that slight edge. Coaching provides that edge.
Starting out brand new in the real estate business is risky. Many are called; few are chosen to earn a living. Leave nothing to chance.
If I were a newbie, I would read this again.
George W. Mantor is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts. During a career that has spanned more than three decades, he has amassed experience in new home and resale residential real estate, resort marketing, and commercial and investment property. He is currently the founder and president of The Associates Financial Group, a real estate consulting firm.
Mantor can be reached at GWMantor@aol.com.