RISMEDIA, August 18, 2009-“Old Realtors never die, they just become listless.”
No one ever left the real estate business with a portfolio of salable listings. Yet throughout the ups and downs of more than three decades, I have often heard agents grumble that they were only going to work with buyers. Fatal error!
Being dependent on buyers is like starting over everyday with little to show for past efforts. Even worse, buyers are unreliable and targeting them and in particular first time buyers is a very poor business decision, as you will see.
The single most important goal of your real estate business is to build an inventory of salable listings. If you have listings, you have a contractual relationship to receive compensation.
In many regions in the country, buyer/broker agreements are still more the exception than the norm. As a result, agents are sometimes reluctant to ask a buyer to enter into a binding agreement because they fear losing the buyer to an agent who does not require an agreement. Serving buyers is not as certain as representing sellers.
Here are five reasons why your entire focus should be on obtaining listings.
1. There is an extremely limited supply of real estate and a correspondingly high demand. There are lots of unqualified buyers willing to spend all of your time hoping you can find them a miracle. Everyone wants to own real estate so by listing property; you’ll have your pick of the most qualified buyers.
2. Listings are your security. Build and maintain an inventory of 5 to 10 listings and you will never worry about money again.
3. Listings create marketing opportunities.
4. Listings attract other listings.
5. Listings sell whether you are working or on vacation.
No matter how hard you work, your activities have little to do with the number of listings in the marketplace. They occur for reasons beyond your control but not necessarily beyond your view.
Residential real estate activity is driven by predictable events that occur along life’s continuum. Family formation, births, promotions, job transfers, reversal of fortune, job loss, illness, accident, divorce, and death are among the chief reasons why someone might need to consult with a knowledgeable real estate practitioner.
Well before any listing agreement is signed, people seek information regarding their options, the selling process, the market, net proceeds, and tax implications. If you nave developed a referral business, you have now positioned yourself to be the one to provide an “initial consultation.”
This early access offers an unparalleled marketing advantage over most agents, who are trying to connect with a buyer or seller who is “ripe.” Later, these agents lose interest after two to three weeks of client inactivity. But, the trusted advisor is there for the long haul. And, when you understand the consumer’s timetable, you’ll understand how this role is better suited to their needs.
A report on home buyers and sellers, by Hebert Research for HouseValuesInc deserves a closer look for what it tells us about our potential clients. For example, buyers and sellers often take up to four years collecting experiences related to their current home, and potential future needs.
After the experience collecting phase, buyers spent 16.7 months, on average, to research and buy their next home but first-time buyers spent a whopping 20.5 months. They take longer to mature than the average agent will be in business.
Forty-four percent of buyers take more than six months thinking about desirable homes and neighborhoods before actually searching for listings. The average buyer then spends more than four months searching for homes.
Once the research phase has been initiated, buyers spend an average of 7.1 months in the pre-research phase, 5.5 months in the active research phase, and 4.1 months in the active buying phase.
The National Association of Realtors announced recently that first-time buyers had increased from 39 to 41% of all buyers. That means that they represent zero percent of all listings.
Outside of the fact that all new and many experienced agents are targeting first time buyers; they generally represent the greatest amount of work for the least amount of compensation.
Sellers, once they pass the experience collecting phase, take far less time moving through the phases.
Sellers also spent up to for years subconsciously collecting experiences. These experiences compound to bring the home sale to the forefront of consciousness, triggering a move to the pre-research phase.
Once the research phase has been initiated, it takes sellers an average of 9.3 months from the time they begin researching until they sell – 5.5 months in the pre-research phase, 1.4 months for the active research phase, and 2.4 months for the active selling phase.
Obviously, you will be meeting people in all phases and a wise business person wants to know conclusively where the client fits into the process. First, because they cannot be rushed and secondly because you want to provide the level of service appropriate to their phase.
It could be that the phases are protracted because the clients are not receiving service appropriate to their phase. Around eighty percent of home buyers start out seeking information on the internet but, there is so much content and distracting clutter that without experience to filter what is valid, it isn’t much help.
But here is the key; according to NAR, sellers list with the first agent they meet an extraordinary 73% of the time and the HouseValuesInc study found 52.1 percent take only one day to select an agent.
Buyers, on the other hand, spent up to three days rejecting candidates before selecting an agent.
Oh, and why according to HouseValuesInc did consumers select agents? Just as you might have guessed, they were chosen because of experience, honesty and past relationships. And what did they want? They wanted someone to handle the paperwork and legal issues, someone to negotiate on their behalf, and access to listings.
Think listings. When you do work with buyers, see them as a source of listing referrals. Never forget that at any given moment, someone you know is probably speaking to someone who is thinking about selling real estate. The number of listing referrals you receive per month measures the effectiveness of your business. A minimum of ten is a good goal.
2. Say the phrase that pays.
“Who do you know that might be thinking about selling their house?”
It all comes down to that. In the real estate business you will be rewarded for the frequency with which you ask that exact question. Exactly that way.
“Who do you know that might be thinking about selling their house?”
Don’t ask about buyers. Don’t ask, “Do you know anyone who might be thinking of selling?” They almost always say “no.” Leave it open ended and they will tell you about anyone with a real estate need.
3. Gear all marketing to a pursuit of listing referrals.
Remember, if you showcase your experience, over time, you will be creating listing referrals for the future. Provide regular, high quality real estate information appropriate to the clients readiness phase. This process is an opportunity to guide them through the phases and be the only practitioner they would ever select.
Armed with a better understanding of the consumers view and a focus on listings, your business will have the foundation necessary to thrive in any market.
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.