By Scott Einbinder
RISMEDIA, November 28, 2007–What are we paid to do? If you ask that question to 100 real estate professionals you will get 100 different answers. That is both the blessing and the curse of the real estate industry. One can carve out their own answer and create a unique and individual value proposition. There is however a common denominator regardless of what business model you work under. A common thread, that when you look objectively, binds all real estate firms, agents, and models together in one giant pool; and that is the cost of the unsold listing.
It’s funny, with all the different business models, all different commission options, all different marketing concepts and all different fonts and logos, the unsold listing defines not only your business model but business sense. It defines if you are authentic and have the skills and integrity to see the business not as just a brokerage relationship but that of a “partner to your seller.” A partner who invests in their seller. A partner who makes a business decision to take a listing because there is a shared benefit between you and the seller. A partner who takes the listing because you are working for a successful result. And what is that result I refer to? My definition is, “Did you sell the home, manage the transaction successfully, and mitigate risk to your seller, while both you and your partner earned a healthy return on your respective investments?”
There is not a real estate office I have been to in the last year where inventory levels have never been higher. Pages and pages of flyer’s, open house books, and price reduction signs litter the office. Online brokers have page after page of virtual tours and panoramic views. Countless amounts of listings where the agent signed the listing agreement, knowing it would never sell at that price, but thought in time, the seller would “see the light” or “need to reduce.” The agent thought, “If I don’t take it, my competitor will and I will lose it.” And like clockwork we have thousands of listings that are getting reduced, but unfortunately it is too late, as the sellers lag behind the market. The streets are lined with properties for sale, open house balloons flap in the wind and agents sit in homes on Sunday afternoon with sign-in sheets and Yankee candles burning in the foyer.
The culture of our business has been built to believe that an unsold listing bears some fruit. It brings buyers of other homes we can sell. It provides a legal billboard to promote our name. It provides a vehicle to advertise who we are in traditional print. After all, an unsold listing, if played right, is like chum on a blue fishing boat–it’s great bait!
This thought process represents everything wrong with our industry, yet provides the greatest opportunity to separate yourself from the competition, get more listings, be efficient with your resources and earn a higher revenue per sold unit.
The agent with the real estate partner mentality recognizes the cost of the unsold listing and knows how to articulate that to a seller. The unsold listing costs the seller and the real estate professional significant money, and here’s how:
The partner mentality understands that for many home sellers, time is a tangible commodity. The real estate partner, shares with their seller partner that buyers today are extremely aware of ‘Days on Market.’ Today, one of the first questions buyers ask is, “How long has the house been on the market?” The overpriced listing reduces our sellers’ negotiating power as time degrades their strength. Once a listing has gone unsold, this is information in the public domain. Real estate partners who have real value to their clients, never allow their partners to be placed in a position of weakness.
The partner mentality knows the unsold listing carries other significant costs. One of the most misleading statistics agents often promote is their list-to-price ratio. In the recent 2007 NAR Report on Buyers and Sellers it states that “sellers sold their homes for 97% of list price.” Is this true? Is this another smoke and mirror statistic? I wonder if that NAR Survey reflected a number that was derived off the original list price or was it 97% of the three price reductions that took place before it sold. I ask, did the unsold listing ever have a chance? Did the agent who took it ever allow the marketplace to even see it? The partner mentality knows the statistic that counts the most is not list to price ratio but list to close ratio. The partner mentality takes 20 listings a year and sells 19. Their list-to-close ratio is always the highest because they have learned how to say no to an unrealistic expectation. They know the cost to an unrealized result and mismanaged expectation is just way too high. My favorite agent promotes their list-to-close ratio at 100% and a list-to-price ratio of 124%.
Simply put, they sell what they list, reject what will not sell and they price their listings at the lowest pricing spectrum to create a bidding war so the true market price will be realized. Sellers never interview this agent; she interviews them! Sellers beg for her to consider their home. These sellers are taught the value of the greatest partnership investment, called truth.
The highest cost of the unsold listing is far more than that classified ad, broker open house lunch and professional staging services you invested in. After all, you may have even received some leads from them to defer the cost. The highest cost however is to one’s reputation. The partner mentality does not blame the seller for an overpriced listing, because they never take it. The partner mentality knows that if the listing does not sell in this market it is because it was not positioned in a place to sell. It was not priced in a place that made it a sound business decision for both the real estate professional and the seller. ‘The New Professionals’ of today do not gamble with their reputations and would never gamble with a seller’s money. These agents are not into “giving it a shot.”
The agents making the real money today make more commissions per unit and obtain more listings because they have deviated from the conventional thinking that listings are assets. Listings are liabilities until they close. They embrace the ability to say no. They have the courage to reject an unsuccessful result. This is what the public needs. Do you have the courage and vision to deliver? Imagine if agents were required to “purchase” a listing opportunity from a seller. An agent who had to invest their own cash and put their opinions of market value on the line? Imagine a seller that demanded the upfront payment of $1,000 for the right to sell his house. My gut tells me that many real estate professionals would learn very quickly to reject the listing if the seller was not realistic on price. I asked this question at one of my recent seminars and there were lots of laughs and most of the room said, if it comes to that I am out of this business. I then asked the room, “Who here thinks the value they give to a home seller is less than $1,000 and please stand up.” There was silence but worse, there was confusion. The real estate partner mentality invests much more. They see their investment as just as tangible if not more tangible as the $1,000 out of their checking account.
Do you want to turn your career around? Think and act like your seller’s partner.
In life and in business the largest costs are often the ones you don’t see or do not directly feel. Challenge yourself to reach beyond conventional approach. You will find once there, it’s where most of your competition has yet arrive.
Scott Einbinder is a national real estate sales trainer and motivational strategist specifically to the real estate industry. For questions or comments feel free to contact him at firstname.lastname@example.org