You’ve heard the whispers and seen the headlines. The housing market is changing, and a recession could be on the horizon.
While that term carries emotional baggage for folks who remember 2008 and 2009, it also means that real estate agents will need to rethink their gameplans to keep the ball rolling in the right direction as the market shifts.
RISMedia spoke with several prominent real estate coaches to delve into what strategies agents should implement to better withstand and thrive during a potential economic downturn that could bring a mixed bag of consumer implications.
Speakers:
Darryl Davis, CSP, founder and CEO of Darryl Davis Seminars. As a real estate speaker, coach and award-winning author, Davis has trained and coached more than 100,000 agents globally, helping them build effective relationships and create lifelong customers.
Marki Lemons-Ryhal, founder of ReMarkiTable LLC: As a real estate keynote speaker, international best-selling author and three-time member of the Chicago Association of REALTORS® Board of Directors, Lemons-Ryhal has over 25 years of marketing experience, utilizing her dynamic strategies and positive outlooks to educate and guide over 500,000 real estate agents through the ever-changing landscape of social media and technology.
Sherri Johnson, founder and CEO of Sherri Johnson Coaching & Consulting: With almost 25 years of experience in the real estate industry, Johnson is an expert national speaker and real estate consultant, bringing immediate and sustainable results with world-class systems and strategies to agents, brokers, owners and other industry professionals.
Dave McGhee, vice president of coaching at Buffini & Company: McGhee oversees a team of 56 coaches for one of the largest business coaching and training companies in North America. In his role, he and his team help more than 3,700 entrepreneurs tap into their potential, expand their capacity and maximize their performance.
Jordan Grice: How can agents best navigate the housing market challenges that typically come with a recession, like increased consumer caution regarding buying or selling their homes?
Dave McGhee: A lot of emotion comes with the terms recession and economic downturn. The key is to keep a perspective. A recession is just a normal economic occurrence. So, the first key is to realize that a recession is not this evil thing, but rather, it’s this regular occurrence and to take the emotion out of it. Secondarily, the process that you have in place is critical. We’ve been preparing our clients for a recession for over a year now because there are a lot of indicators saying that one is coming, so we have our clients focusing on four things: lead generation, sales conversion, profitability and recovery.
Marki Lemons-Ryhal: The first thing I encourage every REALTOR® to do is to go back and look at the numbers in the marketplace through their multiple listing service (MLS). It is time for them to update and reevaluate their current business plan. Newer agents may not have a business plan because it’s been to do what I want, where I want, in recent years, but when we look at a recession, we need to start looking at the absorption rate. We need to go back and evaluate the current sales rate because there are opportunities that will still exist in a recession.
If you’re in different Facebook groups with contractors, they’re complaining about the lack of craftsmanship or the poor rehab jobs that have been done in the past five years. That means that if a recession occurs, we’ll see short sale opportunities and the opportunity to work with people who bought a rehabbed house, and the work was less than stellar.
Darryl Davis: For any agent, No. 1, speaking to a recession, even if there isn’t one, it’s always good business to plan for the worst and hope for the best. My favorite thing I tell our students is that you’re either a thermometer or a thermostat. The thermometer reacts to what happens on the outside. A thermostat sets the temperature and dictates what the outside should be.
We want agents to use the thermostat to set their temperature. The first way to do that is through building relationships with civilians. Almost everybody that an agent talks to on a daily basis probably isn’t homeless. If they are a tenant, that is still their home, and a tenant has the opportunity to be a homeowner. A homeowner has the potential to become a seller and buyer, so almost every single person that an agent interacts with is a lead.
JG: With all the headlines of economic doom and gloom at consumers’ fingertips, how can agents reassure and educate their clients who may be getting a little worried about a potential recession?
Sherri Johnson: Whether there is a recession or not, consumer confidence comes and goes. During the pandemic, for example, consumer confidence went up, which no one saw coming. What we know thanks to socioeconomics and watching buyer behavior is that everyone has to have shelter, and it’s still more affordable to purchase than rent. It’s all about how agents are communicating the positives of these things.
When consumers hear something on the news about downturns or a market crash, they think back to 2008, and that’s not happening and hasn’t happened because we’re coming off of the craziest time where mortgage rates are below 3% combined with a typical market with low inventory. We’ve seen this before, and when we counsel people, we tell them that, and it lowers everyone’s level of fear and anxiety about stuff that is out there on the news. Letting clients know that you’ve seen this before or that we are right where we were pre-2020 puts people at ease.
Speaking with intentional purpose, saying things with certainty and confidence, and being an authority on things matter.
DM: The solution is to be the source of information for your clients. If I go online, I will see every headline from reputable media outlets saying the housing market is crashing. The truth is there is no indication of that. Prices are still going up. There is still a shortage of inventory. In most markets, the average days on the market is still under 30.
So there is no real indication that there is this housing bust, so be the source of information for your clients, your database and your relationships. The second part, and probably the most important, is to be a leader. How can an agent survive and maybe thrive in a recession? Here is what is going to happen. Most agents will struggle in a recession, and inflation is probably more concerning now. Most agents will struggle because they don’t have processes and systems in place and are not in regular contact with their database. Some agents will leave the business because that’s the situation they will find themselves in. The agents that will thrive are those in consistent contact with their past clients, current clients and their business and personal relationships and provide that leadership and information that the people in their database need.
JG: As the market shifts away from the intense seller’s market, how should agents work with homeowners to ensure there isn’t a wave of sellers backing out during a recession?
DM: The market we’ve been in for the last three or four years has been predominantly a seller’s market, so hundreds of thousands of agents have only known a seller’s market, and they think that is normal. It isn’t. The change that we are moving to is normal, and it’s probably good for them as agents, sellers and buyers because it’s a more stable market.
Part of the solution is leadership and information to help the seller know they are still in an excellent position to sell.
DD: If the seller’s motivation is to try and cash out and time the market, they will lose. A seller should sell because they have a commitment to the next level move in their life. In other words, selling the house is not the end result. It’s a means to a bigger end. It’s one of the to-do list items in achieving the next level in their lives.
How agents should respond is to bring back to the surface the commitment to the seller’s why for selling in the first place. You don’t let headlines dictate your commitments in life.
JG: Housing affordability is already a significant pain point for buyers. What do you do as an agent if your client faces issues like qualifying below the median house price or losing a job amid a recession?
SJ: I’m a huge advocate for being a solution-based resource for clients. If people are out of a job and they have to sell a house or can’t afford to buy the place that they wanted because interest rates rose, I would sit with them and help them craft a two- to five-year plan where perhaps they rent first or buy a house in the next lower price level that they can afford.
I would set their sights on the backup plan of what they can afford and make that happen. It doesn’t mean that’s their forever house; it just means that it’s the house they’re in for the next couple of years while we’re getting them through this bump in the road.
It’s really financial real estate planning, and you can help them by giving them other solutions, like perhaps looking at other mortgage products.
JG: What is the most reliable method of lead generation that agents can implement during a recession, and why?
DD: As a business person, there are two things that you look at: increasing your revenue and lowering your costs. If an agent is concerned about a recession as well, then those are things they can control.
Stop paying for leads, doing social media advertising and paying your competitor for leads. Pick up the telephone and call FSBOs, expired listings and past clients as well as old FSBOs and expireds from six months ago.
If there is a market change, it will be harder for a FSBO to sell their home. They will see that perhaps the real estate professional is the way to go. Picking up the phone is the best thing an agent can do. It costs no money.
DM: I would say at any time, but particularly during tough economic times, the best way to generate a lead is by referral because there’s a built-in trust when someone is referred to you on both sides.
The people you are currently working with are most likely to refer to you because they are talking to everybody they know about what they are doing. Past clients are a close second because they experienced your service, and they know, on average, about 250 other people and the advocacy you have staying in contact with them.
I would be almost exclusively working by referral for the next year to a year and a half. And I don’t mean waiting by referral—waiting and hoping that someone will give me a referral—but intentional contact with my relationships and asking for a referral.
JG: How should agents rethink or retool their marketing, social media and branding strategies to better withstand—and win—in a recession?
DD: Anything that is high impact and low cost is the way to go. That is why the ACESocial platform is a must-have for every agent, because it’s a great way on social media to keep a presence consistently with good quality content and great branding, and it doesn’t break the bank.
MLR: For the last couple of years, we have seen substantial agent count and sales increases. Everyone was living this great life. It is now time to go back and think about the messaging. If we go into recession, that means that some people will be in a financial crisis, so rethink your branding and tone, but also think about the amount of empathy you have for people.
Now would be the time to talk more about your philanthropic work and volunteering because that is what they want to see when experiencing hard times.
One of the strategies I implement with social media is “8 x 8,” reaching out to eight people by 8 a.m. on what is important to them because people tell us all of their business in real-time on social media. So now we need to start listening for those additional cues that they are in some form of financial hardship.
If someone asks for an electrician or plumber, they need that work done. That also means it could be a problem with their property, especially if we know they just bought that house in the last 12 – 24 months.
JG: What sort of “out-of-the-box” tips or strategies can you offer agents looking to survive and thrive during a recession?
DM: My answer would be to jump back in that box. A recession is not a time to be testing things.
What I’d be concerned with right now is inflation. An agent has to do 8% to 9% more business this year than last year to be at the same level they did last year because of inflation. Set a goal to do 15% to 25% more business this year than you did last year. If you do that yearly, you’ll double your revenue every three to five years. I would be almost exclusively focused on people I have a relationship with, connecting with them and asking for referrals to the people they know who can use my help.
SJ: Relationship marketing is the key, and if you don’t have that in place, create the relationship marketing right now. In my opinion, everybody should have a VIP loyalty program for their clients and referral sources. We have a loyalty card that gets us points and rewards everywhere we go. You can provide your clients with resources before, during and after the sale that they constantly use you for. It’s like becoming Angie’s List for friends, family, clients, referrals and all of your vendors and home inspectors that you refer folks to. That’s not new, but I think it’s something that no one took the time to do because they didn’t have to. You can send people merch and gifts that provide an easy way to thank people for referrals.
DD: Less is more. Sometimes when agents panic, they keep chasing butterflies to fix things, operating from fear. If they focus on two or three activities they can be passionate about, that’s where the success will come.
A river can actually cut through a mountain because of its consistent action. When an agent picks one to three things, it’s a constant action of those things that will move mountains.
If an agent has just had two conversations—one with a buyer and one with a seller—each day, in 30 days, that would be 60 conversations. There is no way that agents won’t generate one to three sales because they had 60 conversations in a month. That one technique would be a gamechanger for many agents. It’s a simple, consistent action.
MLR: I think they should take a broker price opinion (BPO) class. If we’re going into recession, you’re going to start seeing notices of defaults increase, which now means mortgage companies will begin to hire BPOs. Every state doesn’t allow agents to do BPOs, but the majority do.
The next thing is that there is a relatively newer platform called Showami, where you can have a licensed agent show your properties, whether it is for open houses, buyer showings or buyer walkthroughs. If I were an agent, I’d learn how to do BPOs and sign up for different platforms that pay me directly for services like assisting with showings and things of that nature because these are all natural platforms.
The next thing I’d do is start direct mailing to homeowners where a notice of default has been filed. However, if you perform BPOs, you cannot solicit homeowners to list their property, so you can’t do a BPO and then solicit that person to sell.
