Traditionally there has always been some fluctuation in the real estate market. That is why you hear the term “seasonally adjusted”. It’s generally not a great time to list a house on Labour Day or Easter weekend. Then there is The Christmas holidays between mid December and Mid January. For most, these are days for relaxing, travelling, and celebrating. But what about July and August? While there is some business still going on through July, August tends to be pretty quiet so, by all means, take a bit of time off to recharge those batteries but remember that the tail end of August should be used to ramp up for the Fall.
Before jumping into the audience participation part of the morning, I talked a bit about Destitute Dan, a fictitious agent who really didn’t do anything to keep his business going over the summer. He made some good money in the spring and figured that he had enough to carry him through to the Fall market. Dan spent a lot of time at the cottage, worked on his tan, went out to dinner with his friends, slept in, and even found some time to help his parents clean out their garage, but by the end of August Dan was pretty much out of money. The point is that Dan didn’t budget his time very well. He did not invest any time or money preparing himself for the fall market. By Labour Day, Dan was already behind on his marketing, and in a few short weeks, Dan will be behind on his CEU credits, his website will be in need of a serious update….well you get the picture.
We had a good discussion on the things we should be doing, so check out the list above. Got something I missed? let me know and I will add it. The piont to this exercise was to get the agents thinking that real estate is a full time business. Like any job, it requires a strong committment of time and effort for it to pay off. And while the job requires daily attention, we are reminded to view the big picture as well. When there isn’t a lot of homes to inspect, there are other matters to attend to.
ARGH, ten days ago you listed a great property. All the research you did showed the wonderfully renovated detached home was worth between $799,000 and $835,000. You laid out a plan to list at the lower number in order to generate some great interest. You spent time helping the owners clean up and de-clutter. You have sweat equity in this home. The agent open house was well attended. All your sandwiches were gobbled up and the feedback was terrific. Some agents were worried that they couldn’t get their clients to view it in time. All of them commented on how competitive the price was. That weekend everything was looking great for the public open house. The weather mostly cooperated and the traffic was consistent. On Saturday you hoped to be out of there by 4:15pm but the last person didn’t leave until 5:15pm. By the end of the open house on Sunday you were literally spent. There was a grand total of eighty seven people through the property. Signs were pointing to a multiple offer situation on Tuesday. Monday you called around and talked to a bunch of agents who had shown the house. You answered some questions and sent the survey to one agent. You have been in constant contact with the sellers who are appreciative of your efforts. Finally the big day arrives. You have asked for agents to register with your office by 5pm and plan to present by 7pm. At noon, all is quiet. At 2pm an agent calls to see if anyone has registered. By 4 pm you are starting to sweat. No one has registered their offers yet. 5pm….still nothing. By 6pm you have to pick up the phone and make the dreaded phone call to the seller to tell them that there are no offers but to stand by just in case. Then you frantically call everyone who showed the most interest. Nothing. The hours tick past. 7pm, 8pm, 9pm……and still nothing.
Now what? You spent a restless night wondering what went wrong. You are pretty sure you did everything according to plan. So what happened? Well, the short answer is that sometimes a house just doesn’t sell. Please don’t tell the sellers that though. Most likely it is a combination of a bunch of things; the weather, the stock market, a full moon, you name it. The point, however, is to not lose your composure. The first order of business is to keep communicating to your clients. Remind them that the house is well priced and that some houses just need to have more exposure than others. Now it is time to get back to work and do what you have been hired to do. Push the home out there, get back on the phone and call everyone that came through. Get an ad in the paper and start preparing for next weekend’s open house. Rinse and repeat is the old adage! The market is hot, and the property will sell.
Like so many of my blog posts the material comes from real scenarios that get played out around my office. Would you like to know the outcome? The agent held another weekend of open houses. She met a couple who walked in and fell in love with it. While she was typing their offer another agent called to register an offer. By Tuesday night the house sold firm…in multiples…..and over asking.
Lately I have been thinking about how real estate brokerages in Toronto will change over the next few years. My company is expanding into new markets so I have been thinking about what makes a strong company and what are the factors that make some companies successful and others failures. I’m not simply talking about the selling process. After all, for the last 10 years, we have been in a healthy market. It has been easy to sell properties and easy to build real estate businesses. A strong market has consistently generated sales and those sales have kept brokerages financially fit. But when the market becomes more balanced, or when the rules of how MLS is accessed are changed, we are going to see a shift in the Real Estate profession.
First. Like natural selection, many agents will not be able to understand or adapt to changes and they will reluctantly leave the business. A large percentage of agents have not lived through a balanced or difficult market. They have only seen the good times. I could forecast a 10% decrease in the number of agents in Toronto.
Second. Organized real estate will continue to raise the educational bar for licensing agents. More regulation will discourage part timers. I could see another 30% who will probably park their licences or simply let them lapse. Having fewer agents will put a larger financial burden on existing agents, and further weed out those who just don’t have the money to pay into the system. The end result will be fewer and better agents.
Third. Newer agencies, those established within the last 3 years, will probably suffer significantly because they may have not had time to build a war chest for leaner times, or perhaps they simply thought that the good times would never end and had no backup plan.
Fourth. Older agencies, near the tail end of their lifespan, will probably pick a slowdown in sales as an excuse to gracefully exit the business. They probably own the buildings they are in and may simply find it more profitable to rent or sell their locations.
Fifth. Many good real estate companies with a solid agent base will not have anticipated the significance of how the internet would influence how properties are traded. These companies continue to spend their advertising dollar on newspapers rather than beef up their online presence. They will be behind the eight ball while other companies demonstrate their value added services, not just to buyers and sellers, but to agents. If agents are not given the very best in technology, training and support, they are likely to seek different companies. That may force mid sized companies to downsize.
Sixth. There will be a rise in the number of discount brokerages; as well many midsized agencies will be forced to discount commissions in order to survive. What most fail to realize is that when the market is more balanced, or even tips in favour of the buyer, it actually is harder to sell properties. It takes longer and costs more money. This is actually the worst time to consider being a discount broker. Becoming a discount brokerage is a one way street. Once you offer discounted services, it is next to impossible to become a full service brokerage again.
Seven. A significant shift in power within the real estate community will be created. As companies close, consolidate, wind down or simply lose their edge, agents will transfer to companies that are competitive, relevant, have cache and a history, and have excellent technical and office support.
So who is likely to survive and grow? The million dollar question. Certainly the large regional chains will survive. They have money and resources to ride out a real estate market slowdown. They can tighten belts a little here and there. The multinational companies should survive as well and continue to prosper but, afraid to lose stock value, they will download the costs of staying prosperous to the agents who work for them.
Overall, the barrier to entry for new agents will continue to rise. Many part-time agents will leave the business. The cost of being an agent will increase significantly. There will be fewer privately owned single office brokerages. Multinational companies will continue to grow but the cost to agents will increase. Smaller multi office boutique players should benefit from market changes provided they keep lean and invest in a strong online presence and use the power of the latest technology to add value to the selling process.
Finally, it goes without saying, but being successful in the real estate brokerage business means being able to adapt quickly and not second guess your decisions. Above all, this is a service business. If a brokerage decides to remain and prosper as a professional, full service business, then the agents working for that brokerage must have the tools to guarantee professional service to their clientele. This will be achieved through solid management; agent support, training, and a strong internet presence are the keys to success.
At this piont, I have a responsibility to tell you that the opinions expressed here are mine and mine alone and may not represent the opinions of Bosley Real Estate.