I make it a point to refrain from any discussion surrounding commission rates because, after all, there is no set percentage. It is up to each company to decide what they feel their services are worth. Our company made the decision many years ago to provide a comprehensive service that was based on several key elements; knowledge of the marketplace and skill in negotiating being just two. For a new agent on the hunt to develop his or her business, it is a no brainer. Get the listing at whatever the cost. But I believe it is a short-term solution that will only hurt you down the road. I have said it on many occasions, if you negotiate your commission you are simply joining the race to the bottom and once you are there it is a long arduous task to get to the top again.
Recently the National Association of Realtors reported that Realtor use in the US is at a ten-year high. I believe it is a clear indication that the trading of real estate is getting harder, not easier. While we have been lucky enough in Canada to enjoy a rather long period of sales prosperity, don’t forget that real estate is cyclical. What goes up must come down or, hopefully, just level off. If and when that happens, selling a property will be a lot easier with a skilled agent working for a seller.
A few weeks ago I had an agent come into my office with a rather common problem. He wanted to reduce his commission in order to get a listing. We sat down and had a rather lengthy discussion. As managers, it is our job to reinforce our company values, our skill set and our value proposition. All great buzzwords and I know that I can deliver the message effectively but I wanted some extra ammunition so I decided to do a little research. Here is what I can add;
Successful presentations ( and for that matter- negotiations) are based on four key elements.
First, EXPERIENCE. During the recession of 2008, the New York Times reported that many affluent people didn’t curtail their spending significantly. What they did do was become more selective. Their decision to buy something or hire a service was based on one key question – is it worth it? Ask yourself if you are providing your client with solid expertise, then show them what you do and deliver on your promises.
Second, EXCLUSIVITY. People always want what others aren’t getting. Some of the most successful brands in the world are so because they are considered ‘cutting edge’. Invest in the high-tech. Develop that niche approach to your business and be authentic.
Third, ENGAGE. Your clients want to know that you can handle their business and the best way to do that is create an honest narrative of your abilities and that of your company. People like a good story, so tell one that is compelling.
Fourth, EMOTION. The point of the first three elements is to evoke a positive emotional response with your clients. It’s that ‘Ah-ha’ moment when the client realizes that you have let them in on a very powerful tool….you.
Do you know this man? His name is Vilfredo Pareto. He was born in Italy in 1848 and studied engineering , sociology, economics, political science and philosophy. He made several important contributions to economics, particularly in the study of income distribution. In 1893, he was appointed a lecturer in economics at the University of Lausanne in Switzerland where he remained for the rest of his life. In 1906, Pareto noticed that 80% of Italy’s land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied. This observation lead to further testing of probability and sociology and ultimately became known as The Pareto Principle which today we have come to know as the 80-20 Rule.
So why am I talking about this economists theory? Well, it was part of my topic today at our Monday morning meeting. In previous articles I wrote about what makes a good and successful agent. Today I thought I would come up with the top 10 reasons why agents fail. As luck would have it, I stumbled across a story about classic business mistakes. I took that article and adapted it to real estate and then boiled it down to the Top 10 failures. Here they are;
1. Realtors don’t understand their target market. Or don’t have one.
2. Realtors spend more money then they bring in. They don’t have a handle on their cashflow either.
3. Realtors make faulty assumptions about their business model, they procrastinate, and are slow to effectively change their strategies.
4. Realtors fail to communicate their message to the consumer. ie; what their value proposition is.
5. Realtors don’t know their competition. What are others doing to distinguish themselves.
6. Realtors don’t charge accordingly for the services they offer.
7. Realtors spread themselves to thin. They confuse their customers.
8. Realtors don’t continue to generate leads.
9. They only work part-time.
10. Realtors spend too much time on the little jobs and not enough time on the high payout activities.
So what does understanding failure have to do with Vilfredo Pareto? Simple. His theory went beyond the recognition that 20% of the people owned 80% of the land in Italy. He found that for many events, roughly 80% of the effects come from 20% of the causes. It seems logical that by simply reducing the number of reasons for failure you will succeed. Rocket science and real estate collide.
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.