The real estate market is cyclical. In a seller’s market, listings are king. In a buyer’s market, it would seem that buyers should be king. Consequently, when listings take forever to sell, should you shift your focus from obtaining listings to working with buyers?
In the last bad market I experienced in the early 1990s, a standing joke was, “What do you need to do to get a listing? Stretch out in the middle of the street and play dead.” The great news about today’s market is that although prices are down in 15 states, they are holding steady or increasing in the other 35. The real question is not whether you should focus on obtaining listings or working more with buyers. Instead, the issue is how to maximize your earnings by capitalizing on market shifts.
A key strategy that works in any market is “leverage.” This involves having others do the work for you rather than doing all the work yourself. Here are three reasons that working with buyers provides little opportunity to leverage your real estate activities:
1. When you work with a buyer, you end up doing the work. Unless you have a buyer’s agent or an assistant, you must handle all the showings, negotiations and steps required to close the transaction.
2. The amount of new business that you can achieve from working with a buyer is limited to the buyer’s sphere of influence. You have virtually no opportunity to expand your business beyond additional purchases your buyers may make or the referrals they may generate.
3. When you work with buyers, there’s almost always just one commission involved. In most cases, there’s usually no opportunity to “double end” a deal.
4. If something goes wrong in the transaction, buyers will often stop working with you. Even if you have a buyer’s agency agreement, many of these have clauses that allow the buyers to terminate your agency relationship at will. When the relationship ends, so does the potential for future referrals.
In contrast, working with sellers provides the maximum amount of opportunity to leverage your real estate activity:
1. In contrast to working with a buyer where you do the bulk of the work, when you focus on listings you have other agents working along with you to sell the property. You can earn a commission when you sell the property directly or when someone else sells it. Theoretically, you have every agent and every person who sees any of your marketing materials working to sell your listing.
2. Listings give you the opportunity to earn triple the commission that you normally would earn when you work only with buyers. First, you may find your own buyers for your listing. This means you earn double the commission if you represent both the buyer and the seller. In the case where the sellers will be purchasing another property once their current home sells, you also have the opportunity to represent the seller as a buyer on the next sale. This means you have the potential to receive the equivalent of three sales rather than the single-sale situation with a buyer.
3. If the seller is relocating outside of your area, you also have the opportunity to earn an outgoing relocation referral.
4. Having a listing allows you to leverage your marketing and advertising presence in the area. A yard sign, open house directional signs, print and Web advertising are all ways to get your name out there and to generate additional business.
5. You can create additional leverage by holding a private open house for your sellers’ friends and acquaintances or for the neighbors. In either case, you can dramatically increase the number of face-to-face contacts that you have with future listing and buyer prospects.
Bottom line: Should you dump buyers in a buyer’s market and concentrate only on sellers? The answer is, “It depends.” Ultimately, your success in working with listings will be contingent upon how much activity is taking place in a given portion of the market and how capable you are at pricing properties where they will sell. For example, there are parts of Michigan where there have been no sales in the land market for the last 12 months. This means that no matter how good you are at pricing, the property still will not sell. This is an exception, however, rather than the rule. If you can correctly stage and price your listings, you have an ideal opportunity to fully utilize leverage. If you are unable to do so, it may be smarter to concentrate on working with buyers.
Finally, whether you are working with buyers or sellers, look at your sales board as well as your local multiple listing service to see where the greatest numbers of transactions are currently occurring. When you focus on where the action is, you greatly increase the odds of being able to leverage your activities and make more money.
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of “Waging War on Real Estate’s Discounters” and “Who’s the Best Person to Sell My House?” Both are available online. She can be reached at firstname.lastname@example.org or visit her blog at www.LuxuryClues.com.