If you have been in the business for a bit, then you’ve probably heard of the “Golden Rule” of the database. The Golden Rule states that an agent, if they work their database correctly, will transact as many units as approximately 10 percent of the size of their database by count. That means that if an agent has 100 names, numbers, home addresses and email addresses then they should expect to close about 10 deals from that group of 100.
When I say “close 10 deals out of 100 in the database,” I’m not saying that 10 out of one hundred people in your database move every year. Maybe only three or four actually move but the other deals come to us as agents in the form of referrals. Now of course, “work the database” is a loose term but if an agent truly puts some effort towards that group (calls, texts, emails, letters, etc) then, after a few years, they should be able to achieve the 10 percent rule. Now, take the database from the size of 100 to the size of 1,000 and you’ll close 100 deals a year from it!
Here’s the challenge…I actually believe (and can prove that it’s already happening) that the coveted 10 percent rule is changing, and it’s not changing in our favor. I can see a day where the new golden rule becomes the seven or eight percent rule. Here’s why:
If technology continues to improve, which every indication under the sun is showing that it will be, the amount of referrals from the database will decline. According to the National Association of Realtors’ Profile of Home Buyers & Sellers Annual Report, in 2018, 55 percent of home buyers took to the internet before reaching out to an agent, whereas in 2011 that number was only 45 percent, thus reducing the amount of calls from a client in our databases by about 20 percent. That’s huge. This happens because today it is easier and more convenient for consumers to just click on a link or swipe on some photos to get more information on a property, thus reducing the need to “bother” their agent with what the consumer may consider nonsense.
Well, what may start as nonsense becomes real once they fill out a simple lead capture form and next thing you know they are viewing homes and or meeting with agents to discuss their plans. We’ve all been there …”Oh my gosh Jeff I am so sorry, I know we have used you for years and we tell everyone about you it’s just…it just happened so fast and we made an offer with the list agent because there were multiple offers … Oh my gosh, I also have to tell you that we can’t list our home with you because they gave us such a deep discount to list with them and we would never have asked you to work for peanuts!” Anybody but me ever been there before? If you’re full time in the business, you’ve experienced something similar a time or two. This scenario all started because technology got in the way.
As the advent of iBuyers continues to take shape here’s another reason why the business agents receive from their database will decline. It’s pretty simple math if you ask me: Homeowners can sell with you and get 98 percent or 97 percent of their asking price, which you would probably claim is market value or close to it and these iBuyers are coming in at 88 to 92 percent of value. Back out the five to 7 percent commission and viola, the sellers end up within just a few points of what a full service brokerage could net them.
How does this affect repeat and referral business? The answer is simple: Many consumers will now, just out of pure curiosity, reach out to one of these institutions (or Real Estate teams/brokerages offering them) just to “see” what they could get in an instant offer and next thing you know they are signing paperwork to sell their home to them, thus reducing the amount of calls from a consumer to a real estate agent, which ultimately will affect the “golden rule” in a negative way.
3)Increasing DIY ethos
Take a look back over the last ten years, in nearly every industry, there has been this sentiment of “I can do this on my own now”… why is that? Well some would suggest technology makes things easier, but also because today’s consumer is more savvy than they have ever been. A tech-enabled consumer can now take matters into their own hands (not without risk of course) and complete tasks that they would previously never have considered doing on their own, such as selling a home or not working with a buyer’s agent and going straight to the listing agent.
Despite all the reports saying that millennials aren’t buying homes and they are still living in their parent’s basements, this generational group will present some real issues for loyalty from our database. According to NAR, millenials make up the largest generation of home buyers today, sitting at 37 percent of all home purchased in 2018. What does this have to do with negatively affecting the return on our database?
The answer is simple … for the most part, this group is already used to trusting apps and online processes for buying and selling merchandise. It’s only a matter of time before they trust the latest and greatest home selling or home buying app (and this is already happening.) We hope to have some data to prove this once we get into 2020. Nonetheless, a 28 year old male or female who once may have taken their parents’ advice on which agent to use are now relying on agent reviews online to choose an agent and a certain percentage, maybe while searching agent reviews, will click on links to services that will assist them in buying or selling in non-conventional ways.
5) Online reviews
Speaking of online reviews…many consumers today are using sites like HomeLight and Angie’s List to “check out” the reviews on an agent they were using in the past to see if it is safe to still use them again. During this process, they fill out a form and next thing you know, they are receiving solicitations from every agent in town asking if they’d like to meet. All it takes is one or two a year to do this and end up with another agent thus costing you a sale from your database that would’ve otherwise landed in your lap.
6) Customer expectations
The expectations of today’s customer are higher today than they may have ever been. According to a 2018 survey from the tech firm Gladly, the consumer experience is affecting a consumer’s recommendation of the service provider now more than ever. We had a challenge in our business four years back … our business was growing rapidly. We were closing about 650 transactions as a team after closing around 500 the year before.
The challenge was not that our business was growing too quickly, the challenge was that we were growing and our profits were shrinking. I brought in a consultant to analyze our business: What she discovered was that we were a very “transactional” company. We focused too much on leads and sales, and not enough on the customer experience. It was at this moment where I learned that quality customer service is what people are willing to pay for and what they expect. It’s this great customer service and overall experience that leads to repeat business and referrals.
7) Telephone consumer protection and do-not-call laws
Although the do-not-call laws are over a decade old, we are just now starting to hear of agents and brokers being targeted by law firms that specialize in seeking out individuals on the do-not-call list who have been contacted by real estate agents. These law firms are finding consumers who are willing to say that indeed they had been contacted, in exchange for some type of settlement. Based on my research, what seems to be heavily scrutinized right now is the use of multi-line dialers, mass texting services and direct to voicemail services to those with a phone number registered with the Federal Trade Commission, which maintains the national registry. The increased awareness of these laws are causing agents and brokerages to be more cautious when using services such as the ones mentioned above to reach out to their databases. Why is this affecting the “database formula?” Here’s why … the term “work your database” has long meant calling people, seeing people and adding value to their lives. Well, if the laws change the way we reach out, then it will change the ratio of contacts to appointments set and so forth.
I hope that by now you are finished fighting this idea that the database business will decline as time advances (if you don’t make changes) and are ready to talk about how to not only maintain your current level of business from it, but how to actually get more business from your database than you have in years past.
In 2020 I want you to write the following out on a white board or an easel somewhere, and I want you to look at it daily and add ideas to it constantly: “What can I do, change or implement so that the people in my database feel obligated to use my services and refer me to others?”
For the answers to this question, feel free to join us at the LiveUnrealSummit.com.
Jeff Glover is a Realtor with Jeff Glover & Associates in Michigan.
Are you ready for what the industry holds in 2020? Inman Connect New York is your key to unlocking opportunity in a changing market. At Connect you will gain insight into the future, discover new strategies and network with real estate’s best and brightest to accelerate your business. Create your 2020 success story at Inman Connect New York, January 28-31, 2019.
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