The pandemic kicked off a real estate boom that inspired many to buy homes and made others hesitant to sell — creating the perfect conditions for a seller’s market. Although high demand and rising prices can be a driving force for profit within the real estate industry, what should you do if your bottom line is actually suffering due to the shortage of listings?
Developing a strategy for how you will operate your brokerage during extreme market fluctuations is critical to running and maintaining a successful brokerage. As we continue to ride out the current market conditions, here are the tactics I believe brokers should be using to maximize revenue.
1. Find ways to generate new listings
For a brokerage with productive listing agents, a hot seller’s market can be very profitable. High demand drives up selling prices, which ultimately results in a higher commission.
The downside of a seller’s market is a lack of inventory, with the saying “you have to list to live” ringing true for many. With that being said, your agents can still earn commission in a seller’s market.
Although the importance of winning listings is a noteworthy conversation to have with your agents, it’s prudent to remember that low inventory means high competition for those limited listings.
Rather than reiterating what your agents already know, encourage them to focus on showing their value to current clients and prospects. Tap existing clients for referrals to secure new interest. Satisfied clients can speak to your value in a way that traditional marketing cannot.
Encourage your agents to showcase their expert negotiation skills, stellar customer service and industry knowledge. These can go a long way to helping potential clients determine which agent is right for them.
2. Manage the over-zealous seller
While sellers may not be aware of all the intricate details involved in closing a sale, most do understand the basic rules of supply and demand. With multiple offers and buyers banging on sellers’ doors, some believe they can handle the full transaction without professional help. This leads to two profit-killers for brokerages — commission negotiations and for sale by owner (FSBO).
When it comes to commission, agents may feel compelled to reduce their fee in a low-inventory market to win listings that are likely to sell quickly. As a broker, encourage your agents to know their worth and hold the line.
Agents should be prepared to offer proof points that exemplify their expertise and value. Client testimonials are a great way to do this. At the end of the day, higher commissions are not only beneficial to the agent, but ultimately to your bottom line as well.
Meanwhile, those who are second-guessing professional help entirely are more inclined to do an FSBO transaction when homes are selling quickly and risk appears to be low.
Unfortunately, most homeowners are not equipped to manage the considerable amount of buyer interest they may receive in tandem with their everyday lives. Additionally, sellers with limited real estate experience may find it challenging to navigate various nuances of the sale without professional help.
In both instances, the key to winning over the homeowner is to constantly tout value. Additionally, going above and beyond your clients’ needs will help ensure there’s no way they can argue commission amounts.
3. Keep your options open
A successful brokerage in any market keeps a mixed roster of both listing and buying agents. In a seller’s market, buying agents may be challenged in securing listings and establishing themselves as listing agents.
If you believe you’re lacking listing agents, or if your current listing agents are having a tough time securing clients, explore new avenues to generate business and maintain brokerage profit.
Supporting clients during a real estate transaction is just one way to generate income for your brokerage. When that stream begins to run dry, explore other offerings that may help existing or potential clients in your community.
For example, if your city is a hub for renters, consider adding property management to your list of services to continue generating revenue. Diversifying your income will not only increase your profit, but it will provide a safety net when the market shifts.
If you find that your revenue loss has been significant and beyond what you’ll reasonably be able to recoup, then merging with a stronger listing agency may be the answer.
The process can be tedious, but the benefits can be astronomical. For one, your company now has double the resources. Whether it is additional revenue or something as simple as more mentorship opportunities for your agents, oftentimes, there is power in numbers.
At the end of the day, supporting your agents, providing excellent client service and staying flexible will keep your brokerage in good standing, regardless of market conditions.