Month after month, agents name low inventory as the biggest challenge they have to face in the current climate. When almost every house hitting the market immediately gets multiple offers, it can feel like you have tons of interested clients and very little to show them.
RE/MAX CEO Adam Contos, who recently spoke at Inman Connect about how data can help master long-term strategy and secure business for years to come, said that this entire way of thinking needs to be turned on its head. Instead of waiting for more inventory to hit the market, agents should be creating connections that will help them find and spot properties before they are listed.
“We really stress this: You have to manufacture your own inventory,” Contos told Inman in an exclusive interview. “This business is not about waiting for the phone to ring or the lead to pop through the web browser anymore. It’s about strengthening those relationships and using the data and the technology available to generate that inventory [so that] people out there know that you’re the best one to help them sell it.”
We’ve sat down to talk to Contos about low inventory, commission splits and what agents need to be focusing on in 2021.
Inman: It’s been a year of ups, downs and unexpected developments for the industry. Where do you see real estate headed at this precise moment, as we come out of a pandemic and look into the future?
Adam Contos: When looking at all of the different economic predictors here — housing availability, jobs, interest rates and the economy overall — I think we’re gonna see a little bit less in the number of transactions, but we’re running way above the market velocity that we’ve run at before.
I saw in the news today that interest rates could spike, but we’re talking about going from 2.96 to 3 and these minimal changes. It might soften from this extreme number that we’re running at, but I don’t think that real estate agents or the market necessarily is going to feel that much of a difference [or that it’s] going to be noticeable to them.
It might be noticeable ever so slightly in the numbers but to the average person that is in the market every day, I don’t think they’re going to notice a difference even if it softens a small to a fair amount.
It’s difficult to continue to run at that velocity, where you have 1.1 months of inventory. But I do think we’ll see our inventory go up a little bit, hopefully. We need it. Homebuilders are doing a great job of trying to increase that and they’re also doing a good job of not price-gouging, which is fantastic. So we need to continue to create inventory and make that available for people.
What advice would you give to agents who work in markets where very few new properties hit the MLS? You can’t pull properties out of thin air.
Contos: You actually can pull them out of thin air if you really understand your marketplace and your customer base. That’s one of the things that we started pushing at the beginning of the pandemic when all of this started happening.
We said that you really have to rely upon that repeat-and-referral business because there are a lot of people out there that want to buy and sell houses, particularly those that want to sell and then go move to the place that they wanted to move to. We had that reinforced.
There are all sorts of different variables as to why an individual likes or doesn’t like where they live, and we figured those out. We really stress this: You have to manufacture your own inventory. This business is not about waiting for the phone to ring or the lead to pop through the web browser anymore. It’s about strengthening those relationships and using the data and the technology available to generate that inventory [so that] people out there know that you’re the best one to help them sell it.
For much of 2020, technology became even more inseparably linked with real estate work — agents who were slow to get onboard had to do so very quickly when everything closed down. Now people are talking of renewed need for face-to-face connection and a “digital detox.” How can real estate professionals continue to toe that line going forward?
People want to know that they can trust you before they get face-to-face with you. You shouldn’t unplug from the digital marketplace. Let’s just put that out there because the lion’s share of consumers want to go out and watch some videos with you to figure out “Okay, is this person transparent? Can I trust them? Can I communicate effectively with them?”
If you’re not out there with good quality video and audio and have your act together digitally, it is going to impact your business. Yes, we are tired of sitting on Zoom for for 6 to 8 hours a day but the reality is that when we want to research things, we want to do it digitally.
I don’t think you’re going to have a lot of people interested in getting together at a restaurant to sit and discuss their future over a yellow pad of paper anymore. They want to know that this person is logged on and able to get into that high velocity market quickly and effectively.
You can’t win a deal in a 20-30-40 offer situation if you’re not digital. The consumer knows that.
Our readers always want to know about RE/MAX’s commission splits. Can you tell us more about that?
Everybody goes, “Hey, there’s downward pressure on the commissions,” but there always has been. In 1973, Dave Liniger came in and put downward pressure on the commission splits harder than ever before. It’s been around for a long time.
There’s a lot of opportunities out there for the consumer. Do they want to go out and say, “I want to save as much money as possible by paying the lowest amount of commission split possible?” Some do. That’s inherent to the marketplace in any free economy.
You also have people who say, “I’m going to seek the best value and I’m willing to pay for it.” And I think you’re seeing that a lot more now in this marketplace because people want the very best to help them win this deal.
So if you want to spend six months to a year or as much time as you can donate to the marketplace to go find a house and try and win a deal by saying, “Oh, it’s listed at 350K, we’re going to bid 355K and then we’ll pay our transaction agent to help us with that,” go for it. Good luck finding a house that you can buy.
Do you want a full-time professional who understands how to navigate the most complicated transaction or do you want somebody who’s just in it for the cheapest amount and is going to give you the minimum they need to validate what they’re making per hour?
I think I would pay to get the very best for me and maximize my investment in that home.
It’s simply a question of upward pressure and value meeting downward pressure on commissions. What we’re finding is that people are willing to pay for that upward pressure on value with whatever full commission rate in their marketplace looks like more now than ever before.
In a recent Inman Connect session, you mentioned that data shouldn’t be used to drill down a certain market but to “have one’s arms around an evolving situation.” As last year has shown, so many factors influence real estate — it could be protests against inequality one year and a pandemic another. How does one take a long-term approach to data when, as 2020 has shown, so much of life is uncertain?
When you look at how brokerages have traditionally explored data, it’s been based upon circumstances surrounding a buyer or seller — price per square foot, the neighborhood, the level of appreciation, days on market. It’s more tactical and people have gotten really good at tactical data. It’s time to take a step back and look at strategic data as well.
When you look at artificial intelligence and predicting how often people are in their home in a particular neighborhood or where people are moving and what their activities are, we’re getting far more sophisticated in our use of data and that’s helping us serve the customer better.
This is really a game-changer for the industry. Agents [who can] accumulate clean and defragmented data can serve the consumer better than ever before by making strategic decisions instead of just reacting to the market.
It’s fascinating when you start peeling back the layers of the onion on this because there’s a lot we haven’t done yet in our industry and it’s time we step up to being data experts instead of just looking at “how do I sell this house?”
We learn from our past [even if] it doesn’t always dictate the future, it shows you direction and trends. Who would have thought that we were going to have a pandemic in 2020 that was going to shut down the entire globe? None of us predicted that, but we also didn’t predict that we would have the strongest housing market that anybody can remember.