How to NOT be at the Bottom of the Food Chain

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“There are three kinds of lies: lies, damned lies, and statistics” –attributed to the 19th-century British Prime Minister Benjamin Disraeli.

From the results of a NAR members survey: “For all Realtors in 2010, the typical brokerage specialist completed eight transaction sides or commercial deals. Eight percent did not complete a single transaction in 2010, down from 12 percent in both 2009 and 2008. Median gross income among sales agents was a mere $24,900.” However, this report was completed with fewer than 9,000 survey results.

At the end of April 2011, NAR reported it had 1.01 million members (that figure does not include all the agents who operate as non-Realtor agents and brokers). Including those could bring the figure up nearer the 2 million mark.

Perhaps this is a more realistic scenario:

NAR’s revised home sales figure for 2011 was 4.96 million. Fannie Mae’s number was 4.93 million. Both these figures were for existing homes, not new construction.

Assuming some 15 percent of sales were a combo of FSBOs (or other sales including interspousal transfers), that’s approximately 4.2 million sales among close to 2 million agents.

An average of “two and a bit” sales per agent. Hundreds of thousands of real estate agents are earning less than a Wal-Mart cashier or worse — no income at all. Not pretty, is it?

 

How NOT to be one of those at the bottom of the food chain

lion image via shutterstock

You don’t necessarily have to aspire to be one of the elite 10 percent of agents who dominate the market. You just need to know what works, have a realistic plan and execute with conviction and energy!

The secret to success really isn’t a secret at all:

1. Know your niche market.

2. Know your inventory.

3. Know the comparables.

4. Say what you mean and mean what you say.

5. Always have your client’s best interests at heart.

Some of you are going to say, “Hey, the first three look too much like hard work.” Well, frankly, in the early stages it will be.

Getting up to speed is the price to be paid for long-term success. Once you have the knowledge and expertise, the energy to maintain that plateau is the easy part.

Garbage in, garbage out, and more lies, damned lies, and statistics …

In my humble opinion, median and average prices are the biggest red herrings in the business.

Median price indicates that one-half is higher and one-half lower. For instance, the median price of 31 sold homes would be the price that is lower than 15 of the prices and also higher than 15 of them.

When tracking median prices over a period of time, the figure can be badly skewed if, for instance, the luxury market collapses, as has been the case in most markets across the U.S.

The absorption rate is a much-improved indicator of market swings. It’s a formula that takes the number of weeks it takes to sell the current inventory at the present rate of sales.

To calculate Absorbsion Rate you need to know how many listings are currently on the market, plus how many listings sold last month.

You must count under-contract or pendings as listings, since they have not actually closed – not SOLD yet.

Multiply the number of homes actually solds last month by 12 (months).

Then divide by the current listings. That equals the number of units that would sell each week.

Finally divide the # of units (that should sell each week) into the number available = absorption rate.

Where is all your data?

card catalog image via shutterstock

In many areas, your local MLS will offer only one solution for MLS data and a separate one for tax data.

If your MLS participates, one relatively new source of data is the NAR-sponsored Realtors Property Resource, or RPR. This is how they describe themselves:

“Advanced reporting features will allow the Realtor to create custom reports to provide to clients and customers, keeping the Realtor in the center of the transaction, armed with tremendous information and analytics, all in one place.”

To fulfill your fiduciary duty to present your client with all the facts, you may have to do the blending yourself. How you do this could very well differentiate you from your competition.

Most MLS systems today make it easy to keep abreast of recent listing activity, with reports showing expirations, new, withdrawn, under contract, sold listings, as well as price changes. You must be watching these reports on a daily basis.

Competing for listings

A properly prepared comparative market analysis, or CMA, will allow you the opportunity to make adjustments to the properties that you are comparing your potential listing against.

Completing your CMAs will be much easier if you put the work into creating your sales and inventory wall map as recommended in one of my recent articles: Do your homework and research your market!

If you created your wall map properly, it will be easier to spot trends and to work out the difference in value between homes in a subdivision or neighborhood.

Or even between different locations in town. A similar house on the other side of town might sell for 10 percent more than your target property, for instance.

You could also more easily work out the value that buyers place on the same-floor-plan home being in a cul-de-sac rather than on a busier through road.

Or the difference in value between, say, a full-on ocean view and no view at all.

Winning over the buyers too!

Knowing these ratios is invaluable when you are in the car with that out-of-town buyer who is not sure yet if he wants you to represent him.

Who do you think they might choose if you demonstrate that you know what you are talking about as you cruise through the neighborhoods pointing out comparables and trends along the way?

Attracting clients with your knowledge

Once you have your brain stuffed with all this relative data it’s time to use it to attract new clients, and one of the best places to do that is on the Internet.

Using WordPress, you can easily create sites where you can share your knowledge. Adding a splattering of IDX listing displays and creating neighborhood, subdivision and town/city guides with information that potential buyers are seeking is not difficult if you know where to look for relevant data.

City-Data has all the demographics and statistics you can handle.

Altos Research is worth a mention for the dynamic data trend graphs that you can incorporate into your site.

A new way of showing your expertise in an attractive graphical way is a new app called Nudge that you can embed in a blog post. Find out more here.

Offering reports is another way to attract future clients

Sold statistics are always sought after by both buyers and sellers, so why not offer downloadable PDF reports in exchange for contact info?

You may also expand this offering to include the statistics gleaned from your studies of your niche market.

Follow these simple guidelines and I guarantee you will be surprised at just how quickly you can achieve success.