The last installment was more geared toward brokers and team leaders so I will make this one for agents. I’ll warn you: This strategy will not make you friends, but it will make you money. If you are like most agents today, you are struggling for sales opportunities. You know what to do when you find a new customer, and hopefully, you do a great job. The problem is finding enough customers. Continue Reading…
It’s almost time to start our Zero2Hero Agent Challenge 2010, but it’s not too late to for you to enter. We already have a good sized field of contestants and we hope to get started soon. So far we have agents from Georgia, California, Hawaii, Florida, Michigan, Idaho, Minnesota, Nevada, Texas, and even one from Hong Kong. We have agents from big cities and small towns. We have new agents, and agents starting over. From national franchises and local independents. In short, we have a great sample of the real estate community! Continue Reading…
Faster than a speeding bullet. More powerful than a locomotive. Able to leap tall buildings in a single bound. Look! Up in the sky! It’s a bird. It’s a plane. It’s Agent Hero! Continue Reading…
It sucks! It’s right up there with root canal. OK. So it beats a jab in the eye with a sharp stick, but not by much. It’s horrible! Let me explain why. Continue Reading…
Let’s face it. As a broker, your number one job is recruiting agents. Anyone who says otherwise doesn’t understand this business. Our industry has an agent churn of 40%. In other words, 40% of your agents will change brokerages this year. If it’s less than that, you’re doing well. And if you don’t continue to recruit, it is just a matter of time before you have no agents. Continue Reading…
The FavoriteAgent.com Virtual Model
Imagine starting your very own real estate brokerage. I know what you’re thinking:
“But I don’t have the $20,000 for a franchise fee, or the $10,000 for a lease deposit and and first month’s lease payment. For that matter, I don’t have the $50,000 it will cost me to buy the desks, tables, chairs, fax machine, copy machine, and all the endless stuff that I need to get things started. And even if I had the $80,000 in hard start-up costs, and another $100,000 available for operating capital, I can’t begin to afford the advertising campaign that will be required to recruit agents and to let the public know I exist.”
So instead, you resign yourself to continue to schlep houses until you drop. Riding in cars with buyers. One frustrating transaction after another. Not that you mind making new friends, but enduring the daily grind of chasing from deal to deal gets old. Let’s be honest. You have ambitions to get out of the trenches and you have vision for how things might be. There has to be more than this. Right?
Well I have some great news! There is more! So much more! I’m going to show you how you can own your own Virtual Office brokerage, and how you can do it inexpensively. I’ll show you how you can recruit agents, train them, and manage them better than in a traditional model company. Most importantly, I’m going to show you how you can make more money in the process — a lot more money.
What’s more, in this model you can be up and running in days, not weeks or even months. You don’t have to be able to ride out a long start-up period with yet another big slice of your hard-earned savings. And what’s even better is that this model is thriving during the current depressed housing market. Sounds too good to be true, right? It’s not.
You could open your own Virtual Office brokerage with us and never miss a transaction. I want you to imagine being the person in the plan I’m about to lay out for you. It could very well be you, and the entire transition could take place in a few days. You’ll see. I know you have your doubts, so we’ll just call you Thomas (as in doubting Thomas). Okay, Tom. Here is your plan:
Day 1. Getting everything in place. A building, a managing broker, and your Virtual Office technology platform.
* First, your building. Some states require you to have a physical brick-and-mortar location for your company (at least for another few years). Legally, that can be your house, but I’m not suggesting for an instant that you use your house to meet clients. Here is our model. I’m assuming you are a working agent, so you have been using both a lender and a closing attorney. Start there.Go and ask either of them — no ask both of them — if they’ll allow you and your agents to use a conference room to meet clients, if you continue to send them your business. If they won’t, then find another who will. Believe me, this will be the simplest negotiation of your life. I’ve never heard of an agent being turned down when they asked for the ongoing use of a conference room. Remember, they want your business, and what better way to get it than to let you and your agents use a conference room that sits empty most of the day.
* OK, now your Broker. If you are not legally qualified to manage yourself or other agents, don’t panic. The beauty of our industry is that we have lots of agents who are qualified and yet leaving the business. Find a qualifying broker and make him or her a deal to pay them so much per deal to be the “legal oversight”, and to review your work. It shouldn’t take more than a few phone calls to set that up. Remember, this arrangement can always be changed as you expand your business.
* Finally, Get your Virtual Office technology in place. That one’s simple. Call FavoriteAgent.com and we handle the rest. In a typical office of 30 agents, we cover the the cost of roughly $35,000 per month for the agent’s technology. How easy was that?! No big checks. No first and last month’s rent. No deposits. If you qualify to open an office, we pay the technology bills.
Now it’s been a pretty busy morning, so go ahead and treat yourself to a nice relaxing lunch. While you’re having lunch, let’s think about your company name. Have you decided on a name yet? Well, with our Virtual Office license, you get to use the FavoriteAgent.com nationally recognized trade name, and immediately associate with nearly 20,000 other real estate professionals across the globe. We have agents in all 50 states, in every province of Canada, as well as Mexico, the United Kingdom, Australia, and New Zealand. Let’s see: “FavoriteAgent.com Premier Properties” has a nice ring to it. Perfect!
OK. Lunch is over. It’s time to think about a few logistics. You need to order some business cards and yard signs. No big deal. Our corporate office has all the art work ready to send to the printer and sign company. Oh, and don’t forget to make sure your voice mail has your new company name on the recording. Now log into your MLS and download the email addresses for all the area agents and start focusing on a list of possible recruits. Don’t worry, recruiting will be easy.
Here’s what I mean: Recruiting always comes down to your value proposition to the agent. And what you have to offer them is so much better than everything else out there, hiring agents will be a snap. Here is your value proposition in a nutshell. You give them freedom, better tools, and more money. What more could they possibly want?
Freedom because your agents don’t have to waste half their productive time pulling floor duty, sitting in sales meetings, driving to caravan houses, or any of the other traditional agent busy-work. With FavoriteAgent.com they have none of that. Freedom is huge to a productive agent.
Like any of the national franchises, your agents will each pay 10% of gross commission to FavoriteAgent.com corporate. But unlike those other national companies, with FavoriteAgent.com they actually get something tangible for their money. Instead of paying a franchise royalty to use a national name, they are paying a technology license fee. That technology license fee buys them everything they need to operate a Virtual Office real estate practice. Here’s what I mean.
Each agent gets his very own LCM web gateway, his own LCM phone gateway (both are state-of-the-art lead capture technologies), his own personal website, his own integrated contact management software, his own virtual assistant and mobile applications. They also get the most powerful Virtual Office real estate platform available today, complete with hundreds of training articles, videos, calculators, business planning modules and much, much more. Our technology bundle would cost each agent over $1,100 per month if they were to license it directly.
Now remember, as the broker-owner, running a typical 30-agent office, FavoriteAgent.com will be providing your company with nearly $35,000 per month in Virtual Office technology. You’ll also be happy to know that all of your agent accounting is included in that licensing fee, so you won’t have to spend your money to hire a bookkeeper to run your brokerage, or shut down the entire office for the month of January to get all the agent 1099’s sent out.
But besides all the freedom and all the tools, you’re going to attract your agents the old fashioned way — you’re going to pay them well! The FavoriteAgent.com Agent Compensation Plan is probably the simplest and most generous you’ve ever seen. Here it is: Every single agent pays a 50% split on their first transaction with the company. That’s to offset all the administrative costs in adding a new agent to the company. But after that, all active agents keep a minimum of 80%. To remain active with the company, an agent only has to complete one transaction a quarter, or, they can work full-time in real estate. Now, there are two ways an agent can make 90%! First, by being a top producer. If an agent completes four or more transactions in a thirty-day period, he is paid 90%. Or they can make 90% by recruiting. If an agent recruits five other agents to join your company, his commission is increased to 90%.
And that’s 90% commission with with no office rent, no transaction fees, no administrative fees, no nickel and dime fees, period. So, how easy do you think it is to attract agents when you can give them freedom, you can give them a state-of-the-art technology platform and the ability to forever solve their lead problems, and you can pay them 90%?
Believe me, it can’t get any easier. OK, enough about recruiting. It’s been a tough day but well worth the time invested. Go ahead and take the evening off and get some sleep. You’re going to need it. Tomorrow’s going to be really busy!
Day 2. Today you have your initial coaching session with FavoriteAgent.com. It will take about an hour, and during that hour you’re going to learn how to set up and manage your online advertising. By the end of the day, you’ll have a steady supply of new leads coming into your own Virtual Office contact manager. Don’t worry, if you forget something, the coaching staff is always there to answer any questions you may have. Now it’s time to do your homework.
The coaching staff is going to suggest that you take an hour to make sure that everything is set up just like you want it, and to learn your way around the Virtual Office software. They’ll also tell you to import all your contacts into your software. While you’re at it, why don’t you go ahead and email the customer service department your list of local real estate agents, complete with the phone numbers, fax numbers, and email addresses. You know, the ones that you downloaded yesterday. Within an hour or so, they’ll have them all in your contact manager and ready to use. Was that easy or what?!
Day 3. Now it’s time to actually start recruiting agents. Better check your Pipeline. Oh my! You have seven new leads waiting to be called. Sure, you continue to practice real estate while you build your team, but now you get to keep 90% of your commissions instead of giving over a third to your old broker. Now you can spend less time drumming up business too, because it is coming to you faster than you can handle it. Now you can actually think about building your business by recruiting. Maybe you already are a broker and have agents working for you, or maybe you are just starting from scratch. Either way, using techniques we’ll show you, you should be able to recruit 30 agents in less than 90 days.
Now let’s look at a realistic scenario comparing this model to the traditional model. Let’s say you recruit 30 agents over the next few months, and those agents average one single transaction per month. Here is how your income looks:
* Traditional Model. With 30 agents and 30 transactions per month, using a typical traditional model broker split of 38% (or in other words, you pay your agents an average of 62%), and using an average GCI or gross commission income of $6,000 per transaction, you would have a franchise fee of $14,400. That plus any note payments you might have, and any mandatory signs and supplies you had to purchase. If you run your brokerage like the typical traditional brokerage, then you will bring about 2% to the bottom line or about $3,600! Don’t forget, you might not have that much business coming in, and your expenses will still march on, but for purposes of this illustration let’s say your agents come through and business is good.
* Virtual Model. With the same 30 agents and 30 transactions, using the national average company dollar of 15%, and the same 30 agents and 30 transactions per month, you’ll make $17,901. In other words, your Virtual Office company makes about five times as much money and has virtually no risk. No rent. No utility bills. No accounting. No company advertising bills. No additional staff. The very picture of simplicity. And you have lots of time available to actually do some production, if you decide you want to.
Remember, in the traditional model, your cash outlay is nearly $200,000 and your risk is very high. At that level, your return on investment is minimal and you have basically bought a job. Unless you can live on a $43,200 income, you are going to have no choice but to sell houses every day and compete with your agents.
In the virtual model, you’d make $214,812 on the revenue produced by one virtual office of 30 agents. Let’s say you continued to grow that office, adding 30 agents a year for the next five years. You’d be making $1,388,016, and it would all be profit! Your company will be a virtual real estate money-making machine and you’ll have very little, if any, stress. Your agents will make more money, and your customers will be better served. You’ll have the benefit of a national brand and state-of-the-art technology, and you’ll own a business valued at roughly seven times EBITDA, Earnings Before Interest, Taxes, Depreciation, and Amortization, or nearly $10 million.
Contrast that to the traditional alternative where you would likely still be leveraged to the hilt in your one brokerage of 30 agents, taking on a huge risk of capital, and working with diminishing margins as agents continue to demand more and more money and brokerage commissions continue to erode. Suppose you wanted to expand. You’d have to reinvest more capital to get and equip a larger facility. And you’d have to add staff. Your risk would continue to escalate with every expansion, and unless you’re a rare agent, you’d still be selling houses and own a business nobody would buy.
Day 4. Now comes the fun part… all you do from your fourth day on is make money. Now how cool is that!
Well I hope that helps you understand exactly how I’d recommend you open your own virtual office. It’s simple, and our company pays all the Virtual Office expenses for those qualifying agents who have big dreams but small balances. We’ll hold your hand every step of the way, and help you become successful. The only thing standing between you and a very enjoyable and rewarding life is your own fear to act. So, contact us, and we’ll help you get started doing real estate this new way!
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How to Build Your Own Team: Becoming a Rainmaker
In the previous installments, I’ve discussed many aspects of building a growing and successful real estate business at a time when real estate professionals are failing at record rates. With 86% of new real estate professionals not making it to their first license renewal, our industry turns over an amazing one-third of all our agents every single year! However, even with these dismal statistics, there are a few agents who’ve adapted to this new age of real estate and are making more money than ever before.
Welcome to the “super-agent” or “mega-producer” era. Today, experts tell us that 93% of the total transaction volume is being done by only 7% of the agents! So if you’re not one of those 7%, you’re probably fighting to survive on the leftovers. In my earlier installments, I talked about setting your practice up so you have new incoming customers every day. We discussed today’s Internet customer and we discussed prospecting techniques and today’s real estate buying cycle.
If you’ve missed any of those installments, I encourage you to go back and read them. But if you’ve done much of what I’ve been “preaching,” you have a whole new problem now: you’ve got more business than you’re able to handle alone. Of course, that’s a good problem to have!
So how do you take it to the next level, once you’ve solved the basic problems facing most agents today? After creating a system where you never have to worry about finding customers, how do you actually close all that business? And after becoming the dominant agent in your market, how do you manage all the transactions and still work with the hundreds of buyers who come from your lead generation engine? How do you assimilate all the growth?
How can you get the most and best results from your new-found technology advantage? How can you build your business so that it can be larger than you? Is it possible to work smarter without working harder? Well, all of these questions bring us to this installment — “How to Build Your Own Team: Becoming a Rainmaker.” Let’s just go ahead and jump right in by talking about the different team models in use today.
Today’s Three Team Models
Having had the privilege of working with thousands of agents across the US and Canada, I’ve seen many different types of business configurations. And, today, one of the major real estate buzzwords is “team-building.” In fact, it seems to be the talk of every brokerage. How do we deal with teams? What constitutes a team? What is the brokerage responsibility and liability with a real estate team? How can I encourage teams in my company without going broke? And there are hosts of other questions arising every single day. So let’s start by defining the three basic team models.
The Assistant Team. This is the team model that’s been around the longest, so we’ll cover it first. Somewhere in the progression of an agent’s business, he or she begins to hit a production ceiling. It’s hard to assign a dollar amount to this concept because every market is different, but the ceiling is generally somewhere around forty or fifty transactions per year (or almost one per week). Obviously, this ceiling may be closer to fifty transactions if the agent is extremely organized, or forty if he isn’t.
Another factor that affects the exact point of the ceiling is the agent’s tolerance for less-than-excellent customer service. In other words, if an agent doesn’t mind dropping the ball on his professional responsibilities sometimes (which, of course, he shouldn’t), he may have time to push the ceiling even further. Even so, there’s almost invariably a production ceiling in the range of one deal per week. For an agent to push beyond that ceiling, the top producer generally has to hire an assistant or assistants. Of course, the primary function of these assistants is to handle the administrative load associated with a high-volume practice, or put out fires after the fact, or both.
This team structure is the most common model, even though all it does is increase the rainmaker’s production by twenty or thirty percent. With this model, there’s an absolute ceiling in the sixty-to-seventy-deal range; and as more assistants are added, the costs and the chaos almost invariably increase. Also, there’s a high turnover with assistants, and they’re a fixed cost on the top producer’s business (i.e. an assistant’s salary will be on the weekly payroll whether or not any deals have closed). Assistants tend to be employees rather than contractors and are paid salaries. In the leverage model explained below, the additional personnel are a variable cost, meaning that, if there’s no volume, there’s no cost.
The Freedom Team. This odd phenomenon seems to be gaining in popularity. In this model, two or more medium-producing agents from the same company will share duties and responsibilities so that both can have additional freedom. For example, one team member may pull floor duty or meet a client so that the other can spend the weekend out of town. Then on the next weekend the two agents may very well return the favor.
This model is typically an alliance of equals and is done more for convenience and freedom than for leverage of production. In this model, each agent has his own relationship with the company, and each is treated as an individual with regard to agent splits, fees, and management. Most frequently, a freedom team consists of two agents, but occasionally it may grow to as many as four or five agents who are similar in approach and production.
The Leverage Team. This is the team model that I recommend for building your business. Here’s how it works: The leverage team consists of one super-producer or rainmaker who’s producing more business than he can handle, so he recruits another licensed agent to work some of the overflow.
This second agent typically works on a split with the top producer, as spelled out in a written team agreement. He or she is managed, trained, and given business by the rainmaker as well. The top producer has a relationship with the broker-in-charge; and, even though all the agents hang their licenses under the brokerage and the broker-in-charge, they’re managed and paid by the top producer.
All instruction, coaching, and communication flow through the rainmaker, and usually the production and money are given to him. It’s then the team leader’s responsibility to make disbursal to subordinate agents according to the written team agreement. This model is essentially a company-within-a-company and is the type of team that I built when I began to generate more business than I could handle.
This model also allows an agent to move to significantly higher levels of production because he or she is multiplying time. Most top-producing agents begin by handing out buyer business to buyers’ agents while continuing to do listings (since the listing side is more closely linked to lead generation), but there’s no hard-and-fast rule regarding the division of clients.
In this type of team structure, the team is able to grow to about four or five agents before management responsibilities begin to overwhelm the rainmaker or team leader. Depending on the agreed-upon team split, this first income ceiling is about twice what the rainmaker was able to earn before starting the team. Now, if the team leader doesn’t make the transition to management, he or she is destined to stall at this level. However, there’s a critical step that can be taken.
To go to the next level, the agent must quit being a producing agent on the team and become the team leader full-time. Since the leader’s income is typically reduced by as much as fifty percent during the interim period, most top producers don’t want to make the change. They don’t want to sacrifice any revenue, even short-term. However, if he’s willing to forgo immediate gratification, the top producer will soon discover that the size of his team will be limited only by the amount of business that he’s able to generate.
At the current time, my local team has grown to more than seventy agents, and I haven’t done a real estate transaction in over five years! This year I’ll make a seven-figure income while acting as a full-time broker and managing and training my team. Moreover, I also have agents on my national real estate team, and they are growing and healthy and producing their own leads.
And while growing my real estate teams, I’m also devoting much of my day-to-day work to growing our national technology company, which has now signed more than 20,000 agents worldwide. In addition to our real estate and technology divisions, I’ve just finished my fourth book, and we’ve started a national real estate news and best practices media company. Most importantly, I will not be personally involved in any of the hundreds of real estate transactions we’ll close this year! It’s the ultimate in duplication of time, or “leverage,” and following this model will allow any agent to build his team as large as his imagination will allow.
So what’s required to take a team to this level? Primarily, the only elements that are required are the vision to do it and the ability to generate an unending supply of inexpensive leads to feed your team. And in order to do that, you simply need to have the technology in place. The rest is just a matter of putting more ad dollars to work in generating traffic to the technology.
Our team has generated thousands of leads each month for at least sixty consecutive months, all at a cost of $1.50 to $4.00 per lead. Using our technology, my business is entirely scalable, and we don’t have to spend money to generate additional leads until we’ve built the infrastructure to support that volume.
As a rule of thumb, I use 24:1 ratio to calculate how many leads we need to generate. By this I mean that, if my agents are able to handle, on average, two deals per month, per agent, then we need to produce 4800 leads. (24 leads x 2 deals per month x 100 agents = 4800 leads). And, from a management standpoint, I should hold each agent accountable for any leads that I refer to him. If his “deal rate” rises above 24:1, I need to find out why. I can easily identify problem areas in my team’s prospecting and customer follow-up by monitoring deal rates.
Something else that I look for is a “reach rate” of 50%. (Each of my agents should be able to engage at least half of his customers in meaningful dialogue.) I look for a 6:1 appointment rate, or one appointment for each six customers that he reaches and begins to work with. Finally, I look for two appointments per transaction, or a ratio of 2:1. I want to see one closed transaction for each two appointments with customers.
If the reach rate is too low, then I know I have problems in the areas of agent self-discipline and prospecting. If the reach rate is good but the appointment rate is low, some basic sales training may be in order. Sales skills are developed, not inherited, and part of my job as a team leader is to help my team members develop those skills.
If an agent has a good appointment rate but a poor closing rate, that’s generally an indication that many appointments are being made with customers who aren’t adequately pre-qualified, and the only way to solve this problem is to train agents to do a better job of pre-qualifying clients.
As you can see, once you reach this level, your job will become one of diagnostician and trainer-mentor. And it’s fun! Nothing’s quite like the feeling you get from seeing dozens of transactions coming through from all the agents on your team, while you’re taking the weekends off! This is what teamwork is all about: the multiplying of time for you, the rainmaker. To sum it all up: building a mega-team comes down to only a few key things:
First, you need to be able to create an unending supply of leads for your team. This goal is best accomplished by having a very efficient lead capture technology like our LCM web and phone gateways that are the lead capture part of our Pipeline-i Virtual Office technology.
Second, it’s important to have a common database like our Pipeline-i Virtual Office client management technology that your team members can use for following up leads quickly and efficiently. In addition, all follow-up and working notes must be viewable for each teammate to read. In that way, nothing will be interfering with any team member’s follow up.
Third, you need to have the ambition to grow your business as large as it can grow. Can you see yourself as the leader of the largest team or company in your local market? If not, why not? Why shouldn’t it be you? Someone has to be the dominant agent in your city. It may as well be you.
Well, this should give you some things to think about. If you apply the truths and principles that I’ve shared with you, they could literally turn your business around! In the first installment I mentioned Kyle Wilson, one of our agents in Boise, Idaho. He’s been in real estate only four years, yet in the last two years he’s grown his team to 30 agents and is now the dominant agent in his market.
Kyle is a perfect example of how you can actually become the dominant agent in your market in only a couple of years. He’s actually done it. Kyle has big dreams and big plans. His goal this year is getting to 500 transactions! He fuels that growth by making more than 3000 leads every month and by constantly recruiting new agents to join his team. And it could just as easily be you. Why shouldn’t it be you?
To reach that goal, you need some basic technology tools, and you need commitment to a vision. Don’t worry: the tools are free if you join one of our virtual real estate offices, or if you help us open a virtual office. Even if you want to stay right where you are and simply license the technology, it’s probably less expensive that you think, and should pay for itself many times over. The commitment to the vision is free — but you’ll have to make a leap of faith. It’s tough to spend money, often money that you don’t yet have, to sow seeds of success for your business.
And sometimes it’s tough to go against the flow in your office…the flow of mediocrity. Sometimes you need to muster the courage to do what you know in your heart is right, even if your broker or your friends have never heard of it or done it before. Sometimes the first step to being the leading agent in your market is actually taking a bold step and leading.
I hope that this installment will both inspire and challenge you to become the best REALTOR® you can be. Becoming the dominant agent in your market can be more than just a dream; it can be a reality. And it can be your reality if you want it badly enough and if you’re willing to commit your time and resources to it. I look forward to hearing about your success and maybe even helping you create it.
So what’s next? In the next installment, we’ll be discussing putting it all together. Success is more than just having the tools — although having the tools is very important. But more than the tools, the technology, and the knowledge, is having the winning attitude and mindset. How to add that final element and construct the ultimate real estate practice will be covered in the next installment, so you won’t want to miss it. In the meantime, work on getting your technology in place, if you haven’t already done it. There’s never going to be a better time to start than right now.
OK, it’s time for one more commercial message.
If you’d like to look into licensing our LCM web gateway technology, it’s easy to get. Put away your credit card. You can get the technology for free by joining my personal real estate team, by joining one of our FavoriteAgent.com Virtual Offices, or even by opening your own FavoriteAgent.com Virtual Office. But don’t worry — we even have ways you can license our technology and stay right where you’re at. So, check us out by clicking this link:
My Promise to You for Reading: If you invest your time in reading Becoming a Mega-Producer and then — more importantly — in applying what I show you, your business will never be the same again. This is my sincere promise. It’s my greatest honor to be able to play a small part in your success. Thanks again for reading.
Matt Jones
Broker/President/CEO
FavoriteAgent.com
Tell Me What You Think!
The Ultimate CMA and Two Listing Approaches
In the previous installment, we talked about your becoming the best agent for the job. I mentioned the importance of learning your market statistics and told you exactly how to do that. I discussed how you could increase your credibility and power by arming yourself with some very specific knowledge. I’ll assume that you’ve done your homework now and are ready to learn the actual listing presentation that made me one of the top listing agents in the country.
I want you to notice that I haven’t referred to myself as one of the smartest agents in the country because there are plenty of agents who are smarter than me. I haven’t claimed that I’m the hardest-working agent in the country because there are lots of hard-working agents. But I do maintain that I’m one of the top listing agents because there are very, very few agents who have listed as many homes in a single year as I have, and even fewer who have listed all of their homes for 8% or more. And there are fewer yet who have netted their clients as much as 10% more money at closing while selling their homes twice as fast as most of the agents in their markets.
So how do I do it? I use a unique system that I call “the traffic approach.” In a few minutes we’ll get into this approach to listing, but first we need to examine how I go about doing a CMA (comparative market analysis).
The Ultimate CMA
Let’s be completely honest… as a listing agent using the traditional method of doing a CMA, you can make the numbers say just about anything you want. I know that’s a pretty strong statement, so let me explain.
With the traditional CMA method, the agent selects three recently sold properties that closely represent the subject home (or the home being valued). In most markets, it’s easy to find three properties that sold high, three that sold low, and three that sold somewhere in the middle and still have many other comparables from which to choose.
The real problem is the sample size. In statistics there is a concept known as “margin of error”. The margin of error in any sample can be calculated with a simple formula. One divided by the square root of the sample size. For example if you have a sample size of 400, the square root of 400 is 20. One divided by 20 is 1/20th or 5%. The margin of error for a sample size of 400 is 5%.
When I teach classes on doing a CMA, I typically walk the class through these calculation on several sample sizes. What if you had 100 in your sample? The margin of error would be 10%. Or a sample of 64? A 12.5% margin of error. What if you had 25? Margin of error is 20%. A sample of 16? You’ve got it… 25%. Then I ask them what if they had a sample of just 3 comparables? Margin of error of 58%! “Mr. Seller… your home is worth $220,000… plus or minus $129,000!”
Do you see the problem? It’s the sample size. That’s why when the seller balks after you suggest a listing price, you immediately retreat and say, “Well, maybe I can try to find some different comparables and call you back tomorrow.” Then you go back to the office, tail between your legs, and rework the comps and voila, you manage to pull up a new CMA with the price the seller wants. Let’s be honest. We’ve all seen this happen, if we haven’t done it ourselves.
What many agents do is use the least expensive set of comps for their initial CMA. This method makes the case for listing the home as inexpensively as possible and allows it to sell quickly. But let’s not forget that as a seller’s agent your agency relationship is with your seller. That means that you should be getting your client the most money for his property, not the least.
“So great, Matt,” you’re thinking, “You just destroyed the way I’ve always done CMAs. How do you do a CMA?” Good question. When I prepare a CMA, I take data from three sources: tax records (sale and assessment data), closed comparable listings in the MLS, and active comparable listings in the MLS. Remember, to get the most accurate price possible, with the lowest margin of error, I need the largest possible sample size.
First I look at the tax records to determine what I feel to be the “adjusted” current value of the home. For example, if it sold three years ago for $150,000, and there’s been an appreciation rate in that area of 10% per year, I calculate the appreciation (3 x 10% = 30%, or $45,000), and then I add that figure to the purchase price. Certainly this particular method, alone, is rather subjective, but this is only one part of my valuation.
Next I pull up all the closed comparables in the area or subdivision, going back a reasonable period of time, and I can usually find between ten and twenty of these. (In extremely hot markets where homes appreciate at double-digit rates, you shouldn’t go back farther than a few months or so in order to prevent the CMA from being skewed downward.)
Don’t forget that the amenities and how nice a home looks will affect the curb appeal and saleability of the property but will have very little impact on appraised value, so it’s best to use as many comparables as possible. In selecting my comps, I use the subdivision, the square footage (with a range of plus or minus 10%), and the number of bedrooms and baths. I then calculate the average sale price of the group, eliminating any outliers up or down (e.g. homes that were foreclosures or distress sales).
Finally, I pull up all the active comparable listings. Again, I use the subdivision, the square footage, and the number of bedrooms and baths, but your market may be a little different in how the appraisers select comps. The point is to get as much data as possible!
Now we put it all together. Take the appreciation-adjusted value from the tax records, add the average price from the closed comps, and then add the average price from the active comps. Now take that number and divide by three, and you’ll have the true average value for the subject property. Write down this new number somewhere, add and subtract 5% from it, and you’ll have a “reasonable range” for the value of the home, which tends to be plus or minus 5% from the average. In most markets it’s reasonably easy to support a value within 5%; so once the property sells, getting the appraisal shouldn’t be an issue.
I know this is an out-of-the-box way of doing a CMA, but it will absolutely stand up under any amount of scrutiny by clients, other agents, or — most importantly — appraisers. Moreover, using this method will protect you from accidentally over-pricing or under-pricing a property. Most significantly, it will reinforce the fact that you’re a market authority and know what you’re talking about. If a seller client should be harboring a suspicion that you’re trying to skew the numbers, his or her fears will quickly be allayed because you’ve considered every possible comparable in arriving at the current value of the home. Nothing except an actual appraisal could be more fair.
But now comes the fun part. Instead of doing all that math, which is fairly time consuming, you can now use our simple calculator to build the Ultimate CMA and Proceeds Estimate in only a couple of minutes. In less than 5 minutes you can create a scientifically accurate CMA and Proceeds Estimate that will impress any seller. Check out our CMA and Proceeds Estimator Calculator!
Now let’s take the pieces and put them together into a “lethal” listing presentation. For quick review, what are the pieces? The first piece is knowing your market statistics so that you’re truly the best agent for the job. Becoming the market authority. Then the next piece is knowing the value of the subject property so that you can get the top dollar for your seller client. By knowing how to prepare the ultimate CMA, your foundation is complete.
Beginning the process without laying this foundation simply won’t work. It’s absolutely critical that you go through these first two steps before you learn the listing presentation, simply because the presentation builds on this foundation! If you’re just skimming through this approach so you can get to the “magic words” to say, you are wasting your time. This approach is not about having magic words. It’s about creating a magnetism that will attract your listing clients to you. That comes from building the foundation.
Without building your foundation on solid ground, you’ll instead be building your presentation on quicksand, and you won’t be able to list properties using this powerful and unique method. Why? Because you won’t have the most important element of any sale: the believability factor.
This listing approach is counter-intuitive. It is going to fly in the face of what 95% of the other agents are telling your client. As such, it demands that you have credibility. If you don’t have credibility, the listing approach will never sell because you’re asking the client to place his faith in an approach that, in all likelihood, he’s never heard of before. Take the time to build the foundation.
Two Listing Approaches
Last year there were more than 1.1 million REALTORS® in America, so I guess you could say that there are 1.1 million ways to sell a house. But the truth is that there are really only two ways to sell a house: you can sell it by price, or you can sell it by traffic. Every other sales method is a subsidiary of one of these two. We’ll explore the two different approaches at length and discuss how they differ and how one of them will yield far better results for your client while making you more money.
The Traditional or Price Approach. I’ve read dozens of books — probably hundreds of books — on the subject of real estate. Many of these books speak of the importance of listing real estate, and all of them describe nearly identical listing approaches, with only slight differences. Now, the reason for all this sameness is obvious: it’s the way listings have been done since the beginning of real estate. It’s the old “if it ain’t broke, don’t fix it” thing. Well, I’m here to tell you that it is broke! If you expect to make a lot of money in real estate, you need to determine what everybody else is doing and then do the opposite.
Okay, here’s the basic formula for the “traditional” or “price” approach. As you’ll recall, we talked earlier about building a CMA, or comparative market analysis, for your client. The traditional approach teaches us to find the “reasonable range” of value and then try to list the property on the low end of that range. That’s why we used closed comparables only, and not active listings as comparables. It’s why we aren’t taught to adjust upward for the list-to-sale ratio. We start as low as the client will let us.
If the home doesn’t sell within a month or so, we’re all taught to…what? You got it! To ask for a reduction in price. Then if the property still doesn’t sell, we lower the price again, and again, and again, until eventually we find a buyer for the place. Think about it: we’re selling the house by price. We’re using the price as our marketing tool. That’s why we continue to lower the price, or wait for appreciation in the market to lower the price for us, until the house eventually sells.
One of the reasons this approach works well for the agent is that it places the entire burden of selling the home on the seller! Another reason for using the traditional approach is that the agent doesn’t have to spend a lot of money marketing the house. He doesn’t have to spend a lot of time or effort devising a marketing plan or promoting the property because the price is doing the selling for him. There’s no doubt that this approach will work, of course: it’s been working for decades with good and bad agents alike. However, there are a few drawbacks to the traditional approach that are seldom mentioned.
First and foremost is the agency issue. It’s your job as the listing agent to represent the seller’s interests, which include getting the absolute top dollar for the property. However, most agents don’t get top dollar when they use this approach, and the reason is as simple as supply-and-demand. When there are fewer buyers competing for a home, the sale price may need to be discounted substantially in order to attract interest. In economics-speak, “with a fixed supply and a scarce demand (i.e. fewer buyers), prices drop.”
Another drawback to using this approach is lack of speed: several months may pass before the traditional approach begins to have an effect. In the process, the home often becomes stigmatized. After several reductions, it’s not even shown to potential buyers because it’s been on the market “too long” and is now assumed to have something wrong with it. If the agent starts the process too high and then reduces the price too slowly, the home becomes very difficult to sell at any price.
Many times, listing agents unwittingly become de-facto buyer sub-agents. Even though I don’t know a single listing agent who would intentionally sell out his client, it’s entirely too easy with the traditional listing approach to help the buyer rather than the seller. And, yes, I realize that my judgment may sound harsh, but if you’ll honestly examine this method, you’ll have to agree that, very often, it doesn’t yield the best results for the seller.
The Traffic Approach. To understand the traffic approach, we need to turn our attention again to the “reasonable range.” Real estate is entirely different from liquid investments with absolute values. For instance, anybody can look up a share of stock and immediately see its current price. But because values are subjective in real estate, there tends to be about 10% flexibility in the price range. It’s what economists call price elasticity.
Consider a home that’s valued at $200,000. It’s not worth exactly $200,000! It’s really worth between $190,000 and $210,000. If the price drops below $190,000, nearly everyone will agree that the house is a good deal; and if the price goes above $210,000, nearly everyone will agree that the property is priced a little too high. However, within the “reasonable range” there is little price resistance.
Here’s how the traffic approach works. Instead of listing the home at the low end of the range ($190,000), you raise its price to the high end of the range ($210,000). But that creates a problem. The problem? Now there’s no compelling reason for anyone to show it or buy it.
Okay, here’s the secret weapon: you raise the commission by 2%! What you’re doing, effectively, is “bribing” agents to include your listing on their show lists. What I do is raise my commission from 6% to 8%, and then I raise the price from the low end of the range to the high end, or about 10%. The client then nets about 8% more money before any negotiations!
Sometimes, not often, the appraisal knocks the price down a bit. When that happens, it’s usually a minor adjustment, and then the seller has the option of lowering the price to match the appraisal — or else the deal, as written, falls apart. The buyer also has the option of paying, out of pocket, the shortfall in the appraisal or canceling the deal if there’s an appraisal contingency. When that happens, the client knows that he got the absolute top dollar for his home.
Now, I know that almost any REALTOR® will immediately say, “I never look at the commission when I’m working for a buyer.” I’ve had many agents tell me as much. But I don’t believe that noble-sounding claim because statistics clearly indicate that it’s not true.
I don’t know any agent who would willfully sell a buyer client a home that wasn’t right for him; but if there are sixty homes in the market that generally match the client’s criteria, and if three of those homes pay higher commissions than the rest, it’s certainly not unethical to make sure that those three properties end up on every show list.
Moreover, there’s nothing wrong with hoping that your client chooses to buy one of the three. If he doesn’t, no big deal; but if he does, you just got a big bonus! Let’s not forget, we practice real estate for a living. It’s how we pay our bills. It’s how we support our families. There is nothing wrong with focusing on what pays you the best. In fact, it’s the right thing to do.
One of the questions I’m often asked is why I don’t just offer a bonus to the selling agent. Once again, the answer is simple. Every buyer’s agent knows that if he doesn’t present a full offer, the first money to come off the table will be the selling bonus. Since most homes don’t sell for full offers, the selling bonus doesn’t happen very often, so the buyer’s agent can find himself torn between not getting the bonus and not representing his client.
If the buyer’s agent advises his client to offer less than the listing price, he knows that his bonus is most likely gone. On the other hand, if he encourages the buyer to pay the listing price, he’s probably not fully representing the buyer’s interests. For that reason, the selling bonus is often a disincentive rather than a legitimate incentive.
So now you have the theory behind my listing approach. The big picture, if you will. So what’s next? In the next installment, we’ll be discussing the listing presentation itself, and I believe you’ll find it to be the most powerful listing presentation you’ve ever seen! Until then, work on getting your technology in place so you have an unending supply of inbound leads. And focus on learning all your numbers and becoming the best agent for the job. There’s never going to be a better time to start than right now.
OK, it’s time for another brief commercial message.
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My Promise to You for Reading: If you invest your time in reading The NEW Ultimate Listing Presentation and then — more importantly — in applying what I show you, your business will never be the same again. This is my sincere promise. It’s my greatest honor to be able to play a small part in your success. Thanks again for reading.
Matt Jones
Broker/President/CEO
FavoriteAgent.com
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Preparing for the Listing Presentation
This listing presentation will show you how to list at an 8% commission virtually every single time! Oh, I know that statement sounds incredible, but it’s true! There’s no reason that you can’t list for 8% or even more. You’ll see. The secret is in this presentation.
First let’s talk about ethics and high commissions.
Okay, before we dive into the presentation, it’s important that we first mention ethics. In other words, “How can I better serve my clients while charging them more?”
Simply by having that thought, you’ve confirmed that you’re an ethical REALTOR® who’s trying to put your clients’ interests first. That’s a good thing. Having said it, though, I need to underscore the fallacy in such a line of thinking. The question we’ve asked seems to imply that you cannot earn good money by doing the right thing. But the truth is that it IS possible to serve your clients, your fellow REALTORS®, and yourself; and with this presentation it’s also easy! Let me explain.
We’ll begin by discussing agency–specifically, seller agency. As a listing agent, your client is the seller in any transaction. You’re the seller’s agent, though, and you have a fiduciary obligation to represent him or her to the best of your ability. As a rule, you should be trying to get your client the most money in the shortest amount of time, since that’s the goal with most sellers. And when I mention “money,” I specifically mean net dollars. Ultimately it doesn’t matter how large or small the commission is: what counts is the total your client takes away from the closing table.
So if you knew about a strategy that would net your client more money while selling his home in only about half the usual time, wouldn’t it be in his interest to use it? Of course it would! Well, that’s what this listing presentation will do for you. As compared with traditional listings of homes in the same market, my approach has traditionally netted my clients significantly more money while selling their homes in only 55% of the average DOM (number of days on the market).
More money in half the time! Think of it! Your clients (and the other agents in the market) will love you, you’ll be paid better in the process, and you’ll begin to acquire a reputation for being the agent with the high-paying listings. But I’m getting ahead of myself. Let’s take this thing one step at a time.
So…on the flip side, if you knew that selling a house by the traditional method would double your client’s waiting time and, in the process, net him less money, would that be good for him? Of course not! Not even if you saved him some money in commissions! Your job as a listing agent is to represent the seller and to place his needs first, and that’s what we’re going to do.
Becoming the market authority is job one.
Before we get into the listing presentation, it’s important for you to do an honest assessment of your ability as an agent. Can you look into the mirror and feel, deep down, that you are the very best person to represent your seller client? If you can’t do that (regardless of the listing approach you use), it would be unethical to offer your services to this client in the first place. In fact, you’d have a fiduciary obligation to recommend your fellow agent, the one who is the best, as the right agent to help your client.
So how do you go about becoming that best agent to represent your client? You need to do your homework! You need to study your market. You need to know the market statistics. You need to have clear-cut marketing strategies. You need to have a specific marketing plan that will yield results superior to those of the competition. Otherwise, you have nothing to offer the client!
Doesn’t that make sense? Why should your client list his most valuable asset with you if you don’t know what you’re doing? Would you list with yourself? And if your answer to my last question is not a resounding “Yes!” — then you need to become that ideal agent before you read another word.
Prior to listing my first house, I knew our market statistics cold. I pulled the raw data from our local MLS and crunched the numbers. Was it fun? Of course not! Nevertheless, I needed to know what I was talking about. I needed to be the best prepared agent my client would ever talk to. I needed to be the best agent for the job, or I couldn’t look my seller in the eye.
Trust me about this: your client will recognize whether or not you know what you’re talking about. If you’re bluffing, he’ll sense it. You can’t “fake the funk,” as they say. I wish I could tell you how many times a listing client has quoted an agent on something that I’ve known to be incorrect.
Because I was completely familiar with my market, though, I would be able to explain that the other agent, while very likely a nice person, had his facts wrong. Then I would present the statistics to the seller, and it was quite obvious to both of us who knew what they were doing and who didn’t. It doesn’t take that much work to become an expert, so do it. You owe it to yourself and to your clients.
OK. Here’s the basic market data you need to know before you go to your first listing appointment:
Days on Market (DOM). Average days on market is critical to your seller client for several reasons: it’s important in setting realistic expectations about the time needed to sell a home; it will help you evaluate any offers that come in and make an educated decision about whether it’s advisable for the client to wait for another offer or take what’s on the table; and, if you know the DOM for your market (or, better, yet, for the client’s neighborhood), you’ll be able to guide him or her through the process like a professional - which is exactly what you are!
There’s a problem with DOM statistics, however. Most MLS databases have a very manipulated DOM number which is invariably skewed low. So how can you know what the real number is? Is it possible to determine the actual DOM for your market even if you’re not a rocket scientist? Absolutely! Just use the absorption rate to calculate the true DOM for your area. Let me explain.
Before writing The NEW Ultimate Listing Presentation, I thought I would pull the latest DOM figures from my local MLS and compare that statistic with the actual calculated DOM. The latest number as reported in my MLS is 77 days. However, when I calculated DOM using the absorption method, the actual average DOM is 240! And believe me, your MLS is off as well — maybe not by as much as mine, but it is typically off by more than 50%.
So why the huge disparity? Because the MLS calculates the average DOM as the average days on market for the listings that actually sold. What it leaves out of its calculation altogether are homes that were withdrawn, listings that expired, listings that were withdrawn for a day and then re-listed to restart the clock, or those that were never put in the MLS until they sold (like new construction where they might list only one home in a subdivision, but actually have 20 for sale). And all of those affect the reported DOM.
Here’s how you get the real DOM. Find out how many homes sold in your market last year and how many are currently on the market. For example, if 10,000 homes sold last year, and there are currently 5000 on the market, what those numbers indicate is that the inventory turned twice last year (10,000 divided by 5000 = 2.0). Now, there are twelve months in a year, and 12 divided by 2.0 = 6.0, which is the absorption rate, meaning that the average time actually on market is 6.0 months.
Then, to convert the absorption rate to days on market, you simply multiply this last number by 30 (6.0 x 30 = 180). And if you figure DOM this way, you’ll eliminate all manipulation in your market by builders and agents who re-list stigmatized homes due to their excessive time on market.
I wanted you to know how to do the math, but I have great news. Now, as part of The NEW Ultimate Listing Presentation, I have made your job much easier. Because I got so many calls and emails from agents wanting help on the math, I built you a calculator to use. So try it out. Never settle for those inaccurate numbers from your local MLS again. Click here to launch this awesome calculator!
DOM Standard Deviation (STDEV). What?! I know what you’re thinking: “Matt Jones has lost his mind!” But, before you dismiss this concept (and me) as crazy, let me point out that it will be an easy statistic to calculate and a powerful advantage for you once you know it. What if you could actually know the odds of selling a client’s home in 30 days… or 60 days… or 90 days? Wouldn’t that make advising that client a lot easier? Well now you can! And it’s easy.
As a listing agent, one of the questions I was often asked by sellers when I was listing their home was, “How long do you think it will take to sell my house?” As a new agent I struggled with this, and I did a lot of research to see if I could find the formula to calculate sale probability. Sure enough, I eventually found what I was looking for. I needed two pieces of information to make the calculation.
First, I needed the actual DOM for the area. I just showed you how to calculate that. Then I need the standard deviation of that DOM. The standard deviation of the DOM? How do you calculate that? It even sounds hard!
The easiest way to calculate a standard deviation of the DOM is by using a spreadsheet like Excel. Pull up all the closed residential properties for your community from the last year from your MLS. Then copy and paste that data onto a spreadsheet. Then use the formula in Excel to compute the standard deviation for the DOM column. If you’re using Excel, the function will look like this: =stdev(b1:b20000).
If you are like most agents, by now your eyes are starting to glaze over, and your mind is going blank. You’re probably thinking, “If I have to do all that stuff, I really don’t care about the odds!” And because I know that’s what most agents are thinking, we designed a calculator to do the math for you. All you need to do is type in the average DOM, then the days you want to calculate… like 30, 60, 90 days, etc.
I’ll give you an example. Let’s assume the actual DOM is 240 (like it is right now in my market). In a matter of a few clicks, here are the odds of a home selling:
Now let’s say that a competing agent tries to convince your client that his home can sell in a matter of days. You can tell your client with complete certainty that the chances of selling his home in a few days are nil, and that in reality he should be mentally prepared for at least an 80% probability, using a traditional approach. In the example above, that means just over a year. Fortunately for your client, you have an approach that will sell it in half that time.
When you can show your client, with authority, how long it will take to sell his home, he’ll inevitably respect your honesty and the fact that you know exactly what it takes to sell a home in your market, even if he doesn’t like the hard facts. He knows that you’re not guessing, like most agents, and in fact you’re speaking with the voice of authority. Knowing your market better than any other agent will impress your clients while also giving your own confidence level a boost.
I saved the very best for last. Of all the calculators we’ve developed, this one was the most difficult, but it’s also my favorite because it will give you information nobody else has, and that will win you the listing time after time. You’ll love it! Simply put in the accurate Days on Market and the number of days to estimate, and you will instantly know the statistical probability of selling a home within that time frame. So check out this awesome calculator!
Okay, using the illustration above, you could inform the seller that he has only a 35.8% probability of selling his home in 180 days, using the traditional approach, and that it will take a full year to reach an 80% probability of selling. And if that’s how long, statistically, it’ll take to sell his house, then listing it for ninety days, or even 180 days will clearly be a waste of everyone’s time.
Now, your immediate reaction may be that your clients will never go for this system — yet they will! In all but one of my listings I received one-year terms, and in the remaining listing I got a six-month term, knowing that I would sell the house even sooner. When you tell a client, with authority, how long it will take to sell his home, he’ll inevitably respect your honesty and the fact that you know exactly what it takes to sell a home in your market. You’re not guessing, like most agents, and in fact you’re speaking with the voice of authority. Knowing your market better than any other agent will impress your clients while also giving your own confidence level a boost.
Average Markdown (List to Sale Ratio). Now let’s go back to the statistics that we worked on earlier. Remember my asking you to calculate the average for list price and sale price? Here’s the reason: you need to be able to advise your client as to the “typical” discount in your market. Let’s assume that the average listing price is $175,000, and the average sale price is $169,000. Now, subtract the average sale price from the average listing price, and then divide the difference by the average listing price.
In other words, your client should understand that it’s normal in your market to expect a markdown (or discount) of 3.4% from the listing price. Setting expectations shows him that you understand the market and that you’ll help prepare him for the offers that will be coming in.
You’ll also have an advantage in negotiating with other agents when you know that the average markdown in a certain neighborhood is only 0.5%, while they’re offering 4% below the asking price! You can tell an agent that it’s unreasonable to expect your client to accept such a figure and that he should encourage his client to make a more reasonable offer. I can’t tell you how many times this simple formula has meant thousands of dollars for my clients because I knew the market statistics, and the other agents didn’t.
Buyers in the Current Market (Buying Climate). Let’s always remember what the seller is actually looking for: to net the most money at closing and to sell the home in the least time. What this means is that sellers are acutely interested in how many buyers you’re in touch with. In fact, when I would tell a seller that I didn’t personally work with buyers, there was a perceivable concern in their minds until I quickly pointed out that I had a team of buyers’ agents who worked with all of my hundreds of buyer customers. Then I went on to demonstrate that I was very much in touch with the buying climate. Here’s how I recommend you do it.
I recommend that you maintain statistical information on how many new buyer leads you generate each week. Now, since the average home search lasts eight weeks (according to the NAR), it is easy to tell approximately how many buyers you are working with at one time. All you need to do is simply take the sum of the last eight weeks, and that’s how many buyers you are currently working with. That’s exactly how I did it, and it is very powerful when you present it to your listing clients.
I want you to imagine what the reaction of a seller was when I told him that my team was currently working with 462 homebuyers in our local market and that I had the names, phone numbers, and email addresses of all of them! And if I hadn’t had my lead capture gateway technology in place, I would’ve had only a fraction of those customers, and there would have been no simple way to track my leads.
Here’s one more little trick that I recommend for preparing your listing arsenal. I recommend printing out each lead as it arrives by email and then adding it to a home-buyers notebook that you keep on hand. In an upcoming installment I’ll show you how this homebuyers notebook can become a very powerful listing tool and how you can use it to cinch the listing.
Okay, let’s talk about credibility.
Let me show you how this statistical knowledge can influence your credibility. Imagine a potential listing client with a nice home worth roughly $500,000, and now imagine you’re going up against the top listing agent in your market. How do you feel? Are you nervous? This agent has lots of signs all over the area. Who are you? Just some new agent without very many listings?
Now imagine that the top dog is a typical agent who doesn’t know anything, really, about the local market. He’ll talk in generalities about how good he is at selling homes and how quickly he expects to sell this one. He is like many top-producing agent: full of himself — a legend in his own mind! And because your potential client has seen his signs everywhere, and possibly his ads in the various homes magazines, he is predisposed to think well of your competitor.
But, because you know the market data, you go into the listing presentation ready. You tell the seller that homes in his price tier have a DOM of 240 and that, he has an 76.8% chance of selling his home within 360 days (basically a year) if he uses the traditional approach. The other agent who’s promising to sell the house in only a few days is being dishonest or, at the least, confused (or overly optimistic!) because the probability of selling the home in less than a month is 10.1%. (If you’re having problems with the statistics, don’t hesitate to contact me, and I’ll be happy to help you.)
Then you begin to show your potential client a better way, a way that will more than double the chances of selling his home while netting him more money. Guess what? You’ve just landed a really nice listing. And why? Because you’re the best agent to sell it! And now that you’re the best, you can sell the listing with authority. You’re the best, you know it, and now the client knows it too. Most importantly, you’ve got the listing!
Summing it up.
I think you’ll agree that this is a lot of information to digest! So I suggest that you look through it a few more times until it makes perfect sense. It’s important that you master the basics before we build on them with the listing presentation. Why? Because the presentation requires that you be utterly confident in whatever approach you use. You need to become the best agent you can be. You owe this much to your clients, and you owe it to yourself.
To summarize: we’ve learned that it’s ethical to list at 8% (assuming that the listing will net your client more money and sell his home in less time); but we’ve also learned that it’s unethical not to use this approach if you know it’ll deliver better results (which it will). Your seller client is entitled to the best representation he can get. Let it be you!
So how do you start off down the path toward becoming a great listing agent? First, you need to assemble the technology and the advertising to give you more inbound business than you can possibly handle. That will give you a “take it or leave it” attitude. Believe me when I tell you that customers can tell when you’re desperate. I know from experience. I once was desperate, and my clients could tell. The only way to solve that desperation is by having an abundance of business, allowing you to pick and choose.
Next you need to be the best agent for the job. You have to know your market numbers cold. Statistics can be mind-numbing, but the few simple statistics we’ve mentioned are absolutely worth learning. When we get into the listing presentation, we’ll discuss how to take this knowledge base and convert it into premium listings.
You’ll be amazed when clients actually ask you to list their homes at 8% or even more! Not only can it happen; it will happen when you use this approach to selling houses. Do your homework! Learn your market numbers. In only a few hours you’ll have them nailed down, and then you’ll truly be the best agent for the job.
Now you’ve started taking the steps toward becoming the dominant listing agent in your market! So what’s next? In the next installment, we’ll be discussing the nuts and bolts of the listing presentation itself. Until then, work on getting your technology and advertising in place. Then nail down your numbers so that you’ll be the best agent for the job. There’s never going to be a better time to start than right now.
OK, it’s time for another brief commercial message.
If you’d like to look into licensing our LCM web gateway technology, it’s easy to get. Put away your credit card. You can get the technology for free by joining my personal real estate team, by joining one of our FavoriteAgent.com Virtual Offices, or even by opening your own FavoriteAgent.com Virtual Office. But don’t worry — we even have ways you can license our technology and stay right where you’re at. So, check us out by clicking this link:
My Promise to You for Reading: If you invest your time in reading The NEW Ultimate Listing Presentation and then — more importantly — in applying what I show you, your business will never be the same again. This is my sincere promise. It’s my greatest honor to be able to play a small part in your success. Thanks again for reading.
Matt Jones
Broker/President/CEO
FavoriteAgent.com
Tell Me What You Think!
Imagine what it would be like to be the top listing agent in your market. What if you got to the office and did nothing but talk to sellers and negotiate sales? What if you actually listed two or three homes every week, without fail? I know it sounds like a lot of listings, but think of the freedom you’d have! And if only half of those listings were to sell, you would close over 50 transactions this year just from your listings!
When I finally realized how nice it was to be a listing agent, I was on vacation with my family to the Outer Banks of North Carolina. While on vacation, I did absolutely no work, but I did take a handful of calls from my office during the week. And while I was playing, I had two of my listings sell. Now how cool is that?! There’s nothing like the feeling of your business running itself, making you money, while you’re lying on the beach in the sun, listening to the waves crash in and catching up on your reading.
Well, if you do what I did, it’s not that hard. Most agents I know could do it — if they would do, step-by-step, exactly what I did. There’s nothing I did that can’t reasonably be duplicated by any intelligent agent with the motivation to learn something new and the willingness to work hard. Nothing. So let’s pick up where we left off.
You must solve the lead problem first.
Allow me to tell you a fishing story. A real estate fairy tale, if you will. Once upon a time there was a huge river, stocked full of home-buyer and home-seller fish. All along the banks of that river were REALTORS® with their fishing poles. Everyone was catching all he wanted, and life was good.
Then one day, way upstream, a big commercial fishing company set up operations, with its computerized fish finders, its power nets, and the latest in fishing technology. The company began to pull many of the home-buyer and home-seller fish out of the water before they could make it downstream to the unsuspecting agents.
And it wasn’t long before the fishing downstream began to get tough — so tough, in fact, that many REALTORS® just threw in the towel and quit the business. Others worked longer hours and did what they could to survive, while a third group simply gave up on the whole thing and bought fish from the big commercial fishing operations.
But what if an agent were able to get the same technology that the large commercial fishing operations were using? What if he were to go way, way upstream and begin to catch large quantities of home-buyer and home-seller fish? Not only would life be good again: it would be GREAT! What a huge advantage that agent would have!
Well, believe it or not, this story is actually true. The big commercial fishing operations are the lead vendors, such as HouseValues, HomeGain, and ServiceMagic, and every day the “fishing” gets tougher downstream because new lead vendors open their doors. If you don’t believe me, just check your email inbox. Not a day goes by that I don’t receive some new version of the same old thing — somebody using my listings to advertise on the Internet, catch my customers, and then attempt to sell them back to me.
And if the lead vendors weren’t bad enough, add to that many of the national companies who do the same thing — catch those home-buyer and home-seller fish upstream, and then sell them to their own agents, for a referral fee. I thought they were supposed to be looking out for their agents, and not exploiting their lack of marketing skill. Hmmm.
But there’s another part of the story that’s also true. It’s possible for an agent to use the same kind of technology that the lead vendors and national companies use to capture their leads — commercial lead capture technology on a single-agent level. And for those agents who use it, the technology produces amazing results.
Some real-life examples of “lead capture” technology:
In Greensboro, North Carolina, we have an agent named Kay Hunkins. She’s a veteran agent who was one of the first in her market to begin to try to tap the Internet. Well, she was getting literally thousands of hits to her websites every month and had her sites listed in lots of online relocation directories. The result was that she was getting between 10 and 15 leads from the Internet every month. Not bad.
When she installed a lead capture gateway on one of her existing websites, however — she did nothing else differently — she was immediately so busy that she actually found herself ignoring most of her prospects and following up only on the choicest leads. She began taking listings left and right, and she put a deal in escrow the same week she started with us. Without upping her advertising a dime, she began to capture over 20 leads every day. All of her leads were people who had been coming to use her site anyway, but now she was able to identify them!
Or there’s John Miller, an agent in Austin, Texas. When he began using lead capture technology on his website, John was struggling with only a handful of leads every month. Now, using the lead capture gateway technology, he captures between 300 and 400 leads every month. His business will never be the same! Now he’s so busy that he’s having to recruit agents and build his own real estate team!
So did these agents suddenly get smarter? Did they begin working harder? Did they work longer hours? Did they just get lucky? No. No. No. No. They just got better fishing equipment. Now, instead of having to be dependent on “commercial fishing operations” to sell them leads, they make more leads than they can possibly use, and all for next to nothing.
And I could go on and on with story after amazing story. There are many talented agents out there, just waiting for the tools to succeed and someone to point them in the right direction. They are the reason for their own success — we just happened to be fortunate enough to help them assemble the right tools and then point them in the right direction.
The simple fact is that you have to solve the lead problem before you can attack the other challenges in this business. Having more business than you can handle allows you to work without pressure. It allows you to turn away those “problem” customers. It gives you the ability to multiply yourself by building a team, if you so choose. And most importantly, it gives you freedom. No longer are you at the mercy of lead vendors, RELO companies, or even your broker. You have the freedom, finally, to take some time off and enjoy life again. A good lead count will solve virtually every other problem you can have.
Know how much each lead costs and where it came from.
Lee Iacocca, when he was head of Chrysler Corporation, made an amazing statement. When asked about advertising, he said he was convinced that half of the millions of dollars that Chrysler spent each year on advertising was wasted. Half! But then he added that, if he could only figure out which half was being wasted, he could save the company a lot of money.
As REALTORS®, we’re told by the “experts” to spend 20% of our GCI, or gross commission income, on advertising. Magazines, newspapers, business cards, fliers, direct mail, websites, radio and television spots, billboards, and every promotional gimmick that comes down the pike. We sink money into all of these advertising ideas in a frantic attempt to generate enough customers to keep our businesses rolling. And the sad thing is that we know deep down in our hearts that much of what we spend our hard-earned advertising dollars on is utterly wasted. Just like Lee Iacocca, if we could only figure out which half was wasted, we could save a lot of money.
Well, I have good news. By using lead capture gateway technology, it’s possible to know which ads are pulling and which are not. It’s possible to know exactly where each customer came from and how much each lead cost. Let me give you an example from my own real estate practice. Currently I split my Internet advertising between two sources: Google and Yahoo (formerly Overture). My cost with Google is slightly lower per visitor, but my CR (capture rate) is slightly lower as well. With Yahoo, my per-visitor cost is higher, but the actual CR is also slightly higher.
I’m able to monitor each of those advertising expenses in real time. No more waiting until the end of the month to see how the magazine did. No more wondering if an ad is working. I have the answers in real time. And here’s how I know. I assign each ad its own unique URL (web address), and the server log tracks how many visitors and leads have come in for each URL. I then take this information and make a quick calculation to determine exactly how effective each campaign was. No guesswork! This is a business.
Let’s say that, in a week, you had 110 visitors who came from your ad in Google. Of those, you had 32 leads. Your Google ad cost was $124. During the same week, you had 98 visitors from your ad in Yahoo, resulting in 30 leads. Your Yahoo bill was $125. Then let’s say that your yard signs sent you another 20 visitors, and, of those, 10 registered. Total cost for sign leads: ZERO! Here’s how it all breaks out:
This is a “typical” example. What would 72 leads every week do for your business? They would probably force you to start recruiting! Or you would log in and put your ad campaigns on hold for a while. Either way, your business would be forever changed.
But then what if a particular source of advertising was costing you $125 per lead? (When I quit doing direct mail, that’s what it was costing me.) What if sitting an open house cost you half a day (on the weekend) plus $100 in promotional stuff, and you picked up 5 leads? If your time is worth $100 per hour (and it should be), your ad cost was $500. You captured 5 leads. Your cost per lead is $100. Or what about spending a day passing out fliers? Do the math. Or spending hours a day cold-calling? (Forget the risk of violating the Do-Not-Call laws and the potential $11,000 fine!) What do those leads cost you?
What if you could generate hundreds of your own leads for only a few dollars each, and then stop when you had enough business? You can. This is how mega-agent teams have begun to spring up around the country. One agent figures out how to produce more leads than he can handle, and, before you know it, he has a dominant team taking a huge slice of the local business. Well, that mega-agent could easily be you, if you want it to be. First you get the leads, then you get the listings. Before you know it, you’re “forced” to build your own agent team, and in a year you have a dozen agents working for you.
Here is the best-kept secret about finding new listing leads.
Most agents know what to do when a customer fills out a CMA request on his website (or calls to ask for one). The problem is that those are few and far between. Another concern is that most sellers who ask you for a home valuation also ask several other agents at the same time. Or there are the two age-old favorite and often touted sources of seller leads: FSBO (for sale by owner) sellers and expired listings.
Just like the CMA requests, the problem with both FSBOs and expireds is the fact that you’ll be competing for those listings with the hungriest and most aggressive agents in your market. And while both are good sources for listings, those properties tend to be tougher to sell, either because the seller is unrealistic or because the property has been stigmatized by having been on the market since before you began.
I like getting my seller leads from a place where nobody else is looking: from buyer leads! What?! You read it right — from my buyer leads! Let me explain. According to the National Association of REALTORS®, first-time homebuyers account for 40% of all real estate purchases. This number has held constant for years and shows no indication of changing any time soon. One thing is for certain: none of these first-time homebuyers are listing leads!
Another 23% of homebuyers are looking for investments, while 13% are purchasing vacation homes. Of the investment properties, some are bought to “flip,” while others are bought to hold and rent. The same is true of vacation home sales: many are bought to hold, while many others are step-up purchases, resulting in potential listings as well.
The best numbers from the NAR tell us that 52% of all buyers are also selling — some in the same markets as their new purchases and some in other markets — so more than half of the buyer leads that you get will also be sellers. Here’s the little-known secret that will give you the first, and hopefully only, shot at those sellers: Buyer leads almost always find a replacement home before thinking of selling.
As professionals we understand that this is not in the correct order, but our clients typically get it backwards. The human psyche is hard-wired with a security need. We don’t quit our job until we line up another. We don’t sell our car until we find the new one. The same is true with real estate. The key to generating an unending supply of fresh listing leads is to generate lots of buyer leads and then find the half who are selling too. In most of those cases, you have the opportunity to list a home without anyone else’s knowing it’s going to be on the market. What a huge advantage!
So over half of the buyers will either have a home for you to list or — better yet — have a listing lead you can refer to an agent in another market, giving you a referral fee with very little work involved! No picked-over expireds. No FSBOs that know it all. Just an endless supply of new seller leads with no competition. And having that endless supply of listing leads is the key to becoming the dominant listing agent in your market.
Never worry about violating the “do not call” regulations again.
In March of 2005, the FCC imposed a $770,000 fine on a Phoenix, Arizona, mortgage company for violating the Federal Do-Not-Call Law. The FCC alleged that Dynasty Mortgage made 70 calls to 50 homes in Arizona and California between March 2, 2004, and January 20, 2005. A fine of $11,000 per incident was imposed on 70 separate counts, and the company was given only 30 days to pay the fine.
Curtis White, Dynasty’s president, said that his company had extensive systems in place to try to ensure that any do-not-call numbers were not called. However, some calls may have been made mistakenly because of a “flaw in the system,” and the company is now working to fix the problem.
If this example doesn’t make you think twice about cold calling, nothing will! I can remember many days of cold calling when I would make more than 70 calls! It would be easy to violate the DNC laws accidentally by calling homes that “showed” to be “okay” on the latest list (which may have been out of date at the time of your calls). And $11,000 is a huge marketing cost to incur accidentally.
So how can you be certain that this kind of disaster never happens to you? By making only prospecting calls to inbound leads! How can you do that? With lead capture gateway technology, every lead is permission-based. By this, I mean that the lead has first contacted you and given you his phone number and, with it, implied consent to market to him.
The Federal Do-Not-Call Law is very clear on the fact that, in such instances, there’s a three-month window of exemption from the date of inquiry. And your innocence is very easy to prove if you have a time-and-date stamped inquiry on file for each lead. Inbound Internet leads are the safest of all leads to call — period.
So how safe is your marketing? Do you have efficient lead capture on your website? If you don’t, the first step to becoming a dominant real estate agent is having too many customers. You really have to start there. Everything else is second to that. Today, the lead vendors and national real estate companies are spending lots of money tapping the Internet, and if you’re going to compete with them, you’re going to have to have technology that places you on the same level with them.
What’s next? In the next installment, we’ll start discussing the actual listing presentation that I used to list 114 homes in a single year — all at 8% or more! What’s the key to building your credibility as a listing agent? How can you go up against the top agents in your market and come out with the listing? How can you be totally confident walking into every single listing presentation? How can you make your presentation different from every other agent’s in your market? All these questions will be answered in the next installment, so you won’t want to miss it. In the meantime, work on getting your technology and your advertising in place. There’s never going to be a better time to start than right now.
OK. Here’s another brief commercial message.
If you’d like to look into licensing our LCM web gateway technology, it’s easy to get. Put away your credit card. You can get the technology for free by joining my personal real estate team, by joining one of our FavoriteAgent.com Virtual Offices, or even by opening your own FavoriteAgent.com Virtual Office. But don’t worry — we even have ways you can license our technology and stay right where you’re at. So, check us out by clicking this link:
My Promise to You for Reading: If you invest your time in reading The NEW Ultimate Listing Presentation and then — more importantly — in applying what I show you, your business will never be the same again. This is my sincere promise. It’s my greatest honor to be able to play a small part in your success. Thanks again for reading.
Matt Jones
Broker/President/CEO
FavoriteAgent.com
Tell Me What You Think!
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