According to the Wall Street Journal real estate blog, a “W” or “U” shaped recovery is shaping up to be the most likely curve for the real estate industry, if not the economy as a whole. According to one property mortgage insurance group, there’s still another 12% drop to go in most markets. And even though some economists think prices will remain flat as inventory stabilizes – and we all know that’s also to be tempered with regional biases, since some housing markets have remained reasonably healthy – the chance for another full year of slow or flat growth will pose serious challenges for real estate agents and brokers who have barely hung on this year.
Now, let’s assume you’ve already cut your discretionary spending to the bare minimum. You’ve even dropped the daily Starbucks. What’s your plan for another year of declining home prices? Even if you sell the same number of units, it still means you’re sure to lose another 12% of top-line revenue. And with gold over $1000 and oil prices hitting a one-year high, a declining dollar means even less purchasing power. So you’re going to need a serious strategy to stay in the business.
Thankfully, there’s help. We’ve got our thinking caps on here at MF&C, and we’ve come up with three quick ideas to help you stick around – even if the “U” becomes a “W” or even a further-declining “M” market.
- Get serious about the listing price for new inventory. Reference absorption rates with a passion. When you’re sitting across from the table from a silly seller next year, you’re going to stick by your guns. Show the numbers, and then simply refuse to list anything at a price that will require so many adjustments, you won’t even hit the market value before you exceed the average days on market. Just pack up your stuff – you’re already taking a 12% pay cut – when you realize you are sitting across from those unreasonable sellers. Chances are you’ll do better not listing it, and just finding a buyer (considering co-broke losses). Just because there has to be blood in the water before it sells doesn’t mean it has to be your blood.
- Stop carrying expenses. The recession is teaching the real estate something: Contingency fees cannot create profits if you cannot control the price or positioning of the product. So if your sellers insist on controlling both, then ask them to put some money on the table. If they want a newspaper ad, after you have shown them all of the relevant facts, ask them to pay for it. Should the buyer actually come from the newspaper ad, you can deduct the fee – heck, even offer to double it, because you can’t lose this bet – off the final commission. Alternately, show the buyers your bills for carrying their property too long. Nothing wrong with itemizing your expenses – lawyers and accountants do it all the time – then tacking on a service fee. Get your expenses covered monthly, if you want to make it through the entire year.
- Reduce the cost of your new business. The facts do not lie. The vast majority of new business comes from repeat business and referrals from friends, family and clients. And contacting these people should be almost cost free. Just stop trying to find new, cold business, and tap that old social network – phone, email, Facebook, whatever. Because margins count, and if you can get new leads for near-free (you can buy your mother a Denny’s coffee) then you can learn that Aunt Zelda is ready to downsize before she calls that sweet little agent down the street. Lowering the cost of your new business is still possible, even after you’ve seemingly cut your marketing budget to the bare minimum by tapping your referral network.
- One more idea, just for good luck. This one’s for broker-owners exclusively. Stop recruiting and start coaching. Adding more bodies isn’t the only way to grow market share; in fact, it will only grow your stress, up-front costs and sap your time. Instead, focus on the people you have – and get them into lean, mean effective shape. It’s a recession, right? So you have to do more with less – except that you have plenty of spare capacity already, probably within the people you already have. Stop fooling yourself that adding four more newly licensed agents (read, recently laid off from paying jobs) are going to bring in more deals. It’s time to make management count – and that means working with your people every day.
If we’re going to have a “W” shaped recovery, then let’s make the “W” stand for “Winner.” Should it end up a “U” then let’s make it “Unusual” in our approach. And by all means, let’s not make it an “L” for your “Last” year in the business.