My Projects
Embrace your Weakness
We all have strengths and weakness’. I am very strong in some areas and pathetically weak in others. If fact as I get older and more focused on my strengths I feel my weakness are getting worse. The good news is that to grow and thrive I don’t have to be strong at everything. As long as I am part of a team where we have complementary skills and talents I can overcome my weakness and hopefully continue to develop my strengths. This works very well in our software development company.
How about real estate? Building a successful and sustainable real estate practice requires a broad skill set. Prospecting, marketing, converting leads, managing a budget, managing a data base, juggling new technology, IT, negotiating transactions, managing paperwork flow, continuing education, and about 500 other things. In just about any other business there are specialists in real estate we are one our own. At least to start with.
I believe it is very important for us as agents to really look at ourselves to assess our strengths and weakness’ as we plan the business we want to build. If we know the places we are deficient we can work to create the support system needed to thrive.
Most agents I know have a strong desire to succeed and are smart enough and personable enough to have a shot at it. The determining factors are whether they have a plan, take action and have the proper support system to fill some critical areas of weakness. Understanding our weak spots can have just as much to do with success as understanding our strengths. They are just not as fun to look at:)
Simple steps to Real Estate Success
If you execute these three items at a high level - you win in real estate. Is is as simple as that. Don’t mistake simple for easy though. Any process that is truly in production mode is simple but that does not mean getting there was easy.
Lead Generation - meeting people
Meet tens or hundreds or thousands or millions of People. Create consistent sustainable engines that are run in production mode. There are many strategies and tactics the key is to find ways that fit with your strengths. If you are working against your strengths and talents it is very difficult to maintain over time. It can be face to face or virtually but you must meet people or your real estate career is dead!
Manage client and prospect relationships
Meeting lots of people results in opportunity to further relationships. Our primary role is to inform and help people through the process of buying or selling homes. It is all about building trusted relationships and providing the appropriate information at the appropriate time. If you can follow up with every conversation while adding value you are headed for transactions.
Facilitating Transactions
This is our actual job as far as the clients are concerned. Be a great advocate for the client and get deals done for them. They will love you and happy customers create opportunity.
The key to big time success
Keep all three items consistently running at a high level at the same time and you have a highly productive real estate practice that earns a very high income. Then if you can enhance what is working and fold in additional modules without disrupting the existing structure you can become a mega agent.
Simple but it requires a broad set of skills, solid planning, help from others, and a strong work ethic. It helps tremendously to be in a supportive environment where poeple understand the process and are qualified and motivated to provide asistance. M
Production vs Development
I was recently discussing my frustration around our product development with a friend of mine. The problem centered around how we handle always wanting to build more than we have capacity to possibly get done. Tony asked me a simple question that changed the way we develop Homequest. It also directly applies to building our brokerage and to us as individual agents.
Do you know the difference between production and development? my answer was I think so…um yeh…um no whats that. I felt a little stupid because I have been in direct charge of Homequest Development for years and this sounds like a simple question. It is a simple question and the answer is simple and the implications are huge.
production is where there are no unknowns. for example we sell custom headers for our agent IDX sites. they are $500-1,200, we have a set process for meeting with the client, evaluating their needs, generating mock up, We know how much time and resources they take and block out capacity each week for header production. This program runs on auto pilot we don’t have to think about it, just sell and produce. It is clearly in production. It got that way because we designed it from the start to be in “Production” the internal structure was put in place, we tested our assumptions with a pilot, made some adjustments and now it is reliable.
Development is where there are unknowns. for example we are in the process now of developing a virtual tour integrated into our IDX and Looking glass. We also are in the last stages of development of “orange dots” they are about to enter the Pilot phase where we measure the effectiveness and make small adjustments. You can’t sell things that are in development this includes services as well as products. They are inherently unreliable, take more effort than you think, and it is very difficult to meet the clients expectations.
The key is to really understand your business as it relates to production vs. development. Production is where all the money is generated and development is where innovation occurs and future production components are generated. A balance must be found where new revenue is consistently generated from production and development continues to move the company forward.
This obviously applies to a development company like Homequest but it also directly applies to an agents real estate practice. Can you identify the activities and programs that you can classify as production. Those programs that run on auto pilot and consistently generate revenue? are you spending most of your time coming up with new programs that you are going to implement? I see lots of agents planning and devising new programs but not understanding how to package, test, adjust, and move a program into production.
Our team has esablished an internet marketing program that is now fully established into production mode. We have two new programs that are in development that wil be piloted this years and may or may not reach full production depending on how well they work. The key is that the new pilots will not interfere with the current production that generates our revenue.
Work hard to get programs into production quickly then opperate, and make small adjustments. Only then work on larger innovations and new programs.
Back to Basics?!
I have heard many agents and brokers claim it is time to get back to basics. Well I guess that depends on what you think “Basics” is. If basics means making contact with a very large number of people and engaging in conversations about real estate then YES!
If ‘Back to Basics” means it’s time to hunker down and get back to what we have always done? Call the 25 people in our sphere and go out to coffee or “Pop” by an ask for referrals. Spend $1,200 mailing postcards to your farm area. Then NO!. The environment has shifted and people are getting their information on new paths. The internet, blogs, twitter, google search, facebook, etc are information conduits. If you are not using these tools and others you are missing the leverage needed to expand your reach.
The market is slow and if your reach is limited to your sphere through traditional channels then now matter how well you work your system the yield will be low. It is simple math. The reality in our market is that there are far fewer transaction available. I just ran the raw number of closes for December from 05-08.
Closed Transactions
12/05 = 1651
12/06 = 1511
12/07 = 1075
12/08 = 529
That is a 68% drop in the number of transactions.
Agents must increase their activity and conversations by several hundred percent, What if you are connected to a real estate market that is dead and no matter how hard you try there are simply no buyers? This is the case right now in the $1,000,000 market in much of Portland. So if your social sphere and referral network is primarily connected to this market segment and you want to earn commissions a dramatic adjustment is needed.
If you don’t quickly learn how to leverage every tool availble to you to dramatically extend your reach you are in big trouble.
96.5% of Portland Agents Abucted by aliens
And guess what…there are now the correct number of agents to service the Portland area.
There is no doubt our industry is massively inefficient. It is entirely possible for an agent to close 4-6 transactions per month with the proper support system. In the market area we service there were 687 closings in December with two side per that’s 1,374 sides. agents Required = 1,374/5= 275 agents
That’s right! in an efficient system there would only need to be 275 agents to service the demand for the entire area! I don’t know exactly how many agents we have currently but it’s in the 5000+ range.
Why is there such a dramatic difference? The fundamental problem is in the traditional brokerage business model. The sweet spot of maximum profit is to have a high agent count with low average production numbers. The maximum profit for the brokerage(s) occurs when the total number of transactions is perfectly matched with every agents production stopping at their cap. The cap is a limit to how much the agent pays the brokerage. Caps run around $20,000+-, The agent is usually on a 70/30 split until they reach the cap then they keep 100% of the commission.
example:
cap @ $18,000. Average commission 8,000, split 70/30, Brokerage take = $2,400, $18,000/$2,400= #transaction to cap = 7.5/year, 7.5/12=.625 transactions per month. 1,374 transaction/0.625 = 2,198 agents!
Holy Crap! An efficient system only needs 275 agents and yet the point of maximum profit for the companies occurs at 2,198. Understand that all companies strive for maximum profit. It is what they do, if it is not what you do as a company, you suck as a company!
The basic business model with agents capping at 6-8 transactions per year handcuffs the brokerage. All energy is put towards recruiting, retaining and getting some production our of the marginally effective agents.
This is not a system that can possibly innovate or commit to efficiency because it is direct conflict with it self interest. If there were only 275 agents in our market all of the existing companies would be out of business. There is no incentive for the brokerage, so it is left completely up to the agent to build an efficient and highly productive system.
It is possibly to start from scratch and build a brokrage tht is ideally suited to our new environment that focuses on building the technology and model that thrive with the 275. It won’t happen over night but our industry will move toward efficeincy.