In today’s challenging market, working in a niche market may be one sure-fire way to help a REALTOR® stay competetive. Niche marketing targets your marketing efforts toward a small, well-defined segment of the industry. These markets are often underserved or under-specialized, and focusing on them can lead you to an area of less competition and more results.
So what are the hottest niche markets today? Experts agree that real estate owned (REO) properties may top the list moving into 2010, and economic indicators continue to predict the second home market as a solid niche for the future while the multicultural market continues to be a major source of new housing demand as well. Countless market slices exist, and finding one that is right for you based on your special skills, passions, and geographic location can create a profit pocket you didn’t even know existed.
Boost Your Income with REO Properties
Real estate owned properties, those that go back to the mortgage company after an unsuccessful foreclosure auction, have been in existence for decades, but the demand has skyrocketed because of the recent explosion of defaults and foreclosures and the unfolding of government regulations.
Linda Kody of Kody & Company in North Andover explains that over the past couple of years the sheer volume of REO properties has created a niche market that is booming beyond anyone’s expectations. “I’ve been working in this market for over 20 years and this segment is not disappearing fast. It’s very important,” she continues, “if you are working in real estate to know something about short sales and bank-owned property.”
Bob Corcoran, national speaker and founder/president of Corcoran Consulting & CoachingSM agrees, but admits that REO sales can be a little more complicated because you’re dealing with a bank instead of just one seller. “Here’s the gist,” he explains, “banks are in the money business—not real estate. They don’t keep real estate on their books; they want cash on their books. So the banks are looking to sell these foreclosed properties.” That’s why REALTORS® can really become indispensible in this market.
Kody explains that to work this market, agents should get themselves educated, knowledgeable, and affiliated. Knowledge is essential because this niche is penetrating all areas of the marketplace. “Even if you don’t want to handle the transaction, you can do a great referral business by becoming knowledgeable in the market.” She suggests getting your foot in the door by working as a buyer’s agent, to farm agents to the banks.
Then she advises that you market yourself through word-of-mouth and through affiliates, i.e. attorneys, non-profits like Freddie Mac, and local planning and development organizations. The banks have a hefty inventory of property, but they also have a lengthy list of agents who want to work in this market. “Actively go after these relationships,” she explains, “work the transactions in any capacity you can and get a track record established.”
But the most important component to give an edge in the niche is education. Kody used her experiences to join forces with MAR in the development of the Loss Mitigation Certification course, which teaches REALTORS®
how to work through transactions in short sales, REOs, and auction properties. Clearly, she admits, education will give you the competitive edge to work successfully in this market.
Grab a Slice of the Second Home Market
NAR’s 2008 Investment and Vacation Home Buyers Survey shows vacation home sales dropped 30.8% from 2007, while investment-home sales fell 17.2% in 2008 compared to 2007.
This doesn’t sound too encouraging as a successful niche market, but NAR chief economist Lawrence Yun says that the findings are understandable. Given the economic backdrop and the fact that most people interested in buying a second home are in their 40s, the large population approaching middle age should drive the second-home market over the next decade.
The buyers are baby boomers (those between the ages of 42 to 60) who are at the peak of their earning potential and Bob Corcoran provides four tips to succeed in this niche market:
1. Know the buyer. Boomers are buying two kinds of properties: vacation homes and investment real estate. Vacation homebuyers are emotional buyers, while investment buyers are pragmatists. So be sure your marketing efforts reflect these facts.
2. Reach the buyer. The Internet is proving effective in reaching boomers. NAR reports that 74% of buyers use it as an information source. So make sure your website speaks directly to these folks and that you are able to respond within 15 minutes to any inquiries. You can also use the Internet to search for people by business types using standard industrial codes—search companies by size and then chisel the list down to the right candidates. Also, don’t count out direct mail to target affluent areas. And consider teaming with your local chamber of commerce—a very popular way to target second homebuyers.
3. Be first in your class. The second homes market is a highly specialized segment of real estate and it pays to know your stuff, so take advantage of every educational opportunity you can find. Earning your GRI, MRE, and CRS designations and NAR’s new Resort & Second-Home Property Specialist (RSPS) can all help establish referrals and a strong educational foundation. And brush up on 1031 exchanges; they’re a huge part of the market.
4. Prefer to refer. Even if you don’t live or work in a hot second homes market, you can still load your plate by referring clients to those agents who specialize in second homes. Begin developing a network of agents in the market. Referral fees are common.
An Inside Look at the Multicultural Market
The foreign-born population is already fueling today’s real estate market and will make up an increasing share of homebuyers in years to come. According to the 2009 State of the Nation’s Housing by the Joint Center for Housing Studies, “minorities will fuel 73% of household growth in 2010-2020, with Hispanics leading the way at 36%. As a result, the minority share of households is projected to increase from 25% in 2005 to 35% in 2020.”
In Michael Lee’s book Opening Doors: Selling to Multicultural Real Estate Clients he offers insight on showing property to this clientele, plus cultural traditions and nuances that can help you communicate and relate effectively with your client or customer.
Excerpted from his book are these general cultural observations that are useful to be aware of in this market.
• Know how important punctuality is to your customers. People from Germany, Austria, and Switzerland are sticklers for promptness. But being 15 to 30 minutes late is generally quite acceptable to those from the Middle East. The Japanese may be consistently 30 minutes late, yet they expect you to be on time. Waiting for them is how you show respect. People from Latin America, Italy, and Spain expect you to arrive late, which they, too, consider a sign of respect.
• Make known your smoking preferences. Smoking is more prevalent and accepted in other countries than it is in this country. If you prefer that customers not smoke in your car or in your sellers’ house, say so. But it’s best for you not to smoke in their presence if you’re a smoker. They may be offended by the smoke but won’t tell you out of politeness.
• Carefully plan transportation logistics. Many multicultural customers bring extended family members with them to showings, so confirm travel plans in advance. Some expect to be driven to showings in a spotless, even luxurious, car. Avoid passing cemeteries and funeral homes with Chinese clients, since they consider them bad luck. Treat a Hispanic woman with respect and solicit her opinion, because she wields great influence in her household.
• Don’t steer your multicultural clients to one particular neighborhood. You can’t legally or ethically assume that people of a particular culture want to live in an area occupied by others from their culture. Your best tactic is
to all the information you have about various neighborhoods where they’re qualified to buy. Let them make the decision.
Additionally, Ana Portillo, Certified International Property Specialist and current chairman of the MAR International Council, gives her perspective on educating yourself and share many of the resources available on marketing to this niche in the “Insider” column on page 24.
Getting Started in REOs
Bob Corcoran provides his clients with simple steps to help them take advantage of REO’s. His tips to succeeding in the market include:
1. Hire help to handle
2. Create an effective REO team
3. Stay in contact with REO departments for new business
4. Focus in on the most profitable zip codes
5. Streamline the REO process
6. Develop REO specific scripts
7. Target investors as buyers for REO properties
8. Handle the costs of fixing up properties
9. Craft effective marketing strategies for REO listings
10. Continue taking residential listings while maintaining REOs
More information is available on www. CorcoranCoaching.com/reo.php.