By Michele Lerner
When it comes to losing weight, everyone knows what works: increasing calorie burning while decreasing calorie consumption. Operating a successful business works the same way: owners need to increase revenue while reducing expenses. But whether you are trying to slim down physically or build a business, more than one approach may be needed to achieve your goal.
“The harder you work, the luckier you get,” says Carolyn Chodat, a broker with Classic Properties in Medway. “This market offers agents an opportunity to hone their skills and commit themselves to diligent work and focusing on the basics.”
Back to Basics – with a Twist
Real estate experts recommend a “back-to-the-basics” approach to business, but with a modern twist: spending time and money on boosting an Internet presence.
Paul Consoli, a broker with Ben Consoli Realtors® in Bradford, suggests that real estate agents focus on their professionalism, which he extends to his office, where he keeps the awnings and sign shining, the carpet clean, the lawn mowed and shrubs trimmed. Beyond appearances, he says that agents need to dig in and do deep, audience-specific research which adds value to client presentations.
“Our job is to give clients education and information, so it is important to think and rethink before talking to them,” says Consoli. “This is the time to lay seeds to be the person clients call two to three years from now when the market turns around.”
Consoli has increased some marketing spending, while reducing expenses by cutting professional staff and dropping advertising, particularly in newspapers. “The silver lining to this slower market is that we have been forced to look at spending and realize you just don’t need to spend money on local newspaper ads,” says Consoli. “We just have to educate our sellers so they also understand the bang for your buck is online.”
His agents are increasing their personal marketing, sending brochures and mailers to 1500 families twice a month with consistent market updates, and reaching out to 300 past customers regularly by phone. The company is revamping their web site and spending money online, especially on Realtor.com, Zillow.com and Boston.com -- sites which have worked for them in the past.
Where Your Dollars Should Be Spent
Chodat points to National Association of Realtors® statistics, which show that 70 to 80% of buyers are looking online for a home, which proved that agents should spend their marketing dollars on their Internet presence.
Real estate coach Jerry Rossi says that 87% of calls to Realtors® come from the Internet.
“Your web site is a billboard in the middle of nowhere, to which you need to drive traffic,” says Rossi. “Every agent’s email address should be email@example.com and they should actively market the site.”
Rossi says agents should drop their yellow page advertising and advises against sending letters, as he says people rarely bother to read them.
Chodat says every agent needs to get their name out to the public as much as they can. “Blogs are very popular across the country and so if it saves costs and brings in business it’s worth a try,” says Chodat. “Just realize your Internet liability is as strong as doing anything in print or in person. Agents can look at Active Rain www.activerain.com to see how blogs can work.”
Chodat says some agents are signing up with lead generation companies to increase business. Even though costly, it could be worthwhile if the agent gets strong leads. She also suggests that while this market requires that agents work in every niche, it can help to pick a group such as first time buyers or condominiums to focus on and develop a marketing plan.
Formulas for Success
“Some of the ways to be pro-active are to work your sphere of influence, go door-to-door, call on FSBO’s, call on expired listings and do cold calling after you’ve scrubbed the list,” says real estate coach Mark Leader. “The law of averages says that the more people you talk to, the higher the chances that you will find someone with the money, motivation and urgency to move.”
Leader advises agents to prospect for clients every day and to focus on saleable listings -- those which are priced right and in good condition.
“The formula for success is to bring in at least one saleable listing per week,” says Leader. “Agents also need to separate the looker from the buyer, making sure the buyers are really ready to move and then having them sign a buyer agency agreement.”
When working with sellers, agents need to stay focused on their most effective selling tool: appropriate pricing.
“Ultimately, there’s only one reason something doesn’t sell: it is overpriced,” says Leader. “Agents need to explain to sellers that they cannot perform magic. Sellers need to wait out the market or sell at today’s fair market value and use the equity to buy something that has come down in value.”
Rossi says that because the great majority of transactions fall through because of inspection problems, he recommends that agents convince their sellers to have a home inspection and buy a warranty before listing their home.
“Sellers can also offer to pay points for buyers and can even offer to pay the first three years of principal on the buyer’s mortgage at the closing,” says Rossi. “This way, the buyers make their first mortgage payment after they move in, but they will only have 27 years of loan payments to make. This won’t cost the sellers that much, since the principal payments are pretty low during the first three years of a loan, but it saves three years of interest for the buyers.”
Developing creative ways of working with buyers and sellers requires both knowledge and experience. Consoli recommends that agents use this slower time to educate themselves through classes, conventions and reading so they understand their market. Attending events with other experienced Realtors® can also increase agent’s knowledge.
While agents naturally prefer to focus on building their business, they may also have to spend time revamping their personal finances to meet the challenges of a temporarily reduced income. Chodat recommends that agents meet with a financial planner to make sure they understand how to pay their taxes, save for retirement and save for a down market.
Diane Rule-Enos, a senior advisor with the North Shore Office of The Patriot Financial Group in Beverly, says that the first step should be to do a budget.
“Ninety-five percent of people do not know what their budget is,” says Rule-Enos. “You need to look back for six months at your expenses and then start saving immediately by packing a lunch and giving up your daily latte. Agents can save on gas consumption by driving together in one car when they are visiting properties. If you put your mind to it, you would be surprised at what people can do when they weigh their wants versus their needs. People need to be creative and go through everything to see where they can cut spending in order to make a contribution to a retirement fund.”
Michael Dooley, a financial planner of the North Shore Office of The Patriot Financial Group, says agents should start by looking at their mortgage, checking the rate and looking to see if they can find a better program.
“Some people regularly pay more than the minimum on their mortgage, and they might be able to cut down on that payment until their income improves,” says Dooley.
Chodat says some agents may need to get a part-time job to supplement their income. “A second job can not only boost the household income, but it can also be used to expand your sphere of influence,” says Chodat.
Business owners may also want to reevaluate the group benefits provided to employees. “Owners may want to factor in their health insurance costs into the commission distribution they offer their agents,” says Dooley.
Plan, Plan, Plan
As part of the financial planning process, agents need to determine how to estimate their quarterly income tax payments, which can be more difficult in a shifting market. James Littleton, a CPA and financial advisor with North Shore Office of The Patriot Financial Group, says that agents cannot rely on the previous year’s income to accurately predict their 2008 income.
“Quarter by quarter, agents should review their income and expenses in order to determine their quarterly estimated tax payment,” says Littleton. “People should highball their projected payments for the first three quarters of the year in order to avoid an underpayment tax penalty and then they can lower their fourth quarter payment once they know what their actual income and expenses are for the year.”
In addition to managing monthly expenses and quarterly taxes, real estate agents need to save for slow markets and for their retirement. Rule-Enos says that while many real estate agents own real estate as their retirement plan, they should also realize that “cash is king”.
“At some point, real estate agents should develop a retirement plan that creates a happy medium of real estate and other investments,” says Rule-Enos.
Combining strong financial plans with revenue-boosting techniques and cost-cutting measures should smooth out the rough spots during this slower market and set the stage for an improved market.
New MAR Benefit Partner Can Help with Financial Planning
The Patriot Financial Group is MAR’s newest Benefit Partner providing members with a complimentary Financial Needs Analysis and access to group rates on disability insurance. Find out more in the Member Benefits section of marealtor.com.
Tips to Boost Revenue and Reduce Expenses:
1. Spend marketing money on building a strong Internet presence.
2. Price homes appropriately so they sell more quickly.
3. Reach out to your sphere of influence.
4. Choose an area to farm or a niche such as expired listings or first-time buyers and develop a system to work it.
5. Spend time on increasing your education and researching your market.
6. Encourage sellers to have a home inspection and fix issues prior to placing the home on the market.
7. Suggest that sellers offer to pay the principal for the first three years of the buyers’ mortgage as purchase incentive.
8. Focus on finding saleable listings that can be priced right and in good condition.
9. Prospect proactively.
10. Find ways to educate yourself for free by attending seminars, reading articles online and searching for real estate tips on negotiating and other topics.
Want even more great tips to boost your business in today’s market? Click here for NAR President Dick Gaylord’s Top Ten Tips to Boost Your Business.