(This is Part 2 of a three-part series. See Part 1: Will next housing bust kill my business? and Part 3: Real estate survival of the fittest.)
Today, the National Association of Realtors has more than 1 million members. If the country slips into a real estate recession, 30 percent to 50 percent of those Realtors may be out of business soon. Do you have what it takes to be a survivor?
Last week’s column looked at the first step in surviving a market recession–identifying and then strengthening existing profit centers. This week we take a closer look at eight strategies you need to survive while other agents watch their real estate careers wither and die.
1. Explain the numbers
Whether you are working with sellers or buyers, being able to articulate how much the market is increasing or decreasing is a pivotal survival skill. To do this, compare the average price per square foot today to six months ago. If the price per foot is declining, the seller’s holding costs are increasing. To calculate holding costs, add the PITI (principal, interest, taxes and insurance) plus how much the seller loses each month in depreciation. For example, if the seller’s PITI is $2,000 per month for a $200,000 property and the property is declining 1 percent per month, the seller’s actual holding costs are $4,000 per month. When agents cannot demonstrate how much it costs the seller to have an unrealistic asking price, everyone loses.
2. Dump high-end listings and go for “bread and butter”
Granted, the very wealthy can purchase anywhere they want, when they want. Nevertheless, more than 95 percent of all middle- and upper-range buyers must sell their existing property prior to purchasing their next home. As a result, when the market “goes south,” higher-priced properties are more difficult to sell because they often involve a contingent sale.
3. First-time buyers are “gold”
While expensive properties languish on the market, first-time-buyer properties are often immune to market downturns. The best way to locate first-time buyers is to prospect high-end rental apartments and houses for potential buyers. Since these individuals have nothing to sell, they are much easier to “take to the bank.”
4. You can’t afford to lose a single lead!
More than 50 percent of all buyers and sellers do business with the first agent with whom they have contact. Survival means taking aggressive steps to be the first person the lead contacts. If you can capture leads before they go to a competitor, your business will continue to prosper despite poor market conditions. Many times people who are beginning the buying or selling process will call on signs to learn about current market conditions. To capture these leads, use an 800-call capture system to obtain accurate phone numbers from all print and sign advertising. You will also need a Web site that motivates visitors to provide their contact information. Once you have a lead, be religious about lead follow-up. When market conditions are lousy, you can’t afford to let viable leads slip through your fingers.
5. Lead generation companies may be your best friend
Typically, companies such as HomeGain generate many more buyers than sellers. In a down market, you want buyers. Consequently, joining a lead generation company may be an excellent way to continue to have sales when your listings are not selling.
6. Watch the sales board
Track sales in both your office and Multiple Listing Service. If one geographical area has activity and another is quiet, prospect the active area. Hold open houses. Do everything in your power to be actively engaged in doing business where sales activity is greatest.
7. Dig deep into a niche
People die, get married, and relocate. Each of these events can trigger a real estate transaction. In down markets, representing probates, foreclosures and relocation can keep your business strong. These niches are often immune to market downturns. Watch for announcements of companies relocating in or out of your area. Provide special “newlywed” packages to reach this special first-time buyer market. The objective is to work with individuals who have the highest probability of buying.
8. Work your sphere even harder
Since solid referrals are more difficult to obtain in a buyers’ market, regular contact with your sphere maximizes the probability you will receive the referral rather than someone else.
Remember, to survive a down market, carefully select where you spend your time and money. By paying attention to buying and selling patterns while remaining focused on fundamentals, you’ll keep your income steady and strong no matter what the market does.
Need more help on how to survive the next downturn? If so, watch for next Friday’s column, “Real estate survival of the fittest.”
Bernice Ross is an owner of Realestatecoach.com and can be reached at bernice@realestatecoach.com.
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