I went duck-hunting with Elmer Fudd and came home with a radically different approach to real estate prospecting
[This is a post I wrote at BloodhoundBlog, our national industry-focused weblog. It seemed like a good first-post for the BloodhoundRealty.com weblog.]
About fifteen months ago, we were preparing to list a home for someone we had known for quite a while. The house was a cosmetic flip in an excellent location. We had been consulting with the seller for months to get the repairs and upgrades done the way we wanted them. The seller had great equity, even if he were to sell it at the fix-up price. But he kept trying to cheap out the remodeling, which we thought was the wrong thing to do in a luxury location.
We even paid to have the home inspected, pre-listing, to get another set of eyes on the problems we had identified. The major items on the punch-list were addressed, but not in a way appropriate to the price-range of the neighborhood.
Okayfine. There are listings you can’t get away from — family, old friends, past clients. So knowing that close-enough was going to have to be good-enough, we priced the house as it would be delivered into a buyer’s market: $425,000.
The seller wanted $475,000, which would have been easy to get if the home had been improved to the quality of the location. But it hadn’t. Whoever bought it was going to live in it as-is, or, more likely, they were going to spend that extra $50,000 to bring the house up to its true potential. Ether way, there were competing listings at both prices points, so no one was going to confuse the one for the other.
At $425,000, we could have sold that house in 30 days or fewer, even against all the competition. Lucky us, the seller let us off the hook. He insisted on $475,000, by phone, and he got so mad that he hung up on me.
Dang! I lost a $475,000 listing, which at 3% of never-ever-sold would only have netted out to a loss of around $2,500 for us, not counting our labor.
It takes us a solid week to get a home on the market — photos, floorplans, signs, web site, open house cards, etc. The house was listed the next day — for $479,000. The extra $4,000 might have been an aggravation tax.
The first listing expired in 90 days. That would have been our $2,500, plus a big fat juicy strike-out in a neighborhood full of pricey homes. As far as I’m concerned, the absolute worst form of marketing for a high-end Realtor is not selling the home.
The second listing expired 180 days later. By the end of that listing, they had finally gotten the price down to $424,000 — cutting $5,000 at a time, chasing the market down but always from an above-market price. By the time they got to where it should have been listed over a year ago, it was too late. Does days-on-market matter? I think it does matter, psychologically, but I know it matters in a declining market. If you aren’t going to cut your above-market price to a number very aggressively at or below the current market price, don’t bother. You will not screw the buyer in this market.
Anyway, the house finally sold on its third listing — for $379,000. That’s $46,000 less than we could have gotten for it fifteen months ago — fifteen months of mortgage payments, maintenance, yard work, opportunity costs and heartache.
We were lucky to get fired, rather than having to fire the seller. But we have learned from bitter experience that we simply cannot take a listing that will not sell. I get the idea that some Realtors will take just about any listing, at any price, hoping either that the seller will come to Jesus eventually or that the sign in the yard will pull in enough business to compensate for each doomed listing.
This doesn’t work for us. We spend next to nothing acquiring listings, but we spend a ton of money on our listings. We’re not marketing our brokerage, we’re marketing the home. Everything is focused on selling the home. But, in consequence, our listings tend to sell fairly quickly at fairly high list-price to sale-price ratios. Even in this market, we continue to get multiple offers. Last summer, we sold a house on the third listing for $25,000 more than the list price of the second listing. We are selling high-priced homes in neighborhoods where the neighbors pay very close attention to real estate, so the net result is that marketing our homes as hard as we do is hugely effective at marketing our brokerage.
We are very small, and we are not even close to being as busy as Kris Berg, much less Russell Shaw. But we know going into a listing appointment that the listing is already ours, if we want it. The sellers are sold on our way of doing business before they even call us. Russell has been leaning on us to go on appointments where we don’t have a lock on the listing, so one of my Black Pearls from StarPower is an expired/FSBO campaign. In any case, for now at least, we arrive at a listing appointment with the ability to ask for things the way we want them, fully committed to walking away if we can’t get them.
Again: We simply cannot take a listing that will not sell. Cannot, should not, will not. Our entire marketing strategy for acquiring listings consists of hitting home runs, and we will not list a house unless and until it is a perfect fit to the marketplace. We’re talking about a median value of around $500,000, fairly pricey for Phoenix. We don’t need to hit many home runs to live very well. If we can pump it up to 50 homes a year, we can afford to retire someday.
About fifteen months ago, just about the same time we were getting fired by our erstwhile friend, Cathy was in a house she liked a lot. She decided we were going to list it when it went up for sale, so I registered the home’s address as a web domain.
This is duck-hunting Elmer Fudd-style: We picked out the particular duck we were going to hunt. We’re going through the prep work now to list that home. We had no competition for the listing. It was ours long ago. We just had to wait for it to go up for sale.
We have had great success with people coming in over the transom from Google, some of whom we have done multiple transactions with, some who have become very dear family friends. But most internet leads are just a time-sink, particularly the folks who have invested no time in distinguishing one Realtor from another: Unqualified, unmotivated people probing for information they may or may not put to use. You have to work with each one to find out if there is anything there to work with, but it’s almost always the case that there is not. Working with internet leads is a low-yield prospecting strategy, one that can easily cost more in lost opportunities than it gains in new business.
Taking care of the clients you already have, on the other hand — knocking their socks off and knocking their neighbors’ socks off — seems to us to be a very effective marketing strategy. Our new-client acquisition costs are essentially nothing, and our new clients come to us pre-sold. We can easily grow this to $25 million in gross volume a year, and from there we should be able to ramp it up to $50 million a year. I think we can grow it into high-end markets everywhere, but, in truth, there is a limit to how big we will need for it to grow in order to outstrip our wildest financial dreams.
Hyper-local weblogging plays a part in this, but not as much as it might at other price points. But the same principles obtain: We are target-marketing to particular ducks, identified in advance, and we are persuading them to use us and us alone, now and forever. Even when people find us by the internet, we are pre-conditioning them to our way of working, which is a perfect application of a text-oriented medium like weblogging — and our very text-heavy web site. How do we know it works? Because our clients tell us it does. By talking about what we do, how we do it, and why we will not work any other way, our clients-to-be self-select as our clients. We are not competing for random internet leads, we are building a business that is beyond competition.
It’s actually funny for me to talk this way. We are carrying one listing right now, a starter home in Surprise that I’m selling for one of my investor clients. But we have $950,000 in new listings on deck right now, and we have turned down over $2,000,000 in listings in the past two weeks. Our listings are never on the market for very long — and our stats are improving over time. If we keep hitting home runs, we will keep getting more opportunities to hit more home runs. Our work, our way, our price point, our compensation objectives, our particular pre-identified homes, our wildly-enthusiastic clients-for-life.
Each man to his own Saints, and we’re not terribly concerned about how other people work. Much of what we do is a counter-reaction against the way other people work. I’ve been talking about our listing strategy for a solid year, and, to my knowledge, almost everyone has learned almost nothing. Even in our own market, only the FSBOs are learning from us — perhaps because they want to sell the house, not capture leads. In any case, this strategy is working well enough that we felt confident in walking away from what might have been a lot of commission income. We didn’t believe the houses would sell, but we know that the ones we reserved our time for will.
And that’s the take-away: If you can learn a lesson from Elmer Fudd and hunt for the ducks you want, rather than the ducks that just happen to be flying by, you will build a business you can own — and sell — rather than a business that owns you.