Upping your game selling real estate implies selling enough that you can add the staff to sell even more. For me, that means concentrating on the prospects who will make it to the closing table.
This is a response to Robert Worthington’s post on getting to the next level selling real estate.
I don’t want to represent myself as an expert on production, this for two reasons:
First, because I know that is untrue. I’m a good real estate agent, and I think I’m becoming a good salesman. But if I stand on my tippy-toes, I can almost see over the nap of the carpet. I’m thinking there might a be a world up there.
And second, because I hate it when other people do it. It’s grating when they actually can ride the bull and nauseating when I find out that they can’t — that they’re all hat and no cattle.
With that as a caveat, I have some observations.
Here are three ways to net more income from your working hours:
1. Close more houses at your current gross commission income.
2. Close the same number of houses at a higher GCI.
3. Cut your costs.
Obviously, number 3 works great no matter what else you do, provided that cutting your costs doesn’t cut your production along with it. Marketing is what you communicate, not what you say, and half-assed marketing is worse than no marketing.
Scott Gaertner, a long-time friend of BloodhoundBlog and one of the highest-grossing/highest-netting agents I know, has urged us to pursue plan number 2. I want to do this, and I really, really want for Cathleen to do this, but the time is not propitious for listing luxury homes. In Phoenix — as in Florida, I expect — the inventory consists of lender-owned homes, short sales and the rare, and almost always over-priced, equity sale. I’ll talk about these categories further down, but the bottom line is that, for now, we don’t have either the cash or the resources to pursue the rare motivated equity seller. We can’t afford to acquire that client, and we really can’t afford to fail to close the sale.
I have a lot of respect for plan number 1, because I am a high-D. I like to get things done, and the more things I get done, better and faster, the happier I am in my work. I can show with one party for eight hours, but I’m happier working with four parties over ten or twelve hours. I made a ton of money in April because I have pioneered a niche in rental housing. I sell my share of move-ups and relos and first-timers, but I sell double or triple my share of low-priced tract homes as rentals — and that business is growing very quickly. My GCI per transaction can be very low, but my clients are motivated and expeditious. Most of them have a lot of D in them, too, so our mutual interest in efficiency is mutually rewarding.
This is what I want and I still don’t have it: Someone to handle the back-end stuff that both of us are poor at. We get it done, but I know the right person could do a much better job in one-fifth the time — cutting our costs in two ways at once. That in turn would free us up to sell more, which would in itself lead to greater income. There is no end of leverage to be bought when we can get ahead of our killer monthly nut, but we’re still not doing that reliably. The house that would have been my first May closing hit another snag last night. My pipeline is full, but my cashflow is spastic.
Back to the three major categories of inventory:
REOs are for brutes, as far as I can tell. All those rules and all that chicken guano just makes the listers mean. I know the work pays shit, so your office becomes like a fast food joint or a low-end job-printer: Surly, underpaid staff withering under the glare of hostile management, profitable only by dint of huge volumes of transactions.
Short sales love a good clerk, and I keep running into agents who are preeningly proud of what good clerks they have become. Okayfine. We have found heaven for the high-Cs — except for the high-income part of the job. Figure maybe 84 working hours per closing, on average. That’s your entire work week, so there is no way for one person to close more than four short sales a month. You can do a lot better with an REO-style boiler room, but then you’re back to grinding out greasy hamburgers for pennies on the pound.
Equity sellers, especially at the high end, are a thrilling fantasy. There is no limit to the ways you can find to spend a five- or even six-figure commission check — if you ever see it. There may be a pot of gold at the end of the rainbow, but, far too often, the rainbow never, ever ends.
Real estate joke: What’s a better name for yesterday’s expired listing — tomorrow’s short sale or next year’s REO?
To all of this, I say: Urf.
I like listing appointments, because I like to sell, and I like doing marketing support, because I like marketing. But the day to day jobs that go into listing real estate are not for me. I like listing when the product is prepared and priced to move. But a long, drawn out process of finding a buyer or a tenant is not a good situation for a high-D. I’ve always liked working with buyers, and I’m digging being a property manager.
Each man to his own saints. Cathleen loves to list, but we’ve had to learn to be scrupulously judicious about the listings we take. We lost a lot of money carrying houses we couldn’t move, but we’ve learned our lesson. If you list, you last? Not quite. You cannot last as a lister in this business if your listings do not close.
REOs? Boy howdy!
Short sales? Urf.
Equity sales? Arrrgh!
In the end, this comes down to math — which means I can talk about it, but I don’t do it reliably. But the math works like this:
If my earnings goal per month is X and my anticipated GCI per closed transaction is Y, then I need to close X/Y transactions per month to attain that goal.
You can refine that by working backward from net income, or net after taxes or whatever. You may have to revise your earnings goal upward to get your nets where you want them, but the math is all the same: To net more, you must gross more.
That’s a how problem, and this pack is full of dogs who can help you with the how of closing more homes, but there is an even bigger problem here, I think:
Is what you want to do possible?
If you’re closing three short sales a month, doubling your production would have a profound impact on your income. But can you actually successfully accomplish that result in the working hours of your month?
Maybe you can. But my thinking is that moving up in income implies maximizing the profitable value of your own time: First, by working more-efficiently with more-highly-motivated clients, and, second, by delegating as much non-selling work as you can to other people.
To get to the second state — staffing — you have to get better at the first: You have to produce enough steady cash to pay an assistant or a virtual assistant. That means you have to close more transactions with the resources you have available now — meaning you. That proposition has made me very jaundiced about pots of gold: I am so close to the edge that I simply cannot afford to fail. Buyers who might be interested in making a move? Not for me. Investors who insist on making offers at 60% of list? Goodbye. Brokers or rain-makers with staff have people to waste. I don’t. My job is not as much getting prospects as it is prospect management. I close houses, when I do, because I was smart enough to work with motivated buyers and investors.
As above, I am nobody’s expert, and I am always, always, always better at talking about what I should be doing, rather than actually doing what I’m talking about. But ultimately, this is nothing but a management problem: How do you manage the resources you have to get to the results you want. If you think about it that way, and if you act upon your thoughts, you’ll get where you want to go.15 comments