There’s always something to howl about

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 so far

  1. sfvrealestate May 17th, 2011 7:18 am

    Loved this! And it’s so true. Also, hiring staff and paying them what they’re worth increases your income by what? $10k a year after you staff up? That’s not even enough to pay for the coronary surgery you’re working towards.

  2. Missy Caulk May 17th, 2011 7:56 am

    I hope this doesn’t sound trite, but having a good Assistant should make you money because it frees you up to do the high dollar things and the things you are good at.

    I have had an Assistant since my 2nd year in the business and she was with me for 12 years. She spoiled me because she was so good. She went on to be a Buyer Agent and is still on my team.

    Since then I have had 3,give them 3 months and if you are spending more than you are making it is not the right fit. I hate paper work too and am a D primary and I second.

    When I list a new house or sell one, I hand the paper work off and we send a nice letter introducing my Assistant and explaining they will take over from here on out.

    If you have them take the DISC test prior to hiring, you will have a good idea of their strengths and weakness. Obviously hire to your weakness.

    My Assistants get as good a recommendation as I do because they love what they do.

    Nothing is permanent but you could give a trial period for 3 months and then re-evaluate.

  3. Greg Swann May 17th, 2011 8:02 am

    > I hope this doesn’t sound trite, but having a good Assistant should make you money because it frees you up to do the high dollar things and the things you are good at.

    How do you compensate your assistants?

  4. Missy Caulk May 17th, 2011 8:16 am

    I pay them as Casual Labor so I don’t do payroll. They are available but no regular office hours.

    When there is work, they work. When not they don’t. That prevents me from having a salaried person during the winter months in MI. And paying them to sit with nothing to do at my expense.

    Many stay at home mothers like this as if they have a school function I am kool with that.

    I pay 14.00 a hour monthly when they turn in their hours.

    It is a little high but I am compensating for not having to do payroll. They are responsible for their own taxes and I 1099 them at the end of the year. My CPA figured out with taxes it would be close to $10.00 an hour salary.

    I have a dedicated Team Gmail account which we can both check and use Google Calendar to follow the contingency removals and deadlines. That way I am aware of what is going on and if tasks have been followed, yet not doing the actual correspondence and paper work.

    My team sends all Purchase Agreements to the Gmail account as well.

  5. Erion Shehaj May 17th, 2011 7:07 pm

    This comment thread hit a nerve since I am in the process of hiring an admin assistant right now. What would you say is the best resource for DISC tests?

  6. Missy Caulk May 17th, 2011 7:27 pm

    Erion, I have used ResourcesUnlimited online and they take it in my office, and it is emailed to me.

    I think I pay between 49.00 and 75.00. Now KW has a shorter version that I can use for free but this one is much easier to use.

  7. Robert Worthington May 18th, 2011 4:36 am

    Thanks for the post Greg. Congrats to you on the 1k a day. That is a great goal.

  8. Sam Dodd May 18th, 2011 9:45 am

    Congratulations on your 1k a day! It’s a fantastic goal. I liked your points, thanks for sharing!

  9. Sean Purcell May 18th, 2011 10:21 pm

    Is what you want to do possible?

    Amen Greg. I surveyed a lot of agents and brokers last year for a project I was working on and here’s one of the startling findings:
    – average number of agent hours for a listing, from first appt to close: 35
    – average number of agent hours for a buyer, from first appt to close: 80

    (These numbers are representative of the market we are in and will obviously vary, especially the buyer’s agent number.)

    I talk to agents and they tell me their financial goals… and then they tell me about their plan to work with buyers. Well, how many transactions/month can one agent close at 80 hours a pop? Not too many. This only further illustrates the point you made in your comment yesterday: List, list list.

  10. Greg Swann May 18th, 2011 10:43 pm

    > This only further illustrates the point you made in your comment yesterday: List, list list.

    I didn’t say that. I argued fairly strenuously to the contrary. Listing in foreclosureville is a poor idea for standalone agents or small teams. That’s our experience, in any case. But our hours, in both cases, are the opposite of your findings.

  11. Sean Purcell May 18th, 2011 11:05 pm

    Apologies… it was Broker Bryant and Jeff Brown who argued the soundness of listings.

    I’m not arguing for anyone to become an REO listing agent. In my market (the only one I know), REOs and short sales make up something over 50% of the inventory, meaning one can (and should) pursue listings. Same caveat for the hours: here in San Diego it is a seller’s market and between the ridiculousness of dealing with mortgage lenders and the insanity of dealing with short sale lenders, the hours spent on buyers can be overwhelming.

    Regarding your hours: are you in a buyer’s market there in Phoenix? What would you say are your average hours for the categories I described?

  12. Dan Connolly May 19th, 2011 11:47 am

    Buyers are the greatest percentage of my business. I would guess that the average time in a buyer transaction would be closer to 30 hours. About 25% of mine buy the first day out. The biggest factor in having a successful business is true for both buyers and sellers. Figuring out who not to work with. No overpriced listings and no unrealistic buyers. I am not here to help people steal houses.

  13. Louis Cammarosano May 21st, 2011 6:33 pm

    Hi Greg
    Option 2 sounds like the post office option. raising prices is great if you can get away with it.

    Option 3 is never a growth strategy and should always be pursued as a matter of good business operations

    Option 1 is the what needs focus-get more clients do a great job with them while constantly refining option 3 and if all works in your favor hit option 2.

  14. Dan Boyle May 26th, 2011 2:32 pm

    Does anybody have a standard for dropping listings that have proven to be overpriced or aren’t getting a minimum number of showings?

  15. Missy Caulk May 26th, 2011 3:08 pm

    Dan, I don’t take them in the first place. Now here is what happened this year. A past client of mine called and told me he wanted to sell, he has been in DC for over a year.

    I pulled up comps and told him what the market would sell for. He has a hissie fit, so I looked at what was active that would be competition for his home and there was NOTHING.

    So I said, OK, with the little voice inside of me saying, “don’t.”

    12 weeks, NO showings later…I sent him a lovely email, saying, “Hey _____You know I love you, but the market has rejected the price on your home. I know you don’t want to reduce so I pulled it off the market today.”

    I’m sorry but 12 weeks w/o one showing the market has spoken.

    No hard feelings, he understood and said he will call me if he decides to rent it out.

    I learned from a coach a long time ago, make it about the market rejecting the home, not you, not them. Most folks can understand that.

    Lesson learned.