When the real estate market turns downward, does it feel like a race to the bottom? Are your competitors dropping their commissions in an attempt to secure property listings? Are you frustrated and scratching your head wondering how to compete?
As business owners or salespeople, we all love to ride the highs of a bumper season, whatever the industry. However, as the saying goes, “what goes up must come down”, and the real estate industry is no different. It’s undoubtedly cyclical in nature, so the down times are inevitable, but how do you prepare to handle those times when the market turns?
Today, we discuss what you should do to protect your real estate business when it becomes a bumpy ride, and highly competitive.
Would you work for free?
In recent weeks, many of my real estate clients have been sharing the despair they feel when neighbouring real estate agents drop sales commissions to 1.3% or lower, or worse still offer to cover the entire expense of a vendor’s marketing campaign, to secure a signature on their agency agreement.
One real estate principal even shared a story about a competing real estate agent that had secured a mid-range listing by offering to sell the property for free. Was this pure madness?
It makes you wonder how far some real estate agents will go to win listings. Perhaps this particular agent felt it was a good strategy for building up their experience, to help them win paid work in the future. Who knows?
Industry disruptor or devaluer?
The real estate industry is not alone. Many other sectors face disruptive business practices like these. The digital marketing space is no different. New players can devalue an industry, by offering a lesser service at a lower price to secure listings.
However, all that happens is that the flow of money within the industry as a whole gets reduced and the services that once were great cease to exist.
“Craigs List in the USA is a well-cited example of how free web classifieds halved online classified advertising revenue in one year.”
The Uber model, on the other hand, has used the power of technology and crowdsourcing to disrupt the taxi market and reinvent local food delivery.
Who do you see as the key devaluers or disrupters to the real estate industry right now?
The self-fulfilling prophecy
As you are no doubt well aware, media companies love to report on the real estate market. As soon as they get wind of a change in direction, the daily news media fuels the speculation that ‘the end is nigh’ or ‘prices have gone too high’. Sensationalism sells after all.
It makes me wonder whether real estate agents that change their behaviour and commission structures cause hear-say to become true.
Can you self-fulfil the prophecy that the real estate market will lose 5, 10, or even 20 per cent in value, just by saying this fact out loud to home buyers and adjusting commissions with sellers?
I’d love to hear your views.
How to combat the race to the bottom
So, what can you do to combat the fearmongers and keep your name, reputation and income on top?
1. Compete with service, quality and uniqueness (Entrepreneur.com)
Donald Todrin is the author of Successfully Navigating the Downturn published by Entrepreneur.com. He highlights that “It’s not just about adjusting prices – you need to broadcast your differences, tell people why they should [list] with you, provide them with added value, not discounts.”
Donald even promotes the fact that smart business owners can grow in a downturned market.
A Ray White client of mine who has been in the industry for close to 35 years said this very same thing to me. He expressed that a downturn in any real estate market flushes out poor-performing agents. He was keeping a positive outlook on the future and looking forward to better opportunities to gain market share.
Donald goes on to say “Resist profit-eating sales and discounts. Don’t give away your product; instead, compete with service, quality and uniqueness. Expand geographically, if you can too.”
Consider the pain point that your clients face in a real estate market where home values are in decline. They’re most likely ‘fearful of timing the market incorrectly’ and ‘struggling to make the right decisions’.
A rooky agent will also struggle in this market, whereas a seasoned real estate professional, who has ridden the highs and lows before can truly shine.
So, start sharing your know-how in your marketing and listing presentations. Use examples of past clients’ situations and stories that relate to such a market. Highlight that you know how to navigate the downturn with better-than-average results.
Donald also recommends that you “Review your marketing and reduce spending on traditional media. Use online tools and focus on existing clients first; get more out of them.
He goes on to say that “Digital marketing will save many companies.”
2. Educate home sellers in your local market
A client of ours, Belle Property Balmain, has taken a calm and professional approach. Hoole.co support Co-Principals, Monique Dower and Lynsey Kemp, with their digital marketing. We built a suite of webpages, blogs, videos and downloadable reports, plus set up an automated marketing system to capture leads.
Each week, we produce, publish and promote articles for Belle Property Balmain and promote them across Google and social media. Lynsey and Monique are very hands-on with their content, we do the writing, but the intellect and opinions are their own.
Both ladies have impressive accolades to their names, such as REB Top 50 women in real estate and Top 100 agents nationally. They understand the importance of engaging professional help with their brand marketing so that they can remain focused on listing and selling properties. We, therefore, play a vital role in helping them educate local sellers, and property investors, which in turn helps ensure Monique, Lynsey and their Belle Property Balmain team remain highly visible and receiving qualified leads.
Two recent reports we wrote for the Belle Property Balmain office are excellent examples of the smart approach he took to educating potential vendors and landlords on the current real estate market conditions; Balmain Peninsula Home Sales Report and Property Investor Report.
It’s crucial to recognise that even though you may not be able to shift the views of an entire nation, you can become a key person of influence within your own circles or neighbourhood when it comes to pertinent and timely real estate advice.
3. Re-evaluate your business (Forbes.com)
Jayson DeMers, a regular contributor on Forbes.com, says “If sales are declining, or you’ve got fewer [clients] coming in your door, it’s time to figure out what’s broken in your business and make a serious commitment toward fixing it.”
Jayson lists the top 4 reasons why most businesses fail as;
1. You don’t know how to market your business
2. Your prices are too low
3. You don’t really know your customers
4. You think SEO and social media don’t apply to you
So, knowing your market and better still understanding how to market yourself as a real estate agent (cheaply and cost-effectively) are the main areas where many businesses come unstuck.
4. Promote your real estate brand to loyal past clients (Gov.au)
The Queensland government have also published an excellent piece of advice to help Australian businesses protect themselves in a downturn.
They highlight the need to strengthen your business by making your marketing strategy your primary focus. Saying that better understanding and finding clients should be your number one priority.
Key tactics they recommend are;
1. Running loyalty or customer incentive programs
This is an excellent idea that can be applied by principals, real estate agents and property managers alike.
2. Adapting your services to be more suitable to current needs
Reducing commissions or covering property marketing campaign costs are not the answer here. Instead, consider helping potential vendors better understand their options and where the market is likely to head. Help them produce the financial calculations that will inform and guide their decisions.
3. Diversifying your business
This is a much broader strategy, but a good one to keep in mind at all times and includes extending your real estate services to property management or becoming a buyers agent or partnering with a mortgage provider. However, this is something to put in place long before a downturn arrives.
The government also advise using more cost-effective means of marketing your business and recommends looking toward social media.
Become a better real estate marketer
So, the moral of the story is to hone your marketing skills, be more strategic in your go-to-market approach. Rather than cut your marketing spend altogether, or worse still cut your real estate commissions, find better more cost-effective ways to promote yourself as an agent or your real estate brand. Reduce your traditional marketing spend and move budgets toward digital and social media marketing. Moreover, educate, educate, educate.
Take a proactive stance and you’ll not only survive but have an opportunity to thrive as a real estate agent or agency principal!
And, if you’d like marketing help. Get in touch!