I visited the Apple store in Durham yesterday to try out an i-Pad. While I was there I talked to the kid who helped me, and he was probably 23. Maybe. He’s shaving at least once a week, I’m certain of it. Funny thing was, he knew more about what he was selling than almost any REALTOR® I’ve ever talked to. What a shame.
It made me reflect back to another time — a time when we would go to a store, and the sales clerk would actually know what they were doing. A time when you’d walk into a men’s department and the salesman would immediately know your size (without asking) and your color pallet.
I assume that real estate was probably once like that too. I’ve just not been an agent long enough to remember such a time. As long as I’ve been an agent, the typical REALTOR® knew as close to nothing as is humanly possible. My gosh, just going to the mandatory training ought to cause us to learn a few things, even if only by osmosis, but apparently osmosis doesn’t work with continuing education.
And what’s really great about our industry is that we really don’t have to know that much in order to know vastly more than our clients, our peers, and likely even our brokers. In less than a week of self-directed study, you could easily become the best-prepared and best-educated agent in your market. I’m not kidding. We’re not talking about qualifying for the Olympics here!
But imagine the competitive advantage that could be yours for that very tiny investment! Okay, Matt, I’ll bite. What should I know that none of my competitors know? Just a few things, really. And you can learn them all with very little effort.
Day On Market. First, you should know your actual Days On Market or DOM. Not the one given you by your MLS. It’s wrong. You should be able to calculate that number yourself in a matter of minutes. You might decide to go “hog wild” and calculate it for various price tiers or for various other subsets of your market.
Absorption Rate. Next you should know your market’s absorption rate. I would know it for new and existing homes, and I would know it for several price tiers. Again, it is easy to calculate, and it will not only give you the knowledge advantage, but it will give you real confidence because you figured it out yourself. Trust me… it really is easy to calculate.
Sale-to-List Rate. Don’t ask me why it’s incorrectly called list-to-sale ratio, when it’s really the sale-to-list rate. But regardless what you call it, you need to know what the average markdown is for homes in your market. If an average home is listed at $200,000 and it typically sells at $190,000 then your average markdown is 5% or your sale-to-list rate is 95%. In other words, homes sell at 95% of what they list for in your market.
Sale Probability. Next you should know the statistical sale probability in your market. I used to teach agents to calculate the standard deviation of the average days on market (STDEV-DOM), so they could then compute probability. But that was actually fairly complicated to do, and even harder to teach someone to do. Don’t worry, I’m about to make it super-simple for you.
After getting calls and emails from agents wanting help on calculating all the numbers I just mentioned, I finally just decided to build some calculators to allow any agent to figure these numbers out for him or herself. Once you know your true DOM, your absorption rate, your sale-to-list rate, and your statistical sale probability, you’ll have a huge advantage over your competitors.
I’ve put a calculator series on my blog, as well as the actual calculators that will allow you to become the resident genius in your market. I encourage you to take a few hours to check them out and calculate your own market data. You might even bookmark the site and come back every quarter to recalculate the numbers. It’s easy, and it will make you a ton of money. Here is a link to the calculator series.
Finally, let me share an example of how having this statistical knowledge can influence your credibility. Imagine a client with a nice home worth roughly $500,000, and imagine you’re going up against the top listing agent in your market. How do you feel? Are you nervous? This guy has lots of signs all over the area. Who are you? Just some new agent without many listings?
Now imagine that the top dog is a typical agent who doesn’t know anything about the local market outside of what he’s heard around the office. He’ll talk in generalities about how good he is at selling homes and how quickly he expects to sell this one. But because you know the market data, you go into the listing presentation ready.
You tell the seller that homes in his price tier have a DOM of 289 and that he has a 9.6% chance of selling the home within 30 days, 12.5% in 60 days, 15.7% in 90 days, 29.3% in 180 days, or only a 64.5% of selling in a year.
Furthermore, in order to have 9:1 odds of selling the home, he’ll need to wait 540 days if he uses the traditional approach. That agent promising to sell the house in only a few days is being dishonest or, at the least, is confused (or overly optimistic!) because the chances of selling that home in 289 days is 50/50. That’s what average days on market means! Just as many will take longer as will take less than the average.
Then you begin to show this potential client a better way, a way that will more than double the chances of selling his home while netting him more money. (Read about my ultimate listing presentation on my blog as well.) Guess what? You’ve just landed a really nice listing. And why? Because you’re the best agent to sell it! And now that you’re the best, you can sell the listing with authority. You’re the best, you know it, and now the client knows it too. Most importantly, you’ve got the listing!
I could give you example after example of how having the data gives you a huge advantage, whether negotiating for a buyer or helping a listing client. I’ve personally won many listings because I knew what I was talking about, and you can too. I’ve attracted clients who happened to overhear me discussing market information with other agents.
I’ve been able to answer tough questions and won the respect and the business of customers — all because I took a few days to know my business. And you could too. Think about how spending a few hours in study would pay huge dividends in your reputation, your expertise, and your confidence. And it’s totally free! That’s Max-Bang!