The numbers are in and sales of existing homes fell 1.8% from July 2014 to a seasonally adjusted annual rate of 5.05 million in August, according to National Association of Realtors data released yesterday. Forecast for September is 4.88 million or another drop of 3.5%. At the same time, sales were down 5.3% from a year earlier, when the pace stood at 5.33 million.
As you can see from the chart above, we are entering our seasonal slowdown, off from the highs of the traditional summer moving season. Many of you may not have even noticed the slowdown in your budgets because the median existing-home price in August across the country was $219,800, up 4.8% from a year before.
Most of us see numbers like these and think, “Okay, so my income for the winter will be 15-20% off the level of the good summer months. I can live with that.” But here is the problem with that line of thinking.
While it is true that all of us — the combined total of all real estate agents — will experience that 15-20% pull back, the reality is that none of us will actually experience a 20% pull back. Some will experience no drop at all, while others of us will experience a 50% or even a 100% drop in our incomes.
Here is what I mean: Housing prices — and our commissions are tied directly to housing prices — don’t drop 15-20% month over month. The total number of transactions may drop, but the per transaction commissions are actually increasing year over year from an average of $6,292 last year to $6,594 this year, or an increase of over $300 per deal.
So if you did 5 transactions last month, you might do 4 next month. But if you only did two last month then you might only do one this month, or a drop of 50% in income. And if you did only one deal last month you could very well do no business at all next month. In your world, that is huge! While the market might only be off by 15-20%, your income is off by 100%!
What I am trying to demonstrate is that seasonal slowdowns affect mega-producers only a little, but for agents who are average producers, the hit to their incomes and their lifestyles is huge, often the difference between surviving or getting out of the business. You’re thinking, “Okay, Matt… You’ve got me really depressed now. Thanks a lot!” But wait!
I actually have good news to offer. You don’t have to be a victim of a seasonal pullback. If you know how to find customers, you can shift that pullback to somebody else and not allow it to affect you. You can make it somebody else’s problem. Sure, the market might be off by 15-20% but your world can go on like nothing ever happened.
Here is how you do it. Accumulate the tools to effectively capture leads when they come your way, and then use targeted direct response advertising to bring those prospects to your capture tools. You can have the best ads in the world, but if you can’t capture the prospects when they come, you might as well not even advertise.
Lead Capture Tools. In today’s real estate climate you need to be able to capture online inquiries, phone inquiries, and text-message inquiries. Yes, most customers today begin their home search online, but there are still plenty of buyers and sellers who simply pick up the phone or text-message a yard sign for more information. If you can’t effectively capture those leads too, you are at a severe disadvantage.
That’s why when we built my Ultimate Website, we included all three state-of-the-art LCM technologies — LCM Web, LCM Phone, and LCM Text. [Since this article was originally written we have added a fourth type of lead capture to the Ultimate Website system: social media lead capture.] And all three deliver your leads in real time both by email and text message allowing you to be quick at followup. When the leads come in, they are also pre-labeled to identify which LCM and which ad they came from.
But whether you get your lead capture tools from my company or you build them yourself or buy them elsewhere, the simple fact is that you cannot survive seasonal pullbacks without a steady flow of high quality, inbound customer leads and that means effective lead capture for every source of customer inquiry. Show me a mega-producer and I will show you somebody who has effective lead capture tools.
Targeted Direct Response Advertising. Most people think of advertising and immediately think of spending lots of money. In fact most real estate gurus are teaching that you should spend 20% of your gross commission income each year on advertising. And let’s face it: when income is drying up, the last thing we want to do is spend money.
I believe that most agents today — at least those who want to do up to about a transaction per week — can actually spend no money on advertising and still have all the business they want and all the leads they need to produce that business. It’s true.
If you have effective lead capture tools, you can advertise for free on classified sites like Craigslist, and produce a steady supply of warm, inbound, customer leads without ever spending a dime on advertising. I run ads like the example you see above and generate 3-5 leads every day, day in and day out, without ever spending a dime.
Yes, I’ve heard agents complain about how Craigslist will not produce leads. Let them go ahead and whine. I have hundreds of agents who generate all their leads, exclusively from Craigslist but Craigslist won’t work if you don’t have effective lead capture. That’s why I told you to get your effective lead capture tools first.
Last month nearly three-fourths (73%) of our agents generated all the business they wanted using nothing but our proven advertisements on Craigslist along with our LCM Web, LCM Phone, and LCM Text technologies. Only 27% of all the leads our agents captured came from a paid advertising source.
And here is a statistic I find particularly impressive. While the bulk (77%) of our leads captured came from the internet using our LCM Web, still our agents captured quite a lot of offline business as well. Our LCM Phone technology still amounted to 16% of all leads captured last month and our brand new LCM Text captured a remarkable 7% of all the leads.
In other words, it just confirms to me that we are moving in the right direction by providing for all three lead capture technologies in our Ultimate Website system. Those extra 23% of all leads captured might just be what our agents need to make it through the seasonal pullbacks without upsetting their budgets and lifestyles.
Here’s an email we received just last Thursday that clearly illustrates how pullbacks don’t have to be for everyone.
I’m a second-year broker who just found and started using your Ultimate Website in May. I had so many customers from it this summer that I honestly couldn’t call everyone back and let a lot of leads fall through the cracks.
But I’m using your LCM Income Calculator and still expect to make my goal of $95,000 in commissions this year. However, many of the older brokers in my office have warned me that the last quarter is going to be painfully slow and that I should re-adjust my goal.
As of today, I’m right on schedule, but maybe I should be ahead of schedule in order to hit my goal by December? What do you think?
Well, Jared… my answer is congratulations on a job well done and don’t listen to the old-timers who don’t understand that your lead count is entirely in your own hands. As you already know by now, you can easily make all the leads you need to meet your goal, pullback or no pullback. Let those old-timers experience the pull-back without you! And if you’re reading this and wondering if it could be you and not Jared, the answer is a resounding, YES!
So if you are beginning to feel the pressure from the seasonal pullback you need to ask yourself if this is a welcome break or if you just don’t have all the business you’d like. If you’ve been wide open all summer and you need a little break, don’t do a thing. But if you’d like to be doing more business and not slow down, then focus on those two things: Get some good lead capture technology and then run some targeted direct response advertising. Let this pullback be somebody else’s problem and not yours!