The following article written by Matt Jones was originally published in Broker Agent News on October 17, 2005. It is presented here in its entirety as it was originally published. While non-commercial use of this copyrighted material is encouraged, unauthorized, commercial use is strictly prohibited.
A recent survey of 481,024 real estate professionals averaging 14.1 years in the business found that the single biggest need of agents today is more listings. The reasons vary from needing more customers, to establishing a better market presence, to wanting more freedom – but one thing is for certain: real estate professionals today want more listings!
When I became an agent, I was told, “You’ve got to list to last.” While only 15% of all real estate professionals choose to work as exclusive buyer’s agents, the vast majority (85%) make it a key part of their business to work with sellers, and some work only the listing side. I gravitated to the listing side, typically managing over fifty active listings, with a team of buyer’s agents to service my buyer clients. Everyone is different, but I chose the listing side to generate leads, to establish a position of market dominance, and to give me freedom, allowing me to take weekends off.
Recently there has been much controversy over the role of discount brokerages and fee-for-service companies in our industry, and the downward pressure on commissions has caused many agents to abandon the listing side of the business.
The average commission paid to sell new and existing homes has dropped to about 5.1% today from 6.1% in 1991, according to Steve Murray, founder of Real Trends, a newsletter and residential real estate consulting firm in Denver.
While this continual erosion of commissions is creating frustration for many agents, there are a few agents who have mastered an approach that flies in the face of the discounters. In this article I will discuss five simple steps that, when used, will result in, not just obtaining that listing, but getting top commission in the process. So buckle up, and get out your pen and paper. This article could change the way you think about listing.
1. Step One – Choosing Your Approach. Just as important as knowing what to do is knowing what NOT to do. When I started as a new agent, I read all the books that I could find about real estate and, of course, tried all the traditional listing approaches, such as neighborhood farming, working expired listings, and working FSBOs. And although I was new to real estate, I was anything but new to networking. My personal network or “sphere of influence” (those who knew me and would refer business to me) was much larger than the fifty recommended by most experts.
I am an advocate of any marketing that works, but I’m also a pragmatist. I believe that an agent has to determine which marketing methods are the “highest and best use” of his time and limited marketing budget. As such, much of my traditional marketing had to be minimized in favor of online marketing, where my ROI (return on investment) was much higher. Let me explain: the last postcard direct-mail campaign that I ran to my “farm” was a typical one. I mailed out roughly 1500 pieces at a cost of just over $500 (excluding a half-day’s labor in actually printing the cards and sorting and doing the mailing). I had a yield of four leads, making my cost per lead about $125. (The rough math is $500 spent, divided by four leads = $125 per lead.)
After a while I began to advertise in home magazines. By using call-capture technology, I was able to bring my print advertising (magazine ads) costs to anywhere between $7 and $17 per lead, depending on the magazine. Obviously, this was a much better option for me, and eventually I moved to Internet advertising for the same reason. A typical Internet lead costs me between $1 and $3. What’s even more important is that the quality of online leads is much higher. So I had to learn that, although some marketing choices may have been popular, they were not necessarily a good investment for my real estate business. I had to learn to say no.
Another important element of your approach relates to your plan to negotiate for higher commissions. Recently I’ve read several articles and books that discuss the topic of defending your commission rate in an age of discounters. Most of the advice about defending commissions hinges on the idea of “showing your worth” by all the additional services you provide. My experience has been that this notion is often met with a yawn by the seller, who is not interested in “what I’m worth,” but rather in selling his house quickly and netting the most money.
Your listing approach should demonstrate WIIFM (what’s in it for me?) for your customer. I will get into my listing presentation later in this article, but for now I will point out that it is NOT about all the great things I’m going to do for my customers to earn my 8% commission. In fact, in my listing presentation the customer chooses the marketing plan, the commission rate, and the price, and in one year, 119 of them chose to list at 8% commission or more. I didn’t have to give them 10% worth of additional services to “earn” my 8% fee. I simply sold their houses in half the normal time and netted them 2.7% more money on average.
Don’t get caught in the trap of having to defend your commission rate by giving away the farm. If you do, you will invariably either make promises that you can’t keep (over-promise and under-deliver) or make no additional money after you’ve saved your premium listing. In either case, you may as well have discounted and saved the heartache.
2. Step Two – Get Lots of Leads. It always starts with leads. If you’re going to take a lot of listings, you must have a lot of opportunities. There is a saying that love covers a multitude of sins. I have a similar saying that I use with my agents: a good lead count will cover a multitude of sins! What I mean is that there are very few mistakes you can make that can’t be solved with more leads.
You can have terrible telephone skills and still make a good living if you have enough customers. You might have the worst people skills or negotiating skills and still survive if you have plenty of opportunities. It’s like baseball: one batter has a .400 batting average and gets to the plate 100 times, resulting in 40 hits. Another hitter has only a .300 batting average but gets to bat 150 times, resulting in 45 hits. There’s no doubt who’s the better hitter, but at the end of the year, the lesser player had more hits.
So it is in real estate. Even a weaker agent can surpass much better agents with enough opportunities. And the truth is that much of my success as an agent has been because I had lots of chances, not because I was a great agent. Imagine what would happen if you joined great skill with a great lead count. What huge potential! So make lead generation your focus, and the rest will take care of itself. Now let’s talk about where to get the leads.
As an agent who has tried every conceivable method of marketing, I’ve come to the place where I do almost all my marketing online. As I said before, it’s for one simple reason: online is where I get the most bang for my buck. If I could stand on the corner, pass out business cards, and get a better response for less money, I’d be an advocate of that method. It all comes down to cost per lead.
The National Association of Realtors tells us that Internet customers (website leads) are of a higher quality in every measurable area. They tend to make more money, have better credit, qualify for more house, and make their decisions faster – everything you want from an ideal customer. We’ve all been told that website customers want content. Lots of content. All the “experts” have told us for years that “content is king.” So at one point my website had over 2000 pages of content – everything from school reports to mortgage calculators to weather forecasts to community information to you name it. My site had it all.
However, after three years of continual testing, we’ve learned that the actual data suggests something else. What Internet customers want is simplicity and access to houses. That’s all. The other stuff is nice, but not at the expense of simplicity. Ninety-two percent of real estate website visitors come for one reason – access to listings. So after more than three years of testing, my website has only four things: an IDX link so customers can search houses, a CMA request, a Listings by Email request, and our contact information. That’s all it has, and our customers like the site better than ever. And we’ve learned something else that’s very important. With fewer choices, we get a lot more CMA requests. There are only a few things to do on our simple website, and all of these things specifically deal with meeting our customers’ immediate needs.
3. Step Three – Effective Lead Capture. While having a good website is important, it’s even more important that the website capture leads efficiently. The experts tell us that the typical real estate website has a CR (or capture rate) metric of approximately 1% of all unique visitors. That means that of 100 unique or first-time visitors to the typical real estate website, the agent will get one lead. That’s because the typical real estate website is geared toward giving out information and not toward capturing customers.
The problem with having inefficient capture is that the cost per lead is too high. For example, if traffic costs one dollar per visitor, the cost per lead is $100! If you multiply that by 24 leads (the number of leads required, on average, to produce a closed transaction), you have a customer acquisition cost of $2400 per deal! That’s where lead-capture comes in. The idea is to capture a high percentage of your website traffic, making the Internet a viable source of business. With the use of a good lead-capture solution, you should expect capture rates of between 30% and 35%.
Now, using the example cited before, but with the lead-capture solution installed, the same 100 visitors result in 30-35 leads, or a cost of about $3 per lead. Multiply that by 24 leads (again, the number required to close a transaction), and you have a marketing cost per deal of $72, which means that unless the average transaction in your market is lower than $12,000, Internet marketing is a viable solution! That’s how important the capture rate is and how much it affects the cost per lead. If you’re going to spend money getting customers to visit your site, it’s imperative that you have an efficient capture solution in place.
4. Step Four – Prospecting. Internet leads are different from any other type of leads, and many veteran agents fail when they try to turn website leads into closed business. For an excellent interview that details the proper way to work Internet leads, visit my interview with Michael Krisa on the Broker Agent News Audio Interview page. In it there’s a wealth of information detailing how to capture business from the Internet effectively, and most importantly there’s a very detailed explanation of the real estate buying cycle and how it impacts your prospecting. Broker Agent News Article Archives has another related article, Working Internet Leads, which speaks specifically to the topic of prospecting and the Internet buying cycle.
Even more important, however, is learning to look for the listing opportunities while prospecting. Because most Internet leads come to us as “buyer” leads, many listing opportunities are overlooked. Let me explain what I mean. According to the most recent data, 40% of all buyers are first-time buyers, which means that they don’t have a home to list. Of the remaining buyers, 36% are purchasing either vacation homes or investment properties. That means that a minimum of 24% of all buyers are also sellers. Add to that those buyers who are flipping properties or making step-up purchases, and you can see that 46% of all buyers are also sellers!
Here’s the problem: when a customer tells us he’s buying, many of us overlook the listing opportunity. So why, if he’s also selling, does he come to us as a buyer? We think from the vantage point of expertise: we realize that for the average customer to purchase, he will have to sell his present home, if he has one. So we assume that the customer understands the logical sequence, but the fact is that customers are not logical. All of us have a psychological need for security that generally causes us to look for a replacement home before we’re prepared to sell our current home. So don’t fight reality. Look for those listing opportunities.
5. Step Five – Winning Listing Presentation . Okay, let’s assume that you’ve chosen your approach and begun to focus on lead generation. Let’s assume that you have a great Internet technology solution that’s efficient at capturing leads and yet simple and customer-focused. Finally, let’s assume that you’ve learned how to work with this new Internet customer, and you’re ready to list. Now all you need is a listing presentation that sets you apart from the sea of agents who also want to list the same sellers.
My listing presentation is very simple and very effective, and it’s working well in buyer’s markets, seller’s markets, and neutral or balanced markets, according to many of the agents who now use it. In fact, it’s the same presentation I used to list 119 homes in a single year, all at 8% or more. I will share my listing presentation in a series of upcoming articles here in Broker Agent News , so keep an eye out for them. Whether you use my listing presentation or another listing presentation that will allow you to hold your ground on commissions while serving your clients’ interests, it’s very important that your presentation have several key ingredients.
First, it must be different. If there is one key to success, it’s this: figure out what everyone else is doing, and do as close to the opposite as possible. Most listing presentations are all about the agent. I’m a superstar agent, and I do 37 gazillion dollars in production, and I am in the biggest company, and I, and I, and I, ad nausea. Your client wants to hear WIIFM (what’s in it for me?) and how you are going to meet his needs. Of course, those needs are almost always the same: selling in the least time and netting the most money. Since you know those needs going in, your presentation should be about meeting those needs.
Next, you must establish credibility without being arrogant. The easiest way to do so is by knowing the market data for your area, specifically true DOM (calculated by absorption), knowledge of all of the comparable properties that have recently closed, the number of buyer leads that you’re working with monthly (or your company is working with, if your number is small), and so on. Having these specific numbers available, by memory, makes you an expert in the seller’s eyes.
Finally, you must have a specific approach or marketing plan. Sellers want to know exactly what you plan to do to market their home, not some nebulous, “we’re-just-going-to-get-it-sold” plan. And while many agents have a specific plan, they have not developed the ability to articulate that plan to their customers. You must be able to communicate your value proposition to your customers clearly, or they will find someone who can.
Closing thoughts. Take your time to develop your own presentation. Customers can tell when you passionately believe what you’re telling them. And when you truly believe it, they will too. I trust that these five steps will help you become a master listing agent and will make you more successful in your real estate career. This is an awesome time to be in real estate. More real estate transactions are being closed now than at any time in the history of our nation, and I truly hope that I can help you to get your share of all that business. Ultimately, though, it’s up to you.