Start a Relocation Company!

Tired of endlessly riding in cars with buyers?  Don’t think you can endure another frustrated seller calling?  No problem.  Start your very own relocation company.  It’s so easy I’ll bet that after you read this you’ll wonder why you never thought of it.

First, let’s think about what a relocation company is at its very core.  It is a company that attracts people who are relocating, and helps them find real estate professionals taking the stress out of moving.  The largest relocation company is Cartus Mobility (originally part of what is now Realogy, the parent company of Century 21, ERA, Coldwell Banker, Sotheby’s International, and Better Homes & Garden real estate brands), and the company in your market who handles their relocation is probably the busiest company in your market.

The agents who work those relocation clients are accustomed to paying as much as 40% of the gross commission for each side of a transaction, and since it is a relocation, there are typically two agents — one on each end of the transaction.  The client has the advantage of relaxing and knowing that a relocation company will be overseeing the brokerage services on each end, allowing them to focus on the other details of the move.

Now, imagine if you could identify relocation clients early in the buying cycle, engage them, and then refer those clients, with an assignable agency contract, to an agent you pre-screened on the client’s behalf.  You could make 40% of the gross commission on each end as a referral, and you could run the entire operation from the comfort of your home.

All you would need is a system to attract relocation clients, and then client management that allowed you to oversee the progress your referral agents were making on your relocation business.   Easy enough.   Check out our technology.  And it is also simple to advertise only to out-of-town buyers when you are doing online advertising.  Let’s think about the possibilities.

You advertise and attract a new relocation client online.  The client has a $200,000 home to sell where they currently reside, and they need to buy a similar but more expensive home in your market, let’s say $250,000.   One of the best parts of this strategy is that nearly every transaction is double-ended.

Now, because you’ve read and understand my Ultimate Listing Presentation, you pre-sell the listing at 8% splitting the commission with the buyer side and keeping 4% for the listing side.  That means 40% of an $8,000 gross commission, or $3,200 for the listing side.  And believe me, the listing agent is thrilled to get the 4% commission.

And on the buyer side, let’s say we are talking about 3% of the new purchase price of $250,000 (assuming no bonuses or higher commission offers by builders or agents).  That is another 40% of $7,500 gross commission, or $3,000 for the buyer side.  Not bad.

Now think about it:  You’ve not burned a dime of gas.  You’ve not wasted a week of your life riding around town showing houses.  You’ve not wasted your weekends holding open houses or showing houses.  You’ve not had to place advertising, yard signs, lock boxes, or any of the other hassles of doing traditional real estate business.

And for your valuable service of identifying, connecting with, and referring your client, you’ve made $6,200 in referral fees.  You have no legally required record keeping, because you are not the agent, but rather collecting a referral fee.  And you have very few expenses.

In a typical real estate practice, you would have the cost of producing 24 leads for each transaction, but because your business is double-ended, you will only have to produce 12 leads.  If you have an average cost of $4 per lead, then your advertising cost is under $50 per deal, or less than one percent of your revenue!  Wow!

I know what you’re thinking.  That can’t possibly work.   Otherwise, lots of people would be doing it.  Oh yes it will.  One of our agents lives in the Dallas market, and this is the only strategy he uses.  He makes more money than he has ever made before, while sitting at home by his pool, in his shorts.  Of course his laptop and phone are close by.   Not only can it work, it does work.

If you started using this idea, you’d probably be the only person specializing in relocation services to your market.  What a great unique selling proposition.  The agents you refer to will love it.  You will make a lot of money,  and most importantly, you will provide a very valuable service to your clients, while keeping your costs to an absolute minimum.  That’s Max-Bang!

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Comments 10

  1. author Tweets that mention Max-Bang Series: Start a Relocation Company! « Blog, Matt. Blog! — posted May 17th 2010. 3:59 pm Reply

    […] This post was mentioned on Twitter by Matt Jones. Matt Jones said: Max-Bang Series: Start a Relocation Company! – […]

  2. author DiAnne Arnette posted May 17th 2010. 5:29 pm Reply

    Great idea….you make it sound easy….we know it’s not.

    8% listings…not here.

    Good ideas to ponder……..

  3. author Pi Hwa Boothman posted May 17th 2010. 6:26 pm Reply

    Our company does have a relocation department to handle that, and agents need to get certified with the company to be able to do those deals.

    You are right, referral agent take 40% of the commission, the left over 60%, we will split with our company depend on our split percentage. It ends up, we do lots of work, but we get very little out of the deal. It’s not very attractive to do it with our company.

    Do we need to set up a firm to do that or how is this work? Please advise.

    Pi Hwa Boothman
    Naples, Fl

    • author Matt Jones posted May 17th 2010. 7:40 pm Reply

      Hi Pi,

      I would recommend that you put in place your own lead generation strategy so you don’t have to depend on your company for business. It is easy enough to do, if you get the right tools. Let’s take an average deal of $200K and 3% commission (or $6,000 GCI). In stead of paying $2,400 for the referral, plus let’s say 30% of the $3,600 left over, you’ve spent $3,480 of a total commission of $6,000. That means your actual split is only 42% unless you have a national franchise that takes some off the gross.

      If I were you, I’d get on the referrer side as opposed to the referee. Then you make a lot of money, instead of starving under the current plan. But then, that’s just an opinion.

  4. author Sheila Reeves posted May 17th 2010. 8:48 pm Reply

    Matt, not a bad idea, but it would be difficult financially to get started. I do like the idea of referring business out to other agents, however, all of the companies that I know of who “relocate” their employees choose the relocation company and their employees must use whomever they have chosen in order to get the relocation benefits offered to them. That would be a big hurdle.

    Let me talk it over with a good Realtor friend who has some of those company contacts and who might want to do it too. She is in NY now with ailing parents but will be back the end of the month. In years past, I have “lost some buyers” who had gone ahead and contacted me and then their relocation company ‘yanked” them back to their relocation company and it’s stable of Realtors. I have been to the point that working with a relocation company that requires me to jump through so many hoops and do so much extra work, that I would almost prefer not to have clients that I have to pay 40% of the earnings for.

    Also, would like to discuss with my youngest son who is a very successful sales professional who manages corporate people all the time. J

    Sheila Reeves,
    Broker, ABR, GRI
    WOW Upstate Realty

    • author Matt Jones posted May 17th 2010. 8:52 pm Reply

      Hi Sheila,

      I am not suggesting you capitalize a “full-blown” relocation company. Go back and re-read my article. I recommend that you capture leads from the Internet, and then refer them to agents, much like RELO companies do. Thanks again for reading and for your comment.

  5. author Tom Pitts posted May 18th 2010. 10:01 am Reply

    Matt, does your book The Science Of Online Marketing have some ideas on how to prospect for leads in other cities?
    I really like your idea.

    Tom Pitts
    Tom Pitts Realty
    Wylie, Texas

    • author Matt Jones posted May 18th 2010. 7:59 pm Reply

      Hey, Tom. Thank you for reading and for your comment. Prospecting is really covered in the book, Becoming a Mega-Producer. I just published an article called Max-Bang Series: Start a Relocation Company! that touches on the subject as well. You might want to read the series on the blog called Becoming a Mega-Producer at the following link:

      Thanks again for reading.

  6. author Bill Honeywill posted May 25th 2010. 4:04 pm Reply

    I wish it was that simple… Relocation companies are 3rd party firms that are contracted for relocation services mainly to shield the businesses transferring employees from the TAX man. The IRS has set the rules about when moving expenses are INCOME to the employee and the Relocation Company better know how to work within the rules. Lots of paper work…. This is not a part time agent business.

    Now Mr. Jones idea would need to capture people moving on their own, usually within the same city or state to by pass the IRS rules. Agents that do this are part of the referral problem of lazy agents wanting 30 to 40% of a hard working agents income. Relocation companies are crushing the real estate business with their demands for high (30 to 50%) referral fees. Agents need to ban together to stand against the powerful relocation companies…

    Bill Honeywill
    Prudential Preferred Realty
    Buyer Agent
    Pittsburgh, PA

    • author Matt Jones posted May 25th 2010. 5:16 pm Reply

      Bill, thanks for reading and for the comment. You are absolutely right about a “full-blown” relocation company. Those involve securing corporate relocation contracts, or government relocation contracts and are quite involved. What I was referring to was a “defacto” relocation company. Essentially finding relocation buyers early using web-based technology, and then performing the same services for the client. Actually, only a small part of the population the corporate relocation benefits, and many of those may well be contract bound before an agent ever meets them. If they are not, any agent is entitled to engage them and perform real estate services for them. In that case, it is a matter of who puts them under contract first. I have personally been several weeks into working with a client when a relocation company tried to pull them in, and I have been successful in keeping my clients. Nevertheless, what I was referring to with this strategy is really not corporate relocation but simply private party relocation and working both sides of the deal as a referring agent. Attracting relocation sales leads is very simple given the right tools and the right advertising. Thanks for clearing it up for us, and thanks again for reading.

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