The Ultimate Listing Presentation (Part 3 of 6)
The Actual Listing Presentation
WHAT’S IN THIS INSTALLMENT?
1. ETHICS AND LISTING AT 8%
2. BECOMING THE MARKET AUTHORITY
3. THE CREDIBILITY FACTOR
4. SUMMING IT UP
This listing presentation will show you how to list at 8% commission virtually every single time! Oh, I know that statement sounds incredible, but it’s true! There’s no reason that you can’t list for 8% or even more. The secret is in this presentation.
ETHICS AND LISTING AT 8% COMMISSION
Okay, before we dive into the presentation, it’s important that we first mention ethics. In other words, “How can I better serve my clients while charging them more?”
Simply by having that thought, you’ve confirmed that you’re an ethical REALTOR® who’s trying to put your clients’ interests first. That’s a good thing. Having said it, though, I need to underscore the fallacy in such a line of thinking. The question we’ve asked seems to imply that you cannot earn good money by doing the right thing. But the truth is that it’s possible to serve your clients, your fellow REALTORS®, and yourself; and with this presentation it’s also easy! Let me explain.
We’ll begin by discussing agency–specifically, seller agency. As a listing agent, your client is the seller in any transaction. You’re the seller’s agent, though, and you have a fiduciary obligation to represent him or her to the best of your ability. As a rule, you should be trying to get your client the most money in the shortest amount of time, since that’s the goal with most sellers. And when I mention “money,” I specifically mean net dollars. Ultimately it doesn’t matter how large or small the commission is: what counts is the total taken away from the closing table.
So if you knew about a strategy that would net your client more money while selling his home in only about half the usual time, wouldn’t it be in his interest to use it? Of course it would! Well, that’s what this listing presentation will do for you. As compared with traditional listings of homes in the same market, my presentation will give you a strategy that has traditionally netted my clients 2.7% more money while selling their homes in only 55% of the average DOM (number of days on the market).
More money in half the time! Think of it! Your clients (and the other agents in the market) will love you, you’ll be paid better in the process, and you’ll begin to acquire a reputation for being the agent with the high-paying listings.
But I’m getting ahead of myself. Let’s take this thing one step at a time.
So…on the flip side, if you knew that selling a house by the traditional method would double your client’s waiting time and, in the process, net him less money, would that be good for him? Of course not! Not even if you saved him some money in commissions! Your job as a listing agent is to represent the seller and to place his needs first, and that’s what we’re going to do.
BECOMING THE MARKET AUTHORITY
Before we get into the listing presentation, it’s important for you to do an honest assessment of your ability as an agent. Can you look into the mirror and feel, deep down, that you are the very best person to represent your seller client? If you can’t do that (regardless of the listing approach you use), it would be unethical to offer your services to this client in the first place. In fact, you’d have a fiduciary obligation to recommend your fellow agent, Mr. or Ms. So-and-So, as the best agent to help him.
So how do you go about creating in yourself the best agent to represent your client? You need to do your homework! You need to study your market. You need to know the market statistics. You need to have clear-cut marketing strategies. You need to have a specific marketing plan that will yield results superior to those of the competition. Otherwise, you have nothing to offer the client! Doesn’t that make sense? Why should your client list his most valuable asset with you if you don’t know what you’re doing? Would you list with yourself? And if your answer to my last question isn’t a resounding “Yes!” — then you need to become that ideal agent before you read another word in this article.
Prior to listing the first house, I knew our market statistics cold. I pulled the raw data from our local MLS and crunched the numbers. Was it fun? Of course not! Nevertheless, I needed to know what I was talking about.
Trust me about this: your client will recognize whether or not you know what you’re talking about. If you’re bluffing, he’ll sense it. You can’t “fake the funk,” as they say. I wish I could tell you how many times a listing client has quoted an agent on something that I’ve known to be incorrect. Because I was completely familiar with my market, though, I would be able to explain that the agent, while very likely a nice person, had his facts wrong. Then I would lay the statistics on the client, and it was quite obvious to both of us that I knew what I was doing.
Here’s the basic market data you need to know before you go to your first listing appointment:
1) Days on Market (DOM). Average days on market is critical to your seller client for several reasons: it’s important in setting realistic expectations about the time needed to sell a home; it will help you evaluate any offers that come in and make an educated decision about whether it’s advisable for the client to wait for another offer or take what’s on the table; and, if you know the DOM for your market (or, better, yet, for the client’s neighborhood), you’ll be able to guide him or her through the process like a professional – which is exactly what you are!
There’s a problem with DOM statistics, however. Most MLS databases have a much-manipulated DOM number which is invariably skewed low. So how can you know what the real number is? Is it possible to determine the actual DOM for your market even if you’re not a rocket scientist? Absolutely! Just use the absorption rate to calculate the true DOM for your area. Let me explain.
Here’s how you get the real DOM. Find out how many homes sold in your market last year and how many are currently on the market. For example, if 10,000 homes sold last year, and there are currently 5000 on the market, what those numbers indicate is that the inventory turned twice last year (10,000 divided by 5000 = 2.0). Now, there are twelve months in a year, and 12 divided by 2.0 = 6.0, which is the absorption rate, meaning that the average time actually on market is 6.0 months. So to convert the absorption rate to days on market, you simply multiply this last number by 30 (6.0 x 30 = 180). And if you figure DOM this way, you’ll eliminate all manipulation in your market by builders and agents who re-list stigmatized homes, which of course are those homes that have picked up a negative image due to their excessive time on market.
2) DOM Standard Deviation (STDEV). What?! By now you’re thinking, “Matt Jones has lost his mind!” Before you dismiss this concept (and me) as crazy, though, let me point out that it will be an easy statistic to calculate and a powerful advantage for you once you know it.
So how do you calculate it? The easiest way to calculate DOM STDEV is by using a spreadsheet such as Microsoft Excel. On your computer, pull up all the closed residential properties for your community from the last year. You’ll want to pull them up in your MLS, using a one-liner format. Then copy and paste that data onto a spreadsheet.
Next you’ll want to delete all but three of the columns: list price, sale price, and DOM. At the bottom of each of these columns, calculate the average and the standard deviation. If you’re using Excel, the function will look like this: =average(b1:b20000) and =stdev(b1:b20000). Both of these examples assume that you’re calculating the average and the standard deviation for column B and that there are numbers in the rows from 1 through 20,000.
Okay, you have the numbers, so let’s assume that the standard deviation of the DOM is 53 days. Let’s further assume your calculation of the absorption method indicates that the true DOM is 186 days. Now comes the fun part! Add one standard deviation (53 days) to your average of 186, and you have 239 days. Add another standard deviation, and you have 292 days. Here’s what that means for your listing client:
You have a 50% chance of selling his home in the average DOM. If you add one standard deviation, you take the probabilities to 84%, and if you add another standard deviation, it’s 93%. Another standard deviation would elevate the probabilities to 96%, then to 98%, and so on. Now let’s say that a competing REALTOR® tries to convince your client that his home can sell in a matter of days and that he should list for ninety days.
You can tell your client with complete certainty that the statistical probability of selling his home in a few days is nil, and that in reality he should expect the process to take the average amount of time plus at least one standard deviation. Using the illustration above, you should inform him that he has a 93% probability of selling his home in 292 days, using the typical approach. If that’s how long, statistically, it’ll take to sell his house, then listing it for ninety days will clearly be a waste of everyone’s time.
Now, your immediate reaction may be that your clients will never go for this system — yet they will! In all but one of my listings I received one-year terms, and in the remaining listing I got a six-month term, knowing that I would sell the house even sooner. When you tell a client, with authority, how long it will take to sell his home, he’ll inevitably respect your honesty and the fact that you know exactly what it takes to sell a home in your market. You’re not guessing, like most agents, and in fact you’re speaking with the voice of authority. Knowing your market better than any other agent will impress your clients while also giving your own confidence level a boost.
3) Average Markdown (List to Sale Ratio). Now let’s go back to the statistics that we worked on earlier. Remember my asking you to calculate the average for list price and sale price? Here’s the reason: you need to be able to advise your client as to the “typical” discount in your market. Let’s assume that the average listing price is $175,000, and the average sale price is $169,000. Now, subtract the average sale price from the average listing price, and then divide the difference by the average listing price.
($175,000 – $169,000 = $6000
$6000 divided by $175,000 = 0.034, or 3.4% markdown)
In other words, your client should understand that it’s normal in your market to expect a markdown (or discount) of 3.4% from the listing price. Setting expectations shows him that you understand the market and that you’ll help prepare him for the offers that will be coming in. You’ll also have an advantage in negotiating with other agents when you know that the average markdown in a certain neighborhood is only 0.5%, while they’re offering 4% below the asking price! You can tell an agent that it’s unreasonable to expect your client to accept such a figure and that he should encourage his client to make a more reasonable offer. I can’t tell you how many times this simple formula has made thousands of dollars for my clients because I knew the market statistics, and the other agents didn’t.
4) Buyers in the Current Market (Buying Climate). Let’s always remember what the seller is actually looking for: to net the most money at closing and to sell the home in the least time. What this means is that sellers are acutely interested in how many buyers you’re in touch with. In fact, when I would tell a seller that I didn’t personally work with buyers, there was a perceivable concern in their minds until I quickly pointed out that I had a team of buyers’ agents who worked with all of my hundreds of buyer customers. Then I went on to demonstrate that I was very much in touch with the buying climate. Here’s how I would do it.
I kept statistical information on how many new buyer leads we generated each week. And since the average home search lasts eight weeks (according to the NAR), it was easy to tell approximately how many buyers we were working with at one time. All I needed to do was simply take the sum of the last eight weeks, and that’s how many buyers we were working with. I want you to imagine what the reaction of a seller was when I told him that my team was currently working with 462 homebuyers in our local market and that I had the names, phone numbers, and email addresses of all of them! And if I hadn’t had my lead capture gateway technology in place, I would’ve had only a fraction of those customers, and there would have been no simple way to track my leads.
Here’s one more little trick that I recommend for preparing your listing arsenal. I recommend printing out each lead as it arrives by email and then adding it to a home-buyers notebook that you keep on hand. In an upcoming installment I’ll show you how this homebuyers notebook can become a very powerful listing tool and how you can use it to cinch the listing. Okay, let’s talk about credibility.
THE CREDIBILITY FACTOR
Let me leave you with one example of how this statistical knowledge can influence your credibility. Imagine a client with a nice home worth roughly $500,000, and now imagine you 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, really, about the local market. 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, with the standard deviation of 72, he has an 84% chance of selling the home within 361 days (basically a year). Furthermore, in order to have 9:1 odds of selling the home, he’ll need to wait 433 days if he uses the traditional approach. The agent promising to sell the house in only a few days is being dishonest or, at the least, confused (or overly optimistic!) because the probability of selling the home in fewer than 145 days is under 7%. (If you’re having problems with the statistics, don’t hesitate to contact me, and I’ll be happy to help you.)
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. 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!
SUMMING IT UP
I think you’ll agree that this is a lot of information to digest! So I suggest that you look through it a few more times until it makes perfect sense. It’s important that you master the basics before we build on them with the listing presentation. Why? Because the presentation requires that you be utterly confident in whatever approach you use. You need to become the best agent you can be. You owe this much to your clients, and you owe it to yourself.
To summarize: we’ve learned that it’s ethical to list at 8% (assuming that the listing will net your client more money and sell his home in less time); but we’ve also learned that it’s unethical not to use this approach if you know it’ll deliver better results (which it will). Your seller client is entitled to the best representation he can get. Let it be you!
So how do you start off down the path toward becoming a great listing agent? First, you need to assemble the technology and the advertising to give you more inbound business than you can possibly handle. That will give you a “take it or leave it” attitude. Believe me when I tell you that customers can tell when you’re desperate.
Next you need to be the best agent for the job. You have to know your market numbers cold. Statistics can be mind-numbing, but the few simple statistics we’ve mentioned are absolutely worth learning. Imagine a bell curve. The center line of this curve is the average, or 50% probability. If you move to the right or left of the center line by one standard deviation, you cover the odds from 16% on the low end of the center to 84% on the high end. A second standard deviation reveals a 7%-to-93% probability. The average markdown will assist you in building expectations for your client and for the other agents, and the process is much easier than it appears. In fact, it’s far easier than reading a HUD-1 or calculating interim interest!
In the next part of the listing presentation, we’ll discuss how to take this knowledge base and convert it into premium listings. You’ll be amazed when clients actually ask you to list their homes at 8% or even more! Not only can it happen; it will happen when you use this approach to selling houses. Do your homework! Learn your market numbers. In only a few hours you’ll have them nailed down.
SO WHAT’S NEXT?
In the next installment, we’ll be discussing the nuts and bolts of the listing presentation itself. Until then, work on getting your technology and advertising in place. Then nail down your numbers so that you’ll be the best agent for the job. There’s never going to be a better time to start than right now.