The following article written by Matt Jones was originally published in Broker Agent News on September 9, 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.
According to the 2004 National Association of REALTORS® Profile of Home Buyers and Sellers, a full 77% of all our customers are using the Internet for at least some part of their home searches! And that number is growing.
In the last year alone it increased by 26%. These days, to be out of the Net is to be out of business! The simple fact is that, if we don’t learn to tap the Internet, odds are we will be doing something besides real estate in a few short years.
So let’s take a look at these “Internet” homebuyers. Here are some things you may want to know about them:
- They’re better educated.
- They have more money.
- They’re buying more house.
- Their search time is shorter.
- They like to help in the process.
Sound like the perfect customers, don’t they? However, today’s real estate customer is more demanding than his predecessors and wants information right now. Tomorrow’s not good enough! He goes to the Internet to get that information, and if you’re not there, several national lead aggregators will be there to grab him.
It’s imperative that you have a strong web presence, that you learn how to capture business from the web, and, most importantly, that you know how to respond to today’s Internet customer.
INTERNET REAL ESTATE FOR DUMMIES
Let’s talk about the nature of Internet leads. How are they different from other leads, such as referrals or duty-desk leads? Should you handle them much as you would sign calls? Or should you treat them like open-house leads? How can you know how to approach them? Are they all the same?
The Real Estate Buying Cycle
An agent who has come up doing traditional real estate and who’s been very successful at it is frequently unsuccessful when he tries to transition to Internet leads. Why? Because he tends to approach Internet leads the same way he’s always approached leads, and for the first time in his career he’ll find himself failing.
The first temptation for a confident and successful agent is to assume that Internet leads are of poor quality since, for whatever reason, and even though he clearly knows how to prospect, he’s not making a connection with these leads. This problem is compounded by the fact that many of the sellers of Internet leads provide very little information-often just a name and an email address.
The reason many agents fail in prospecting Internet leads is a fundamental misunderstanding of the real estate buying cycle. The Internet customer is an ordinary customer, with the same needs and motivations as any other real estate customer, except that (as research shows us) the Internet customer is the cream of the crop, so to speak. So let’s talk about the real estate buying cycle and how we can use our knowledge to change the way we approach and follow up with real estate customers on the Internet.
The real estate buying cycle consists of three phases: information-gathering, the search, and finally escrow. The successful writing and acceptance of an offer to purchase mark the end of the search phase. Of course, there’s still the escrow phase, which ends at closing. This buying cycle has been relatively unchanged for many years. Until recently, though, very few agents knew of the existence of Phase One. Make no mistake: Phase One has been with us for as long as people have used agents to buy real estate, but until recently it has remained largely unknown.
Phase One: Information-Gathering
The best research indicates that home shoppers begin the process of buying a house about 4-6 weeks before the beginning of Phase Two, or 6-8 weeks before the beginning of Phase Three. At first they’re just thinking and dreaming, but that dreaming leads to visualization as they become obsessed with the idea of getting a new home. In fact, in their minds they’ve already bought one!
During the early part of Phase One, the buyer is thinking about budget, features and amenities, neighborhoods, and school districts. Let’s not forget that this is the American Dream! We’re taught from earliest childhood that home ownership is very much a mark and measure of success in our culture, so we want to be careful and thorough in our search process. In this initial phase, the customer is solidifying, in his own mind, what he wants to buy. He chooses his search criteria and his budget (often incorrectly, as any experienced agent can tell you!).
This is a very important part of the buying cycle, and it’s going to happen whether we like it or not. The best thing we can do is realize it, accept it, and plan for it. Most importantly, Phase One of the buying cycle is the only part of the process that every customer wants to do on his own. Our clients don’t want to have their dreams shaped by agents, parents, friends, or anybody else. They want the dream to be theirs. This phase is going to last 4-6 weeks. Anyone attempting to speed up the process does so at his own peril!
Phase Two: The Search
After the information-gathering phase has run its course, the buyer proceeds to a new phase and a mental shifting of gears. He’s decided what it is that he wants and is now on a legitimate quest to find it. This phase typically lasts about two weeks, and, according to the NAR, the search process has actually been shortened by about a week during the last several years because of all the technology tools that are now available everywhere.
Real estate shoppers understand that they need us to help them in the process of finding their dream homes. But what they don’t want (and I can never reiterate this enough) is for us to try to shape their dreams. That part of the process is very personal for most customers.
During the search phase (Phase Two) of the buying cycle, the customer wants to look at actual houses. He’ll typically do lots of drive-by looking on his own and will begin skimming through home magazines. Remember: he now knows what he wants and is out to find it. And, somewhere in the middle of this search phase, he wants to begin working with an agent.
This is the crucial part of understanding the buying cycle: the agent who’s on the customer’s mind when he reaches Phase Two is the agent who’ll close the transaction and collect the commission!
So how do you become that agent? (This is the secret to working Internet leads, by the way.) By being there! You need to be there at the precise moment when the prospective buyer calls a duty desk, the moment when he picks up a home magazine and calls an agent, the moment when he’s out riding around looking at neighborhoods and decides to make a sign call. This is how most agents have traditionally picked up their new customers! Well, the customer hasn’t changed with the advent of the Internet. What has changed is when the customer comes into our lives; and this search phase, which is usually only two weeks long now, lasts until the customer finally finds his dream home and gets an accepted contract.
Phase Three: Escrow
Beginning with the acceptance of the contract and moving forward to closing, there’s the third and final phase of the buying cycle, also known as the escrow phase. At this point, the buyer has found a home and is very emotional about it. Every little bump in the road becomes a drama, and this is one of the reasons that home buyers and sellers need us: we aren’t emotionally connected to their dreams. Certainly, we identify with the client and wish the best for him (and let’s not forget that we want to be paid for our work), but we don’t have the level of emotional attachment to the transaction that our client feels.
Therefore, a skilled agent will minimize potential bumps in the road by making sure (in Phase Two) that the client has actually been pre-approved, not just pre-qualified. By the way he negotiates the contract, he’ll show the client how to eliminate deal-breakers. Maybe he won’t allow a home inspection to create needless drama but instead will use it only to protect the client from unseen structural damage in the house, rather than using it as a second negotiation round, as many beginning agents do.
How well Phase Three goes is entirely dependent on how well the agent does in Phase Two. It should be noted that almost all of the legal problems arising in real estate transactions will surface during Phase Three, which is why all of us need to excel at the setting and managing of customer expectations.
This is one of the most important things you can take away from reading this article. If you learn nothing else, you should at least be looking at Internet leads differently, and here’s why. (Drum roll!) Internet leads come during Phase One!
Do you see the advantage? Has the light clicked on? Has the “Aha!” popped into your head yet? According to the National Association of REALTORS®, 74% of all buyers and 76% of all sellers will work with the first agent they talk to. What that statistic means, unfortunately, is that our clients see all of us as largely the same. We know that we aren’t all the same, but what’s important is what our clients think. If they see us as a commodity and more or less interchangeable, and if we still want to have some kind of strategic advantage, we need to be first. If we’re first, the odds of our doing the deal are 3:1 in our favor. Period. The only way to change that ratio is to mess it up!
What a huge advantage! A smart agent will simply identify the customer first and then devise strategies to make sure that he doesn’t mess up the process, so to speak. The rest will take care of itself.
Let me close this article with a simple yet powerful illustration that will change the way you look at Internet leads. I want you to think back to the last time you shopped in your favorite department store. Now, if you’re like me, you don’t have a lot of time to waste; when you go shopping, you go because you want to buy something.
But remember how, as you walked into the clothing department, a sharp sales clerk came up to you and said, “Can I help you?” Now, I want you to be completely honest. What was your answer? You know what it was; it was the same as mine: “No, thanks. I’m just looking.” And I’m willing to bet that, within five minutes, you were looking around and finding that same clerk to help you locate something in your size.
Did you really mean that you weren’t interested, or were you implying that you wanted to gather information for a few minutes and that, later on, when you were searching, you might actually need his assistance? The procedure is no different for a real estate customer except that the buying cycle is much longer, given the price point of the purchase. The Internet customer is still gathering information when most agents call to say, “Can I help you?”
So there are generally only two reasons that an agent will fail in working Internet leads: either he’ll take the “No, thanks. I’m just looking” literally, as though the customer wants nothing to do with him, or (more often) he won’t take the hint and instead will insist on trying to set up an appointment to start showing houses immediately! This overbearing, hard-sell approach simply alienates the agent from the potential customer and removes any chance of his gaining the business. But make no mistake: that customer will go on to buy or sell, but with another agent! What a tragedy.
Is there a solution to this fundamental problem? Of course. The first step is to embrace the reality that the Internet is a legitimate source of business and is here to stay. At the current rate of growth, virtually all real estate customers will use the Internet for help in their property searches or sales within the next year or two. As real estate professionals, we can either accept that fact and learn to capitalize on it, or we can begin to “build our parachute” and look for an exit.
The next step is to understand the real estate buying cycle and know that customers won’t want us around much during Phase One. Around, no – in touch, yes. But not in a pushy way. We need to learn the skill of staying visible but not pushy. Our job is to be helpful. What could be simpler? Learn to serve your customers, not asking anything in return. You are simply there to make a friend. Research shows that a home buyer will work with the agent that he likes, so be that agent. Your job is simply to make him like you during this crucial first phase.
Finally, the third step is to have in place a follow-up system that will allow you to maintain contact with “future” customers over a longer period, even when you’re feeling overwhelmed with “present” customers. The rule of thumb is to keep it short and keep it personal. Mix it up. Use phone calls and emails, but remember, twenty to thirty words in a short but personal email will do much more than any mindless drip campaign. We are making friends here. Let’s be honest, when we all get a mindless drip campaign email we know it, and so will your client. We owe it to them to become personally involved. Increase frequency of contact as your client gets closer to entering Phase Two.
When you’re tempted to dial up the pressure in your early Internet prospecting, remember this simple truth: three-fourths of our customers will use the first agent they talk to (assuming they can remember who that is). So stay in touch and stay out of the way and the odds are 3:1 that you will earn a commission. It’s really very simple when you think about it. The buyer wants to buy, the seller wants to sell, the lender wants to lend, the closing attorney wants to close. If we just stay out of the way and stay in touch, we get paid! What a fantastic business!