I made a conscious decision to become a Realtor. That decision, though, was based on much more than saying to myself, "Gosh! My Realtor just made $5,000 for having me sign a bunch of papers saying that he didn't know anything about the house I bought and that he didn't do anything illegal while he was having me sign all the paper telling me that he didn't know abything about the house I bought. I can do that!"
My decision was based on getting doing some calculations for projected sales, projected income, projected expenses, and net income.
After working with so many people throughout the years, I think the 80/20 rule works magnificiently here:
- 80% of people who change jobs just look at gross income and insurance benefits; perhaps a couple of other minor things.
- 20% of people actually analyze the situation to see what kind of ramifications there might be, such as extra drive time because the new office requires driving on the freeway in rush hour traffic, so gas expenses go up and aggravation and stress go up.
Realtors are pretty lucky in my opinion, because they have a monopoly throughout the nation in charging a percentage of the purchase price of a home. It doesn't matter whether they are selling a $5 million, 3,000-SF mansion with a view of the world or a $500,000, 3,000-SF home with a view of the mall dumpsters. Set the price right and the home sells. At least, that seems to be the predominant message here at ActiveRain.
There are many surveys out there, though, that indicate that only about 15% of people consider price to be the major factor in buying something. I'm pretty sure that those 15% shop at Nordstrom and not Wal-Mart. Of course, everyone wants a bargain, even the Nordstrom shoppers. They just have different definitions of what a bargain is.
Other major factors that consistently rank higher than price are:
- confidence
- quality
- service
- selection
The MLS allows Realtors to provide selection, but confidence, quality, and service are a little more difficult to indicate to a prospective Client that yours is better than the competition's. There have been many different pricing strategies through the ages, including even discount pricing (IPayOne, Help-U-Sell, Help-U-Buy, etc.). They did okay as long as the real estate market was booming because they relied on volume, the same thing that Wal-Mart does. If people aren't buying, even though everyone is hurt, the discounters are hurt the most. Do we have any discount Realtors here at ActiveRain? I haven't seen any.
Even though it's not always about price, it's always about price. Why? Because no one ever talks about net proceeds. Ask anyone how much they sold their house for, and you're going to get the purchase price, not the net price. Ask someone how much money they made last year, and you're going to get the gross, before taxes amount, not the net, after taxes amount.
That can be problematic for we who are self-employed because we've been taught by society to think of gross dollars, not net dollars. Analyze your income AND EXPENSES on a weekly basis but track of it on a daily basis. That allows you to be able to tweak things more readily and to do a lot of your income tax returns themselves rather than paying the CPA and his expensive bookkeepers to do it for you.
If you are wondering if you're making any money in real estate, it might be time to sit down and do an analysis of your business plan and income/expense projections. If you can't adjust your pricing, you might need to adjust your expenses, such as doing your grocery shopping on the way home from showing properties rather than going home and then going back out.
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