For thirty-three years, I have either been selling or training other top agents to sell real estate at a high level. My real estate business has survived numerous market cycles. I have depended upon this twelve step plan to allow me in focusing, regenerating, and surviving differing markets. I hope these truths will help you become profitable and ride out any storms on your horizon.
- The National Association of REALTORS® and your state association will always have published reports that sound better than what you are personally experiencing in the market. Please understand that they support us. They know that whatever they say will end up in public press. We do not need any more negative press! When you read reports that we have reached the bottom or that the market has actually gone up, take it with a grain of salt. Their job is to permeate the world with good news about real estate.
- Here's a shocking truth for you - making money in a down market is always harder than making money in an up market. I know that other speakers say that agents get out of the business faster than the business goes down, but I also understand that there will be less competition. The fact remains that sellers are not as excited to sell when they are looking at lower prices, and buyers want to take much longer to make a decision when they believe there will be additional pieces of inventory appearing on the market at better prices.
- You have to fly against the conventional wisdom that buyers are good in down markets. Buyers take longer to make decisions, they "nibble" more, and they will actually eradicate your net profit if you continue to work buyers as a major part of your income flow. The only way to make money in a down market is to increase your listings at a much greater rate than your board's inventory increase. For example, in the sizzling California market of 1990, I had to have an inventory of at least ten listings at all times to net two million dollars a year. In the absolutely horrible California market of 1995, it took me 120 listings to maintain the same net income. The reason is simple - the only sellers who will sell in a down market are those who are motivated so I had to increase my sample size to obtain the correct number of motivated sellers. The more listings that I was able to obtain, the more buyer contacts who came into my office. If I aggressively pursued the most motivated buyers, I could keep my income up.
- It is time to cut expenses. If your assistant is not producing leads, fix the situation or let him or her go. If you are spending money on lead generation systems that are not producing, improve them or stop doing them. If you have an expensive boat parked out back that you haven't used in the past eighteen months, let someone else throw money into the boat! You do not need the most expensive cable or satellite package. You certainly do not need a $93,000 Range Rover. I became the top real estate agent in California while I was driving a diesel Rabbit.
- The only reason that you need to talk to a seller every week is for them to continue to like you, to obtain a price reduction, or to obtain a value enhancement. You will have to time-block your activity of calling sellers once a week. Make certain your sellers know that you are trying to achieve their goals, and let them know that the only reason a property doesn't sell is that it is price incorrectly. Once a week, you need to be requesting price reductions or value enhancements to make your listings more saleable.
- You are going to have to be more deliberate with your time. There is no more running around without a plan! A couple of years ago, everybody wanted to buy and sell! Now, you have to have schedules to keep. When do you generate leads through FSBOs, expireds, and out-of-state owners? When do you call your buyers in the "A" class, your sellers in the "A" class, and pendings? When do you go on office caravan? When is your day off? When is date night or family night? The only way you will survive a tough market is to utilize your only asset of time extremely well. Go back to the basics of time-blocking and make certain that you know what the perfect week looks like.
- Don't hang around with other real estate agents! Other real estate agents will not buy from you, and 95% of them are too negative now! You cannot listen to them. You do not need to listen to that negativity. Spend the time that you would normally listen to the other agents in generating leads.
- Only listen to real estate speakers who have sold real estate as a mega-producer or still sell real estate as a mega-producer. There are thousands of pundits out there, especially from the technology field, who have not even sold real estate. If they have never sold real estate, please take their suggestions lightly.
- Get coached! There are numerous expensive and inexpensive coaching programs offered by current agents and former agents. The rule above applies to this as well - if they haven't sold real estate, don't let them coach you on how to sell real estate! Seek those who had or have experience in selling in hot and cold markets but were still successful! Having your feet held to the fire, having your activities re-focused on the net-profit producing activities, and being held accountable are all important activities. Most of my coaching clients will double their income this year only because we have spent time re-focusing their efforts into the most profitable areas of tough markets.
- Don't forget your family! Time-block family night, date night, and personal time! Work when you're working, play when you're playing. There is no room in your life for working while you're "playing." It will only upset those you love.
- If you are doing less real estate, take some time to take better care of yourself. It is time to time-block visits to the gym. Balance your diet, too!
- Most importantly, get ready for the bottom of the market. You know what it looks like. It is when you can put 10% down on a piece of property. With a 40% expense factor, you can break even with a fully amortized loan. The times are exciting at the bottom of the market, and you should have money in the bank to purchase real estate. Every rich real estate agent from the '94 to '96 California market is financially independent, because we had money to invest at the bottom of the market. Quit speculating! There is no room for speculation. At the bottom of the market, buy real estate that will actually break even. Have the tenants pay off the mortgage. Watch the next cycle of appreciation take over and make you wealthy.
Congratulations on being in one of the world's greatest businesses! I know that it is not like it was, but there is just as much money to be made (if not more) in a down market as there is an up market. You are going to have to be smart. Start a savings account. Accumulate a little bit of money. Buy at the bottom. Some day you will be able to say, "I love this business, but I don't have to go to work today!"