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Article Courtesy of: Inman News
By: Carl Medford 

Expressing your value to clients begins with knowing yourself, writes mega-team leader Carl Medford. You cannot articulate what you have never taken the time to determine on your own


As the fallout continues from the landmark commission lawsuit, real estate agents across the country are assessing the damage and pondering the way forward. At the heart of the issue is the decoupling of commissions and the inability, as outlined in the National Association of Realtors settlement, for listing agents to display buyer agent compensation on MLS platforms, scheduled to take effect by August 17, 2024.

Additionally, buyer agents will now be required to use a buyer broker agreement to delineate their relationship with their clients and specify how their fee will be paid.

As a result, we are currently experiencing chaos, which is producing a growing uncertainty as to how buyer agents will be compensated for their efforts, if at all. “If commissions will be decoupled going forward,” some reason, “then buyers may be expected to begin compensating their agents. With little or no precedent for this in many markets across the country, how will buyer agents convince their clients to pay a full-service commission or fee?”

We are already beginning to see pushback from buyers as many are already straining to come up with down payments and closing costs. The thought of adding an additional fee might literally “break the bank” for many. 

To clarify, there is no such thing as a “full-service” commission. In sharp contrast to the allegations against NAR of “price-fixing,” commissions have always been negotiable and that fact will not change going forward. Additionally, the level of service provided has always varied from agent to agent, company to company, region to region and is also affected by the type of home being purchased, price point and so much more.

I think the real question here is, “What will buyer agents do going forward to ensure that, under the new rules, they still have the ability to earn a living?” 

My answer here is divided into two segments. First of all, I think there is going to be some short-term confusion as sellers, listening to the fake news pounding the airwaves, believe they no longer need to provide any financial incentives to the buyer’s side of the equation in order to sell their home. I think this is going to be short-lived as market pressures, especially in declining markets, will reveal the short-sightedness of this approach.  

Second, I believe we will see a return to buyer agent compensation that will very closely match what existed prior to the NAR settlement but will be packaged differently thanks to the impending decoupling rules. 

REAL Prsident Sharran Srivatsaa, in a video response to the NAR settlement, provides a great perspective. Using a trip from his home in Laguna Beach to Los Angeles as an example, he explains that the shortest route would take approximately 69 minutes. That is not the only way to get there, however, he points out, adding there are additional routes which will still get you to LA, but will involve a few more steps and take a bit longer.

He emphasizes that regardless of which route you take, the goal is always the same: get from Laguna Beach to LA. As for your role as a Realtor? “You are going to help a consumer buy or sell a house. The result is exactly the same. There are two routes: a route that you are used to and a route that you are not used to.” He continues, “And the new route probably takes a few minutes longer.” 

As a result, to prepare for the impending changes, here are 12 recommended steps Realtors representing buyers should take to effectively manage the path forward. 

1. Get skilled up 

I many cases, buyer agents’ existing toolboxes do not have the tools required to handle the emerging changes. Successful agents will be those who have the ability to fully explain the emerging landscape, have the new procedures and forms dialed in and are seriously trained negotiators.

All of this requires training to enhance agents’ skills. As an example, most real estate agents I know claim to be great negotiators. How many of them, however, have attended negotiation training events, taken protracted negotiations classes, earned a negotiation certification or have at least read outstanding books like Never Split the Difference by Chris Voss?

2. Develop a value proposition

At its most basic, “a value proposition is a simple statement that summarizes why a customer would choose your product or service. It communicates the clearest benefit that customers receive by giving you their business” and has four key components:

1. A focus on needs: Start by identifying the core issues potential clients will face when buying or selling a home.
2. A clear and specific roadmap: Follow up by identifying how your services will address your client’s anticipated issues.
3. A list of benefits: Continue by explaining how your services are unique and how you will save your clients time, effort and money.
4. A risk-free commitment: Conclude with specific ways your clients are protected when working with you. Examples could include an “easy out” policy whereby they can cancel their representation agreement or a guarantee to resell their home for free within a specific period of time if they are unhappy with their purchase.

A value proposition is not a vanity list of how great you are in comparison to others but, rather, a summary of specific things you will do to meet a client’s perceived needs. Everything else you do should be built upon this. 

3. Develop a mandatory buyer consultation and presentation that rocks

Successful agents have always had stellar listing presentations. Given the new guidelines, a buyer presentation is going to be critical as well. Sharran Srivatsaa again provides some clarification by reminding us of his cardinal rule of real estate.

He states. “We have a seller and we have a buyer. A seller has a house and a buyer is looking for a house. It is our job as the agents to facilitate that.” He emphasizes, “Don’t overthink this. Your job in a living room on a listing appointment is not to talk about marketing — your job is to talk about finding a buyer.”

He further explains, “Your job with a buyer is not to talk about loyalty or the buyer-broker agreement. It is not to talk about how great you are and how many sides you have represented. Your job is to talk about how they can get the home they want at a price they want and the terms that they want.”

He goes on to state that, to develop a buyer presentation, we should 10x the amount of time and effort we put into developing our listing presentation.  Our presentations should provide a clear roadmap to success so potential buyer clients understand how you will help them accomplish their dreams. To facilitate this, an effective buyer consultation should be mandatory. 

4. Learn to tell stories

People quickly tire of facts and figures but will listen to captivating stories for hours. Rather than try to convince buyers how great you might be, provide examples to help them understand how critical competent representation is. Here are a couple of examples: 

No. 1: Recently, our team had a home listed for $1,650,000. We had set an offer deadline and as the time approached, we had no offers. At the last minute, an offer hit our inboxes. Excitedly, we opened the email and discovered a fully non-contingent contract for $1,900,000.

The buyer’s agent, a recently licensed individual working for a discount brokerage, had not contacted us, had not asked if any other offers had been submitted, had not asked about the seller’s desires … nothing. Had they called, it is quite possible they could have negotiated a contract for less than the list price.

Instead, their incompetence as a buyer’s agent, inaccurate assumptions about the market and subsequent failure to act as their client’s fiduciary unnecessarily cost their clients a quarter of a million dollars. 

No. 2: Our team listed a home for a couple looking to downsize. We quickly secured a buyer for their home and then got them into contract on the home of their dreams in a nearby city.

As time progressed, the husband began to exhibit anxiety. I received a call one day from the wife, who explained, “A number of years ago, my husband — due to an extremely stressful situation — had a massive anxiety attack that led to a depression that lasted three years. During this time, his depression was so significant that he was under constant medical attention and literally could not work. Apparently, the sale of our home has retriggered the symptoms of anxiety and I am concerned we may end up going through another bout of depression.”

Although the transactions would have provided two large commissions to our real estate team, we put the needs of our clients ahead of our own and counseled them to cancel both transactions. Needless to say, the other two Realtors involved were less than happy, but we successfully negotiated on behalf of our clients and got them out of both transactions with no financial penalties. 

Bottom line? Experience matters. 

5. Explain how agency works

There is a significant amount of confusion out there as to what agency is, how it is established, and how it is compensated. Many agents assume that since a buyer visited their open house or they showed a person any given property, they are now the agent with procuring cause. Au contraire. Here are the definitions from NAR (National Association of Realtors):

The seller’s representative (also known as a listing agent or seller’s agent) is hired by and represents the seller. All fiduciary duties are owed to the seller, meaning this person’s job is to get the best price and terms for the seller. The agency relationship usually is created by a signed listing contract.

The buyer’s representative (also known as a buyer’s agent) is hired by prospective buyers to and works in the buyer’s best interest throughout the transaction. The buyer can pay the agent directly through a negotiated fee, or the buyer’s rep may be paid by the seller or through a commission split with the seller’s agent.

A subagent owes the same fiduciary duties to the agent’s customer as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not the buyer’s agent, shows property to a buyer. The subagent works with the buyer to show the property but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer customer can expect to be treated honestly by the subagent.

A disclosed dual agent represents both the buyer and the seller in the same real estate transaction. In such relationships, dual agents owe limited fiduciary duties to both buyer and seller clients. Because of the potential for conflicts of interest in a dual-agency relationship, all parties must give their informed consent. Disclosed dual agency is legal in most states, but often requires written consent from all parties.

If you expect to establish meaningful client relationships that lead to a paycheck, you need to fully understand agency and be able to clearly articulate it to clients so they fully understand the nature and implications of the various relationships. 

6. Explain how representation works

When a party is represented, compensation is warranted. This simple fact is what secures a fee in a real estate transaction. In any given transaction, there are three representative parties: 

1. The seller is represented by the listing agent.
2. The buyer is represented by the buyer agent.
3. The purchase agreement is represented by the closing company (title or escrow company or attorney) to facilitate the contract.

In each of the three scenarios, a fee is earned. I think it is safe to say that Realtors have shot themselves in the foot over the years by stating that we represent buyers for free. Now that commissions will be decoupled, some backtracking is in order so buyers understand that if they are going to be represented in a real estate transaction, a fee is warranted. Once they grasp this fact, then the various options for payment of the fee can be discussed. 

7. Establish a strong relationship with a very good lender  

The recent Fannie Mae and Freddie Mac decision to not count a buyer’s agent commissions as part of their allowable interested party contributions (IPCs) removes what could have been a serious obstacle in the way of a buyer agent securing a fee from their buyer clients. Going forward, it will be critical for buyer agents to partner with lenders who fully understand all of the rules specific to each type of loan program.  

8. Start using the buyer broker agreement now

It is important to understand the difference between a consumer and a client. You provide information to a consumer, but you provide service to a client. The documentation that establishes the difference between the two entities is the buyer broker agreement.

Since a majority of real estate-related information is now in the public domain, it is assumed that information is free. The only means of justifying compensation occurs at the point where you have an officially recognized client relationship (in writing and signed by all parties) that delineates the activities that will be performed that justify a fee.

Although the planned date for the new rules is in July, we recommend you start using your association’s buyer agreement now. Since these forms can typically be filled out in any number of different ways, get the training you need now so you will not be playing catchup once their use becomes law. 

9. Consider charging a retainer fee

Many professionals charge a retainer fee, including attorneys, contractors, some auto mechanics and more. With the real estate landscape shifting, in an effort to increase the professionalism of our industry, retainer fees need to at least become part of the ongoing discussion. The retainer would be paid upfront and then reimbursed through escrow.

If the client decides to back out and not purchase a home, the fee would be retained by the Realtor to compensate for the time already spent on behalf of their client. This practice has been suggested by none other than The Consumer Federation of America, which has also lambasted the current levels of Realtor professionalism given the high percentage of Realtors who are part-time and who do virtually no transactions on an annual basis. 

10. Talk to the listing agent

There is one caveat here: The listing agent needs to answer their phone. With the decoupling of commissions and the emerging inability to put compensation information on the MLS, buyer agents will need to be able to talk to listing agents to get compensation particulars.

Those listing agents who think they can set up a separate website and expect buyer agents to go through a series of hoops to get the information they need will quickly earn the same reputation many REO agents had during the foreclosure crisis, which includes some words that cannot be used in this context. 

Those listing agents who want to help buyer agents succeed will establish some effective communication protocols in order to set the stage for meaningful offers. While it may be hard for some agents to understand the nuances of this, the goal of a listing agent is to do whatever it takes to help facilitate a buyer agent’s success (and yes, this comes under the category of don’t get me started).

In my opinion, any listing agent who consistently fails to answer their phone is in violation of their fiduciary relationship with their seller. Bottom line, to quote Leigh Brown, it’s time for agents to “show up.”

And if you as a listing agent are too busy or too important to field buyer agent queries on how to effectively sell your listing, at least have the courtesy to provide — on the MLS — contact information for someone on your team who has the required answers and who will answer their phone.

11. Have an ongoing dialog with your existing clients

We have a history of doing things behind the scenes to make life easy for our clients. Not only do we need to continue in this vein, but we now need to communicate the intricacies of what we are doing so buyers begin to understand everything we actually do.

A buyer cannot fully appreciate what we do if they are not consistently and methodologically informed. Once they get a glimpse of what you are doing on their behalf, they will be more amenable to writing reviews and providing referrals. 

12. Make getting client reviews a priority

I am amazed at how few agents consider reviews a vital part of their business strategy. Let past clients do some of the heavy lifting for you. Implement a strategic plan for getting reviews for every transaction and, while you are at it, ask for referrals as well. Showcase these reviews in your buyer consultation meeting and provide a list of references.   

We are entering a brave new world where buyer agents will need to be able to delineate their value to their clients in a way that leads to contractual relationships. It begins with knowing your value yourself: you cannot articulate what you have never taken the time to determine on your own. 


Further, GBAR is offering the Accredited Buyer Representative® Designation course at no cost to our members on May 21, 22 and 23. This course differs from NAR's online options by being offered with a local instructor, covering Massachusetts-specific info, and offers 10 CE credits. We also hosting our Budiling Bridges, Not Barriers: Strategic Buyer Counseling in Legal Turbulence webinar on June 13, which montiors the ongoing legal actions, settlements & updates relevant to the ongoing antitrust litigation.


Carl Medford is the CEO of The Medford Team.

12 Factors That Convince a Buyer to Pay a Full-Service Commission
Article Courtesy of: Inman News
By: JIm Dalrymple II

The National Association of Realtors on Friday, May 3, outlined the various policy changes that will stem from its landmark commission lawsuit settlement, and revealed that those changes will go into effect in August.

NAR broke down all the policy changes in a 57-page document posted to its website. Significantly, the document begins with an executive summary revealing that the changes “were approved by the NAR Leadership Team and will be effective on Aug. 17.”

The August date may surprise some observers; after NAR agreed in March to settle various homeseller-led commission lawsuits, the resulting policy changes the organization promised to make were expected to officially roll out in July.

The new date pushes the deadline back. It’s also the first date that a class notice can go out following preliminary approval of the settlement, which happened on April 24. A hearing to grant the settlement final approval is currently scheduled for November.

NAR’s new document also outlines the specific policy changes that will go into effect. Among other things, those changes prohibit listing agents from making offers of compensation in the MLS to buyers’ agents. The document further notes that MLSs also will have to eliminate the fields in their technology platforms where such offers were made, and states that MLSs also can’t create other mechanisms for their members to make such offers.

The document additionally explains that the new rules “prohibit the use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers or other buyer representatives.” Such a rule presumably means a consumer-facing portal, for example, cannot step in and fill the role MLSs once had by displaying offers of buyer agent compensation from sellers or their brokers. Doing so will “result with the MLS terminating the participant’s access to any MLS data and data feeds,” the document adds.

The document also defines the word “cooperation” as it pertains to MLS participation, notes that compensation disclosures will be required between consumers and their agents, and reiterates that buyers will need to have signed agreements with their agents before touring homes.

Though various policy changes stemming from the settlement were already announced and clarified, the new document shows specifically how and where NAR’s governing language has been updated to reflect the changes. Because the document is lengthy, Inman will continue to analyze it and report on additional details in the coming days.

In the meantime, some uncertainty remains. Though NAR has expressed confidence in its settlement — which will also see it pay $418 million — the U.S. Department of Justice has also indicated it wants to see even bigger changes. The DOJ consequently serves right now as something of a wildcard that could, ultimately, mean different or bigger policy changes lie ahead as well.

NAR Commission Settlement Rules Will Go Into Effect in August

New Report: Local Option Transfer Taxes Would Reduce Sales, Lower Property Values, Generate Minimal Revenue Study Highlights Alternative Ways Massachusetts Should Confront the Housing Crisis

Cities and towns implementing new real estate transfer taxes will lose as much 60 cents for every dollar in new taxes collected while further driving down local property values and doing little to solve the state’s housing crisis, says a new report authored by the Greater Boston Real Estate Board and Building Owners and Managers Association (BOMA) International, with research assistance from the Tufts University Center for State Policy Analysis.

Indeed, the research finds, a 2 percent tax on real estate sales last year would have produced an offsetting loss of nearly 60 cents for every dollar collected, a dramatic inefficiency in the proposals put forward by Boston and other communities, the report found.

The report, “Empowering Cities and Towns to Tackle the Housing Shortage,” highlights the negative impacts transfer taxes would have on the region’s residential and commercial real estate markets. The report notes how, for every one percentage point increase in the transfer tax, sales decline by seven or eight percent. Citing a study previously conducted by the city of Boston, “Empowering Cities and Towns” discusses how a one percent transfer tax lowers prices by one percent. Even when real estate sales are thriving, a Massachusetts community with a two percent transfer tax would lose 43 cents for every dollar they expect to raise.

The report is available for review at the website, MAHousingsolutions.com which breaks down the findings.

Empowering Cities and Towns to Tackle the Housing Shortage

 

Article Courtesy of: Inman News
By: Marian McPherson

Thirty-nine percent of agents plan to switch brokerages in 2024, according to Coldwell Banker Real Estate's latest survey, citing favorable commission structures and strong lead gen systems

In the survey of 1,500 agents, 39 percent said they plan to switch brokerages. That’s a 56 percent increase from 2023 when 25 percent of agents said the same thing. Of the 852 respondents affiliated with Coldwell Banker, the growth in agents who said they plan to move increased marginally from 2023 (30 percent) to 2024 (31 percent).

“Given today’s challenging landscape, many agents have become more open to leaving their current company and working with a partner who best supports their personal and career goals,” Coldwell Banker Affiliates President Jason Waugh said in a written statement.

For agents who plan to switch brokerages this year, wanting more referrals and leads (52 percent), better training and education opportunities (44 percent), a better commission structure (42 percent) and better team support (42 percent) are the driving factors behind their decision.

When it comes to agent priorities, brand trust (93 percent), marketing and advertising support (88 percent), a strong brand image (85 percent), recognizability (83 percent) and leading-edge technology and tools (82 percent) topped the list.

Respondents affiliated with Coldwell Banker were more likely to cite brand trust (97 percent), marketing and advertising support (95 percent), strong brand image (95 percent), recognizability (95 percent), and leading-edge technology and tools (92 percent) as a priority when considering brokerage choice.

Coldwell Banker agents also had an increased interest in a brokerage’s luxury real estate expertise (66 percent in 2024 vs. 51 percent in 2023) and the strength of their global footprint (65 percent vs. 50 percent).

Waugh said he’s proud of the results from respondents affiliated with Coldwell Banker as the company heads toward its 118th anniversary in August.

“I’m proud to say that the Coldwell Banker network continues to find value in our products, services and resources as well as their partnership with the brand,” he said. “Our strong reputation, powerful brand image and global network equip affiliated agents to maintain a commanding presence in the marketplace.”

Coldwell Banker’s survey comes in the middle of a recruiting frenzy centered around attracting high-quality agents who have the experience and skills to navigate strong market headwinds.

Of the 1,009 agents who responded to the March Inman Intel Index, 71 percent said they received recruiting offers during the first quarter of the year. Nineteen percent said they received a recruiting call once a week, and 32 percent said they received a call once a month.

Coldwell Banker Realty president and CEO Kamini Lane offered her insights on Intel’s findings, saying a slower market stokes competition and pushes brokerages to supercharge their retention and recruitment efforts.

“When the market contracts, the cream rises to the top and the best agents are the ones who are going to get the fewer listings [that remain],” she told Intel in April. “Because of that dynamic, we naturally look for the better and best agents.”

More Agents Plan to Switch Brokerages in the Coming Year
Article Courtesy of: Inman News

Judge Stephen R. Bough ruled that the sweeping changes NAR agreed to were 'fair, reasonable and adequate' and set a final approval hearing for November

Judge Stephen R. Bough, who presided over the landmark Sitzer | Burnett class action lawsuit, granted preliminary approval to the proposed settlement reached last month by the National Association of Realtors® in an order released on Tuesday.  The order makes it increasingly likely that Realtors® will operate under new rules within just a few months at which time NAR has agreed to implement a set of changes governing the industry.  Bough ruled that the sweeping changes proposed within the settlement agreement were “fair, reasonable and adequate” and set a November hearing for final approval.

Under the terms of the settlement, NAR agreed to establish rules preventing the display of cooperative compensation within the multiple listing services by mid-July. In addition, it will require MLS participants working with buyers to enter into written buyer representation agreements prior ro touring a home. NAR will also pay $418 million over the next four years, and plaintiffs’ attorneys said in a Friday filing the settlement amounted to “greater than 50 [percent] of NAR’s net assets.”

The rule changes are widely expected to provide added transparency into how real estate agents are compensated, and some experts believe the changes will lead to more negotiation around real estate commissions paid by buyers and sellers in the near future.

NAR’s proposed settlement offered blanket protection from a growing list of lawsuits filed by home sellers and homebuyers across the country in the months following the Sitzer verdict.

In a statement, NAR spokesman Mantill Williams said the organization was happy with Bough’s order.  “It has always been NAR’s goal to resolve this litigation in a way that preserves consumer choice and protects our members to the greatest extent possible,” Williams said. “This proposed settlement achieves both of those goals and provides a path for us to move forward and continue our work to preserve, protect and advance the right to real property for all.”

The lawsuits largely centered around what was known as the Participation Rule, which required listing brokers to make blanket, unilateral offers of compensation to buyer brokers in order to submit a listing in a Realtor-affiliated multiple listing service.

The rule changes envisioned by the settlement will also require buyer’s agents to obtain a signed representation agreement with clients before touring homes.

The settlement didn’t include HomeServices of America or other brokerages that conducted over $2 billion in transaction volume in 2022. That left out more than 90 brokerages. Ultimately, however, NAR said its proposed settlement would protect over 1 million of its nearly 1.5 million members. HomeServices has vowed to fight the Sitzer verdict.

Brokerages and MLSs not covered by the proposed settlement have until June 18 to take action and be covered.

Bough also agreed to certify the proposed settlement class, which would include the following:
• Homes listed on Moehrl MLSs: March 6, 2015, to date of Class Notice;
• Homes listed on Burnett MLSs: April 29, 2014, to date of Class Notice;
• Homes listed on MLS PIN: December 17, 2016, to date of Class Notice;
• Homes in Arkansas, Kentucky, and Missouri, but not on the Moehrl MLSs, the Burnett MLSs, or MLS PIN MLS: October 31, 2018, to date of Class Notice;
• Homes in Alabama, Georgia, Indiana, Maine, Michigan, Minnesota, New Jersey, Pennsylvania, Tennessee, Vermont, Wisconsin, and Wyoming, but not on the Moehrl MLSs, the Burnett MLSs, or PIN MLS: October 31, 2017, to date of Class Notice;
• For all other homes: October 31, 2019, to date of Class Notice.

Watch now

Following the Oct. 31 verdict, some of the largest companies in real estate have reached proposed settlements with plaintiffs in various lawsuits. More settlements are expected to come.

“Every day we continue to engage in settlement conversations and settlements with companies,” Michael Ketchmark, the lead plaintiffs’ attorney in the Sitzer case, told Inman earlier this month.

On Tuesday, Ketchmark told Inman he was happy to see the preliminary approval.  “It’s a huge step towards bringing about the necessary relief to homeowners nationwide,” Ketchmark said. “NAR negotiated a way for large brokers, and we reach settlements almost daily. The long-engrained mandatory compensation is finally dead.”

The approval isn’t the end of the scrutiny NAR faces. Earlier this month, an appeals court ruled that the U.S. Department of Justice could reopen its investigation into NAR’s cooperative compensation rule, also known as the Participation Rule, which it began investigating five years ago.
 

Sitzer Judge Grants Preliminary Approval for NAR Settlement
Article Courtesy of: Inman News
By: Jimmy Burgess

Change is coming, so it's time to make sure you're leaning into the potential of a listings-based business, Jimmy Burgess writes. Nothing helps do that better than geographic farming


When change happens, the key to success is to find the most effective strategy possible that will generate results and execute on it. The time-tested strategy of geographical farming worked in the past, is working now, and will continue to work in the future.

In this article, I’ll share the step-by-step blueprint for success that will develop a consistent flow of listing opportunities for your business.

Step 1: Identifying the right area

Success or failure through geographical farming is determined early on by choosing the best area to farm. The first question you should ask is whether there is a dominant agent in the neighborhood. I determine this by totaling the number of listings closed in the past 12 months and the current active listings.

I prefer to start a new farm in a neighborhood where there isn’t any one agent who has active listings or sold listings from the previous 12 months that exceed 10 percent of the total listing opportunities for the neighborhood. If you find a neighborhood like this, you have identified one that is ripe for your marketing to make you the dominant agent for that area over the next 12 months.

If there is someone who has between 10 percent and 20 percent of the sold and currently active listings, then the neighborhood still has potential for you to farm, but make sure you know where your breakeven number is for the investment you will be making.

Step 2: Financial evaluation

Finding the perfect farm area involves not just finding a neighborhood you love, but also identifying one that provides an opportunity for you to add money to your bottom line. Consistency is key to becoming the dominant agent for your area, so we want to start with a 12-month commitment to marketing to the neighborhood.

I like to use a budgeted amount of $2 per month per home or $24 per home for the year. I will go into what these expenses will be shortly, but for now, let’s see where our breakeven point will be.

For this example, let’s assume we have 400 homes in the neighborhood. The $24 per home, per year budget multiplied by 400 homes means we will have an estimated expenditure for the year of $9,600.

If the average sales price in the neighborhood is $400,000 and your listing side commission is 3 percent, then you could anticipate an average listing side gross commission rate of $12,000. If you have an 80 percent split with your brokerage, then your net proceeds after the split would be $9,600. Meaning, for this example, you would need to list and sell one home in the neighborhood during the year to break even.

I also like to evaluate the opportunity in the neighborhood. If the average homeowner stays in a home for 11 years, then that means the neighborhood should have roughly 9 percent of the homes in the neighborhood selling each year. Based on 400 homes in the neighborhood, this means we can anticipate roughly 36 homes in an average year being listed and sold.

If you execute on the marketing in the following section, you should be able to list over 10 percent of the available listings in a neighborhood over the next 12 months. That means the estimated minimum results you should expect for this farm would be to list 4 homes in the coming year.

If we are being conservative and say you only sell three of the four homes you list, then based on our average net commission from above, this means your $9,600 budgeted expense for the year would generate $28,800 ($9,600 average net commission times three homes sold) or a net income amount of $19,200.

With the breakeven point of one sale, no dominant agent in the neighborhood, and a conservative expectation of listing 10 percent of the available listings, generating a return of $19,200, this appears to be a farm area with a lot of upside potential.

Step 3: Consistent direct mail

The marketing plan for the neighborhood will determine whether the farming efforts are successful or not. Remember that we budgeted for $2 per home per month. The consistency of monthly, at a minimum, mailers to the neighborhood is foundational to your success.

The monthly mailers I suggest are a mix of postcards or direct mail letters. I like a quarterly sales report or card that goes out four times a year. The January one will be a year in review; the April, July and October ones will be reports for the quarterly sales activity.

These cards should be clean and easy to understand with a section for homes currently for sale, under contract or that sold during the time this card is reporting on. It should include the address, number of bedrooms and bathrooms, square footage of the home, list/sales price, and date sold if closed.

These cards should also include a summary of the activity levels and any market details that encourage potential sellers to call you for additional details. Every mailer we send should have a strong call to action for additional details or a free, no-obligation home valuation analysis of their home.

The additional eight months of monthly mailers will be a mix of different marketing pieces. The following are examples of the types of mailers you can choose from, or you can supplement with some of your own ideas.

I recommend a review/recommendation piece twice a year. These should share a quote from your client about how you helped them sell their home and the service they received. The effectiveness of these pieces is increased if you can include a picture of your clients and even more effective if the home you sold for them is in the neighborhood you are farming.

Other mail alternatives for the additional months should be a mix of local service provider cards, community calendars, just listed cards, just sold cards and even an “About Me” card so the owners get to know you.

Step 4: Next-level ideas for the farm area

Mail is the foundation, but additional touch points are what turn good farms into great farms. The $2 per month per house I mentioned during the budgeting portion will not be completely absorbed each month via mail costs. These additional funds will be spent on quarterly activities or large events every six months to increase your recognition in the neighborhood.

The first of these additional activities should be an evergreen video about the community. This video should include the history of the community, the number of homes, the size range of homes, amenities and a call to action to reach out to you for additional details. Not only is this a great lead attracter, but it also shows your commitment to and expertise on the neighborhood to the owners in the farm area.

Other options for special events can include a food truck night you sponsor, a family photography or pet photography day in the neighborhood or even a fall festival in the community park. The key is to serve the neighbors and show your commitment as the neighborhood agent of choice.

In addition to the special events, your presence in the neighborhood is also a key to success. Glennda Baker, out of Atlanta, Georgia, said she began her career farming a luxury neighborhood while living in an apartment. Not only did she know the neighborhood inside and out, but she would drive over to the neighborhood she was farming in the afternoons to walk around it, pushing her baby in a stroller so that she could be visible and meet the owners.

Why not walk your dog or take an afternoon walk in your targeted area? Your presence will make a difference.

Step 5: Leverage your listings

If you follow these steps, you will generate listings. Once you get that first listing, leverage it to audition for your next listing. Spend extra on professional photography and videography of the home that you can share with the neighbors.

Send just-listed and just-sold cards, but with a twist. Instead of typical postcards, tell the story of listing the home and the marketing you did, and provide bullet points showing numbers and results.

Door-knock or call neighbors to let them know you are hosting an open house. Put up clean, professional signs with take-one boxes and QR codes for easy access to the marketing videos you produced of the home.

Always look for ways to stand out. Mary Maloney, out of San Diego, California, utilizes the take-one box in a unique way once a listing she has goes into escrow. She asks the sellers for a review of their experience and has professional photos taken of the family providing her with the review.

Once the home is in escrow, she creates a two-sided flyer that states the home is in escrow with the owner’s photo and review. The second side of the flyer provides other properties they have listed and a strong call to action to call Maloney if they are considering buying or selling.

By marketing the listings you take at the highest level possible, you will be rewarded with additional listings.

With the changes coming, now is the time to build a consistent listing lead flow for your business. Nothing accomplishes that goal better than geographical farming.

Jimmy Burgess is the CEO for Berkshire Hathaway HomeServices Beach Properties of Florida in Northwest Florida.
A Never-Fail, Step-by-Step Blueprint to Consistently Find Leads
 

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