Exploring alternatives to the Status Quo in real estate
Quoting Inman News this morning:
NEW YORK — Realtor.com is about to roll out a free tool that will allow real estate professionals to build single-property websites optimized for mobile devices.
We’ve had that for what? A year? 18 months?
Oh, and with our version, the agent doesn’t have to ‘do’ anything . . . it all happens automatically on every listing. Period.
We had quite a Roundtable Call today. Lots of good information flew around, but one item really struck me.
Richard Cricchio from Honolulu started talking about ‘Office Exclusive Listings.’ I asked him to clarify and he responded:
‘When we take a call on a listing, we always ask if the caller is working with an agent. If they’re not, we send them directly to the seller to arrange a showing. The seller shows the house and we followup afterward. That way, if the buyer moves forward on the house, all the seller pays is the Set Fee. They save the largest amount of money. We’ve always done that on all of our listings and it’s helped drive the message that we are about savings.’
It sounded like such a radical idea.
But it’s not.
It’s about 35 years old. It’s a thing called ‘Help-U-Sell’. That’s how this company was designed by Don Taylor. That’s why it’s called ‘Help-U-Sell‘. As we turned the corner on the new millennium, we started adjusting the model here and there.
First, the seller’s phone number came off the for sale sign. Remember, for 25 years, our listings were ‘For Sale WITH Owner’ and we put the sellers number on the sign so buyers could contact them directly. We did that for two reasons: first, it gave the seller the greatest opportunity to save, which is what we wanted so they’d tell everyone they know about us and second because it’s a way of multiplying our efforts, enabling us to more that we’d otherwise be able to do.
Then we started capturing buyers and showing our listings ourselves. Sellers still could find their own buyers by holding open houses and talking the house up with the neighbors and at work. But we wanted a relationship with that buyer, so we started handling the showings ourselves.
I’m not saying either of these adjustments was wrong. But I do think it’s interesting that the guy who is way out ahead of the pack in our currently running Winter Warm Up Contest is still sending buyers directly to his sellers. How much time are you spending each week running over to show a listing to a new buyer? If your sellers handled that task for you, what else could you be doing with that time? Are your followup skills strong enough that you could still build a relationship with that buyer after they’ve seen the listing with the seller? After all, most of the time they’re not going to buy that house anyway.
In today’s market, where so many sellers have so little equity, I’d think giving them the greatest change of finding their own buyer and saving the largest amount of money would be very appealing. Think about it.
Help-U-Sell is certainly NOT a For Sale By Owner company. Yes, it’s true: in the late 70’s Don Taylor pioneered the use of the phrase ‘For Sale By Owner’ on the Help-U-Sell For Sale sign. In time, that phrase morphed to ‘For Sale With Owner,’ but the intent was never for Help-U-Sell to be a stripped down FSBO package vendor. Our vision has never wavered from the notion that Help-U-Sell is a full service real estate company.
Having said that (and fully embraced it without reservation), I think it might make sense to examine our Consumer offer – the one to Sellers, specifically – and how we present it.
Pictured below is the graphic that is often used with sellers as we talk with them about putting their home on the market. It acknowledges that there are really three ways a home might sell and prepares the seller for the good news that we charge them, not on some arbitrary percentage basis (no matter how the house sells), but on a logical pricing model that varies depending on how it sells. This chart forms the real heart and soul of most Help-U-Sell listing consultations.
*Note: the savings in this example are versus an ordinary broker charging, say, 6% commision on a $300,000 home.
We use the first option, the ‘You Show’ option to talk about seller involvement in the sale process through holding open houses, showing prospective buyers through and talking the listing up at work and in the neighborhood. If they procure their own buyer in this way, then the Low Set Fee is all they pay; which means maximum savings.
The second option, ‘We Show,’ is the place where we introduce the idea that one of the Buyer Agents in our own office may be working with a buyer for whom the home might be perfect. If the seller opts we can include this option as well. (Notice, in this example, the broker charges a set fee on the showing side too and it’s equal to the listing set fee. There are variations out there, but let’s remember: we are a set fee real estate company. Shouldn’t the showing fee also be a set fee?)
Finally, option three has us putting the listing in MLS and having the seller be prepared to compensate an outside company and agent should they have a buyer and affect a sale.
Regardless of which options are selected at the time of listing, the seller will always pay based on how the house actually sells. Even if we put it in MLS, if the seller ultimately finds his or her buyer, all they pay is the option one price: the Low Set Fee of $3,950 in the example.
There was a time when many sellers opted for option one or one and two, choosing to stay out of MLS all together, thereby ensuring a large savings. With the downturn in the market, however, this has become a rarity. Most sellers, with the advice of their Help-U-Sell brokers, want to pull out all the stops when it comes to initial marketing and so go into MLS from day one.
All of this brings me back to option one. I think it might be helpful to remember that a whole lot of marketing happens in that option:
Look at that list! That’s a lot of stuff! And you know what? That may be enough to affect a sale even in today’s tough market, a sale that could yield a very happy seller who saved thousands!
I’m not suggesting you abandon the MLS (although I am looking forward to the next generation MLS – the one that is not connected to your Board of Realtors and whose policies don’t restrict your business). However, I’ll go back to what I said earlier:
A properly priced listing, marketed well, will sell. Period. And that applies no matter what the market realities.
Maybe it’s time to start offering this option more vigorously to our equity sellers who are willing to price right and are interested in saving maximum dollars. It’s hardly ‘For Sale By Owner.’ It’s full of good marketing and advice. And remember: there is a direct coorelation between seller savings and seller delight; between seller delight and word-of-mouth advertising; between word-of-mouth advertising and the growth of your business.
Having finally gotten back from vacation, my thoughts are a little scattered . . . but I still have a few morsels to share.
The NAHB (Home Builder’s Association) is out with a list of marketplaces that have shown sustained improvement over the previous six months. These are places where three indicators (Housing Permits, Housing Prices and Employment) have improved steadily over the period:
Meanwhile, Zillow is out with a list of the ten metro areas experiencing the greatest drop in home values over the past five years, based on their own Z-Estimate guess at value. All of these markets have experienced at least a 50% drop in value, according to Zillow:
Of course, I see a 50+% drop in values and immediately imagine a 50% drop in percentage based real estate commissions. The whole traditional approach to the business has taken a 50% pay cut and that’s before factoring in any decrease in the number of sales occurring. Clearly, we are in the midst of a huge change. I don’t believe we will ever do business again the way we did it in the past. In the future, consumers will demand a leaner, more efficient, less expensive, no-nonsense approach to buying and selling real estate. Oh! What was that I just heard?? Did someone whisper ‘Help-U-Sell?’
In the past, when we had a downturn, there was a purgative effect on the business. Bad agents – I hate to mince words, but anyone doing less than a deal a month is, well, a bad agent – usually left the business when the pickings got slim. While REALTOR ranks have shrunk during this long season, they’ve not dwindled they way I expected.
Concurrent with this downturn, we have the widespread advent of the ‘Virtual’ real estate company, an innovation I believe will be part of the future of real estate. Unfortunately, the current aberration of the ‘Virtual’ company presents a problem. Most have simply become a place were unproductive agents can hang their licenses cheaply. Some charge an agent only a few hundred dollars a year, while others charge a small per-transaction fee. So the three or four deal a year agent – the one who used to get out when things got tough – can now afford to stay in and scrape a few deals together each year while earning a regular paycheck somewhere else. Of course, that’s fewer transactions available to the real professionals in the business, but in the end, it is the consumer who suffers. They’re saddled with agents who do so little business they can’t possibly be as current or effective as others who live and die real estate every day.
I think it is very relevant and totally appropriate for any person thinking of selling today to ask their prospective agent, ‘How many transactions have you done this year? How many last year? How many were successful short sales?’ Today, you want an agent who is capable of turning numbers, who knows how to navigate a short sale and to solve the big problems that torpedo so many transactions. One of the biggest mistakes a potential seller could make would be to select an agent who is doing so little, they don’t have the depth of experience to do much at all.
By the way: Jackson Hole, The Tetons, and Yellowstone were all wonderful, but Utah . . . now that’s a State in which to spend some recreational time. Zion National Park and, especially, Capitol Reef were amazing. I learned many important lessons on the trip, especially that dogs and toads don’t mix. Homer bit one when I wasn’t looking and immediately turned to foaming at the mouth and shaking. Turned out this was not a lethal toad, just a typical one, and he got through it. But All toads can produce the same reaction in a dog, even from just licking the little rascals. There are a few that are lethal, but they are rare. Although frogs don’t seem to be a problem, my advice is: if it croaks and hops, give it a wide berth.
One thing that ordinary real estate brokers doubt about Help-U-Sell is our claim that we Charge Less but Make More. Their disbelief is understandable. Usually they are charging thousands more for the same service we offer and having a very difficult time turning the smallest profit. So they think, “If I’m not making it charging 5% or 6% or even 7%, how are they making it on a much lower Set Fee?”
The problem with that kind of thinking is the Paradigm surrounding it. The ordinary broker looks around and sees office after office doing essentially the same thing, broker after broker trapped in a recruiting treadmill that is supposed to pay off someday, agents coming and going and demanding ever increasing splits . . . and concludes that’s just the way things are in the real estate business . . . for everybody (us included).
Well, it’s not. Our reality is very different. Our Paradigm is built on almost 40 years of success in the field with a business model that is remarkably and proudly different than the status quo. It’s a model that strips a lot of the fluff and nonsense out of the real estate business and gets down to the brass tacks of: what does it take to market a property? And, what should that cost?
Let’s start with the Listing. Ordinary real estate would have you believe that the fine art of selling a home requires the careful handling of a near super-hero, a professional who routinely works miracles with the wave of his or her mysterious, magic real estate wand. That may have been partly true in the 50s and 60s when most Americans were pretty naive when it came to home buying and selling and we didn’t have the wonderful marketing tools that are readily available today. But today, it’s pretty simple. Here’s the formula:
Getting this job done does not require a magician, a super-human agent, or anything of the kind. It requires a well-organized person who knows the local market and has a predictable and repeatable system for processing all listings the office takes.
At Help-U-Sell, you’re not paying to have a super-star agent’s name sitting on top of your for sale sign. You’re paying for a proven marketing system and a team of professionals to do a complicated job for you. We believe that all listings belong to the office, not to an individual agent and it is the office’s marketing system that will bring a buyer, not the personality of an agent.
So the seller pays a Low Set Fee that is sufficient to cover the cost of carrying and marketing the listing until sold plus a reasonable profit for the office. When the sale closes and the Fee comes into the office, we don’t lop off the lions share to give to the ‘Listing Agent.’ The ‘Listing Agent’ was the office and the full fee goes into the company coffers. It’s one of the reasons we are able to charge less but make more. Take a look at the numbers:
Assume a $250,000 house. The ordinary agent working in an ordinary office charges, say . . . 6%. The Help-U-Sell Broker has a Set Fee of, say . . . $3,950.
Ordinary Office:
Help-U-Sell Office:
The Help-U-Sell office, in addition to having a delighted Seller, has $1,700 more to apply to expenses and the bottom line. It’s one of the reasons our brokers are able to out-market their ordinary competitors: they have more funds available!
Now let’s take that delighted Seller and multiply by, say 300. Can you imagine how quickly business would fly through your door if you had 300 former clients in the local marketplace singing your praises every time they had a chance? Add to that the fact that your offer to home Sellers is far superior to anything else anyone is doing and Listings get easier and easier to take. And you know what all those listings produce, don’t you? Yes: Buyers.
And this is where Agents enter into the equation in a Help-U-Sell office. We hire agents to handle the Buyers our listings generate.
Once again, we have to make a Paradigm shift when we start talking about hiring agents. The ordinary broker believes that the only way to expand the business is to add more and more agents. The ordinary broker has been taught that Recruiting (with a capital R) is his or her single most important function. The ordinary broker’s mantra is something like: Always Be Recruiting, Recruiting is the Lifeblood of the Office, Recruit the World! Recruit! Recruit! Recruit!
At Help-U-Sell, we don’t Recruit. We Hire agents when the flow of Buyer business is so strong that we cannot handle it with our current staff. We Hire agents to help handle the business the Office has created. It’s a great job, too, because we don’t ask our agents to list, to call FSBOS, to door knock, to do any of the things agents generally hate to do. We ask them to take the Buyer leads the office has created and do a decent job of converting them into sales. And because we have taken responsibility for expanding the business off their shoulders, we are able to pay them a reasonable commission split.
Did you hear that?
That was the sound of push-back as dozens of real estate agents read that last sentence. It’s that ‘reasonable commission split’ part that gets them. But hang on just a moment. Average per agent production today is in the 6 closed sides a year range. Yet average commission splits are in the 70% range. I think everyone would agree: if you’re doing just 6 sides a year, you’re failing. So what good is that 70% split? It’s not enough to boost your income above poverty level, is it?
How many more Buyer side transactions could you produce in a year if you never had to generate a lead, take a listing, fight for a price reduction, pay for marketing, wait for the phone to ring, and so on? And how many more could you do if every time you put one under contract, you were handed another? You see, the ordinary broker has little to offer an agent other than a lofty commission split. At Help-U-Sell we offer you leads. We also offer you training, coaching and accountability.
I was an ordinary broker years ago. I was a good one too. But at times I just felt like a beggar. I spent my days begging people to come to work for me and begging the ones I already had not to leave. My program was exactly like everyone else’s so all I could do was beg and wave around a big commission split. The agents I hired went out into the field and begged people to list with us. Again, our program was exactly like everyone else’s so all they could do was beg and hope their personality would win the day.
At Help-U-Sell we don’t beg. Our Seller offer is so good that sellers reach for it, without the begging. Our systematic marketing is so effective that we have a flow of buyers coming into the office. We hire agents to help take care of that business, without the begging. It’s a real business with no smoke, no mirrors and no magicians.
*MLS is a wonderful tool, but it is expensive. Selling through MLS usually means having to pay not one company but two. So when you elect to go into the MLS, you have to be prepared to pay that other company, that outside agent. Sometimes market conditions are such that MLS is essential. But sometimes it is not, especially if the home is priced competitively. Where most ordinary brokers insist every listing must go into MLS (and every seller must pay enough commission to cover the added expense), at Help-U-Sell MLS is an Option. You’ll discuss this with your Broker and make a decision.