Category: The Industry

Price vs. Value

You are not the lowest price in the market! Nor should you be!

Your Low Set Fee consumer offer is designed to create a ‘tell-me-more’ inquiry only.  It is not what will cause sellers to list with you. That takes something more substantial.

People contact you because they think you might be able to save them some money.  They list with you because they perceive you are the best Value.

Value is the place where price and service intersect. A low price coupled with slashed service, i.e. Purple Bricks, is not a good Value. Great Service at a big price, i.e. many ordinary Realtors, is not a good Value. Great Service at a really good price, i.e. Help-U-Sell,  is a good Value. All of which leads us to this:

What is the Value you bring to a home seller? What do you have – beyond your Low Set Fee and savings – that will cause a seller to say, ‘Yes!’

Right now your biggest competitors are in two basic camps.  There are the new entries – Purple Bricks, Redfin and the like. And there are the old establishment – the ordinary Realtors.

They old guys have a business model that runs on high fees and big splits to agents.  But current realities dictate that they cut commissions to be competitive.  So when they cut commissions they are cutting the fuel it takes to run the business model. Their cut really is a CUT. The commissions are lower, yes; but what had to be cut on the service side to accomplish that?  Less marketing?  Less competent agents?

The new entries have a sleek model that emphasizes technology and minimizes the importance of agents.  They take the listing, plug it into the technology and wait for something to happen.  The agents are paid less and are really just clerking the listings leads created by the corporate marketing machine.  Yes, they charge less. But the service they offer is also reduced.  It is the service of a clerk and a computer, hardly a good Value.

Your Value is so much more than either of these!  When a seller deals with you, they’re dealing with the owner of the company.  You have years, even decades of experience.  You have a track record and can document your success. You have systems that enable continuing contact during the listing period and beyond.  You are their skilled consultant, guiding them through the largest financial transaction they will ever have.  Yes, you charge less; because your business model is designed to run more efficiently (you are not dependent on high-split agents to grow your business). But the service you provide is the best available today.  That’s the very definition of Value.

So, market your Low Set Fee and the savings it produces.  That creates inquiries.  But, once you have the inquiry, sell your level of service and the Value you bring to the transaction.  That’s what creates signed listing agreements.

My Real Estate Pet Peeves

Jack Bailey’s Buyer Consultant Training starts today, so I thought I’d share some of what that excellent program will cure:  a few of my Pet Peeves!

  • Real estate professionals who don’t know how to use their calculators and can’t figure (or at least look up) a mortgage payment on the fly.
  • Real estate professionals who don’t know how to measure for and calculate square footage (at least good enough to tell if the tax records are wrong).
  • Real estate professionals who can fill in the blanks of their State approved purchase agreement but can’t walk through it with a buyer or seller explaining each boilerplate paragraph.
  • Real estate professionals who stop at ‘No,’ when trying to get a deal closed or financed.  The answer to ‘No’  is always the same:  ‘What do we need to do/add/change/find to make it work?’ and ‘What can I do turn this around?’
  • Real estate professionals who can’t do basic pre-qualification of a buyer including an initial discussion of finance including an examination of income-to-debt ratios.  (Though important, this is not a substitute for an in-depth discussion with a lender).
  • Real estate professionals who can’t accurately (within a reasonable tolerance) calculate seller net proceeds and buyers’ funds needed to close quickly and on a legal pad if necessary.
  • Real estate professionals who are afraid of the Internet . . . or even uncomfortable with it.
  • Real estate professionals who ‘wing’ their listing presentations.  It’s a job interview, for goodness sake!  You at least need an outline of where you want to go with it!
  • Real estate professionals who don’t spend money on marketing.  Agents should be spending a minimum of 10% -15% of their anticipated 1099 on marketing.  Brokers should be spending more.
  • Real estate professionals who expect the MLS to sell all of their listings.
  • Real estate professionals who organize their companies to appeal to agents rather than to serve consumers.
  • Real estate professionals who celebrate mediocre production.
  • Real estate professionals who don’t constantly question why things are the way they are and how they could be better for the buying and selling public.

These are just some of mine . . . what are yours?

Why Zillow’s ‘Instant Offers’ Pilot Program Doesn’t Matter

Zillow is testing a new program in a couple of markets.  They have a pool of investors who will generate an instant offer on your house, picking it up on the cheap without the time, hassel or expenses usually associated with an ordinary real estate transaction.

There’s nothing new about this. For more than a decade, investor groups have created marketing campaigns to help them identify home owners who will take significantly less for their properties to have a swift and hassel free transaction.  And there are people for whom such an offer has great appeal.

I think about my good friend who, at age 80, wanted to divest himself of a rental condo that was a mess.  He considered the value, and was about to list (with a Help-U-Sell broker!), when an investor group contacted him out of the blue.  They gave him about 80% of fair market value.  He took the offer because he wouldn’t have to clean the place, do extensive repairs, sweat out inspections and appraisals or pay many of the normal costs associated with a sale.  Yes, he lost money . . . or rather he exchanged some money for convenience and quickness.  For him, it made sense.

As the real estate industry continues to scramble and ‘innovate’ to re-establish an identity with consumers, some recent entries to the business have adoped a similar approach.  Open Door, now in Phoenix and a few other markets, is buying houses in much the same way.  They are marketing the program as a new approach to residential real estate, one that relieves many of the ‘pressure points’ that weigh so heavily on home sellers. (Translation:  they are buying low, paying cash, fixing and flipping).

The first time I encountered this kind of program was back in the 1970s, when ERA Real Estate built their whole marketing program around the notion, ‘If we don’t sell your house, we’ll buy it!’  It sounded pretty good.  But after a few years it became very obvious that they weren’t buying many (or any) houses!  The terms of ‘we’ll buy it’ included a sales price based on 70 – 80 % of value, and few sellers were willing to take that kind of hit!

The Zillow program – if it survives the pilot, which it should – will appeal to some home sellers;  but they are the same home sellers who are by-passing brokers to take a quick fix already.  It is competition for HomeVestors (the ‘We Buy Ugly Houses’ guys) and Open Door more than competition for us.

Listen:  we have the best program in the business for home sellers interested in making a move with minimum inconvenience while maximizing their hard earned equity.  While  40+ years old, it still looks wildly innovative compared to current alternatives.  Don’t get distracted!  Remember who you are:  you are in the Equity Preservation business!*  And nobody does it better than you!

*Everyone else is in the Equity Consumption business!  They are into taking as big a bite out of the seller’s equity as possible.  The ‘We’ll buy your house’ people are just taking an even bigger bite!

Who Is Your Customer?

I spent almost 20 years working with Century 21 Real Estate.  I was a salesperson, a broker, owned offices, sold them and then spent a dozen years working for the Franchisor, primarily developing training.

Working in the Century 21 Ivory Tower – International Headquarters, where the rubber meets the clouds – I heard the Executives who ‘ran’ the company say (on many occasions), ‘We’re not in the real estate business;  we’re in the franchising business.’

Being a real estate guy, this really bugged me.  I believed that my job was to help my broker members find more customers and sell as much real estate as possible. But that was an afterthought to the company brass. To them, the Century 21 Broker was the customer – and they wanted to get as many of THEM as possible.  AND they wanted to find as many ways to pull revenue from their existing franchisee base as they could.

It was the ultimate disconnect.  And that attitude of ‘an outlet on every corner,’ and ‘nickle and dime ’em to death’ is how that brand came to mean absolutely nothing in the modern real estate world. Think about it:  what does the brand Century 21 stand for? See, I toldja so:  the powerful identity they crafted 40 years ago is gone.

I’ve been thinking about this a lot lately – but not about Century 21.  I’ve been thinking about Help-U-Sell Real Estate and how subtly but completely different we are.  At franchise headquarters and in the minds of everyone who works for the company, there is no doubt who our customer is.  It is the same customer our franchise brokers have: the buyers and sellers of real estate.

We see the franchisee/franchisor relationship as a partnership.  We are working together to realize a goal we have in common:  to work with ever increasing numbers of buyers and sellers and to grow our presence and marketshare year after year.

At Century 21, questions about what the brokers were getting for all the money they paid the franchisor arose at every meeting. Brokers who entered the system full of hope quickly soured, often realizing they were paying the franchisor more than they were taking home themselves. The relationship became adversarial at its core:  us vs. them.

I’ve been hanging out with Help-U-Sell for 14 years now and in our latest incarnation – the one that began in 2009 – I have rarely heard any of that kind of talk. Because we view our brokers as partners (with corporate as the supporting cast), because we have the same bulls-eye, because we are all real estate people, there is a positive sense of participation and unity in the group.

We don’t look for ways to extract more revenue from our franchisees.  Instead we look for ways to help them do more business.  We don’t sit in a vacuum and dictate how things will be.  We ask our people in the street how they should be and how they could be better and then we go to work together to move in that direction. It is a refreshing approach!

And if you can’t tell it:  I’m proud as punch to be part of this company.  I love who we are, how we operate, what we stand for and how we collaborate.  We are on a mission to not only sell more real estate, but also to change the way real estate is sold; and there ain’t nothin’ better than that!

What a Trump Presidency Might Mean for Real Estate

The inauguration hasn’t happened yet, so all we can do is speculate but, based on what was said during the campaign, I won’t be surprised to see some of the following:

  1.  Reduction of regulation in Banking.  Dodd-Frank created a significant layer of bureaucratic reporting and procedure that banks had to follow.  The goal  was to ensure that nothing like the great melt-down of 2006 could happen again.  It has clearly been in Mr. Trumps sights as well as those of the Republican Congress.  Look for an easing of government regulation in the banking industry that may mean easier access to money.
  2. Reduction of regulation in Construction.  Trump has clearly singled this out for action.  In an address to the NAHB, the said upwards of 25% of the cost of new housing is compliance with government regulation.  His goal is to get that closer to 2%.  In addition to having home builders dancing in the street, this might mean more affordable housing.
  3. Easing of lending requirements on government backed mortgages.  Though not much has been said about Fannie Mae, Freddie Mac and FHA, it would stand to reason that, given the easing of regulations in other areas, a relaxing of guidelines here will happen as well.  It could put home ownership back into the realm of possibility for many.
  4. What about the mortgage interest deduction?  Some in Congress have had their sights set on this for years.  Mr. Trump said he wasn’t going to take it away – but that was a campaign promise. His plan to reduce corporate taxes and initiate new tax cuts for the wealthy may stimulate the economy, but the money to run the government is going to have to come from somewhere. I’m not suggesting we’re going to lose that deduction, but I am saying it might be vulnerable. That’s a very good reason to contribute to RPAC (The Realtor Political Action Fund). They have been successfully fighting for that deduction and for home ownership for decades.

So what does a Trump Presidency mean for those of us who work in real estate?  Based on what I’ve said above, the outlook could be good.  It could mean easier access to mortgage money and lower prices, which could mean more activity. Could.  It also could mean we have to be very careful not to get back into the kind of mess we had a decade ago.

By the way, let me just state what might not be obvious.  This is not a political post.  I’m not a Trump or Clinton supporter.  I’m not a Democrat or a Republican.  I don’t beat the drum or wave the banner for either side.  I’m a Help-U-Sell Real Estate Professional and I watch the market every day for clues as to what’s on the horizon.  As of today, being the positive person I am, this is what I see.

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