Current Dangers for Real Estate
There is a bear in the forest. It’s been lurking for a few years now, and it poses a threat to us. There is an aggressive new competitor in our industry. This competitor looks like an ally of Realtors but is actually an adversary. There are a large number of web-based outsiders trying to break into the real estate market. These outsiders are fighting a battle to win customers through initial offers of gift certificates, cash back, gift cards, or free rebate opportunities. Multiple agents are also promoted to the consumer with the incentive of receiving sales materials such as CMAs or marketing plans. These companies are luring consumers with the lure of lower rates or rebates.
The most sophisticated of all these intruders is Lending Tree. They have already been involved in lawsuits with the Cendant Group and RE/MAX. I have no doubt that they will continue to cross the line and others will follow. The only service these companies provide is to be the intermediary between the potential prospect and a group of agents bidding on the business. For this service they want 30% – 40% of the commission!
These companies are working diligently to become major players in the agent referral business. For example, if a consumer used Lending Tree to help them find an agent, they could receive up to a $2,000 Home Depot gift card based on the price of the home.
The whole industry of these web based party crashers is making money off of you. So you can do all the work you’ve already been doing, but with a 30% – 40% reduction in your fee structure.
There are others like Home Loan, which offers a cash reward of $500, or Master Moving, which offers a reward of 0.225% of the sales price. The reward would be $675 on a home valued at $300,000. All of these companies want a slice of an already thin pie.
A recent NAR study gives us an indication as to why we are experiencing these predators lurking in our industry. For the years 2003 and 2004 only 13% of consumers returned to their agent that they used in a previous purchase. This statistic shows our blatant lack of service after the sale. It shows that we are no better than other salespeople who make a sale and never follow up with the customer again. Until we change our ways, that bear will be out of the woods and in our customers’ backyards. He’ll be rummaging through trash cans trying to find a way to get invited!
We must take these bears back to the forest. The only way to do that is to really protect what we have from now on!
As agents, many of us rely on snail mail and email to build relationships with our clients after the sale. We are using a pre-packaged CAP program, or Customer Appreciation Program, where we give them “items of value” on a monthly basis. I don’t want to be misunderstood here. It’s okay if you do that. There is nothing wrong with regular contact by mail or email.
The problem lies when we lull ourselves into a sense of security because we send them something every month that makes an impression on our customer for a total of 30 seconds at best. Customers also know that you send these same “things” to over 500 other people. The consumer knows that all we did was merge a mass letter and a mass marketing piece. How special does that make you feel? Sending out mass email marketing pieces is better than doing nothing, but it’s a far cry from the exclusive relationship we expect.
We must realize and value these mass mailings for what they are… support pieces. The only value of these pieces is to support personal efforts in which we must participate. The personal efforts we make towards our clients are the basis for increasing our referrals and the retention of our previous clients.
Our personal efforts can be segmented into two key areas, the “relationship building” area and the “industry expert” area. We need to build the relationship so they know we care about them. We must also establish ourselves as industry experts. Our past clients need to feel that having an expert on their side outweighs the freebies these companies are luring them with. If all we have is a relationship, they will be tempted to evaluate and even accept the offers of these strangers.
To master the field of relationship building, we must go beyond mail and email. We must intertwine personal intervention, phone-to-phone or face-to-face contacts. Our previous clients need to hear from us personally on a regular schedule. We must raise the level of intimacy with our customers by the frequency of personal contact and the intensity of personal information. Personal information intensity is the core information about a customer. We will track this central information on each customer. An example would be birthdays, anniversaries, children’s birthdays, children’s activities, and client interests. There are more options than one could list in an hour. The question is what do you want to track? What will give you the edge to protect what you already have? The power of this information in a usable format is explosive. A usable format would also establish intimate correspondence based on life events, such as sending birthday and anniversary cards. A usable format would be the ability to search your database based on these categories, as well as other specific categories.
Very few agents do what I will now describe. You have a client who is interested in golf. He knows this because it is core information that he tracks on his client’s interests. You read an article on a golf topic about a new course opening in your larger region. Then photocopy that article with a note to the client that says, “I read this article and really enjoyed it. I thought of you when I read it because I know you love golf. I hope you and your family are doing well.” “Next, mail the article to your customer. Then make a call in a few days to make sure they received it and you can ask for referrals. If we do this kind of relationship building, we reduce exposure to customer defections. A defection is when someone leaves your database and uses someone else – using the CAP system as your only avenue for relationship building is not enough!
We must also position ourselves as experts in the industry. The reason rates have felt additional downward pressure is the message from these outsiders, the media and others. The message they are sending is: “It doesn’t matter who you select, as agents we are all equal.” Our message should be “It matters who you select to represent your interests.” First we have to believe that to the core. Second, we have to be able to document it empirically with statistics. We must be able to articulate our average listing price with sale price, average days on market, and average listing sold vs. listing taken vs. board average or other agent average. From these statistics that we call “Big 3” we need to show the benefits to the customer. The benefits of more net dollars in your pocket, less hassle or disruption to your family due to reduced days on the market, and a higher probability of selling when you use us to represent your interests.
We must also regularly update our client on market conditions. Again, showing them empirical evidence of home inventory as a function of price range, the number of homes sold in each price range, days on the market in each price range, and the absorption rate. The absorption rate is how many months of inventory we have based on current trends. These statistics affect the value and ultimately the capital position for our clients.
There are endless ways to position yourself as the expert. We must create a positioning plan and then implement or execute the plan to publicize our expert status.
These outsiders are threats and present a clear and present danger to our industry. There are strategic and tactical moves that we can make in this game to minimize the momentum that is being generated from these outside forces. The time to implement is now. We all need to work together to get the bears back in the woods.