There are tell tell signs in the market before it starts declining. Real estate market pundits usually start talking about it some time before the shift occurs. Your clients are starting to ask a lot more questions about what is happening in the marketplace and they often sound alarmed. You see other agent are getting worried and have a lot more conversations about the market. And yet, the market shift surprises most agents, as if they did not know that the nature of this business is cyclical.
I got surprised by these changes in 2017. Our team had a good number of properties in the inventory, it was selling well (up to a point) and I was thinking that the change will have an impact on how we approach our daily work, but not on the number transactions or our bottomline. And then we did not sell anything in 3 months. Our tried and true approaches to selling our listings no longer worked and we were in shock. The questions we started asking ourselves was “What do we need to change in a declining market?”. It took us 2 years to internalize the answers we came up with. Here is what we did:
Cut fixed expenses. This is the first thing you need to do. Unwind back to where you started riding the wave of the rising market, hiring people and spending lavishly and assess if it is possible to go back to the setup you had then. You will be eating away at the money you have made in the high market and the sooner you cut expenses the longer you will be able to sustain your business in a recession. This will also allow you to invest strategically, so that when the market stabilizes you can gain a greater market share.
Refocus on your past clients and the sphere. This source of business will continue bearing fruit even when everything else is going south. It is important to realize that the results will not show up right away. It may take a few months of sustained effort for you to start seeing referrals or immediate business form your sphere. Stay calm and keep calling. Ask everyone who knows and trusts you for their business and referrals.
Create a sales strategy for every listing you take. Two years ago it was enough to put the property up on MLS and it would sell within 2 weeks. No longer. In a declining market you have to push it hard through all marketing channels, including MLS to sell it. Contacting your own database for buyers, marketing it to agents working with buyers in the area, running agent open houses, running Facebook ads, reaching out to your professional network, etc. The more aggressive your marketing approach is, the better chance you have at selling a property and not letting it expire.
Dust off your price reduction scripts and start practicing them. When the market is starting to decline, most sellers are thinking about prices they could fetch a few months or even a few years ago. After the first year of the shock therapy, they either get more flexible on the price or make a decision to explore other options. Possibly staying in the house or renting it out. Either way it is your responsibility to tell them what the actual market price of the property is. Once you take the listing, you need to give them pricing updates every 10 days to make sure that they either go to their plan B (staying or renting it out) or reduce the price to the current market value and sell. Price of the property is one of the most important selling features in a declining market. Be careful not to run after the market by making incremental price adjustments that are too small for you to be able to sell.
Increase your prospecting efforts. Focused and extended prospecting becomes crucial in being able to bring in new leads. Everything in this business starts with new leads entering your pipeline. We interviewed a few ISAs in the past and always asked them the same question: how many appointments do you typically book in a day? Many of them would say 3 to 4 per day. Ok, this can happen from time to time, but every day? Even in a great market setting 3 to 4 appointments per day is a challenge. In a declining market and with a consistent and gruelling prospecting schedule you can book up to 3 to 4 appointments per week and not 3 to 4 per day. Increase your efforts to make your daily numbers.
Start working with buyers more. If you are a listing agent you would likely only work with buyers whose property you sold. In a declining market your inventory will take longer to sell and it is going to be harder to get new listings. Start paying attention to buyers outside of your seller’s pool. Talk to your sphere and past clients and see what they are up to or who they can refer. This could be a good source of additional cashflow when everything else dries out.
Invest in marketing. Your first reaction in a slow market would be to dial down the marketing expense. This may not be the best idea. Evaluate this carefully. You will still benefit from marketing and if you persist, it will likely give you a bigger market share when the market starts to recover. Look into cheaper options or increase the volume of your free marketing while cancelling some of the paid stuff. You can spend more time engaging your client base on the phone, contacting people on Facebook or Instagram, you can send e-letters to your prospects, you can start recording YouTube videos, etc. It does not pay off in the short term, so have the patience to persist. Equally important, don’t substitute your foundational practices for new marketing strategies. You have to work them in parallel until you know what works.
Above all, work on your mindset every day. This will allow you to stay productive every day and your inner calm and confidence will translate into your clients wanting to do business with you no matter how difficult the times are.