I’ve done extensive non-linear multi-variable regression analysis on sales in 17 different market areas across the United States.
Rather than provide you all the gory details, I’ll simply summarize the results.
In EVERY market, good and bad, city and resort, one thing was true.
100% of the closings involved a buyer.
So… rather than spending most of your resources (time and money) searching out sellers, build a strong Buyer Brokerage practice.
John Pinto of San Jose taught me a lot about working with buyers, so this post it dedicated to him.
I’ll be talking more about buyers from time to time… what I’d like to learn is what works for you.
Allen says:
What works best for me is NOT working with buyers. I’d much rather work with sellers. Less work for the same money. That’s what buyer’s agents are for.
May 6, 2009 — 1:06 am
Joe Loomer says:
Ira,
Lost in the analysis is the fact that Buyers mostly come from marketing of listings – be it through an IDX feed or other multi-list exchange via the web.
Buyers (a huge percentage) are also former Sellers, which involved a list agent who may or may not represent them on the next purchase, or even refer that Buyer to a Broker down the road in another town.
Example – Buyer sees a home I have listed or via the IDX feed on my site, contacts me, we see the home and several others in the same price range, they buy a different property. Meanwhile – another agent in my firm or another here in town gets another Buyer who has seen my property on their site via the Broker reciprocity rules of the IDX, that agent brings me a contract on the original listing.
A simpler question would be “Why are so many agents going out of business in this market?” Answer: They have no clients.
May 6, 2009 — 3:01 am
John Kalinowski says:
And, in EVERY market, good and bad, city and resort, another thing was true…. 100% of the closings involved a SELLER.
Searching out motivated sellers can be a much more effective use of your time, and the key to building a lasting real estate business. The reality is that one agent can only work with so many buyers, with a natural limit on their potential compensation. With the right systems, an agent can close substantially more listings, and as long as you’re careful about what you list, it’s been proven to be the best way to build a lasting business with super-sized compensation.
Russell Shaw has discussed this many times, and he’s a perfect example. All of the mega-producing agents in the country have listings-based businesses. They then leverage those listings to generate buyers who are handled by team members specializing in the buyer side, but again can only handle a limited number of transactions per year.
Seems to me that despite the market, the best way to generate qualified buyers continues to be through properly leveraging a large listing inventory.
May 6, 2009 — 4:46 am
Teri Lussier says:
One word: engenu.
Buyers love engenu. They love to look at photos, lots of photos. They love the control that they have with engenu to stop and start photos, to share a link with other people, to gaze at the floor and the ceiling and the park down the street. To ask me questions about the home or the city or the neighborhood before they get to town, or after we’ve seen the home. And yes, they do tell me they spend hours looking at homes in engenu.
Putting an engenu site together also tells buyers that I don’t treat them like afterthoughts on the way to getting listings.
May 6, 2009 — 5:18 am
Don Reedy says:
Ira,
Way to go. Shake em up with a “contrarian point of view.”
I believe, as a noted philosophical Realtor we know might say, that your whole point rests on the definition of a “Successful Real Estate Career.” I would say with some certainty that Russell Shaw, Gary Keller and others have pretty much proven that listings are the way to ultimate financial success, much more so than buyers, and for precisely the reason John cites above.
But if you do not harbor the desire to have buyers agents working FOR you, and if you like the rhythm of working with a finite number of buyers, then certainly you can carve a “successful real estate career” from that practice.
Curious as to whether you see this differently?
May 6, 2009 — 7:06 am
Cheryl Johnson says:
Everyone: Take Teri’s comment and replace the word “engenu” with the word “communication”.
Buyers love it when you ~communicate~ with them. engenu is simply a tool to make that communication fast and easy.
Heck, you could take a bunch of snapshots with a disposable camera, have them processed at a one-hour lab, and send them to the buyer via snail mail.
engenu simply automates that process so you can zap each set of photos out as a complete web site in a fraction of the time.
Could you create a flickr collection for the buyer instead? Sure. But using engenu allows the collection to live on your own web site, where you can benefit from the additional content and authority.
~cj. One of the six living people who understands engenu. http://www.engenuworkshop.info 🙂
May 6, 2009 — 7:29 am
Ira Serkes says:
Looks like a spirited debate!
Looking over my post I realized that it wasn’t clear that we have BOTH a strong seller and buyer practice.
My experiences? They’re two different animals. The Yin and Yang of Real Estate.
To paraphrase Woody Allen “Representing sellers AND buyers doubles your chance of a commission so you can go out on a date on Saturday night.”
More details to follow. My experiences:
A: Buyers are more fun to work with – they’re happier, particularly in this current market
B: They usually will come back to you when they sell
C: Costs – somewhat more time, lots less $ cost
D: Easier to work with buyers at higher price points than get listings at higher price points
E: Combining C+D means that buyers > higher net profit.
F: They stick around and refer you more clients
Do both.
And keep the spirited debate coming.
PS
Our buyer system is “scalable” We have a very active MLS Broker Tour where we preview 15-20 homes each week, then provide detailed information to buyers via one of our private web sites. The buyers see the homes at open houses (no silly threshold rule), then tell us what they want to buy.
May 6, 2009 — 7:29 am
Brian Brady says:
Way to come out swinging, Ira. A cuppla logs for the building blaze:
1- Listings attract buyers. In today’s world of IDX, is it important to “control” the listings if they’re aggregated onto your website for you?
2- Which has a higher market cost of acquisition; listing or buyer?
May 6, 2009 — 8:00 am
Scott Schang says:
Ira, Ira, Ira….I miss your analytic brilliance! Here’s another angle that agents could consider as well….
Mortgage Lenders ONLY work with buyers. Who is the guerrilla marketing, tech savvy, cutting edge Lender in your State that is attracting first time home buyers and investors in droves? Find that guy, and you’ve got a beautiful relationship.
Lenders…..are you providing value and building quality relationships with Realtors like Ira, and Teri, and Cheryl? Why not?
May 6, 2009 — 8:42 am
Teri Lussier says:
Scott- I just found a lender who clicked with me. Thrilling stuff!
The more I work with buyers the more I realize how this entire industry works against buyers. From arcane laws to real estate agent’s attitudes- “Buyers are liars” Really!? Really? You want any clients to hear you say that about anyone, let alone fully one half of the transaction? Ugh. Tres, tres professional.
Bottom line from my limited world? It’s a big ol’ Buyer’s Market. Guess who I’m courting? Prove me wrong. ::Waiting for the BawldGuy:: 😀
May 6, 2009 — 9:43 am
Jeff Brown says:
Crackin’ up so much I realized the echoing laughter was from Dad’s grave. Gotta go now, there’s a post I gotta write. 🙂
Greg, you’ve really outdone yourself here. Kudos.
May 6, 2009 — 10:20 am
Ira Serkes says:
Time for some numbers and philosophy.
For years I strove to be the Number One agent in Berkeley. Never made it.. Carol and I were always in the top 10 (out of about 500 agents in the market.
Then I realized I’d rather be the happiest agent in Berkeley.
Lots more fun.
So.. we’ve never made superstar status, but I just ran some very rough sales statistics.
With a team of 4 (Ira, Carol, Poudini & Baby T – 4 heads, 8 ears, 12 legs, and two tails) we average a perfectly OK $14M of closings per year.
Our business model? Work only with nice people. If they’re buyers, they need to have at least 20% down, and be able to afford the median home price for the number of bedrooms they want in the neighborhood they want. Why? Because it’s hard to get an offer accepted if they don’t meet those specs, and no one really wants to buy a below-average (i.e. below median) home.
We’re licensed to sell in the State of California, so we’ll take any listing or any buyer anywhere in the state, as long as it’s within about 5 miles of our office.
Buyers or sellers who don’t meet our criteria we refer out. Yes, I don’t get them as a future client.
Why not a team?
Economics.
Let’s use simple numbers. Say your REAL operating/business expenses INCLUDING split with the office (and before taxes) are 30%. They’re most likely higher.
That leaves you 70%
Which you split 50:50 with buyer agent, leaving you 35% net profit.
I only get 25% referral fees (we offer 26.89% for buyer/seller referrals).
So.. which would I rather have? 25% for investing 2 minutes to place a referral with no liability, or 35% and have to do everything it takes to close a sale. For me 25% is the choice.
If they’re not nice… they’re not our clients and we don’t refer them.
Between 2006-2008, 55% of our sales were buyers, 45% sellers, so 50:50 for all intents and purposes.
Our average BUYER sales price is 16% HIGHER than our listing sales price.
Our cost of working with buyers MIGHT BE higher in time. For some buyers it is, for others it isn’t. We often sell homes to buyer who we’ve never shown the home to – we report on it via IDX or tour notes, they go to open houses, and we write it up.
Our cost of working with buyers is ALWAYS less in $ out of pocket.
Commissions to us on buyer side tend to be higher than listing. My gross income for buyers (not quite the same period as above, so imprecise data) is way higher than sellers.
Now… where is all the attention in training? Getting listings. So if you’re a stealth Realtor, consider setting up a program to go after the clients that most agents are not. They’re known as buyers. And many agents treat them with contempt and scorn. Big mistake.
Not included in the $M sales figures are the referral fees from the referrals we’ve placed. It’s down in 2008, but in previous years we averaged about $50,000/year in INCOMING referral fees. I would have had a higher gross if I’d worked the buyers, but I think our net wouldn’t have been hugely different.
And did I mention that we do it all and ALSO travel 30-60 days/year?
In the past two years, we’ve been to London (14 day trip), San Antonio, Las Vegas, Raleigh, New Mexico, Washington DC, Mexico, New York City, Portland, Los Angeles, Asia (30 day trip), Coloado, Boston (and in 2005 to Italy and Alaska)
I define successful real estate practice as having a life which happens to be funded by real estate.
There are lots of people who can teach you how to do more business. I hope I can give you some ideas on how to build wonderful memories as well.
May 6, 2009 — 10:44 am
Ira Serkes says:
And while I was composing that post, this email came in.
“Could you please put me on your email list for 1.5mm to 2.5mm homes in the Claremont section of Berkeley.”
QED
Following comments are especially for Greg
epistulas electroniter mittimus, ergo vendimus
May 6, 2009 — 10:50 am
Scott Schang says:
Teri – That’s awesome about your lender find. When innovative people collaborate, great things happen….Scenius, right?
Something that strikes me about that term – “buyers are liars” – did it ever occur to anyone that buyers don’t open up with too much info because they don’t feel comfortable? They don’t want to be sold to or pushed? I dunno…sometimes i have crazy thoughts.
What if your business model was such that the exact types of clients you want to work with find you? This was a challenge I attacked head on. My entire business model is built on educating home buyers for free – NO sales pitch, ever.
There can be no question that home buyers in this market are very much aware that they are profiting from the spoils of a massacre (turn on the news and you’ll get 24 hour coverage!).
Home buyers can not shake the fear that the enemy is out there, lurking in the dark recesses of the neighborhood, waiting for unsuspecting prey. That enemy? Real Estate professionals.
I am out-of-my-mind-busy with home buyers signing up for our Homeownership education classes….and guess what? They appreciate the education. They are grateful for the opportunity. They are amazed that more information is not available to them.
This creates raving fans. As raving fans, they trust me for a referral to an agent, or to get pre-approved for a purchase loan with our company – not because I asked for the business, but because I shared my experience and knowledge and asked for nothing in return.
Trust me, Ira nailed it right out of the gates. Buyers are FUN. There is nothing better than helping a family buy their first home. You will have no greater satisfaction than seeing that smile on their faces when you help them realize a dream that they previously did not think was possible. THAT is an opportunity that is overwhelmingly prevalent in today’s market.
May 6, 2009 — 12:27 pm
Gary Ashton says:
I have to say that I have made a career worthing 90% with buyers that I have generated via my internet presence. In a way this bastardized the traditional real estate model of getting as many listings as possible, genrating more buyers from open houses and sign calls as well as creating a buyer from the seller.
In the end I would like to develop the traditional real estate model as a perfect compliment to the number of buyers my sites generate so really the ideal situation is to have a strong presence in both areas.
In the long run, the emphasis on buyers should turn into future listings as past clients get in to the 5 year cycle of selling and buying.
All in all to dominate either model is a sure fire way to be successful. However, if you can do both….. 😉
Gary 🙂
May 6, 2009 — 3:59 pm
Al Lorenz says:
I like to think of Ira’s thoughts as “engineering success in real estate.” Ira, you’ve already gotten me smiling today and I bet your favorite clients aren’t only nice, but they’re fun to work with as well. Thanks!
May 6, 2009 — 4:45 pm
Nicole Boynton says:
A very short and pointed blog. The buyer agent versus seller agent ideology will rage long after we are driving our space rockets to show property. I personal prefer being a buyer’s agent because I like the more immediate gratification and find that buyers tend to be in the area longer where sellers often move out of town. I love your humor and appreciate the post.
May 6, 2009 — 7:09 pm
Ira Serkes says:
Thank you. “Ideaology” is the perfect word to describe the different points of view.
May 7, 2009 — 6:28 am
Joe Hayden says:
My humble $0.02…
Happiness and enjoying your work rank right near the top of reasons why one chooses a certain business model over another. If you like buyers, but realize that you may limit your income, there are creative ways around this issue. For me, no amount of money can replace the satisfaction that comes from being great at what you do, so pick your path and stay focused on what matters most…
/opinion
May 7, 2009 — 12:37 pm