Resolve to Make Rules in 2015


Resolve to Make Rules2014 was a boom year for many real estate brokers in Washington State which we were all thankful for. However, along with the success came episodes of complete broker burnout. Although much of this burnout was attributed to brokers just managing transactions and keeping clients happy, I saw traces of avoidable burnout due to a lack of rules around how brokers conduct their business. 



Rules we establish to help get us on the road to a steadier paycheck can easily go by the wayside when it comes to the possibility of a commission check in hand sooner.  Consider the following scenarios. Has this happened to you recently?

You have a day off scheduled, but a buyer calls you, says she is only in town for a few days and she would like to resume her second home house hunting on that day.  Of course, you change your plans to accommodate her.

You have a rule around not cleaning your sellers’ houses, but you find yourself stopping by before showings to make sure the rug doesn’t need to be vacuumed as a dirty rug might turn off potential buyers.

You have a rule about not taking overpriced listings, but you don’t want to lose this listing to another broker who will allow it to be overpriced so you don’t emphasize the importance of pricing it at market.

The economic downturn is partially to blame for our predicament because brokers have been conditioned to jump on any potential sale.  Bad habits of letting rules slide for the promise of a paycheck became the norm instead of the exception.

The result is that brokers—good brokers—wind up doing things like taking buyers thirty miles or more outside their service coverage area because they think they can’t afford to refer the business out. If you are one of these brokers, take a very close look at the extra time and money you devote to those types of transaction: Gas, time, extra research time, etc. Then take a look at that commission check and ask yourself if it was worth it?  

DEFINE AND RESOLVE TO WORK IN YOUR SERVICE COVERAGE
Every buyer or listing taken outside your normal service coverage area needs to be regarded as an opportunity cost. What opportunities and potential business are you passing up by taking buyers 30 miles outside of where you would normally work? Add one hour for every time you take them out (around six times) plus mileage, plus the extra time to help find an inspector, plus going out to meet the inspector and the appraiser, plus one more time out to do a final walk through with the buyers.

Total extra: an estimate additional 10 hours and gas expenses out of pocket.

The better alternative could have been that you referred that out and taken the 20-25% referral fee, saving yourself an additional 10 hours and gas expenses (plus the actual amount of time for the tour and transaction).  This would have left you open for business that was more in line with the type of business you want to cultivate.

REVIEW YOUR AVERAGE COMMISSION
Review the average commission you are earning per transaction and how much you are willing to reduce your commission by when pressed by a seller to do so. You might be surprised to know that many brokers will reduce their commission. Even with a .5% reduction, at a median home price of $209,300, this represents $1,046.50 on the table per transaction, or $12,558 in one year if you have one transaction a month on average.
If this were you, wouldn’t you like to have an additional $12,558 in your pocket? If you had a rule around cutting commission and a system for handling an objection if the seller does ask for a reduction, those dollars could become a reality.  

Most brokers want to make more money in their business or they want to have more time off to enjoy their lives.  Neither is possible if you don’t implement some rules in your business.  Rules allow you to have a roadmap to follow which is critical for all brokers today.  Below is a list of suggested rules you should have in your business. Indicate your current rule and then indicate in the far right column what this rule should be.
Now that you have your rules, how are you going to respond when your rule is challenged? It is easy with a little practice.

rules worksheet

Let’s take a look at a possible rule for pricing properties. Perhaps you have established a new rule that indicates you won’t take listings where the seller is adamant that it is priced 10% above market value. That is a great rule (and I would highly suggest having a rule that gets the price down to market if the market won’t support that price, but that
is another column).

Now what happens when you go into a listing presentation, indicate the market price for the home is between $250,000 and $265,000 but the seller is adamant about listing it at $309,000 (16.6% above market value)?

The way to handle any conflict is with this Conflict Resolution Formula:

Conflict Resolution

Let’s look at each in more detail:
State the Facts: The facts around this particular issue are that your CMA and your pricing research do not support the $309,000 price the seller wants.

Engage: Ask the seller why he feels his home is worth $309,000. Is it really that $309,000 price has merit or does he just want $309,000 because that is what he needs to purchase his next home or that is the balance on his mortgage? You won’t know where this price assumption comes from if you don’t ask and you can’t handle this objection if you don’t know where the other party stands.  

Offer Solutions:  Solutions here could include pricing the home at $290,000 and after ten days, if you don’t have a robust number of showings, the seller will agree to drop the price to $275,000.

Tell Your Truth: Did the seller agree and you are happy about it? Make sure you tell him that you think he made a great decision. Or maybe he held fast at his $309,000 price? At that point you can say that you are sorry but it would be professional negligence to list his price so high above market value, that when a home sits on the market without an offer, potential buyers and brokers start to wonder what is wrong with the property and aging a listing is not something you will be able to do. “Your Truth” is what your gut wants you to say but we often squelch it down because we don’t know how to deliver that message without a lot of emotion. However, if you can sandwich your truth between two “yes” statements, it can be a lot easier to say…and swallow:

“I really wish I could take this listing (yes!). However, the market isn’t saying $309,000, it is saying $265,000 (your truth!). If you change your mind about the price, I would really like to represent your listing.” (yes!)

Try the Conflict Resolution Formula for your own rules the next time your rule is challenged.  

If you are a new broker, I strongly encourage you to use the rule chart, make some rules right now that you are going to implement, and stick to them in your business. Brokers who conduct their business from a place of strength rather than chasing commission dollars are appealing to buyers and sellers everywhere.

Make 2015 the year you roll out your rules and make your business strong!


The founding partner of The Lones Group, Denise Lones, brings over two decades of experience in the real estate industry. With expertise in strategic marketing, business analysis, branding, new home project planning, product development, and broker training, Denise is nationally recognized as the go-to for all things “real estate.” Visit www.thelonesgroup.com for more information.

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