What to do in a shifting real estate market
Today I wanna talk about what do you do in a shifting market real estate market. What happens when your market is shifting? Maybe some of the numbers are down, and you can see your transactions decrease. What do you do to make sure that your income doesn’t decrease?
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Now, in a shifting market, a lot of times, what a lot of agents naturally want to do is start battening down the hatches, right? They want to make sure that they have fewer expenses and less overhead. I think it’s a smart thing to be prudent.
However, at the same time, I’m an opportunist. So, if houses tomorrow all the sudden were cut in half as far as value, I’d be out there buying them. It’s the same thing in your market if your market is starting to shift. You don’t want to shrink back as long as you have the numbers in place and you’re able to track your return on investment from your advertising dollars.
The reason why you don’t want to is that let’s say, 10 people right now are going after one customer (for example), on Google. That means there’s 10 potential advertisers on Google, and then, all of a sudden there’s only half of those people. What do you think’s going to happen to the cost per click or the cost per lead? It’s gonna go down because of supply and demand. That means that you’re able to increase your exposure, increase your amount of leads for the same amount of costs that you have now.
Said differently, if you were to all the sudden spend more money during this time because you got half the people out there going after the same customer, you would be able to get a higher bang for your buck and regain more market share during a down market. I’m always really excited anytime that there is a potential to grow during a downturn because most people are scared and running for the hills. But, for smart agents, we like to call the market makers, the ones that actually know their numbers, know how much money they’re investing, what their return on investment is, how long until they get that money back, the cash conversion cycle, this is a huge opportunity.
If you spend $500 on pay per click today, and it takes you on average 90 days to get that money back with a transaction out of that investment, you know that that money’s coming every 90 days. That’s your cash conversion cycle. The smart agents who know that can still afford to spend comfortably and competently and don’t have to drink the Kool-Aid of fear.
Now, the other thing that you need to do in a shifting market, is you need to make sure that you have multiple pillars. You need to have multiple pillars to prop your business up. And what that means is if you’re focused on, let’s say, 60/40, right? Let’s say it’s 60% sellers and 40% buyer. What if the market shifts and it becomes a buyer’s market instead of seller market?
The problem is it takes a while for your sellers to start to catch up with the reality that is a shifting market. They’re going to not be very proactive in price reductions and trying to sell their home for less money because they’re going to hope that either they’re lucky, the market is wrong, or it’s going to bounce back.
So, what you want to do is increase your buyer pillar so that you have more buyer-side transactions than seller-side transactions. What could happen and what does happen in a real down market where it’s high buyer-side, is you can’t sell a listing. And, so, they just are a drag. Listings become a drag on resources, your time, and they’re actually hindering you. You have to continue to pay the advertising, babysit the seller, and make sure that all of the things that you do naturally in a seller-side transaction are done.
So, in a shifting market, you want to make sure that you have some good pillars in place to be able to easily turn the knobs in your real estate business. Don’t just be focused on sellers, so that you could turn up buyers higher, turn sellers down lower, and continue to maintain the income and the gross commissions that you normally do while just shifting gears.
Another way to make sure that you have multiple pillars is to use different forms of media as far as your leads as concerned. Don’t be just dependent on one or two. So, for example, Google or Facebook, or print ads, or radio. Those are different pillars, different forms of media. Make sure that you have multiple forms of media so that if one starts to lag and go down, you can push the money over to the other one.
So, there you have it. In a shifting market, make sure that you have those things in place, don’t shrink back, push forward, and make sure that you’re gaining more market share while everybody else is running for the hills and scared. You should be able to clearly see your numbers, and feel confident in making that investment into your self and into your real estate business.