In This Issue...
Words of a Champion
Dirk Zeller
CEO
I have been personally coaching all my clients about building urgency due to the Fannie Mae and Freddie Mac issue over last weekend.
I decided to send you my thoughts directly because you are one of our valuable Coaches Corner subscribers.
Please take the time to read carefully because I believe this challenge is an opportunity to you and your Clients and Prospects.
Click here to read more...
To Your Achievement of Greater Success in 2009,
Dirk Zeller, CEO
RealEstateChampions.com
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• How you can build your Real Estate Business into an asset that can be sold in the future
• How to play the odds in your favor like a casino - you too can become the house
•Why spinning the lead generation odds will lead to better income, results, and time off with your family
• How to determine & then double your hourly rate which in turn will reduce the number of hours you have to work to make the same amount of money
• The #1 way to change the odds of success in your Real Estate Business
• Why most agents suffer from “lead bulimia”
• 3 Keys to overcoming the hurdles that litter the small, narrow, rocky pathway to super success
• 4 Rules of Business Expansion and how to apply them to your business
• The largest opportunity in Real Estate today that 87% of Agents completely missed last year
• How one simple strategy increased my client’s market share by over 49% in the toughest real estate market in 10 years.
• How you can transform your thinking, actions, execution and planning to the level of a successful business person
• Three steps to easing the rapid process of real estate market change
• The right way to plan your own financial independence |
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• 6 CDs - Audio Training (7+ Hours)
• 1 CD-ROM Workbook |
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Fannie and Freddie
We had another financial issue in the last week that has, and will, influence the real estate market now and in the future. With the government stepping in to aide, prop up, or potentially take over Fanny Mae and Freddie Mac, we are seeing another challenge hit the financial markets like the subprime meltdown we saw a little over a year ago.
This recent financial problem was forecast some months ago by many in the financial sector, so the news is not as abrupt as the subprime issue. It will still create uncertainty in the marketplace. I view that uncertainty as an opportunity to position yourself as an expert, demonstrate your value, and build urgency in buyers and sellers.
We need to educate the public on a few issues in the next week:
- What role Freddy Mac and Fannie Mae play in the housing marketplace.
- What percentage of loans this will affect.
- How these challenges might affect buyers.
- How it might affect sellers.
- How it might influence the overall marketplace.
There is no question that consumers have no clue what role Fannie Mae and Freddie Mac play. I would even venture to guess and say many Real Estate Agents don’t know as well. Their role is significant, that they buy more than 50% of the loans in the United States. You read that right…over 50%!
We need to explain to buyers and sellers that their Bank or Mortgage Company will most likely sell their loan to Fannie or Freddie. The reason is that most Banks feel that the business of originating mortgages; charging points, fees, etc. is more profitable and with less risk than holding the mortgage for the term of the loan.
If the Banks and Mortgage Companies can’t sell the loans to Freddie Mac or Fannie Mae or others like themselves, they will be out of business with no new money to loan.
If you have buyers on the fence or with low urgency, you can use the challenges with Fanny and Freddy to let them know money is available now. The concern is will it still have the same availability in the future? That point is uncertain and why the government stepped in to help. There could be some stipulations placed on Fannie or Freddie by the government to insure solvency and protect our investment as tax payers.
I do not believe Freddie or Fannie are going down, but I do believe change will happen due to the marketplace or government intervention. Others will step in to the void in business if Fannie and Freddy are forced to pull back, but in the interim we could hit a rough patch. To avoid the rough patch, buyers need to understand money costs, availability, and credit will most likely remain the same for at least 30-45 days. The message is, buy now!
For sellers, due to this challenge, the pool of buyers they are trying to attract might be the largest they will see for the rest of the year. If tightening happens with credit and money it will force some buyers out of the market due to an inability to secure funds.
If the pool of buyers is affected, that could trigger a further tightening of the values and prices in many local markets across the country. I am not predicting, merely stating there is a possibility that exists.
The message is, position yourself well for this pool of buyers. Sellers need to reduce prices, improve condition and curb appeal, and stage their homes. They must be the most competitive they can possibly be given the risk factors that just went up in the marketplace due to Fannie and Freddy.
Let me make another statement as to the media reporting the interest rate reductions due to this. While we have seen reductions in interest rates since the weekend, that seems to be a quick market response. The drop will happen when competition increases, which will take some time for companies to ramp up. The stance that buyers should wait for interest rates to go down is unwise. When have you ever seen the government step in to help and it ends up costing less money? The most likely outcome is it will cost more!
I believe it is time to inform clients and prospects of the possible challenges ahead. The goal is to inform them of the landscape, share with them your observations and expert views and conclusions. Don’t force your views on your clients and prospects. Merely give them facts, history, and logic and see if the urgency to act changes. Ask them, does this alter your views, timeline, or intensity to act? Do we need to seize this opportunity? Whether they agree with your conclusions or not, they will respect and appreciate you informing them of the marketplace and how it affects them.
On Monday (9/22/08), I'll be going into greater detail about how to use this information to create urgency with your clients in my free video service, the Champion's Minute™. So if you aren't already signed up for the Champion's Minute™, make sure to click here and sign up today so you don't miss out on this important information. I'll see you on Monday!
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Ten Biggest Mistakes and How to Avoid Them - Part 1
As the saying goes, an ounce of prevention saves a pound of cure. Consider this article, in two-part, your prevention formula. Just watch for and avoid the following ten frequent real estate agent mistakes to steer clear of trouble and success-eroding errors. Here, in Part 1, I will cover the first five.
Failing to Build Your Real Estate Practice as a Business
Most Real Estate Agents launch their careers with only two objectives: To achieve a certain level of income and to enjoy the freedom of self employment. Only a rare few start out with the idea of building a business that will grow for years and that can be sold to someone else in the future.
If you adopt a business owner’s mindset, you’ll derive far greater benefits from the time, effort, and money you invest in your real estate practice, and here’s why: You need to make nearly the same investment in marketing strategies, customer service strategies, and time management techniques whether you operate as a single Agent who sells homes or whether you build a real estate sales business that employs a team of Transaction Coordinators, Listing Coordinators, and Buyer Agents.
The difference between how a single Agent works and how a real estate sales business works boils down to this: To build a business, you need to design and perfect a set of business systems. In addition to the sales and customer service programs that every Real Estate Agent needs to adopt, to build a real estate business you need to add systems that define how you hire effectively, train consistently, hold others accountable, and establish, track and monitor the performance of the Agents who are part of your business team.
Over the years when I’ve been asked to define the secret of my real estate career success, I’ve always given the same, true answer and it’s never what the person asking me expects to hear. Without hesitation, I say this: “I’ve never been a Real Estate Agent. I’ve always been a business person that happens to sell real estate as part of his business.” That attitude, focus, and business approach will deliver more success than you can imagine.
Poor Financial Management
The number one reason people become a Real Estate Agent is to become financially independent, yet remarkably few actually achieve that goal. When they don’t, most often poor financial management, rather than poor earning performance, is the culprit. When it comes to developing wealth, the truth is it’s not about what you make; it’s about what you keep.
I’ve met Agents who make half a million or even a million dollars a year in commissions and yet they’re broke. You read that right…broke! And I’m not talking about a rare example or two.
Too many Agents enter the real estate arena with lack of a business background, a lack of previous self employment experience, and a play-now-pay-later mindset – and they end up in big trouble financially. They overspend on business expenses and then compound the error by overspending on personal expenses as well. They lack the backstop provided by a good budget that restricts spending, sets aside funds for taxes, and allows for savings and investments. In other words, they’re like most other people in the United States today.
Follow these few simple steps to avoid the financial problems that plague a good many Agents:
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Establish a business checking account. This separate account will ensure that you don’t co-mingle your personal and business funds and expenses. Deposit your commission checks into your business checking account and then pay expenses – including payments to yourself – with business revenue.
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Open two business savings accounts, one to hold funds to cover your income taxes until they are due and one to serve as a reserve account that you can draw from in lean commission months.
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Set aside funds for income taxes on an ongoing basis. When you receive a commission check, deposit the money into your checking account and then immediately transfer 20% of the commission to your tax savings account. This will protect the funds to meet your tax obligation and will spare you from the quarterly or annual scramble that most Agents endure when IRS filing deadlines loom.
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Create a business rainy-day fund. At the same time that you transfer 20% of your commission check to your tax savings account, transfer 10% to your business savings account. Should you hit a slow month, you’ll have a reserve to draw upon.
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Set up a retirement plan. Commit to financial success by planning for your long-term security. Each time you receive a commission check, direct 10% to a SEP, Simple, 401K, Keogh, or IRA account. If you’re in a higher tax bracket, the tax benefits alone will deliver you a high first-year rate of return even if the account doesn’t go up a dime.
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Pay yourself. Set a personal salary amount that you draw monthly from your company. Pay yourself enough to set aside another 10% into your personal savings account.
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Take advantage of tax deductions. Being a self-employed business owner delivers many opportunities to create wealth. With those opportunities come expenses that are often deductible from State and Federal taxes. Meet with an Accountant to learn which expenses are deductible. Then keep careful track of expenses and deduct every one that you can when you complete your tax return.
Not Buying Enough of What You Sell
Significant wealth in the real estate arena comes not from the sale of real estate – though commissions from sales certainly help – but from the acquisition and ownership of properties. Inquire and you’ll quickly learn that the wealthiest Agents believed their own sales pitches and purchased properties regularly and consistently. In fact, I’ve yet to meet a successful long-time Agent who, looking back, thought he or she bought enough. I certainly fall into that category though, fortunately, at least I bought some.
Before I embarked on my real estate career, my father gave me this excellent advice. He said, “Dirk, you need to understand that dentistry did not make me financially independent. My dental practice created the cash flow that allowed me to make investments in real estate that created financial independence. As you build a good real estate sales business, use your cash flow to purchase the real estate that will make you wealthy.”
Poor Use of Time
Your time is your most precious asset. Learn to control your time and you will be able to control your life, your income, and your wealth.
Not Investing in Your Most Important Business Asset. . .You
Too many Agents spend a fortune on what they wear and what they drive and spend nothing on the improvement of their skills and mindset.
Look at successful companies and you’ll see that they invest a small fortune annually on what’s called Research and Development or R&D. They do it in order to constantly improve the products and services they offer the public. As a Real Estate Agent you should do the same though, luckily, your R&D will take the form of self-development programs that improve your skills and mindset, and those hardly cost a fortune.
Dedicate 5% to 10% of your annual business expense budget to self improvement. Then enroll in courses, buy books, engage in coaching and listen to audio programs to improve your skills – and your business success.
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Throw Training Your New Buyers Agent in Reverse
Most Agents make a significant mistake when they try to train a Buyer’s Agent. The mistake is they train the Buyer’s Agent in the incorrect order of importance and value. They usually train the Buyer’s Agent in order of the flow of the business. They train them to do lead follow-up, qualify leads, categorize them, set the buyer interview appointment, conduct a professional buyer interview, close for an exclusive right to represent contract, show property, write a purchase agreement, negotiate a transaction, service to close, and after sale servicing. Those steps for training are the exact opposite of what should be done.
Champion Team Rule – Train Buyer’s Agents from the back of the transaction to the front.
Before I coach you through the why and how, I will tell you that I am the only Coach, Trainer, or Speaker who has figured this out. You will only hear this from me.
There are two reasons why you train from the back to front. The first is the time investment is greater at the rear of a transaction. Buyer’s Agents are there to leverage your time. You want to get rid of the largest investment of time first. The bulk of the time is invested in researching property to show, showing property, writing and negotiating a contract, inspections, appraisals, repairs, walk-throughs, and attending closings (if you do that). When you look at the difference in time invested by an Agent, the back half of the work done for a buyer client is at least four or five-to-one compared to the front half of the job. A Buyer’s Agent could spend a couple of hours in research; ten to fifteen hours in showing property; a couple of hours in writing and negotiating the contract; a couple of hours in inspection, appraisal, and repair; and another hour at least in walk-through and attending the closing. All total, there easily could be an investment of seventeen hours to complete the back half of the transaction by using the Buyer’s Agent to remove this lower importance, more time consuming section right away. It will allow you to keep control of the smaller time investment front half of the business and more important segment. You are delegating the lowest value activities to the lowest paid competent person.
I would work to relinquish control of these areas right away when you have a new Buyer’s Agent. I would retain control of the lead follow-up, qualifying leads, categorizing the leads, booking the buyer interview appointments, and conducting the buyer interview. The mistake that most Agents make is to turn over the whole process, the lead follow-up and lead conversion process, or they turn over from the front to back, to their new Buyer’s Agents. That approach is wrong on two fronts. The first is the Buyer’s Agent isn’t nearly as effective at converting that lead to a face-to-face buyer consultation, as you. If they were as effective as you, it would be questionable if they would be working with you. A Champion Agent will have a conversion rate of about 30% on buyer leads, but a typical non-performing or low-performing Buyer’s Agent will convert on less than 5%. If you generate even just twenty buyer leads a month, that’s the difference between six buyer interviews that you book and one that your Buyer’s Agent will book. It’s the difference between at least three transactions a month for $15,000 gross and half a transaction a month for $2,500.
The time invested to follow-up on twenty leads, determine their motivation, book an appointment with six of them, and conduct six buyer interviews is less time invested than your Buyer’s Agent will invest to do one transaction. You will convert more leads, invest less of your time, and raise the conversion ratio of leads and signed exclusive right to represent contracts. What you are keeping control of, in the short run, is the highly skilled sales functions of lead follow-up, booking the appointment, and conducting the appointment to secure the relationship.
Once you have a client on an exclusive right to represent contract, and their motivation is at a very high level, selling them a home is easy. The hard part is really over. The risk is also reduced at whether you will earn a paycheck or not once they sign an exclusive right to represent contract. Why waste the leads and opportunities when all you need to invest is a couple of hours a week. Is it worth a few hours a week to increase your income from 50% of $1,500 to 50% of $15,000 (Based on the typical split of most Buyer’s Agents and Lead Agents being 50/50)?
How we go about training our Buyer’s Agent has definite impact on our cash flow. If we are turning leads over to them to blow, it has a detrimental effect on our cash flow. As they become more proficient, you train and begin to start to turn over the sales functions; the sales functions being all activities up through the buyer interview. To start training them, have them watch you conduct a dozen or perhaps two dozen buyer interviews in person. Then, you book the appointment from the leads and have them conduct a couple dozen with you there critiquing their performance. Once they master the buyer interview, you can book them appointments and not have to be there. Then, work to train the lead follow-up procedure and techniques. Once they have that down pat let them do all the lead follow-up after the initial call from you. Then, start training them how to market the initial call to the prospect and book an appointment on the first call. Then, keep training, testing, tracking, and monitoring their performance for each stage until they are able to handle the initial contact with the prospect and convert them as well as you do. We can’t turn over good leads and good opportunities right away to people who will blow them. They also will progress faster if they are actually able to conduct business; to work with high quality buyers. If they can’t convert leads and appointments, they won’t be showing property and making sales. This approach also helps you build your value to them, so they are not as likely to exit and go on their own.
Dirk Zeller
CEO |
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