We work intimately with thousands of real estate agents in Australia, New Zealand and the UK. They tell us the important numbers (listings, open home attendees, sale prices) and, consequently, commissions are either declining or have been low for some time. There’s no doubt we’re in a less-than-rosy phase of the property cycle. This, however, is not another doom and gloom news piece: we want to talk about the silver lining. History shows that market shifts present smart operators with huge opportunity.
But who are we and why do we get a say?
We’re glad you asked! The first reason is our background: we’re Rexlabs, a team of entrepreneurs building problem-solving software products for the real estate industry. Every day, we immerse ourselves in the real estate market (and its challenges) on a global scale. The second reason is that property touches us all. Whether we choose to rent, own or crash on our friends’ couch, we all need a roof over our heads.
So what do we think? We believe that there’s never been a better time to be an agent.
Let us rephrase. There’s never been a better time to be a hard-working agent. Think of it this way: during economic booms, there’s an influx of new agents. These newcomers can seem like naturals, with low days on market and high selling prices. However, when the market weakens, it becomes obvious their success was not the result of skill (good marketing, great service and expert negotiating) but luck (the strong market). Their income drops and cue exit.
As Warren Buffett said,
“It’s only when the tide goes out that you discover who’s been swimming naked.”
When major shifts in the economy occur, traditional prospecting and sales methods aren’t enough. Sales scripts stop working. Persistence and consistency remain key — it’s still a numbers game, after all. But agents have to do more, faster to keep hitting targets.
Let’s step through that:
Homes never stop being bought and sold
Economists, politicians and news outlets rarely agree, but one thing everyone concedes is that we are due for a recession. There’s a whole lot of fodder there, but let’s get straight to the point…
Property continued to exchange hands throughout the 1830s, the first major boom and bust on record. And during the Great Depression of the 1930s. It also continued when interest rates hit 17% in the 1980s, and during the GFC from 2007 to 2009. But when there are less sellers, and even less buyers, agents need to work harder to get listings.
The majority of sellers still want quality, professional service
In a difficult market, businesses often compromise the quality of their goods and services to improve their bottom line . It’s a natural inclination — “I’m hurting financially so I’ll cut my costs to ride it out”… but will you make it?
Early this year, we received a cautionary tale on the risks of lowered service levels following the spectacular failure of Purplebricks’ entry into the Australian market. We first got a hint of trouble in February, when they announced the US and UK CEOs were stepping down. Then, we heard revenue guidance was down (the market’s to blame, again…) and shares plummeted. Its founders have since slipped off The Sunday Times Rich List.
Purplebricks didn’t cut costs in a downturn. It was, however, a cut-price, low service agency that entered the Australian market just as it was slowing. The outcome? After just over 900 days in the Australian market, the controversial disruptor that promised to change the real estate industry went out in a big puff of purple smoke. So, what went wrong?
A market downturn exposed the fatal flaw in Purplebricks’ product: in seeking to cut people / quality of service, they exposed their lack of expertise and true focus on cutting costs. Homeowners realised they simply couldn’t use a lower value service and expect to perform as well. People skills are an integral element to any successful negotiation, especially in a slow market. It’s a skill irreplaceable by tech.
In that way, Purplebricks represent a timely reminder of the potential risks of cutting service in any kind of market — but especially in the market we’re in now.
With that in mind, here are four things we think real estate agents should be doing right now (or even better, yesterday) to prospect, list, and serve better, faster in a weak market.
Just because Purplebricks’ business model failed in Australia doesn’t mean everything they were doing was wrong. Plenty of homeowners used their services, some quite successfully. So, instead of simply dismissing Purplebricks’ failed expansion as a win for traditional agents, we suggest learning from the things Purplebricks did well, the messages that resonated with homeowners and their approach to the sales process.
We’ll cut to the chase: you’ll find much of what made them successful was tech. From their tagline (‘Welcome to the Future of Real Estate’) to their description (they combine ‘end-to-end customer facing technology with licensed, professional Real Estate agents’) to their ad copy (‘The most convenient and transparent way to sell a house.’), Purplebricks was all about revolutionising the sales process through tech to save vendors’ money. The problem was, they didn’t follow through.
This leaves a gaping hole of opportunity for other real estate agents to step up and exceed where Purplebricks failed. Agents in the UK are already doing this by focussing on the same tools the online agents had to connect with customers, while using their secret weapon (real people and real service). Australian agents are slowly but surely following suit.
Here’s what they’re doing.
Using digital to find sellers
Not too long ago, if you wanted to become the local ‘go to’ agent, you’d plaster your face on bus stops and park benches, Phil Dunphy style.
But it’s 2019, and people see around 5,000 ads every day… so they’ve started tuning out traditional forms of advertising. Even if someone does stop to take a second look, how do you keep track of them? How do you make sure they keep seeing your face? With technology, of course.
A strategic digital marketing strategy utilising the Facebook and Google Display Networks can put agents’ personal brand in front of potential sellers while they’re commuting to work, waiting in line for a coffee, or unwinding in front of the TV. Then, tracking technology can make sure those who clicked or interacted with ads in some way see it again and again, until they enquire.
Using digital to sell houses
We’re in an age where a motivated seller is perfectly capable of taking photographs on their smartphone and uploading their property listing to the portals. (We’re not saying they’ll get the best price — just that it’s possible). So, agents need to do more.
A real estate agent’s main aim is to pinpoint the buyer willing to pay the best price for a property, and to do so quickly. Often, that someone is not even in the market. Agents can (and should) use that same tech we just mentioned tech to lure that buyer out.
Agents who live and breathe their market have all the knowledge to target specific types of buyers. With the right tech tools, an agent can put a five bedroom family home in front of thousands of locals with a combined income of $200,000, who use their credit cards to shop online and are actively searching for luxury items — before it appears on the portals. They can put a fixer-upper in front of local builders, or a starter home in front of newlyweds. They can even show a recent divorcee a unit close to their current address (and their kids). And it costs a fraction of the price of traditional vendor paid advertising.
In fact, many agents (about 20% of our user base!) are saving their vendors thousands of dollars in VPA by only advertising properties on Facebook, Instagram and the Google Display Network through tools like Spoke. No portals needed!
Tech tools and apps can take over the heavy lifting, but humans still need to connect all the dots and streamline new processes. Think of it this way: the invention of email didn’t eliminate the need for communication — it created a faster alternative to snail mail. We still need to work out what to communicate, when, how and why.
Not following? Allow us to get personal. Agents: a Customer Relationship Management system doesn’t mean you can sit back and relax. It means you can automate some of your tasks and use the time you save to provide even more value. Here are two ways, for starters.
Targeted emails
Ah, the open home details dance. We’ve all experienced it, as agents, interested buyers or stickybeak neighbours. It’s when someone brushes past the front door with a comment like: “You don’t need my number — I’ll call you if I’m interested!”
It’s understandable; there’s enough spam floating round as it is. However, although some agents still employ the spray-and-pray method of communicating with buyers, there’s a growing number using their CRM to match potential buyers with their perfect properties (often, before they’re listed on the portals).
By categorising buyers as hot, warm or cool and filtering using keywords like ‘dog’, ‘primary school’ and ‘pool’, agents can set up a trigger which automatically sends an SMS or email to buyers when properties matching their requirements are listed. These buyers receive less irrelevant properties (read: junk) and more opportunities of genuine interest to them. It’s an exchange of value for contact details, meaning higher open rates and less unsubscribes.
Calls with context
Agents can clock up hundreds of calls in a day. In digging through post-its to find what John said about the property price last week, they waste valuable minutes that could’ve been spent talking to another interested buyer. Times that by a hundred and there’s a big problem.
Any real estate CRM worth its salt makes call logging and note-taking simple. Some even have To Do lists that surface important information like this. Agents simply have to make a commitment to use the functionality. John wouldn’t have to repeat himself and the agent could get to the point quicker! John’s also more likely to pick up the phone next time.
Think about all the moving parts involved with buying or selling. The sale itself is just one part — there’s a long list of services and connections required, such as a mortgage broker, energy provider, removalist… the list goes on. And then there’s renters, with their short leases. Agents have countless opportunities to make referrals and generate additional revenue.
Building a referral base is an investment; even if someone doesn’t need your services right away, they’re more likely to remember you if you help them without asking for anything in return. It shows you’re a full-service provider that truly cares about their needs. It’s also an opportunity to work with more local businesses and potentially generate reciprocal referrals.
We’re not the first ones to say this: “Continuing to perform in these market conditions demands a re-think of the client experience — whether that’s vendor, buyer, landlord or tenant.”
However, there’s no reason why agents should spend hours arranging removalist quotes, finding home connections phone numbers and dealing with all the paperwork and tedious follow-up that flows from that. There’s an app for that: Hitch. We built it.
Shift tack by adopting a blue ocean strategy
All markets are made up of two oceans: red and blue. The red ocean is the known market space; it’s cut-throat and competitive. The blue ocean represents untouched, deep waters with room to explore.
A ‘blue ocean strategy’ is usually the creation of a new, uncontested market space that makes competitors irrelevant and creates new consumer value, while decreasing costs. Just look at Uber! They turned non-customers (of taxis) into customers (of Uber) and created demand rather than fighting over it with those already in the market.
To do this requires a fundamental shift in your thought process: create an offering that does not exist, or rarely exists, so you have little to no competition.
In the context of real estate, today’s agencies are hugely focussed on the sell. But what about the broader problem of moving or buying? It’s a hassle! Can you reach further into your customers’ journeys by delivering more value?
You could help current buyers or sellers by providing a service that coordinates more of their move — helping them with everything from finance and conveyancing, to packing, moving and cleaning. In doing so, you could create a new service category that no-one is providing: a full ‘concierge’ service for the move.
You could also turn non-customers (for example, renters) into future customers by referring them to removalists, bond cleaners and the like as part of their moving process. Create more value and it will come back in the form of loyalty and referrals.
By expanding your offering you create a new, richer service for buyers and sellers that eases their move (a service level that no-one else is providing) and significantly expand your audience to people earlier in their home-buying cycle.
This idea of broadening your service is the philosophy behind Hitch — a Rexlabs product. This way, you become a full-service provider even to people that don’t end up selling through you.
Redefine your marketspace
Another tactic agents could employ is to offer something that sets them apart, or shifts their market. What this offering is depends on the unique characteristics of the specific market and the people within it, as well as the skill set within the agency itself.
For example, an agency operating in a suburb bordering a main university likely deals with a lot of renters. Perhaps they could build out an expertise on buying strategies and a finance function that helps long term renters with their approach to savings and finance applications. This would create additional demand for property once those renters sort out their finances so they can qualify for a loan.
It’s about finding a way to create a loyal customer base willing and able to buy the types of properties they sell, no matter what the market is doing.
Grow while others contract
Instead of shrinking in the market, real estate agencies could try to grow. Agencies could acquire staff from competitors that aren’t investing in tech tools to do all of the above. Those with deep pockets could even consider acquiring smaller local competitors that can’t keep up, thus eliminating the competition and expanding their reach in one fell swoop. Look at what The Agency has just done! Others, like Compass, are acquiring other businesses.
But we’re not asking you to trust us. Trust Harry Triguboff!
“If times are bad you buy land, and by the time you have finished building times are good again.”
Triguboff thinks long term. He understands that property, like all other markets, moves in cycles. It seems counterintuitive, but the best rewards come from taking a risk and building while others are sitting on their hands. Expanding your agency can create a more defensible business model, as long as you maintain your core focus and do the things we’ve just mentioned.
It’s Darwinism 101. Survival of the fittest; what evolution has dictated since the beginning of time. Real estate agents who play their cards right will come out the other side of this market shift stronger, and the industry as a whole will be better for it.
So, agents, we want to know: are you adapting, or just surviving?
By Claire McHardy // Illustration by @ltd_designstudio
