12-05-22 FIRESIDE CHAT WITH MIKE AND SABRINA
Mike Ferry: Good afternoon to everybody. It’s Mike and Sabrina Ferry sitting in our offices in Las Vegas. I guess about four years ago, Sabrina had an idea that we should do a little Fireside Chat towards the end of the year and update all of our prospects, clients and Coaching Clients as to what the market is doing. And she suggested again we do it. It was very popular last time. I think it was because you were in the video and that makes a big difference so …
Sabrina Ferry: Yes, we all know how much I love these.
Mike Ferry: So thank you for that. So why don’t you tell us what we want to accomplish and give them a little history on the Fireside Chat?
Sabrina Ferry: Well, as you can see, we traded in our fireside for a wreath this year, and it is the holiday season. And as the holidays come closer and the year winds down, we last time took the opportunity to sit down and produce this little video to talk to you and to give you Mike’s thoughts as the year closes out and what to expect for 2023, because that’s always what’s on everyone’s mind. It’s been a crazy year. It has been very, very interesting. We have had highs, we have had some interesting changes. We have what Mike calls a “normal market” and we’ll get into that in a minute because that seems to be so different than what we had experienced during 2020, 2021 and at the beginning of 2022. And then things changed. So I’ve got a couple of questions, Mike, that I would like to ask you, and if you would answer for the audience, that would be great. So my first question is, give us your thoughts as to the state of the market for 2023. There’s a lot of people have a lot of negativity about this market and they’re worried about a recession. Do you see that coming? What are your thoughts?
Mike Ferry: In a normal year, we will have 4.5, 4.6, 4.7 million sales. 2021 was an abnormal year. We talked about it so much inside the company because we had a little over 6 million sales. And I’m talking about in the US versus our Canadian friends. So, you know, when they talk about the state of the market, we’re back at 4.5 to 4.6 million this year. And, you know, it definitely changed starting about May and June of this year, as we all saw. So I don’t see it being any different for the first half of 2023. I think we’ll be on the same kind of pace. Now, December every year is a little bit less than every other month because of the holiday season, but I certainly don’t see a recession taking place. I don’t see a recession under any circumstance. For an agent that understands the sales process. The Mike Ferry-trained agents (and I’m not trying to brag about our agents) are pretty much recession-proof.
Sabrina Ferry: Go ahead and brag about our agents.
Mike Ferry: Well, they are recession-proof because they understand the sales process. They understand managing their time and prospecting and doing good lead follow-up and prequalifying and making strong presentations. If there’s going to be 4.5 to 4.7 million sales next year and your goal is to do 30 as an example, let’s face it, there’s no recession going on that can affect you doing your 30. You may have to prospect a little more. You may have to be a little stronger in handling some of the objections that Sellers and Buyers give. But for the agents that don’t understand selling, it’s probably going to be a tough year. And the reason it’s going to be so tough, you know, there’s a great book and we’ve talked about it called, The 80/20 Rule. Written I think probably in the early 1990s. It’s on my bookshelf here in the office and it’s a great book talking about that 80% of all the productivity comes from 20% of the people in an organization. I think today is probably 94/6.
Sabrina Ferry: Wow!
Mike Ferry: I think 5% to 7% of the agents are doing over 90% of all the business. I was quoted this by Kevin Sanchez (one of our long-time great customers) saying, “1.7 million agents, approximately an 8%, which is about 125,000, did four or more transactions during 2022.” That is certainly not the 80/20 rule any longer. So for those that are on the side of the 6% to 8% … Congratulations, it’s going to be a great 2023! For the rest, hold on and learn how to sell.
Sabrina Ferry: That sounds a little exciting. But you’re right. Learn how to sell. Learn the skills that will get you through any market. So obviously, with the market changing, do you see foreclosures coming back into play?
Mike Ferry: We saw that heavily 2008 to 2012. That was the foreclosure explosion. That’s because there was not a lot of equity that people had in their homes. They had bought their homes in 2005, 2006, 2007, 2008. The margins were very thin. The financing at that time, for those that are newer to Real Estate, you know, 110% financing. And I say that as a joke, but that was much more common than a 70/30 loan ratio. Today, everybody, because of 2021, has experienced rather significant appreciation on their homes. And if they are going to be changing the rates, which they have already changed up, down, up, down, up, down two or three times. And if there is ARM loans coming due which there always is versus the foreclosure will be people putting their homes in the market. So I really think that the listing opportunity in the first and second quarter of 2023 is going to be better than ever because to avoid the foreclosure with a big equity position they can list their home for sale, cash out, save their credit and move on. So I don’t see it now. There’s always foreclosures. That is no matter what the state of the economy is, there’s going to be foreclosures. I don’t see it being anywhere near what we experienced 2008 to 2012. I don’t see that happening. And if I’m wrong, I’m wrong, but I don’t think I am.
Sabrina Ferry: Well, you are so right that the equity position that people are experiencing now is different than before. And I know that there’s been a lot of talk of the market changing and yet home prices have stayed relatively high.
Mike Ferry: Yes. And are still increasing.
Sabrina Ferry: That’s interesting.
Mike Ferry: Now some markets, they have gone down a little bit like the Las Vegas market probably has gone down about 10% in average sales price. But we had almost a 75% increase in a 12 to 14 month period. So a small decrease is no big deal, but it’s still most of the country. Limited inventory always causes increase in prices. And we still have today a limited inventory. We have more than we had, but we still have less than we need.
Sabrina Ferry: Well, you know, you keep talking about this being a normal market and there are so many people out there who are newer to real estate and they’ve never experienced what you call “normal.” Can you help us understand that a little bit more and help the viewer understand more of this normal market?
Mike Ferry: If you started in the second half of 2020 and experienced 2021, you have to understand that was totally an abnormal market. Any time there’s over 6 million transactions, it is very unusual. So I wrote some thoughts on this particular question. I wrote down, “Normal market. The days on market for a listing keep extending.” You know, we had a point here in Las Vegas less than 18 months ago where we went from four days on market to eight. And agents started to panic.
Sabrina Ferry: Yeah, I remember that.
Mike Ferry: And then it went to 45. So that’s much more normal. Inventory is starting to grow, which is the sign of a normal market. It’s not grown a lot, but it’s growing. Price reductions are in play. I mean, we didn’t have price reductions in 2021. We had price escalation. If there were 17 offers on a listing and it was listed at 595, it probably sold for 685. Today, If it’s 595 is probably going to sell for 545. And if the agent doesn’t get a price reduction, we have the next problem, which is Expired Listings. We didn’t have Expired Listings of consequence for a couple of years. In a normal market, we have 15% to 20% Expireds. The COVID Buyers … They’ve all bought. So that big rush that we saw and that heated exchange of people having to buy property has disappeared. That’s a good choice. Interest rates are going up and down, which is normal. That 3% interest rate we had for an extended period of time, it’s unlikely we’ll see that again in our lifetime. Now, I’m substantially older than my beautiful wife, but I still have at least 30 years left. We won’t see 3% again, and if we do, something has gone haywire. I also wrote down, In a normal market, there’s going to be very few offers per listing. In abnormal market, there were 10 or 15. Now, agents less property and tell the Seller we should have several offers in the next couple of weeks and then the Sellers are mad when there’s no offers.
Mike Ferry: I wrote down the number of showings has declined dramatically, which is normal. So you have to understand that for-sale banners are not selling quickly. That’s normal. Prices are flattening out … Normal. And in some cases declining. The number of deals falling apart is much higher than it has been over the last two years. That is normal. Let’s just use the example that in a normal market, 20% to 22% of all transactions do not close. For whatever reason, Buyer didn’t qualify, property didn’t qualify. You know appraisals came in low, etc. So deals are falling apart. And for agents that have never experienced that, it’s traumatic. But for the veterans, it’s normal. And then I wrote down also in terms of normality, Seller concessions are once again part of a normal transaction, whether being buying down interest rates or paying part of the closing costs. So the biggest challenge we have today is the majority of all the agents started in Real Estate after 2019. They’ve never been through what the veterans, ourselves and our clients are going through today. This is normal. Put that into your head as a mindset and you’ll look at your market in a much more favorable fashion.
Sabrina Ferry: It’s interesting when you said, “Concessions are back in place.” I remember seeing a listing where they were throwing in the car. A car would come with the house and they were just trying to get people to bring in an offer to get something going. And it is interesting because one of the greatest challenges that we seem to be running into is that everybody out there, that initial shock of COVID when we were all shut down, it was a few weeks of total, almost disbelief. And then the industry adjusted and a lot of people built momentum very quickly and did a huge amount of volume in that 2020 to 2021 period. And you’ve described it many times as it was like a huge wave that came in.
Mike Ferry: Yes.
Sabrina Ferry: And you just didn’t have to work the same way. So just a quick thought on mindset. How do you, as a newer agent, understand that this is normal and that skills will help you get through if you have them and that they are something you can acquire? So can you just give us your thoughts on that?
Mike Ferry: If you get on a commercial airplane, you expect the pilot to have fundamental skills?
Sabrina Ferry: Yes.
Mike Ferry: If you go to your doctor to have a broken finger repaired, you expect the doctor to have fundamental skills. If you’re in court, you expect your attorney to have fundamental skills. Buyers and Sellers expect that of us. And this is an industry of independent contractors. And with that phrase being attached to our name, we don’t have to learn the skills that other professions have to learn. So part of the mindset is clicking off independent contractor and saying, I have to develop skills to have the confidence to do my job at the level that Buyers and Sellers expect. But at the same time, if you stop reading the news, stop watching the news, stop talking to negative people, you’re going to have a better view of what’s going on in your office, in your company. It’s unfortunate that this little tiny percentage is selling this much of the Real Estate today, so it’s hard to distinguish without being in conversations with other agents what their attitudes are towards the market. But as soon as they say things like, oh, I just don’t think we can take listings today, you smile and walk away and talk to somebody else. You’ve got to control what’s going in, to control what comes out, and you have to control what goes in to control your behavior patterns. So stop reading the news. Stop watching the news. Stop talking to negative people and do what other professions do. Learn skills.
Sabrina Ferry: It’s such a simple thought and yet so hard for so many people to do. So, with learning skills as advice to the agents, what would you say to the Brokers as we come into 2023?
Mike Ferry: I had this conversation this week with seven or eight Brokers that I coached personally. I said, “Strengthen your recruiting skill set.” Because right now we have a tremendous influx of new licensees, people that are being unemployed by their industries, looking at Real Estate and seeing big commission checks. So we’re having this big influx and recruiting has to revolve around 50% new licensees, 50% existing agents. You’ve got to strengthen your recruiting. I wrote down they have to do sales training versus social media technology, etc. What does a person say to a person that is a Seller who gives you an objection? You have to have a response or an answer. Social media. You can’t present something you’ve posted on social media to a Seller and say, “Read that to get the answer.” That doesn’t work. Technology’s always going to be important as part of our life. We have technology right now in front of us here in the office, and we understand that technology is important, but they’re not listing with you because of technology, they’re listing with you because they think you have the ability and the skill to get a transaction. But then I also wrote down Brokers have to start setting minimum standards and then enforcing those. And that is a hard one because they’re independent contractors. But if they recruit, if they train and they have standards for people to follow. Brokers are going to have more success. They’re going to create some turnover in that process. And that’s okay. Because less sometimes is more when it comes to agents.
Sabrina Ferry: Well, I’ve heard you for a long time now say that for Brokers, they will solve every problem they have with recruiting.
Mike Ferry: Correct.
Sabrina Ferry: And you stand by that more than ever again.
Mike Ferry: Absolutely. 100%.
Sabrina Ferry: It is interesting how cyclical the market is.
Mike Ferry: It’s a series of waves coming into the beach.
Sabrina Ferry: Yeah. I’ve also been amazed at how many people are looking for an easy answer. You mentioned social media and all these other things. And yet the bottom line is, even if you do get someone to respond to something you post, you still have to be able to talk to them, answer their questions, handle their objections and convince them that you’re the right agent for the job of selling their home. And I assume that’s the reason why you’re always saying, you know, all the add-ons are great. But if you don’t have the fundamental skills, it’s going to be a challenge.
Mike Ferry: Or as I’ve said now for the last 18 months, “Selling Real Estate is simple … It’s just not easy.” Because watch, somebody wants to buy, somebody wants to sell. Our job, get in the middle. But if you get in the middle, you have to know what to say to bring the two parties together. And that’s really what your job and our job is together.
Sabrina Ferry: So any last words for our agents who are watching? What should they be doing for the last four weeks of 2022? And as we approach 2023
Mike Ferry: Work!
Sabrina Ferry: Ooh, a four-letter word.
Mike Ferry: It’s not a month off. It’s work. There is going to be less transactions. We know that it’s historical and sometimes hysterical at the same time. But if you work 18 to 20 days, you still have ten days off over the holidays, which everybody is working hard to have some time off. But second, talk to your database more than you’ve ever talked to them before. Third, I wrote down … Focus on listings for January, February and March. The listings you take in January will be generated because of the work you do in December. And then I wrote down, obviously, focus on improving your skills. I mean, there’s no better time. I’m doing a two-day event on Listing Property in Anaheim in December. Yeah, I can’t remember the dates.
Sabrina Ferry: The 14th and 15th.
Mike Ferry: Okay. And we already have I think 350 people signed up to attend, which I thought if we had 100, I would be excited. And we’re at 350 with a couple of weeks to go. Focus on skills and learn the skills. And then I thought last for the agents and the Brokers … Consider joining MFO Coaching because there’s no question it can make a difference. I talked to a guy today nice fellow, productive agent, works in KW system and he called and he said he wants to be involved in Coaching. And I called him back saying, “Would you like us to sign you up for Coaching?” He said, “No, I want to be a Coach.” And he said, “What do I have to do to be a Coach?” I said, “You have to be in Coaching and know what we do.” And I said, “Have you ever attended any of our events?” He said, “No, but I’ve heard about them for years. I’ve never attended.” I said, “Well, until you attend and are part of what we do, how can you teach it?” Well, everybody wants to be a Coach today. If you want to be a Coach, become a great agent, because then people want to hear what you have to say. And the money for great agents is listing property. Learn how to list property. Life will be better in 2023.
Sabrina Ferry: You know, it’s interesting that you should say, “Everybody now wants to be a Coach.” And as the market has returned to normal and you have to work, they’re looking for an easier way of making a living. And apparently some people think that’s Coaching. One of the things that I’ll just say, I had a conversation recently with one of our Coaches Ann Baker and she said, “What company can you go to that has Coaches that can that have 20 plus years of experience coaching you, helping you build the skills, helping you know what to say and what to do?” And as she said that I first of all, couldn’t believe that all that time had gone by. It does seem to happen very quickly.
Mike Ferry: We’ve had Coaching for 33, 34 years now.
Sabrina Ferry: And I think and just pass 25 years actually as a Coach with us and tap into that that experience, find a way of learning and developing the skills. Mike mentioned the program that we are doing in Anaheim. The nice thing about that too is it is our Toy Drive and I’m going to tie this back in, if I may, to the holidays, because of course, Christmas is coming, the holidays are coming. And for our Toy Drive, we really encourage everyone to bring an unwrapped toy. We’re excited this year we can actually have toys again. COVID is over and the hospitals are accepting toys, actual physical toys again. So if you are planning to come, please bring an unwrapped toy with you and we encourage you to participate in this event. Any closing thoughts for everyone for the holidays?
Mike Ferry: Well, first of all … Work! And that’s that.
Sabrina Ferry: I think he said that already, right?
Mike Ferry: Okay … Second of all … Work!
Sabrina Ferry: Is there a third?
Mike Ferry: Yes. Try working. Because as the market shifted over the course of the summer and into the fall, less and less agents were participating. And I heard that from Brokers every single day. So let’s start the new year on Thursday, December 1st. Let’s start. That gives us a 13-month year to get the habits in place and achieve the goals we’ve set. So when Sabrina said to me, “Let’s do a Fireside Chat again”, I said, “Nah, we did that. I’m not a big fan of that kind of stuff.” But it was one of our most and highest, responded-to, little videos we did a couple of years ago. So we hope there’s a lot of you watching, listening, learning and working. So thank you for the idea. That’s my thoughts on our Fireside Chat.
Sabrina Ferry: And from me and from all of our staff at MFO. I just want to wish all of you a magical holiday season, hopefully filled with love and joy and good things. Boy, we all could use it. And that is the thing that we need to make a commitment to. Give yourself the gift of a positive mindset this year. Focus on working on that and doing what you need to do. If you have the skills you can build your business in any market. He’s been proving this for 48 years. People often call Mike old-fashioned. He laughs and says, he may be old, but as far as he knows, making a profit and having a successful business is still quite fashionable. So I always love that response of yours. And as I said to all of you, we wish you the happiest of holidays and we are excited for coming into 2023. We have the ability to make it a great year. Don’t underestimate your ability to make 2023 great for you and for your family. Thanks for watching.
Mike Ferry: See you soon.
Sabrina Ferry: Merry Christmas. Happy Holidays.
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