A month ago, I said we have three great months to produce. Now we have two: November and December. I hope that your mindset is that you can be very productive in these two months. October, November, December; we know that the market naturally slows down. It’s normal, it happens every year, there’s a little slow down. People are waiting until after the holidays, etc.
At the same time, I think most of you recognize that nationwide the market is slowing down. That’s normal, real estate is a very cyclical business. We have four or five years of a very strong economy (that we’ve experienced from 2012 through this year), and then we have a hiccup, and it’s 6, 12, 18 months of a slowdown. It’s a simple adjustment to the market. It’s normal. It happens every five to six years, and it’s been going on for all of our lifetimes.
Right now we have two happening at the same time; the normal end of year and a cyclical slowdown. A lot of people are panicking so I’m constantly asked this question: What is the most important skill I should work on if I expect to succeed at a high level in the balance of this year and all of next year? I’ve probably been asked that 25-30 times in the last month, and the answer hasn’t changed so I want you to listen.
Cherry Pick the Good Buyers
Since 90% of the efforts that we expect you to extend in your work is listing oriented, you’ll usually have about 75-80% listings and 25-25% buyer-controlled sales. Now that the market is slowing down and listings are tougher to get, it’s probably 60% listings 40% buyer-controlled sales. Cherry pick some of those good buyers that are in the market, and as long as you have a good buyer program that you represent, you can get them under contract. But the majority of our time should always be spent on listings, whether it be listing a property for sale or showing property to a buyer.
If you follow The Mike Ferry Sales System, you know that in the listing process rule #1 is “prequalify 100% of the sellers 100% of the time, no exceptions“. It’s the same exact thing with buyers. If you’re working with buyers, there are two types of prequalifying. The first is is the financial prequalifying– their ability to execute a contract, to get a loan if necessary and get that transaction completed. The second is finding out the type of home, the neighborhood, etc. that they want to buy. Our job is to prequalify relentlessly in this type of market, not just partially.
Prequalifying a Seller
I talked to a great agent about two months ago, we’re talking about someone with 150+ deals a year. This man said to me, “You know, Mike, my only challenge is on the prequalifying of a seller. I will often skip questions when I think I know the answer and then I get to the house and I find out I don’t know the answer. It’s embarrassing.”
I asked, “Why don’t you ask all the questions?”
He said, “I’m committed to asking all the questions.”
If you don’t have the prequalifying questions for buyers, download them. If you don’t have those for sellers, download them. Then commit for November and December not to put a buyer in the car under any circumstance until they’re prequalified 100% (by the lender and by you for the type of home). You’re not going to allow any seller to have your presence in front of them without prequalifying 100% also.
Your Biggest Asset is Time, and You Can’t Afford to Waste It
In a downward trending market, when it’s getting a little bit tougher to do a deal, your biggest asset is your time. You can’t afford to waste your time. If you’re driving someone around or presenting, and you don’t know what they’re trying to accomplish, or you don’t understand their motivation, you are technically wasting your time. You can’t deny — and it doesn’t matter how you choose to argue, it doesn’t matter what direction you go in — that prequalifying a buyer or seller is critically important to speed up the process. If you don’t do it, you’re going to waste your time.
Some of you will say, “If you get me a buyer in the car, and I show them enough homes, I can find a way to get them to buy.”
Or, “Get me in front of enough sellers. Even if I haven’t found their motivation, I’m good enough to get them to sell.”
Listen, and listen carefully. Everyone says I’m pretty good at the work that I do in helping people list and sell more homes. Still, I can only get 15-20% of all the people I talk to to do anything that I say. We have tens of thousands of viewers every week on MFTV, and I can only get a small percentage of them to do what I say.
I can’t get most of you to do what you know you’re supposed to do (and I’m pretty good at motivating people to get them to do what they’re supposed to do), and you think you’re going to get an unmotivated seller to sign a contract? I don’t know if marijuana is legal in your state, but you must be doing drugs, because there’s something wrong. It’s not going to happen, and you’re going to waste your time.
Prequalifying Benefits Both Parties
So, the biggest thing I try to get across to our clients, you do the prequalifying obviously to benefit the client because you know more about them and you know how to solve the problem they have through prequalifying
Second, you give yourself the gift of time. There’s nothing worse than spending four hours in a car with a buyer on Saturday only to find out they can’t afford to buy a house. Or, you go through the work of sending a pre-listing package to a seller, and when you show up and make a presentation you find out they don’t really want to sell their home!
So one I do it to save time, and second I prequalify so I can find out the heart of the problem. Does the buyer really have to buy? Does the seller really have to sell? Because if they don’t, I’m doing an injustice to myself, my broker, my family, my kids, the other agents. If I don’t prequalify, I’m doing a terrible injustice. I want you to write this down. “I don’t want to waste my time therefore I prequalify.” Second, “we don’t want to present to a seller who’s only interested in greed versus the need to sell.”
Need Vs. Greed
What do I mean by greed? In 2006 through 2011 and part of 2012, a large part of the sellers lost a lot of equity in their homes. It was a terrible situation, they bought a house for $350,000 in 2005 and by 2010 it was worth $150,000, but they owed $300,000. It was a terrible economic, financial disaster. Well, now that property has regained all the equity, and probably more, that $350,000 home today is worth $695,000.
They say to themselves, “Honey, let’s sell it for $695k. Let’s take our money and run.”
Alright, do they have to sell? No. Do they want to sell? Yes, which makes it a greed-oriented transaction versus the need.
- 1. I need to sell because I’m being transferred.
2. I need to sell because the kids have grown up and we don’t need the space.
3. I need to sell because I’m losing my job.
4. I need to sell because we want a much bigger house because we’re having a family.
Discover Needs Through Prequalification
Need versus greed, how do you find out the difference? Through prequalifying. If you can’t discover a need or problem during prequalifying, don’t make a presentation. In this kind of market also remember you have a set of questions you’re going to ask. Listen to those answers, and see what additional questions you have to ask to make sure you understand their motivation.
It always comes down to the same thing, the motivation to buy and sell. A long answer to the question asked of me last week by a client (what’s the most important skill I need to work on), I said prequalifying. If you understand that learning the motivation of your party is the name of the game (and really comprehend that), then the whole process of selling real estate can be more fun, productive, and certainly a lot more profitable.
Prequalify to Win
If you don’t prequalify and you waste time, you are probably going to lose. Give it a lot of thought. We have a great November and December. You are going to have your best two months ever but you have to prequalify to make it happen. I hope you’re preparing to work right through December 23rd. In America, we’ll take a four-day holiday for Thanksgiving. If we work through December 23rd, some of you will have a little vacation for Christmas and over New Year’s, but we are working because we have buyers and sellers that need the service you have to offer. There’s only going to be a handful of competitors working, you want to be one of them.
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