Investing in Real Estate :The New Ultimate Listing Presentation (Part 15)Posted on October 22nd, 2010 No comments
A Lethal Listing Presentation (continued)
In the previous chapter we covered the traditional listing approach in detail. If you recall, I call it the “Price Approach” because it relies on the price to sell the home. Now allow me to introduce you to a brand new approach — the Traffic Approach.
The Traffic Approach
To understand the traffic approach, we need to turn our attention again to the “reasonable range.” Real estate is entirely different from liquid investments with absolute values. For instance, anybody can look up a share of stock and immediately see its current price. But because values are subjective in real estate, there tends to be about 10% flexibility in the price range. It’s what economists call price elasticity.
Consider a home that’s valued at 0,000. It’s not worth exactly 0,000! It’s really worth between 0,000 and 0,000. If the price drops below 0,000, nearly everyone will agree that the house is a good deal; and if the price goes above 0,000, nearly everyone will agree that the property is priced a little too high. However, within the “reasonable range” there is little price resistance.
Here’s how the traffic approach works. Instead of listing the home at the low end of the range (0,000), you raise its price to the high end of the range (0,000). But that creates a problem. The problem? Now there’s no compelling reason for anyone to show it or buy it.
Okay, here’s the secret weapon: you raise the commission by 2%! What you’re doing, effectively, is “bribing” agents to include your listing on their show lists. What I do is raise my commission from 6% to 8%, and then I raise the price from the low end of the range to the high end, or about 10%. The client then nets about 8% more money before any negotiations!
Sometimes, not often, the appraisal knocks the price down a bit. When that happens, it’s usually a minor adjustment, and then the seller has the option of lowering the price to match the appraisal — or else the deal, as written, falls apart. The buyer also has the option of paying, out of pocket, the shortfall in the appraisal or canceling the deal if there’s an appraisal contingency. When that happens, the client knows that he got the absolute top dollar for his home.
Now, I know that almost any Realtor® will immediately say, “I never look at the commission when I’m working for a buyer.” I’ve had many agents tell me as much. But I don’t believe that noble-sounding claim because statistics clearly indicate that it’s not true.
I don’t know any agent who would willfully sell a buyer client a home that wasn’t right for him; but if there are sixty homes in the market that generally match the client’s criteria, and if three of those homes pay higher commissions than the rest, it’s certainly not unethical to make sure that those three properties end up on every show list.
Moreover, there’s nothing wrong with hoping that your client chooses to buy one of the three. If he doesn’t, no big deal; but if he does, you just got a big bonus! Let’s not forget, we practice real estate for a living. It’s how we pay our bills. It’s how we support our families. There is nothing wrong with focusing on what pays you the best. In fact, it’s the right thing to do.
One of the questions I’m often asked is why I don’t just offer a bonus to the selling agent. Once again, the answer is simple. Every buyer’s agent knows that if he doesn’t present a full offer, the first money to come off the table will be the selling bonus. Since most homes don’t sell for full offers, the selling bonus doesn’t happen very often, so the buyer’s agent can find himself torn between not getting the bonus and not representing his client.
If the buyer’s agent advises his client to offer less than the listing price, he knows that his bonus is most likely gone. On the other hand, if he encourages the buyer to pay the listing price, he’s probably not fully representing the buyer’s interests. For that reason, the selling bonus is often a disincentive rather than a legitimate incentive.
So now you have the theory behind my listing approach. The big picture, if you will. So what’s next? In the next part, we’ll be discussing the listing presentation itself, and I believe you’ll find it to be the most powerful listing presentation you’ve ever seen! Until then, work on getting your technology in place so you have an unending supply of inbound leads. And focus on learning all your numbers and becoming the best agent for the job. There’s never going to be a better time to start than right now.
Matt Jones is the founder and CEO of FavoriteAgent.com and nationally syndicated author of LCM: The Secret to Success in the New Age of Real Estate, The Ultimate Listing Presentation, Traffic: How to Sell Fast and Net More, Becoming a Mega-Producer, and 20 Questions: Everything You Always Wanted to Know about Real Estate but Were Afraid to Ask. Jones’ North Carolina-based company has been profiled by major media outlets as an innovator and a pioneer in the industry, and CNN’s Pulse on America claimed FavoriteAgent.com is “changing the way real estate is being done in America.” This content is cross-posted in the following locations: BlogMattBlog.com, RealBlogging.com, NewsGeni.us, TheCommissionCheck.com, and now Amazon Kindle.
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