Real Talk: What Brokerages Must Do To Weather The Next Recession

Real Estate

As the market is starting to suggest, we’re likely heading for a downturn. For the real estate industry (that only recently stopped licking its wounds from the Great Recession), this is surely a constant on all minds, especially those of us in brokerage leadership. How bad will this recession really be? I find that it’s been hard to speculate the depth of impact it will cause, but instead of worrying about that, brokerages should be focusing on how they’re going to survive it.

The best way to thrive when the downturn comes is to play to real estate’s greatest strength — the human element — to nurture and reinforce existing relationships by employing sphere-based marketing.

The ‘R’ Word

Let’s face it: A recession is coming. Nobel Prize-winner Robert Shiller, the economist who predicted the last housing crash, believes there is a “greater than average chance of recession in [the] next 18 months.” Price growth in housing has dramatically slowed in many markets; in fact, the Case-Shiller 20-city home price index in the U.S., as of May 2019, experienced the “smallest annual gain in house prices since August 2012.”

To give another example, let’s look at my firm’s neck of the woods: Seattle. According to one analysis, “For two years price growth accelerated faster there than anywhere else in the country. Then between April 2018 and April 2019, the year-over-year price change shrunk from 13.8% growth to a 0.0% flatline. Over the same time frame, San Francisco fell from 10.9% to 1.8% annual gains.” Now, these might only be two cities, but it’s saying something that two of the fastest-growing markets had the biggest losses.

All of this plus the fact that inventory is still a problem in many parts of the country due to insufficient new home construction is a major concern. To put things in perspective, 379 (just fewer than 76%) of the 500 firms ranked by REALTrends in 2002 survived the last downturn. Brokerages must be strategizing how they’re going to make it through the coming months and years.

Compressing Margins And Brokerage Budgeting

Life is getting harder for brokerages — not just because of the market, but also due to the compressing margins they’re facing. When the market turns sour and budgets shrink, the first thing to get cut is often advertising.

If the brokerage has a lead-focused model that’s dependent on advertising spending, they will be in trouble when the recession hits. It will be an unfortunate spiral down as they try to cut their way to prosperity. They’ll be spending less on advertising, which means fewer leads. Fewer leads mean even fewer dollars to spend on advertising. See where this is going?

I strongly believe that chasing leads is a bad business model to rely on. If a brokerage business depends solely on the conversion of leads, then to put it not so eloquently, it dies in the downturn. The only element that stands the test of time is relationships.

The Sphere Of Influence

Relationships, especially in real estate, are the beginning and end of every great business. Because of that, focusing on sphere is inherently more durable and sustainable in a downturn. The brokerages that understand and practice sphere-based marketing tactics are the ones that often perform better in a downturn, not worse.

These existing relationships — whether it’s agent to sphere, brokerage to agents or brokerage to previously transacted consumer — are the bread and butter of future brokerage business, and vitally, they require very little cash spending. Every existing system, tool and technique at your disposal should be aimed at strengthening relationships with this core group of connections.

How To Incorporate A Sphere Methodology

While there are countless ways to employ sphere methodology, here are a few that should be top of mind and first on your “recession is imminent” to-do list:

• Provide a customer relationship management (CRM) tool and/or other tools that emphasize the importance of an agent’s sphere of influence. Choose an option built for brokerages and their real estate agents who utilize sphere-based marketing, and one that allows them to improve relationships with the people they already know and grow their sphere along the way.

• Provide training for your agents on how to stay top of mind with their sphere and nurture them until they’re ready to transact. There are some famous methodologies around this that come to mind; one in particular is Ninja Selling.

• Urge your managers and agents to connect with someone they already know or have worked with previously a couple of times a week. Making room in their schedule for their existing sphere, rather than just chasing leads, is essential.

However brokerages choose to prepare and weather the recession storm, I implore them to try to include sphere-based marketing tactics in their master plans. If brokerages are able to play to their strengths and take care of repeat and referral business, the rest will take care of itself.

Products You May Like

Articles You May Like

Stocks making the biggest moves after hours: Nvidia, Applied Materials and GE
WeWork doesn’t have a single woman director, according to IPO filing
Residents complained of rats, mice in Kushner-owned buildings before Trump, Cummings feud
Profiting With Straddles This Earnings Season
Bitcoin’s Price is Up More Than $1K Since Bakkt Futures News

Leave a Reply

Your email address will not be published. Required fields are marked *