Archive for October, 2009

Creating a Referral-Based Business – Part 2

Posted October 9th, 2009

For the last month I have had the good fortune of speaking at a number of events across Canada sponsored by Genworth Financial, Merix Financial and Macquarie Financial. The intent of this cross-country “MGM Road Show” was to allow real estate and mortgage professionals to come together under the same roof to foster stronger working relationships. Having a foot in both industries makes me uniquely suited to understand the challenges both groups are experiencing.

I realized early in my real estate career that if I had a strong relationship with great mortgage professionals, I could close more transactions. I went in pursuit of such an individual and the person I chose was not only well networked in the community, but had the experience to know how to package my sales properly so lenders could appreciate my clients. Not only did my income go up, but I no longer had to babysit any of my deals after the offer was accepted so I had more time to prospect for new business. It was a win-win relationship because both of our volumes went up, we both created a professional image, and our clients receive an exceptional level of service so our repeat and referral business increased. In my travels around the continent it is apparent that many relationships between the real estate and mortgage communities are a mixture of love and hate. My best advice to you if you want to increase your volume is to increase the quality of your Realtor referrals over the next few months.

TIP #1: Stop trying to connect with EVERY Realtor. Choose the top 25 agents in your trading area and develop a marketing campaign to start to build relationships with them. Develop a unique marketing campaign that suggests you have solutions to their challenges. Don’t trade on rates – trade on service. You can check the MLS system to determine agent volumes. You are searching for Realtors who sell more than they list (buyer agents) and check for teams who do large volumes. If you have ever received a deal that was impossible to finance due to the quality of the client, this is a byproduct of a Realtor that does not know their craft, and in turn, they will likely blame you for their client’s inability to receive approval. This kind of business takes you away from good business opportunities, and costs you time and money. It is better to partner with agents who understand that showing houses and writing contracts with clients who most likely will not get financing is nothing more than a fishing expedition. The best agents ensure the quality of their opportunities by having their buyers pre-qualified for their mortgage in advance to ensure they aren’t wasting time. These agents know that in order to make a 6-figure income they need to work with good quality clients.

TIP #2: Create a value proposition based on what Realtors need. Understand what it is they need to be more successful and ensure you deliver just that. Realtors want real-time communication about what is happening with their clients. The best way to accomplish this is to set up a checklist for every client you work with that includes sending all pertinent information to the Realtor at specific timelines. Realtors want to work with mortgage professionals they can trust to take care of all of the financial details without getting involved in the sale details. They need to be kept informed immediately if problems arise. NOTE: I understand we have privacy legislation that restricts us from sharing some details unless the client signs a waiver, so my advice is to ask all clients to sign waivers so their Realtor can be kept abreast of any important details that may affect closing.

TIP #3: The quality of the referral source will depend on who you decide to focus your attention on. Always chose quality over quantity when searching for your referral sources. Remember, quality referral sources will ensure more volume, better quality deals, happier clients and more income with more time off. This is how you build a business by design, not by accident.

To find out more about how to develop and grow such a business, visit my website at www.LeadersEdgeTraining.com to see when the next Leader’s Edge Training course for mortgage professionals will be offered in your area.

I wish you great success this month.

Chris Leader
President, Leader’s Edge Training

Protecting Your Commission – Part 1

Posted October 6th, 2009

          I hear the same challenges from real estate professionals regardless of the market – they continue to face the age old objection about commissions. For the new agents in the industry, it should be noted that this problem has been decades in the making. The problem is not an issue with the public, though they ask us to negotiate our commission, but it is more so with the agents who do not feel they are worthy of a 5, 6 or 7% commission. This problem can be fixed if everyone would take a moment to analyze their profitability and understand their costs of doing business. I am not suggesting that you charge a specific commission rate, but rather that you choose a commission rate based on your forecasted revenues and expenses.

The reduction of 1% in your commission rate is a 15-20% drop in your gross revenue and more importantly, a drop of up to 33% in your net pay!! The cost to sell a house is the same at 6% as it is at 4%, the difference is pure profit. Most agents don’t realize the net impact of this drop or how it affects their take home income.

I often see agents cut their commission as a form of survival when they lack the skills to communicate their unique value proposition. They lack the skills and the training, so to compete they have to give away a piece of their paycheck to convince the public to do business with them. It is sad to watch them trade away their worth as a professional, and I don’t think they realize they are alienating the rest of the industry in the process. If these agents would take the time to understand the repercussions of their actions, maybe they would take the time to create a value proposition and the ability to communicate it effectively.

For the record, I want to state that not protecting your income demonstrates an inability to negotiate on many different levels, including the inability to negotiate on behalf of clients. If we are not careful, our boutique quality approach that many clients have enjoyed from their real estate professionals over the years will be replaced with a big box model designed to reduce us to order takers, and in the process, we will be working harder for less money.

Real estate is an unusual business – the salesperson takes on all the risk and their entire income is predicated on them closing sales. With salespeople getting a larger portion of the commission these days, they also assume more expenses which raises their risk. Whenever someone has risk, the return has to be in direct balance to make the risk tolerable. The problem is, many salespeople today have assumed the risk but in their lack of wisdom, they have also reduced their return so their business model doesn’t make sense.

It is easy to focus on the problem, but much more difficult to address the solution. In the next few issues I will supply you with some scripts for handling commission challenges. If you know someone in the industry who lacks the skills to protect their paycheck, or maybe has not thought about analyzing their profitability, please feel free to forward this issue to them and ask them to sign up for my free monthly subscription so they will receive the commission dialogues to set them on the right path. It is my mission over the next few issues to address this problem so salespeople will be equipped to deal with commission objections head on.

I wish you great success this month.

Chris Leader
President, Leader’s Edge Training

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