Get Recession Proof
Economists say we are in a recession due to the virus, but very few agents are talking about it.
If you are like most people, you’re experiencing anxiety trying to figure out how and when we will get back to normal after such a devastating blow to our economy.
The Feds and the Bank of Canada have reduced interest rates to an all-time low to prop-up the economy, but other than continuing to dump money into the economy (which can’t go on forever), those are their only cards to play.
How far our market retreats has to do with other external factors, namely, if businesses that have been hurt by the virus can actually recover, if we see another spike in the virus, and how long it takes to mass produce a vaccine, so we can put this horrific virus behind us. Experts give us their best guess every day, but no one has a crystal ball.
I believe the real estate market will be strong for the short-term because sellers have been holding off for the past three months and there is pent-up buyer demand, but the long-term market is questionable.
There are really two things to consider right now:
How do you capitalize on the current market to maximize your earning potential?
In an under-supplied market, the position you need to hold is the listing agent. You are ensured to always get paid, even if there are nine offers on the property. Use your buyer profiles to prospect for listing opportunities. Don’t wait for listings to come on the MLS, actively hunt for new listings now.
If you are working with buyers in this under-supplied market, you must get good at using the urgency close to get them to write their best offer up front or risk losing out. Many buyers today are putting in low-ball offers trying to use the virus as an excuse for why they should get a good deal. If you don’t advise your buyers on why this is not a good strategy, you will perpetuate their frustration when they keep losing out in multiple offers.
How can you setup your business to survive long-term if this recession continues?
The solution lies in understanding your cost of doing business. Some expenses are “need to have” and some are “nice to have”. Knowing the difference clearly defines where you can cut expenses if you need to. During a recession, short-term profit trumps long-term growth. How much income do you need to earn this year to meet your personal obligations and pay down your debts? Having a nest egg put away allows you to sleep at night without panicking about where tomorrow’s business will come from. In a retreating market, clients will likely be panicking and if the you are panicking as well, it is a bad combination. Here are some simple suggestions:
- Analyze every dollar you spend on marketing. What’s working and what’s not? If you can’t afford to market right now, how are you proactively prospecting to fill your pipeline?
- Analyze your office expenses. What can you eliminate without affecting client service? Spend money on things that will generate short-term revenue, rather than focusing on long-term growth.
- Put a plan in place to pay off your credit cards and loans with high interest. Consolidate your debts into a home equity line of credit at a preferred interest rate so you can pay off your debts sooner.
- Once debts are paid off, put 10% of your income away in a “slush fund” bank account to give you a cushion during the down cycle.
- Postpone all major purchases. For example, RV sales have gone through the roof recently because it is a way for families to vacation while isolating. My experience tells me that during times of uncertainty you must postpone self-indulgence.
No one can tell us for sure how long this recession will last. Some economists predict a V recovery, some predict a U recovery, and some predict a W recovery, but ignoring the market uncertainty is like the captain of the Titanic going full steam ahead into an ocean of icebergs. It raises your odds of a tragedy.
Play it smart. As we reopen, use this window of opportunity wisely in case we see another spike.
Leader’s Edge Training