If you are a real estate agent and you want to grow your business, maximize your take-home income, and actually have a life at the same time, there are three big career crushing mistakes you must avoid as if your financial future and sanity depended upon it.
Hi I’m Mike Regan. Before I got into real estate, I was a process improvement consultant and the author of two books on the subject. Then, as a top-producing real estate agent, I sold over 750 homes in my 17-year career.
Now as the founder and CEO of Relevate Real Estate we’re pumped to have a higher percentage of top producing agents than any other mid-sized or larger firm.
In this blog I’m going to tell you about three terrible, and unfortunately extremely common, career and life-destroying mistakes I see agents out there making every day.
I’ll explain why each of them is so terrible for agents who want to grow their take-home income and have balanced lives, and most importantly, I’ll describe exactly how to escape each of these awful mistakes, and never look back.
The first mistake is
1. Being Dependent On Someone Else For Your Leads
The biggest mistake agents make when growing their business is to be dependent on someone else for leads. This is a problem for a lot of reasons.
- First, because in fact by doing this, you are not growing your own business but instead you’re working hard to grow the business of the lead supplier, which is to make money from you by selling you leads… or getting referral fees from the leads they give you, which is the same thing, you’re just paying a lot more after closing on closed leads, instead of paying less per lead up front.
- The second reason this is a problem for your career is that the supplier of those leads could cut you off at any time for any reason.
- And the third reason is that you’re incurring lead purchase expenses that on average, compared to working to build your own lead generation system, reduce your take home income by about 50%. You might say, “Well it’s worth it because I didn’t have to go get the leads myself. Well no, that’s BS for two reasons…
(a) because you could get those leads yourself for a lot less, even taking the value of your time into account, and
(b) you are not considering that the leads you get from someone else are usually low quality and require so much of your time to convert into a closing, that if you used that same amount of time and effort time to get higher quality leads for yourself, you’d end up spending the same amount of time to both get AND convert the lead, and not have to pay for the lead in the first place.
This mistake even applies to established agents who have a good amount of leads coming in from their own efforts, who drop everything and gladly agree to take a referral from another agent with a 25% referral fee or from a relocation company with a (gulp) 42% referral fee. The time the agent spends serving that client and getting paid much less than normal could have been invested in getting several more clients on which the agent could have kept their full normal commission.
Finally, the biggest problem I’ve seen with this mistake is that two-thirds of those who take these kinds of leads get addicted to them, and simply stop even trying to build their own independent businesses, even though they are working all the time and never truly get ahead financially. As a result they never have enough money to reinvest in a support team to free them up to get even more business while also having a balanced life.
The solution is to invest your unpaid time up front to create your own lead flow. Yes I know this requires delayed gratification, not getting something immediately after you do a little work, but that’s the nature of building your own business, and really the nature of success in life in general.
Your job is lead generation. That’s the most valuable activity in your business. Henry Ford once said, “Nothing happens until someone sells something.” That’s got to be you for your business. You need to own and control your source of business, otherwise you are working for someone else, the person or company who is generating those leads.
I’ve analyzed all the different ways real estate agents generate leads for themselves. Don’t spread yourself too thin. Pick one of those methods and master it. None of them are easy. ALL of these methods work, but they all take time and effort to make them work for you consistently. If you dedicate yourself to mastery of your chosen lead generation method, you will own your source of lead generation and you will be the master of your own business.
The second mistake is
2. Not marketing To Your Past Clients
The next big mistake is always chasing new lead sources and strangers and not keeping in touch with past clients and asking them for referrals.
Your past clients won’t refer you to others, if you don’t stay top of their minds and actually ask them to do so..
Not staying in touch with past clients is a problem because they are your best sources of business. 80% of buyers and sellers find their agent by referral. Your past clients WANT to refer you. Their friends are asking which agent they use and because you aren’t keeping in touch they can’t remember your name or your number! If you do a really good job of staying in touch with past clients, eventually you won’t need any other types of lead generation.
The solution is to have a system to keep in touch with past clients. To do this you’ll need a marketing program. At least every 45 days, you need to send something to all your past clients that they’ll think is cool. It could be about real estate, like a report of what’s happening in the market. Or it could be an invitation to a happy hour you are hosting for them. Either way, whatever you send is simply this: it’s an excuse to call them and say “hi”. It’s something you are giving them, so you can feel good about asking them if they know anyone who is thinking about buying or selling. You don’t get if you don’t ask. My friend Tim says “No asky, no getty.”
You’ll need to have a good database system to keep their names and contact information, birthdays and closing anniversaries, reminders to call for kinds of other reasons, all their transaction records, and notes about your interactions with them. It will also really help if the software allows you to prioritize people based on how likely they are to refer, and to be able to group them, like which of them are moms so you can deliver a Mothers day gift to them, or who’s into college football or girls nights out with wine.
One reason some agents hesitate to touch base with past clients is they’re worried they might be upset with them about something that happened during the transaction. That’s a pretty common fear. I’ve even thought this at times when I was a busy agent. Sometimes, yes, a client was emotional during or right after a transaction but it’s crazy how it’s like childbirth, they might be feeling pain during it, but right after they forget the pain and they love you. In my experience, 90% of the time when you think they’re mad at you they’ll surprise you with expressions of joy and love when you call.
That’s real estate for you. You’ve got nothing to lose by making that call and saying “hello”.
The third mistake is
3. Reducing your listing commission
The third big mistake agents make while trying to grow their business is reducing their listing commission.
Doing this is a big problem. Again, for several reasons.
- First by discounting your commission, you are telling the client you don’t respect the value you bring, and that client will never again respect you or your advice as much as they originally would have, and that will make you less effective for them.
- Second, by discounting your commission, you are telling them you’re a bad negotiator, and that when a buyer’s agent brings an offer, you’ll give away the price of their home also. After all, the seller’s reason, if you give away your own money right in front of them, for sure you’ll give away their money when they aren’t watching you.
- Third, let’s use 6% total commission as an example because that’s the minimum our agents are worth at Relevate based on the value we bring to sellers. 3% goes to the buyer’s agent, so you’re left with 3%. If you give up 1% of your commission, that reduces your revenue by 33%, not 1%. For the average agent, that’s half of what’s left over after all expenses, profit, meaning you’ve just cut your take-home income in half. And that’s when you only give away 1%.
Finally, once an agent starts doing this, it’s hard to stop.
Remember earlier we talked about getting referrals from your past clients? … Now when they refer you, they’ll tell the new client, “Hey, they’ll reduce their commission, just ask.” And you’ll have to because after all, you did it for their friend. Now you HAVE to do it for them, too.
The solution is first to have value to offer sellers and be able to explain it clearly and in a compelling way.
Sellers want to sell their home fast and for the maximum price. How exactly do you deliver that for sellers? If you aren’t sure, then study the home selling process and come up with a process or system you believe in for them. I’ve put together a video explaining what I believe all agents can and should be doing every time for every seller.
Next, realize that at least half the time when a seller asks you to reduce your commission, they’re just ASKING. If you say NO, these people will say “Okay, I was just asking, where do I sign?” They were testing you, and although they won’t admit it, they’re relieved you said “no”. They understand that if you stand up for your own value, you’ll also stand up for the value of their home. Right?
Finally, you’ve got to accept that there are just some cheap people out there that don’t appreciate value no matter how you or anyone else explains it. They know everything, trust no one, and will always go with the cheapest choice and get the cheapest results no matter what.
As a business owner, you need to tell yourself “Not all business is good business”, and walk away. Working for these types of people is a nightmare anyway. Let another agent deal with them. If you drop your commission enough to make these people happy, you’ll drown your self-respect, and the future of your business, with it.
These are three terrible mistakes I see agents making out there every day, and the solutions to those mistakes so you can escape them… Or hey, hopefully never make them in the first place.
I was pretty blunt in my explanations because I don’t want you or your family to suffer from the consequences of making those terrible mistakes. I want you to have everything this great business can give you, without unnecessary pain and suffering.
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