MAGIC NUMBER How many listings do you need at all times? This is possibly the most important number of your career!

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1 MAGIC NUMBER How many listings do you need at all times? This is possibly the most important number of your career! What is the Magic Number? The Magic Number is the total number of Active Listings you must have in inventory at all times to meet or exceed your goal. In other words, how many listings do you need in order to create a predictable number of closings per month that matches what your goal calls for? What is Magic About This Number? Each listing you have should create a minimum of one additional listing, and up to five additional buyers. This happens as a result of all of your marketing, prospecting, and promotional efforts surrounding each of your active listings. In this class, we teach you how to do this so don t worry if you don t know how yet! Secret: This is why listings have higher value to you than buyers. When you work with a buyer, it s one sale, once. Hopefully you ll get referrals, but when you ve sold them their home, that s that. Listings create other business. That s why you must become a great listing agent. It also allows you to stop doing crazy things like paying for buyer leads. How Do You Figure Out Your Magic Number? First, make sure you have calculated your Ultimate Monthly Income. (Refer to this website, and find How to Calculate Ultimate Monthly Income.) Do not proceed with the rest of this coaching section unless you know how many deals per month you need to be closing. That s what the Ultimate Monthly Income Worksheet creates for you. Go back and do it if you skipped it. Ask for help if you need it! Number of transactions you need monthly =. Memorize that number.

2 How do you figure out how many listings you need to create those monthly deals? You have to know just a little bit about the Absorption Rate in your marketplace. Don t panic, it s easier than it sounds. ABSORPTION RATE The rate at which homes are selling in a specific area. How many days or months does it take to sell an active listing? There are three pieces of information you will need in order to calculate absorption rate: 1. The specific time frame 2. The number of sold homes during that time frame 3. The number of active homes right now Why should you care? You re going on your next listing appointment and you are now able to talk to your client about the number of months inventory of homes (just like his) that are currently on the market. You can set expectations for how long it should take to sell based on market conditions, inventory, and supply and demand. Will this add to your pricing confidence? Will the seller be more likely to allow you to accurately price his home? Certainly. Will you be smarter and more professional than your competition? Of course you will. You re working with your next buyer, and you re being trusted to negotiate for the perfect house. You can communicate to the seller s agent and to your buyer that there is a year s worth of inventory currently available just like their listing. Conversely you may have to advise your buyer, based on complete lack of inventory and very low days on the market, that if they want their dream home, it s appropriate and expected that they write an offer above the list price. Either way, knowing the absorption rate gives you the confidence necessary to give sound advice to your clients. Absorption rate is a measure of how many months worth of homes are currently on the market. This is calculated by establishing how many purchases were made in the past 12 months within a given set of parameters. Next, we find out how many homes are currently on the market with the same set of parameters. By dividing the number of current listings by the number of buyers buying per month, we arrive at the absorption rate. If there are ten homes on the market that are just like your subject property, and two sell per month, then there s a five-month supply. If five sell per month, there s a two-month supply and if ten sell per month, you have virtually no supply. Use your MLS to pull out this data. Keep in mind that you must use the same criteria for your sold search as you do for your active search. Be specific but not too specific. Those of you who have done eleventy seven hundred BPOs know what I mean.

3 For Example: Let s say your subject property is in the Worthington suburb of Columbus, Ohio. Don t take numbers for all of Columbus, limit your search criteria to Worthington Schools. It s a standard two story with 4 bedrooms and 2.5 baths and a two-car garage and it s 2300 square feet. It was built in the 60 s and is in an established neighborhood. I ll limit my search to that zip code, in Worthington Schools, with 4 br s 2.5 baths, and give it a range of 2000 square feet to 2600 square feet and search for solds in the past 12 months. Next, I divide that total number of solds that are similar to my subject property by 12 and that tells me how many homes like that sell per month. If there are 120 solds in 12 months, the market absorbs (someone buys) 10 of those homes per month. I will then use the same criteria to see how many homes like my subject property are currently FOR SALE, active listings. I divide actives by solds. If I have 20 active listings and 10 sell per month, I have a two-month supply, or I can expect to have about 60 days on the market. If I have ten homes for sale like my subject but ten sell per month, it s probably going to sell pretty fast. All of this does not take into account any new homes coming on the market, so it s important to run these numbers pretty regularly to see what s really happening. Secret: Two suburbs in the same town can have dramatically different absorption rates, and even within that subdivision itself if there are more or less desirable factors. Schools, parks, development, desirability, all affect the number of days or months it takes to sell housing inventory. Secret: The National Association defines a balanced market as five months worth of inventory! More than five months indicates a buyer s market and less than five months indicates a seller s market. How does this affect my personal, Magic Number or the number of listings I must have in inventory at all times to meet or exceed my goals? The absorption rate of your own listing inventory should reflect the same numbers as the market in which you re selling. This means that if your area has a 60-day absorption rate for the types of homes you sell (or hope to sell as you become a better listing agent), your average days on the market should be the same or better. If it s longer, then you must work on two things number one, prequalifying your sellers for motivation and number two, being great at pricing. These are both things we will help you perfect in this coaching program.

4 So, here is the big question: What s happening in your market? Does it take ten active listings to sell two per month and get two buyers to spin off from that inventory? The general rules have always been: One to five listings = One closing per month MAYBE, occasionally two or three, sometimes zero. This is how you get stuck going from deal to deal, never having predictable income. This is the most stressful time in your career. Five Active Listings at all times = One to two closings per month. Ten Active Listings at all times = Two to four closings per month. 15 Active Listings at all times = Four to six closings per month. Etc. Secret: We re talking about ACTIVE listings here, folks. Not pendings, not the short sales you ve had in inventory for six months, allegedly closing. (Refer to your ASD class here at HREU to get those to close.) Active means there s no contract on it whatsoever. Secret: Some of you are in low inventory markets. This puts pressure on you to have more listing leads at all times, if your listings sell immediately. Your job is to replace the listings immediately upon selling, if not before. Homework: 1. Do an absorption rate study on your own home. You know it best, so figure out what would happen if you put it on the market today. How long would it take to sell? 2. Do absorption rate studies on all of your active listings. If any of them have been on the market longer than average days on the market for their neighborhood, you are overpriced. 3. Figure out how many listings you must have in inventory to create predictable closings every month, which meet your Ultimate Income each month. Example #1 Jack Jack is the guy who goes from deal to deal. Jack has built a pretty good business. He s able to pay his bills most months, no problem, but it seems like three or four times every year, he is temporarily broke or at least suffering from poor cash flow.

5 Jack has a basic monthly income requirement of $5000 to pay for his mortgage, his car lease, gas, and groceries for his family. He makes this money by either a buyer closing almost every month or selling a listing almost right away when he has a listing. If any problems occur with his one or two pending deals, he suffers the consequences of having to go into serious survival mode for up to a month while he sells something else or saves his deal or deals. He then gets his bills caught up right before the next round of monthly bills happens. This causes Jack stress. Jack has just figured out that if he had five listings at all times, he could change his career from one of subsistence to once of being able to save some money, take an occasional vacation with his family, and sleep better at night knowing he wasn t dependent on any one or two deals. Jack needs $15,000 per month to reach his Ultimate Monthly Income goal, pay off his debt, catch up this taxes, create some financial reserves, have some fun in life, and keep all his bills up to date. That requires not one closing per month, but three, every month. Jack pays his bills most of the time going from deal to deal. The next level for him is to make it his mission in life to build his listing inventory to five active listings at all times. Once Jack gets to five listings, it s smooth sailing. He then simply has to replace his listings as they sell. The fact that he HAS five listings will make this dramatically easier, provided he puts a few marketing and prospecting items in place for each of those listings. He s learning how to do this in this coaching program. Example #2 Jeannie Jeannie is one of those agents that can turn lemons into lemonade. She is a grizzled veteran. She was smart enough to have some money saved during the real estate crash, and got into REOs and Short Sales just before she spent all of those savings. Jeannie always has two or three short sales going and ultimately gets them closed, but she s still working on getting them done faster, so it s hard to predict the closing dates on those. Meanwhile, Jeannie was doing a lot of REO work in her town, and for two or three years she had her own little real estate boom happening. The average sale prices weren t what she was used to during the boom, but the volume made up for it. She was super busy for a while, but didn t really build new relationships with asset managers or portfolio managers and her market heated up in the meantime. Her REO inventory is dwindling. Jeannie hasn t really worked much on normal business while she s been busy with the short sales and REOs, and has been so busy scrambling to take care of the volume of

6 deals necessary at the lower price point that she s almost forgotten how to handle equity sellers and certainly hasn t spoken to her old past clients in years. Jeannie is not broke, but she s neither is she ready to retire and she s wondering what s next for her in the new market that s emerging. Jeannie fantasizes about what it would be like to have listing inventory again with equity sellers in a decent price range. She has set a goal of building new inventory up to at least ten new listings in the next 90 days. She knows how to do it; she just has to get back in the saddle. Now that Jeannie sees the math and remembers how it worked back in the old days, she is again inspired to do what it takes to get back to herself, the best listing agent in her area. She s going to make sure her whiteboards are set up and get to work immediately on building listing inventory. Example #3 Chris Chris is brand spanking new in in real estate. He really couldn t be any greener, but he is a pretty smart guy. He understands that it s a numbers game and sees that the more people he helps sell their homes, the more consistent income he has. He doesn t have any baggage from previous markets and just wants to get to work. Chris decides to call all of his friends, family, and previous business associates to see who they know who wants to buy or sell a home. He knows that he has a lot to learn but is ready to get started as soon as humanly possible. Chris figures he ll learn some scripts and how to prequalify and present and negotiate with real people so he can earn while he learns. Example #4 Elizabeth Elizabeth has a thriving business, a team with three buyer s agents, one transaction coordinator, and a personal assistant. By and large, she is here to stay and is well respected as a top producer in her area. So why does she care about a Magic Number? She wants to take it to the next level. Elizabeth knows her OWN absorption rate. She knows when she has 20 listings at all times, she and her team are able to close four transactions each and every month, and sometimes they have months as high as six or eight closings. The problem is, she d really like to plan ahead for her retirement. The boom and bust cycle cleaned out her reserves, she sold her rentals and downsized everything.

7 Elizabeth wants to rebuild her net worth, her retirement funds, and buy a beach house on the coast, just like she d almost been able to do prior to the crash. She knows that the Magic Number is the key to happiness. Elizabeth has set a goal of doubling her listing inventory within six months and maintaining an inventory at a higher level without hiring too many more staff members. They all could be busier and better at converting leads into appointments. Example #5 YOU What s your story? Are you struggling? Are you subsisting? Are you thriving but not consistently? Are you in rebuilding mode? Find your Magic Number and use your whiteboards. Your Active Listings Board has to have the number of listings written on the left hand side of the board. If you average five but know you have to have ten to reach your Ultimate Income Monthly, then write one to ten and fill in your existing five. Set a goal of when you ll have ten. Next, it s all about HOW you re going to do it! That s why you re in this coaching program. Secret: At least now you know exactly what the goal is! This is golden information and absolutely critical to your future success. If you have any confusion on this what so ever, ask for help immediately!