Inspiration

Stock – An Expensive Habit to Support

Reduce your stock and boost your profits

This market has dramatically divided the good from the mediocre, and as we have progressed through this year it has become increasingly clear to me that there are two distinctly different schools of agent. Those who REACT, and those who RESPOND.

Those who are reactive often believe they are being responsive. The danger is that this belief can lead them in directions they might prefer to avoid. These are the agents who, for the past few months, have continued to focus wholeheartedly on increasing their stock. Nothing specifically wrong with that.

The problem arises when the market changes from a sellers’ market to a buyers’ market. Reactive agents assume that they are suddenly getting what they have been trying to acquire – an increase in stock! They often believe that they are moving ahead in the market, even gaining market share, when what is actually happening is the opposite, as they are unwittingly being tricked by the responsive agents who are simply dumping unsaleable stock at their door.

Responsive agents on the other hand are taking a more measured view, because they have a good handle on what is actually happening. They realise that an increase in stock does not necessarily equate to an increase in sales, and can become a very expensive habit to support.

If you took some agents’ current business “plan” to a bank manager, I suspect you would come away empty-handed. Look at the following scenario:

The REACTIVE agent says: “Mr. Bank Manager….

1. “I’m going to spend money advertising that we do “free valuations”. This will attract lots of people who want us to provide a free valuation. They are not really thinking about selling, although if the price is right, they might!

2. “This offer means that we will be judged on how high our valuation is, not on the value we bring to their house-move.

3. “We will therefore have to value fairly high in order to get the business. But that’s OK because it gets us the instructions we need.

4. “These instructions will be difficult to sell, because these properties belong to uncommitted vendors who want too much money for their property. In fact these houses will be used by our competitors as a springboard to demonstrate what good value their stock is, and they will sell their instructions to buyers who were also registered on our books.

5. “By the way, we will fail to sell to about 96% of our registered buyers.” (Imagine a butcher throwing away 96% of his sausages each day!)

6. “It will take longer to sell our stock, so we expect to get loads of phone calls from ira te vendors wondering why we haven’t sold their property yet. And as we have had to shed a few staff, the onus on the remaining staff will make this even more of a headache, and our customer service will deteriorate which will inevitably affect our reputation.

7. “Of course, with lower sales volumes, we’ll need to cut back on our advertising, but we also need to keep our vendors happy, so we’ll just have to reduce the size of each property ad.

8. “Because we have a fixed period of s ole agency, the end of it prompts people to switch to another agent who will take on the property at a saleable price and inevitably sell it for the fee we should have made.

9. “And when we do sell a property we’ll make one of the lowest commission rates in the world, despite the fact that we actually do more than many agents elsewhere. We’ll even make less than our local competitors because we dropped our fee to attract the business in the first place.”

The flip-side belongs to the RESPONSIVE agent who says: “Mr. Bank Manager….

1. “I see a great opportunity here. The other agents are absorbing all the unsaleable instructions onto their books.

2. “Because buyers are now more discerning than they were, we will only take on the most saleable stock, which will save us time, money and reputation.

3. “We will not advertise “free valuations” as we do not want to be judged on our valuation, but will be rigorously selective in what we take on. We will only list property that we, and our buyers, like. This usually means well-presented property that is attractively priced when compared to others on the market through those helpful competitors whose stock makes ours look cheap!

4. “We will be instructed because people prefer to do business with us, because of who we are, not necessarily what we do. We will be really milking this angle in the current market, as we have proved time and again that these people are not overly concerned about how much we charge. So we’re aiming for 3%. That should scare off a few weaker sellers, and our competitors are welcome to them. They’ll be back!

5. “As this opportunity is great for developing our reputation as well as our market share, we will be using larger ads in the paper, whilst our competitors reduce theirs. And of course, we won’t be advertising every property every week! That’s ridiculous. We know that buyers are highly unlikely to purchase the property about which they enquired. Our larger-style ads not only make the competitors look like amateurs, but they also attract more buyers, to whom we will probably sell a different property to the one advertised.

6. “And one thing we’ll do really, really well is look after our buyers, who are bound to buy from us anyway, as we have the best stock in the area.

I have been delighted to hear that some of my clients are currently enjoying their best year ever, and guess which camp they fall into!

So you have a choice. Are you a panel-beater, or an embroider? Are you responding, or simply reacting? The future or your business could depend on how you mix your existing talents with the right strategy for today’s market.

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© Richard Rawlings 2010
Richard Rawlings is the founding director of Estate Agency Insight, which specialises in helping estate agencies harness opportunity through innovative method, marketing, publicity, and training. He can be contacted at or on 0845 838 1354.

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