Inspiration

Two Things You Need To Know re This Market Part 1

Rafting and Shafting. Increasing your revenues by having a clear strategy on stock in a buyers’ market.

Most estate agents’ primary focus has always been on securing stock - he who controls the stock, controls the market. And we all know what lengths agents have been to in order to gain instructions; simpering flattery, gross overvaluation, and, would you believe, reducing fees to pathetic levels (which, you may have noticed, doesn’t work - but that’s another story).

But today’s market forces a shift of emphasis which can, for some agents, be difficult to acknowledge, let alone accept. This requires a hard look at your business and the way in which you direct your staff, because there are serious dangers ahead if you haven’t considered making some fundamental changes to the way your agency ticks.

Firstly, in this market, a healthy cash-flow is critical and probably outranks all other business parameters. This should concentrate the mind on identifying the difference between the important and the urgent. Whilst acquiring stock volume is important, it is not currently urgent. Acquiring stock costs money and servicing it costs even more. Of course, you could reduce costs by laying off staff and advertising less. But what would this reduction in service do for your reputation in view of the unhappy clients it would prompt?

What is urgent is an increase in your ability to sell your stock. Whilst this has always been important, you can no longer rely on taking a property on, and waiting for it to sell. That is now an expensive luxury which has no place in the current market. You need to look at every instruction, current and prospective, through new lenses and ask “is this an opportunity, or a potential cost?” and be ruthless in your actions. I recall a business consultancy speaker at The Negotiator’s recent Survive and Thrive Conference recommending that you should “take massive action and act earlier, harder and faster than you thought you would ever have to”.

The key is absolute saleability of stock (coupled with an ability to capture buyer loyalty, but see the next edition of The Negotiator for my article on working with buyers). The simple fact is that even if a property is “correctly priced”, it probably still won’t sell! (Have you ever tried selling a £10 note for £10?). Your stock has to be ahead of the wave, not on it, and certainly not behind it, if it is going to sell. In other words, you need to price for tomorrow’s market, not today’s. Remember, the only property in a certain category that will sell, is the one that offers best value in relation to others available. The rest in the street remain totally unsaleable until such time as the single best value property has sold.

So make sure that you only take on those properties that categorically represent best value. And constantly re-evaluate as well; because if someone else in the street reduces their price, it certainly does have a bearing on yours. Stay ahead of that wave!

I call it “Rafting and Shafting”. You only have room on your emergency raft (and this is an emergency) for a certain number of instructions. You simply cannot carry dead wood. No matter how beautiful a property is, it is dead wood unless it is the best price/value in its category locally.

I’m not suggesting you stop taking on instructions – quite the contrary. Keep pushing ahead, keep marketing, keep generating instruction opportunities. But this time, use this volume of opportunity to become highly selective in what you take on. You need to ask, “Is this an exciting instruction, from an excited client, at an exciting price, at an exciting fee?” If not, then politely decline the instruction, leaving the door open for the future. And when you do decide to take on a property that represents the best value in its category, then, as you have limited space on your raft, you have to elbow out your worst offending current instruction.

In practice this elbowing simply means recommending a significant “repositioning in the market” (or price reduction). By significant I mean a reduction of at least 10% or even 20% if it is to retain its place on your raft. You might also want to re-launch the property with new photos, ads and web presence. In this market it is not difficult to justify a fee increase at the same time and I would expect dynamic agents to clear 2%, or 3% in London. Don’t forget – your value to the client is currently greater than it has been for years! You are effectively “selling” your buyers to your clients. As these buyers are increasingly scarce they become more precious, and you should not sell them cheaply.

Of course, if the vendor decides not to reduce – that’s fine. Let them go to one of your competitors who may be foolish enough to accept this proven unsaleable instruction. If your competitor is drowning, then push a hosepipe up his nose! Sticking to a price in a falling market is the same as putting the price up in a level one, and only the foolish do that.

So back to market share. Market share gives momentum to your reputation. In this market, an agency’s reputation is made by its ability to sell, not simply to list. Whilst a forest of your for sale boards may look beautiful, this is vanity over sanity. It is your Sold Boards that have real meaning in this market, especially if you take advantage of using your impressive Sold v For Sale board ratio to your advantage in your marketing efforts and on instructions.

In the past, any agent could sell a property, so our service became commoditised and drove fees down. In this market, there is real value in appointing an agent who has proved that they are selling despite the market. The agent who maintains a calm, confident approach, and has the self-assurance and skill resources to walk away from anything other than the most saleable instructions will enjoy the short-term cash-flow, and reputational benefits that will secure long-term business success.

Richard Rawlings is Managing Director of Estate Agency Insight, the specialist estate agency consultancy that creates distinction for its clients via radical training, marketing and prospecting initiatives. www.estateagencyinsight.co.uk 0845 838 1354.

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© Richard Rawlings 2012
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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