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CRISIS?
Danger
+
Opportunity
“Crisis”
C.R.I.S.I.S
A Circumstance Requiring
Immediate
Shift In Strategy!
The Market Has Shifted Dramatically
• Sales volume and transactions have dropped drastically.
• Inventory has reached a breathtaking high.
• Buyers continue to be reluctant, and sellers continue to
be unrealistic.
• Real estate agents seem dazed and confused.
• Brokerage net profits are going red.
• Fear is rampant, anxiety is high, and people are getting
out of the business right and left.
8
So, What Happened?
9
People …
• Over spent and under saved
• Over borrowed and over paid
And too many got in over their head.
10
Now they’ll …
• Under spend and over save
• Under borrow and under pay
And the economy will begin to move back
into alignment.
11
We Are in the Midst of One Major Shift!
• You shouldn’t be surprised.
• Economic history repeats itself. That’s why it’s called an
“economic cycle”.
• What’s happening today has happened before. The
economy is in one of the “down” parts of its cycle.
• You may have thought we’d either cured economic down
cycles or you would escape the planet before another big
one hit.
12
So, the Economy Shifts and Therefore Real Estate
Markets Shift
They always have and always will
and
Your life goes on …
Your business and career can too ...
13
… IF YOU DO THE RIGHT THINGS!
14
But you better step it up!
The next 180 days may be the toughest
economic days you’ll see for the rest of
your life!
15
No Kidding – House on Fire!
16
To Shift or Be Shifted …
That Is the Challenge We All Face
Professionally Right Now!
17
The
Numbers
That Drive
Real
Estate
18
The Numbers That Drive Real Estate
1. Home Sales
2. Home Prices
3. Inventory
4. Mortgage Rates
5. Affordability
19
Home Sales
In Millions
• Sales declined 13% in 2008.
• The number of first-time home buyers increased to 41%
7.1
of home purchasers.
5.7
5.0
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
Source: National Association of REALTORS®
4.9
20
In the fourth quarter of 2008, 6 states saw an increase in sales,
mainly in areas where the sharpest declines in prices occurred.
MN
Home Sales Direction
NV
CA
VA
(Year-Over-Year Change)
Sales Increased
AZ
Sales Decreased
AK
FL
HI
Source: National Association of REALTORS®
21
Home Prices
In Thousands
The median home price declined by 9% in 2008.
$250
$219K
$199K
$200
$150
$100
$50
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
20-year historical appreciation rate = 4%
1996
1995
1994
1993
1992
1991
1990
1989
$0
22
Home Price Annual Appreciation
15%
0%
3% 5% 3% 3% 4% 3% 5% 5% 5% 4% 4% 7% 8% 8% 9%13% 1%
-1% -9%
-15%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
20-year historical appreciation rate = 4%
23
Inventory
Months Supply
# of months it would take to sell all the homes on the market at the current rate of sales
Slowing sales pushed up inventory for existing homes to
10.4 months in 2008.
10.4
8.9
1999
2000
2001
2002
2003
Source: National Association of REALTORS®
2004
2005
2006
2007
2008
24
Mortgage Rates
30-Year Fixed
Mortgage rates remained low for most of 2008 at around 6%.
12%
Mortgage rates ended the year at 5.1%, an all-time low since
Freddie Mac started its mortgage survey in 1971.
10%
8%
6.3%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
Source: Freddie Mac
1992
1991
1990
1989
4%
6%
25
Let’s put this in perspective …
In 1971:
Gasoline
40 cents a gallon
Stamp
8 cents
Turkey
43 cents a pound
Datsun Sports Coup
$1,866
Monthly Rent
$150
Average New Home Price
$25,250
Dow Jones Average
890
And you still couldn’t get a mortgage as cheap as you could in
December 2008.
Mortgage Rate in 1971: 7.48%
26
Housing Affordability
% of Income
% of a median family’s income required to make mortgage payments on a median-priced home
30%
24%
24%
19%
20%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
Source: National Association of REALTORS®
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
10%
19%
27
The Numbers That Drive Real Estate
1. Home Sales
2. Home Prices
3. Inventory
4. Mortgage Rates
5. Affordability
28
Home Sales
In Thousands
Sales fell 17% in 2008 (back to 2003 levels).
524K
437K
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Source: Conference Board/CREA
434K
29
Home Prices
In Thousands
The national average home price decreased by 1% in 2008.
306K 304K
147 142 149 150 153 158 151 151 155 152 158 164 172 188 206 226 248 276
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
20-year historical appreciation rate = 4%
30
Home Prices
7 out of 12 provinces saw an increase in prices in December.
Home Price (Year-Over-Year Change)
Prices Increased
Prices Decreased
Northwest
Northwest
Territories
Territories
Newfoundland
Manitoba
Prince Edward Island
Nova Scotia
Saskatchewan
Source: Conference Board/CREA
New Brunswick
31
Home Price Appreciation
12%
8%
4%
5% 1% 2% 3%
0% 2%
4% 4% 5% 10% 10% 9% 10% 11% 11%
0%
-3%
-5%
-1%
-1%
-4%
-8%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
20-year historical appreciation rate = 4%
32
Inventory
As a whole, Canada remained largely in balanced conditions for most
of 2008 but ended the year in a buyers’ market.
100%
80%
Sales to Listings Ratio
Sellers Market
61%
60%
Balanced
47%
40%
20%
Buyers Market
0%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Source: Conference Board/CREA
33
Mortgage Rates
5-Year Fixed
Mortgage rates remained steady in 2008 at around 7.1%.
13%
In December, rates declined to 6.75%.
7%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Source: Bank of Canada
34
Affordability
% of Income
Proportion of median pretax household income required to service the
cost of mortgage payments (principal, interest, property taxes, and utilities)
• Canadians have been feeling the
impact of high ownership costs as they
experienced deteriorating affordability
over the past few years.
• Affordability finally improved by an
average of 1.1% in the third quarter of
2008.
• Similar to trends seen in the U.S., the
steepest market correction is occurring
in provinces that were least affordable,
such as British Columbia and Alberta.
Property
Type
Q2
2008
Q3
2008
Change
Detached
bungalow
47%
46%
-1%
Standard
two-story
53%
52%
-1%
Standard
townhouse
38%
37%
-1%
Standard
condo
32%
31%
-1%
Average Change
Source: Royal Bank of Canada
-1%
Economic Snapshot
1. Gross Domestic Product
2. Inflation
3. Unemployment
36
1. Gross Domestic Product
• The economy contracted by 3.8% in the fourth quarter of 2008
primarily due to weak consumer and investment spending.
• The National Bureau of Economic Research announced that the
U.S. has been in a recession since December 2007 due to the
deterioration in the labor markets.
10%
5%
-0.5%
-0.2%
-3.8%
2008.Q4
2008.Q3
2008.Q2
2008.Q1
2007.Q4
2007.Q3
2007.Q2
2007.Q1
2006.Q4
2006.Q3
Source: Bureau of Economic Analysis
2006.Q2
2006.Q1
2005.Q4
2005.Q3
2005.Q2
-5%
2005.Q1
0%
37
1. Gross Domestic Product
Annual Year-to-Year Growth
6%
Despite the contraction in the last two quarters, the overall
economy grew by 1.3% for 2008.
5%
4%
3%
2%
2%
1.3%
0.8%
1%
0%
-0.2%
-1%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Source: Bureau of Economic Analysis
38
2. Inflation
6%
Inflation averaged around 3.8% in 2008.
3.8%
4%
2.8%
2%
0%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
Source: Bureau of Labor Statistics
39
2. Inflation Jan - Dec 2008
• Toward the end of the year, there were signs of potential deflation (a
downward spiral of prices, earnings, and economic activity) in the
economy as inflation ended at 0.1% in December.
• This was a significant departure from the peak of 5.6% in July.
5.6%
8%
4%
0.1%
0%
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Source: Bureau of Labor Statistics
40
3. Unemployment
• Unemployment increased to an average of 5.8% in 2008 from 4.6%
in 2007.
• Unemployment rose to 7.2% in the final month of the year.
5.8%
8%
4%
0%
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
Source: Bureau of Labor Statistics
41
Canada
The economy slipped into recession in November 2008, almost an entire year later
than the U.S. Historically, the lag between the U.S. and Canada is usually shorter,
giving some glimmers of resiliency in the Canadian economy. The weakening
economy and declining commodity prices continue to place downward pressures on
inflation. Unemployment increased 0.8 percentage points to 6.6% in December from
the record low of 5.8% in early 2008. Most of the increase occurred toward the end
of the year and was largely driven by a drop in construction.
Metrics
%
1. Real GDP (2008 estimate)
1.8%
2. Inflation Rate (Dec)
2.4%
3. Unemployment Rate (Dec)
6.6%
The
Events
That Drive
the
Numbers
The Events That Drive the U.S. Numbers
1. An increase in foreclosures and short sales continued to
drive home price declines
2. More banks tightened their lending standards
3. The number of first-time home buyers bounced back
4. Bank failures and mergers increased
5. Government rescue became commonplace
6. The competitive landscape redefined
7. The available sides per agent fell further
8. Commission rates rose
9. Economic activity follows demographic trend
44
1. An increase in foreclosures and short sales
continued to drive home price declines
Distressed Sales
38%
Q3 2008
Distressed sales (foreclosures/short sales)
represented approximately 45% of all sales
transactions in the fourth quarter of 2008.
45%
Q4 2008
• 1 in 54 housing units received at least one foreclosure filing in 2008.
– Total number of filings: 3.2 Million
• So far, foreclosure prevention programs have not been successful in
slowing foreclosure rates.
• Approximately 420K hybrid ARMs are scheduled to reset in 2009.
Source: National Association of Realtors
45
Top Foreclosure States
% of homes that received foreclosure notices
Number 1:
Nevada - 7%
(1 in 14 houses)
Less than 1%
1–5%
Above 5%
AK
HI
Source: Realty Trac
46
2. More banks tightened their lending standards
1st Qtr
72% Tightened Subprime
53% Tightened Prime
2nd Qtr
78% Tightened Subprime
62% Tightened Prime
3rd Qtr
86% Tightened Subprime
74% Tightened Prime
4th Qtr
100% Tightened Subprime
71% Tightened Prime
0%
20%
Source: Federal Reserve
40%
Percentage of
banks that
tightened their
lending standards
last year
60%
80%
100%
120%
47
3. The number of first-time home buyers
bounced back
• Historically low interest rates and decreasing home prices continually contributed
to positive affordability conditions.
• According to Global Insight, housing prices were 3.8% undervalued based on total
market value in the third quarter last year.
• The market share of first-time home buyers rose to 41% in 2008.
Percent of First-time Home Buyers
42%
40%
40%
40%
36%
39%
41%
2001
2003
2004
2005
2006
2007
2008
Source: National Association of Realtors
48
4. Bank failures and mergers increased
346
Number of failed banks taken over by
3
Jan to June 1929
2007
25
??
2008
2009
Here were a few key acquisitions …
5. Government rescue became commonplace
Feb 13
Economic Stimulus
Tax rebates (stimulus checks)
Act of 2008
$7,500 tax credit for first-time home buyers
Housing and
Economic
July 30
Recovery Act of
2008
Change in loan limits for FHA, VA, and
Government Sponsored Enterprises (GSE)
Hope for Homeowners: FHA foreclosure rescue
Additional property tax deduction
Moratorium on risk-based pricing for FHA loans
End of seller-funded down payment assistance
Note: Not a complete list of provisions
51
5. Government rescue became commonplace
Sept. 7
Fannie and Freddie placed under government conservatorship
Sept. 16 Insurance giant AIG received $85 billion
Sept. 18
Federal Reserve pumped $180 billion into money markets to combat
seizing up of lending between banks
Oct. 3
Emergency Economic Stabilization Act: Plan to purchase up to $700
billion in mortgage-related assets
Nov. 25
New plan unveiled to pump $800 billion into financial system to
unfreeze consumer credit
Dec. 16
Federal Reserve cuts short-term lending rate to near zero
Dec 29
Treasury announced plan to give $6 billion infusion to GMAC
Note: Not a complete list of rescue efforts
52
6. The competitive landscape redefined
acquired
reports $50 Million loss in the third quarter of 2008
acquired
6. Competitive landscape redefined
Bankruptcy Filings
Layoffs
45 employees
20% of its employees
25% of workforce
7. The available sides per agent fell further
Despite a 10% contraction in NAR membership, the real estate
industry continues to become increasingly competitive.
13.8
13.6
13.5
11.2
9.5
8.4
8.2
2007
2008
12.3
2004
2003
2002
2001
2000
1999
1998
Source: National Association of Realtors
12.6
2006
12.9
2005
13.3
55
NAR Members vs. Annual Sales
2008
8
1.6
NAR Members: 1.2 Million
1.2
Annual Sales: 4.9 Million
4
0.8
0.4
NAR Membership (in Millions)
Existing Home Sales (in Millions)
0
0
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
Source: National Association of Realtors
56
8. Commission rates rose
• Commission rates in 2008 increased to 5.3%, the highest level in 7 years.
• Rates increased slightly more on the buyer side than the seller side.
– Buyer side: 2.8%
– Seller side: 2.5%
• The median commission amount per transaction decreased by
approximately 5% on the seller side and 4% on the buyer side due to
declining home prices.
5.19%
5.21%
5.20%
5.12%
5.10%
5.09%
5.33%
2002
2003
2004
2005
2006
2007
2008
Source: Keller Williams Commission Study
57
9. Economic activity follows demographic trend
45-54
Spending by Age Group
35-44
25-34
55-64
65-74
<25
Source: The Great Bust Ahead
>74
The age group with the
biggest spending power
is the 45 to 54 year olds.
58
9. Economic activity follows demographic trend
“82 years of tight correlation from 1920 to 2002 of the
number of 45 to 54 year olds with the Dow Jones Industrial
Average ups and downs (economy booms and busts) cannot
possibly be a mere 82-year coincidence.”
-- Daniel A. Arnold, The Great Bust Ahead
1920
1930
1940
1950
Source: The Great Bust Ahead
1960
1970
1980
1990
2000
2010
2020
2030
59
The Events That Drive the
Canadian Numbers
1.
2.
3.
4.
5.
The Central Bank cut interest rates 6 times in 2008
Commodity prices and Canadian currency decline sharply
Restrictions tighten for government-backed mortgages
Parliament suspended
Available sides per agent fell
60
1. The Central Bank cut interest rates
6 times in 2008
• The Bank of Canada lowered the overnight interest rates to
mitigate downward pressures on the economy and stabilize
the financial system.
• While rate cuts caused mortgage rates to fall, banks failed to
match the rate cut for the first time in a decade on October 8
due to tightened credit conditions.
• Despite the credit squeeze, mortgage lending to households
actually increased 12% in December.
61
2. Commodity prices and Canadian
currency decline sharply
• Commodity prices rose significantly from 2002 to mid-2008.
• Higher prices for energy, agricultural products, metals, and minerals were
important drivers of domestic demand and were an important wealth
contributor to the general population.
• Decreasing global demand led to a significant decline in commodity prices over
the second half of 2008, which ultimately led to weakening of the Canadian
loonie.
Exchange rates (Dec. 31)
2007: C$1
2008: C$1
1.01USD
0.83 USD
62
3. Restrictions tighten for government
backed mortgages
Stricter guidelines were implemented to support stability in
mortgage markets.
Requirements
Before Oct. 15, 2008
After Oct. 15, 2008
40 years
35 years
0%
5%
3. Minimum Credit Score
No set standard
620
4. Maximum Total Debt Service Ratio
No set standard
45
1. Maximum Term Limit
2. Minimum Down Payment
63
4. Parliament suspended
• Prime Minister Stephen Harper suspended
Parliament after facing a vote of no confidence.
• Why? In the face of an increasingly troubled
economy, the Conservative party’s 2009 budget
(presented towards the end of the year) did not
include economic stimulus measures.
• The three very different opposition parties came
together in an effort to form a coalition
government.
• With Parliament suspended, a vote on the coalition
government could not occur.
64
5. Available sides per agent fell
In 2008, home sales fell 17% but CREA membership increased 4%.
Available sides per agent fell to 8.9 transactions.
10.5
12.2
12.7
12.3
12.0
11.7
10.9
1998
1999
2000
2001
2002
2003
2004
2005
2006
11.2
8.9
2008
10.1
2007
9.2
65
CREA Members vs. Annual Sales
600
2008
120
CREA Members: 97K Annual Sales: 434K
300
0
60
CREA Members (In Thousands)
Home Sales (In Thousands)
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
66
0
How Did
We Get
Here?
67
The Story Behind THE STORY
The Incredible Global Pool of Money
– In 2000, it was $36 trillion.
– In October 2008, it doubled to $72 trillion!
68
A “Simple” Way to Look at It
Buyer Demand
Mortgage Broker
• Normal qualified potential home-buyers
• Subprime potential home-buyers
GSEs
Wall Street –
Financial Institutions
Loosened standards in 1999
Mortgage-Backed Securities
• Normal investors
• Speculative investors
Rating Agencies
Everyone
Investors
What the
Governments
Are Doing
What the Governments Are Doing
Both the U.S. and Canada have implemented
stimulus packages to help the ailing economies.
U.S.:
1. American Recovery and Reinvestment Act of 2009
2. Homeowner Affordability and Stability Plan
Canada:
1. Stimulus package included in 2009 budget
71
U.S.
1. American Recovery and Reinvestment Act of 2009
$780 billion economic stimulus package was
signed on February 17.
35% in tax cuts
65% in spending over the next 2 years
72
American Recovery and Reinvestment Act of 2009
Six Key Housing-Related Provisions
1.
2.
3.
4.
5.
6.
First-Time Home Buyer Tax Credit
FHA, Fannie Mae, and Freddie Mac Loan Limits
Neighborhood Stabilization
Commercial Real Estate
Energy Efficient Housing Tax Credits and Grants
Rural Housing Service
73
1. American Recovery and Reinvestment Act of 2009
Six Key Housing-Related Provisions
1. First-time Home Buyer Tax Credit
Key Changes
2008 Credit
2009 Credit
Credit Amount
Maximum of $7,500
Maximum of $8,000
Effective Date
Purchases between Apr. 9, 2008 to
July 1, 2009
Purchases between Jan. 1 to Dec. 1,
2009
Repayment
Yes (over 15 years)
No
Recapture
If home sold before 15 years,
outstanding balance is captured at
sale.
If home is sold within 3 years of
purchase, entire credit is recaptured
at sale.
Revenue Bond No credit if home is financed with
state/local bond funding
Financing
Buyers who use revenue bond
financing are eligible for credit.
1. American Recovery and Reinvestment Act of 2009
Six Key Housing-Related Provisions
2. FHA, Fannie Mae, and Freddie Mac Loan Limits
–
Extends expiration date of 2008 conforming loan limits to
December 31, 2009
3. Neighborhood Stabilization
–
–
$2 billion in grants to address the problems that arise when
whole neighborhoods are engulfed by foreclosures
Funds can be used to purchase, manage, repair, and resell
foreclosed and abandoned properties.
75
1. American Recovery and Reinvestment Act of 2009
Six Key Housing-Related Provisions
4. Commercial Real Estate
–
–
Funds for state energy programs to support commercial
property owners’ investment in energy efficiency upgrades
Potential tax relief for small business owners:
• Bonus depreciation and capital expenditures
• 5-year carryback of net operating losses
5. Energy Efficient Housing Tax Credits and Grants
–
Homeowners will be able to claim a 30% tax credit for
purchases of new furnaces, windows, and insulation
through 2010.
76
1. American Recovery and Reinvestment Act of 2009
Six Key Housing-Related Provisions
6. Rural Housing Service
–
–
$500 million for existing USDA Rural Housing programs
Expectations that financing would be available to fund an
additional 192,000 homeowners
77
U.S.
2. Homeowner Affordability and Stability Plan
Overview
On February 18, 2009, President Obama announced his
Homeowner Affordability and Stability Plan designed to help
approximately 7 to 9 million families avoid foreclosure by
refinancing or restructuring their mortgages.
Some of the measures will require Congressional approval prior to
implementation.
78
Homeowner Affordability and Stability Plan
Three Key Elements
1. Refinancing option for loans guaranteed by Fannie Mae
and Freddie Mac to help make mortgages more
affordable.
2. $75 billion homeowner stability initiative to assist up to
3 to 4 million at-risk homeowners.
3. Support of low mortgage rates by strengthening
confidence in Fannie Mae and Freddie Mac.
79
Canada
Stimulus package included in 2009 budget
Overview
1. $40 billion stimulus package over the next two years was
approved on February 2, 2009.
2. Similar to the U.S., three-quarters was allocated toward new
spending.
3. Key areas:
– Spending on infrastructure investments, communities, skills,
and work-transition strategies
– Tax relief for individuals, households, and businesses
4. To restore liquidity to credit markets, $125 billion was allocated
to help businesses and households access new loans.
80
Canadian Stimulus Package
Five Key Housing-Related Provisions
1. Home buyer tax relief
– First-time home buyers to receive $750
2. Increase in withdrawal limits from retirement savings plans
– Withdrawal limits for Registered Retirement Savings Plan (RRSP) to
increase from $20,000 to $25,000 for first-time home buyers
3. Home Renovation Tax Credit
– Up to $1,350 in tax relief to reduce the cost of renovations
– Renovations must be between $1,000 and $10,000 and occur between
January 27, 2009 and February 1, 2010.
81
Canadian Stimulus Package
Five Key Housing-Related Provisions
4. ecoENERGY Retrofit program
– Funds to support home energy efficiency retrofits
5. Social housing investments
– Construction for low-income seniors, persons with
disabilities
– New social housing units
– Renovations, energy retrofits, and additional support for
existing social housing units
82
How Do We
Recover?
The 4 Keys to Housing Recovery
4
Stimulate
Economy
3
Create Jobs
2
Stabilize Banking System
1
Stabilize Home Prices
84
So, What Can
You Do?
85
The Six Fundamental Secrets of Success in a Shift
1. Get Real and Get Right – Right Now!
2. Re-Margin Your Personal and Professional Life – Right Now!
3. Focus on Lead Generation and Conversion – Right Now!
4. Get Sellers to Price Ahead of the Market and Stage Their Homes – Right Now!
5. Help Buyers Find Their Motivation – Right Now!
6. Get Involved in Short Sales, REOs and Foreclosures – Right Now!
86
First, Get Real, Get Right!
Right Now!
87
GET REAL!
Today, the next 180 days, will be the most critical
period in your career! Period!
If you get real and get it right – You catapult!
If you don’t get real and get it wrong – You get laid off!
88
GET REAL!
• You’ve been living through the era of average and
now you’re living in the “ERA OF EXTRA”.
– Average effort may have done fine in the past
– But not in the “ERA OF EXTRA”!
• Average is now being laid off!
– 100,000+ in Auto Industry! And climbing!
– 150,000+ in Real Estate Industry! And counting …
89
The Bar of the Past!
THE ERA OF AVERAGE EFFORT
Acceptable Level of Success
90
The Bar Has Now Been Raised!
What you got for average effort – now
requires EXTRA EFFORT to achieve!
AVERAGE just got dramatically cut
back or just plain laid off!
THE ERA OF EXTRA EFFORT
Acceptable Level of Success
THE ERA OF AVERAGE EFFORT
Unacceptable Level of Success
91
GET REAL!
Look at it this way:
Both your swing and the size of the field you’re
playing in matter! A swing in one size of the field
knocks a home run, while in another size of field it
could be a popfly to the infield.
A swing in one field may not cut it in another!
Effort Matters Today More Than Ever!
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GET REAL!
This is your best opportunity for the biggest
professional DEFINING MOMENT in your life!
93
GET REAL! WHY?
1. You will never see a worse economic crisis in
your lifetime than right now!
2. Great success is always launched by great
motivation and momentum!
94
GET REAL!
Truth:
Little effort becomes a habit and leads to little results.
Big effort becomes a habit and leads to big results.
So choose the RESULTS you want –
Then choose the EFFORT.
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GET REAL!
Massive
Success
Complete
Failure
AVERAGE
Most People
How Do You Get Out of
Being Stuck in the Middle?
96
Now That You’ve Gotten Real ...
You Must Get Right!
97
GET RIGHT!
Truth:
When you’re doing the right things professionally ...
the right amount of success and money will come to you.
This truth is how you know when YOU’RE doing the
right things and when YOU’RE NOT.
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GET RIGHT!
If the success and money aren’t there then you may be in the right area
professionally for you, but you’re still not doing the right things. It’s a
simple truth that should set you free.
The GET RIGHT question:
“There is a reason why I don’t have the professional success and money I
desire, what is it?”
The answer should inform your IMMEDIATE ACTIONS!
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GET RIGHT!
If this is going to be your DEFINING MOMENT,
you’ll need to do 3 things:
1. Focus Only on What Matters
2. Be Willing to Do Whatever It Takes
3. Bring Intensity (Hint: Extra Effort)
100
GET RIGHT!
The Six Core Real Estate Agent Competencies:
1.
2.
3.
4.
5.
6.
Lead generate, capture, and convert to appointments
Present to buyers and sellers and get agreements
Show buyers and market sellers
Write and negotiate contracts
Coordinate the sale to closing
Manage the money
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Second, You Must Re-Margin Your
Personal and Professional Expenses
– Right Now!
“It is not necessary
to change. Survival
is not mandatory.”
W. Edwards Deming
102
WAKE-UP!
You’re now living in the Extra Effort with
High Intensity – Low Overhead Era!
DO YOU GET THIS?
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WAKE-UP!
You’re now living in a period in history where this
simple truth rules above all others:
“The Business with the Lowest Costs Wins!”
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The Re-Margin Two-Step
First, you cut your personal expenses!
To the bone! Now!
Second, you cut your business expenses!
To the bone! Now!
GET IT?
105
Re-Margin
First, Personal Expenses
• You can’t let society or the media tell you what your personal
life “should be.”
• When the market shifts like it is right now – you follow the
“must be” rule.
• You downsize and you do it fast. You get your personal
expenses where they “must be” in order for you to survive.
(No kidding!)
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Re-Margin
Second, Professional Expenses
• When markets shift, the first absolute for any business is to “re-expense” itself.
Immediately!
• “Revenuing” your way out of a shift is iffy at best.
– Generating more income may be impossible in the short run and take too much time in
the long run.
– “Now” is the required speed when a shift occurs.
– Get your business overhead lower - now!
– The “Must Be” rule applies here as well!
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“Name a business that has been ruined by
downsizing. I can’t name one. Name a
company that has been ruined by bloat. I can
name dozens.”
Charlie Munger
Warren Buffett Speaks
108
Re-Margin
• You must lower your costs now. And revisit this every month!
• Remember, to generate revenue, you generate leads – to make a
profit, you manage expenses.
• The profit you seek will always be made in the way you manage
your money.
• When the market shifts, you must create a budget that matches
your revenue.
• We call this re-margining your business.
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Third, Focus on Lead Generation
and Lead Conversion! Right Now!
“If your ship
doesn’t come in,
swim out to it.”
Jonathan Winters
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You Must Lead Generate.
Think of it this way, if you don’t have an able, ready and
willing buyer or seller right now – You’re not in business.
Hint: If a real estate office doesn’t have enough able, ready and
willing to lead generate real estate agents – they’re not in business.
And get this Passive doesn’t work well in a shift!
Aggressive extra effort with intensity will!
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Lead Generation
Here’s What’s Happened
This size market supports a
specific number of agents and real
estate companies.
Test Question:
Which Direction Is the
Market Going?
112
Lead Generation
So, unless you get a disproportionate and unfair share of the
available number of leads (and if you’re a company – a
disproportionate and unfair share of able, ready and willing to
lead generate agents) – you’re going to be very very unhappy
with your income!
Wake Up and Get Real!
There Is No Longer Enough to Go Around!
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Lead Generation
The market shift may have now exposed a real
personal dilemma you must overcome:
You love helping people.
But you haven’t yet learned to love hunting for them.
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The Two M’s of Lead Generation
1
MESSAGE
1
2
Match
Your Market
Make
an Offer
1
2
1
2
Target
Audience
Market
Conditions
Direct
Offer
Indirect
Offer
Response
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The Two M’s of Lead Generation
2
METHOD
1
2
Prospect
Market
Time Block
1
2
3
Prepare
Take Action
Maintain
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Taking Open Houses Beyond the Basics
Level 1
Sign in Yard
117
Taking Open Houses Beyond the Basics
Level 2
Sign in yard
Sign in yard
with balloons
and riders
118
Taking Open Houses Beyond the Basics
Level 3
Sign in yard
with balloons
and riders
Directional signs
at key corners
with balloons
and riders
119
Taking Open Houses Beyond the Basics
Level 4
Sign in yard
with directional
signs at key
corners with
balloons and
riders
Fliers the week
before, email
invites, and
posted on
websites
120
Taking Open Houses Beyond the Basics
Level 5
Sign in yard with
directional signs at
key corners with
balloons and riders,
fliers the week before,
email invites, and
posted on websites
Go invite
neighbors.
(100 minimum)
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Taking Open Houses Beyond the Basics
Level 6
Sign in yard with
directional signs at key
corners with balloons
and riders, fliers the
week before, email
invites, posted on
websites, go invite
neighbors (100
minimum)
Get on the phone
that morning and
remind
everyone!
122
Taking Open Houses Beyond the Basics
Level 7
Sign in yard with
directional signs at key
corners with balloons and
riders, fliers the week
before, email invites, posted
on websites, go invite at
least 100 neighbors, and get
on the phone that morning
and remind everyone!
Hold 4 other
open houses in
the area in
various price
ranges.
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Didn’t You Get it?
It is the “Era of Extra Effort”!
• Some agents just stick a sign in the yard and call it lead
generation.
• Others go six steps beyond this and call it lead
generation.
The big question is:
What do YOU call lead generation?
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Lead Generation
• To make “Extra Effort” happen every day, you must
subscribe to one simple belief:
– Dealing with current business never takes precedence
over finding new business. Never! Ever!
• You must adopt the position that until your lead
generation is done every day, nothing else should
done. All else is a distraction!
125
get
Time Blocking
• To ensure your lead generation is always your
number one priority you must acquire the
discipline of “time blocking”.
• Time blocking is setting aside daily blocks of time
to execute your most important business
Page 75
priorities.
126
Time Blocking
• Think of it as making appointments with yourself.
• Once done, you must protect that time against any
and all distractions.
127
Time Blocking for Success
Monday
7
8:30 to
11:30am
Lead
Generation
Tuesday
8
8:30 to
11:30am
Lead
Generation
Wednesday
9
8:30 to
11:30am
Lead
Generation
Thursday
10
8:30 to
11:30am
Lead
Generation
Friday
11
8:30 to
11:30am
Lead
Generation
Saturday
Sunday
12
10:00 to
2:00pm
Lead
Generation
13
12:00 to
5:00pm
Lead
Generation
128
When Someone Shows Intent, You Must Immediately
Convert it Into an Appointment.
• The ultimate success of your lead generating is directly
dependent on your “lead conversion to an appointment”
ability.
• One can’t work without the other.
– Many agents spend significant amounts of time and money on
their lead production proficiency but neglect their conversion
competence.
Get Appointments!
129
Get Appointments!
• Lead conversion is a scripts and dialogues based
skill. To master it – you must practice it.
• Your secret weapon: Time on the task overtime.
• Truth: Talent is Overrated!
– Practice with accountability to improve
beats talent over time!
130
Fourth, You Must Get Your Sellers
to Price Ahead of the Market and
Stage Their Home Competitively.
Right Now!
131
The Only Way to View Pricing and Staging
Staging Study
A review of over 2,800 properties in eight cities
found that “staged homes, on average, sold in half
the time that non-staged homes did. The sellers with
staged homes ended up with 6.3 percent more than
their asking price, on average.”
From an October 2006, USA Today article which cites a Coldwell
Banker Residential Brokerage report
133
Staging Study
Vacant Homes
Homes Previously on the Market
Marketed vacant homes that were previously unstaged were
not sold after 120 days on market.
Once staged, those homes only took 26 days to sell.
Occupied Homes
Marketed occupied homes that were previously unstaged
were not sold after 102 days on market.
Once staged, those homes only took 45 days to sell.
Source: RESA
134
Fifth, You Must Help Buyers
Find Their Motivation. Right Now!
“If someone is going down the wrong
road, he doesn’t need motivation to
speed him up. He needs education to
turn him around.”
Jim Rohn
135
The Two Main Ways to Energize Buyer Urgency
1. Become the Local Economist of Choice
2. Address Buyer Reluctance
136
Five Strategies to Overcome Buyer Reluctance
1. Don’t Wait – The Hazards of Timing the Market
2. Trade Up – The Opportunity of a Down Market
3. Less Is More – Narrow the Field
4. Provide Best Buys
5. Help Them Tap into Their “Why”
137
Sixth, Get Involved in the
Market of the Moment –
Short Sales, REOs and Foreclosures!
Right Now!
138
The Big Three
1. SHORT SALES
Individuals or families willing to avoid foreclosure.
2. REOs
Financial institutions with an above average number of
foreclosures to sell.
3. FORECLOSURES
Bargain hunters and investors
139
Never Give Up –
Never Surrender!
140