Why conversion rates matter.
There are a few almost “taboo” topics among real estate agents and “skills” seems to be on the list. I know very few agents who actually track their conversion rates. Wait, what do “skills” have to do with conversion rates? Everything!
In the book The Millionaire Real Estate Agent, Gary introduces the concept of the Economic Model. (personally, I think a better name would be the Training or Skills Model, but that’s another story) Gary says if you want to close 24 transactions in a year, you have to represent more than 24 people. That makes sense, but how many? Well, depends on your conversion rate! If your conversion rate from people you represent to people you get paid on is only 50%, you need 48 signed representation agreements.
To get signed representation agreements, you need to have appointments with new buyers or sellers. Let’s say your conversion rate from the appointment to the representation agreement is 50%, then you need to meet with 96 people over the course of the year so 48 hire you and you get paid on 24. Easy peasy. That’s only 2 people per week with 4 weeks off!
Now, here’s the fun part!
1. Block time on your calendar to practice appointment setting scripts
Let’s say your skills are good enough we can increase those conversion rates just 20%. So for 24 closings, you would need 35 representation agreements. And at 70%, you would only need 50 appointments. Folks, that’s HALF! (ok, not exactly half, but darn close!)
My personal recommendation is to up your game in two really specific areas so you can work smarter rather than harder. First, nail – I mean really perfect – your listing and buyer presentations. Know your material well enough that you can pay attention to the client. Listen to what they have to say and be able to respond to it.
2. Block time on your calendar to practice needs analysis
Second is the needs analysis. If you have ever shown someone more than 12-15 houses (and that’s in a super hot market where you may lose out on multiple offers), you need to work on your needs analysis. Buyers aren’t liars. It’s our job as agents to ask better questions and listen better. It was a very rare buyer that we showed more than 5 homes to. Our average was 4.6 per buyer before they bought.
3. Improve your conversion rates
As real estate agents we often are so worried about getting a lead that we do a terrible job once we have one. We don’t know how to set an appointment, what to do when we get there nor how to help them find the right home (or sell theirs). These are all skills we can (and should) practice and get better at. There are really easy scripts for setting appointments. My favorite is presenting my value proposition, then using the alternative close. It’s based on science and research – and works!
The needs analysis, done well, will make you and the client both feel much more empowered. No matter what the buyer says, no one really truly wants to look at 100 homes before they choose. Daniel Pink wrote a wonderful book To Sell is Human. In it, he explains that humans, when presented with too many options, freeze and don’t choose at all. And we hate making “decisions”, we much prefer “choices.”
4. Sit back and enjoy your extra time as you’re now working smarter rather than harder!
Where did all this leave us? Skills! Look at your calendar and block out an hour once or twice per week to practice. Start with your appointment setting skill, then move on to the needs analysis. I personally like the idea of half the work for the same money.