THE MARKET SHIFTS
Real estate is a cyclical business. What goes up must come down. And what is
down won't stay there. Shifts are never unexpected but rarely predictable. You
know one is coming. You just don't know when. They are, in fact,
But we forget. Each time a shift occurs, we act surprised, as if it had never
happened before. Once the shift is over, we act as if it'll never happen
again. It's like we have amnesia. And that's odd since we deal with
something similar every year. It's called seasonality—the seasonal cycle of
sales that repeats each and every year. From month-to-month there is an ebb and
flow to the real estate business. Within each year, there is a time to make
money and a time to save money. It is so natural most simply take it in stride.
There is a natural buildup of listing inventory from January through April and
an offsetting decline in inventory from May through October, with an up tick in
sales at the end of the year. This seasonal cycle of sales causes a
corresponding seasonal cycle of income.
For real estate agents, these graphs are a heads-up and give meaning to the
phrase "make hay while the sun shines." The fact is, every year, real estate
agents have to deal with the seasonal sales cycle and its impact on their cash
While seasonal cycles occur within a single year, economic shifts happen over
several years. Seasonal market cycles are month-to-month and economic market
shifts are year-to-year. Just as the seasonal cycles dictate a rise and fall to
your income over a period of months, the larger economic shifts create a rise
and fall to your income over a period of years. Seasonal cycles feel
predictable, short-term, and manageable. Economic shifts feel unpredictable,
indefinite, and overwhelming. One feels like business as usual and the other
feels, well, downright scary.
The real estate industry has learned to live with regular seasonal cycles, but
it is always challenged by irregular economic shifts.
THE ANATOMY OF A SHIFT
Shifts are easy to understand. They occur whenever supply and demand move out of
balance. When seller supply exceeds buyer demand, it's a buyers' market.
When buyer demand exceeds seller supply, it's a sellers' market. A shift
occurs when the market moves from one to the other. Think of it this way. If
over time more listings are selling, you're moving toward a sellers' market.
If over time fewer listings are selling, you're moving toward a buyers'
Why does the shift to a buyers' market create pain? Two reasons. First it
leads to fewer sales and less available sales income in your market. Second it
tends to be abrupt and precipitous. The misleading aspect of an economic shift
is that it seems relatively natural and gradual when looked at nationally. When
experienced locally it is usually dramatic and fast.
The national perspective rarely, if ever, matches the local experience. The hard
truth is local market shifts are seldom slow and local landings are almost never
soft. It's a lot like a pendulum or a golf swing, beginning relatively slowly
but accelerating very quickly through the middle. Some local shifts can actually
take your breath away.
Several factors can cause an economic shift. Currency exchange rates and
political climate are the primary global factors. On a national level it's
interest rates and inflation. Population, jobs, and household income take center
stage at the city level. And at the most local level, it's neighborhood
dynamics and housing prices. All of this simply boils down to buyer demand,
which is driven by affordability and perception—how many buyers can afford to
buy and how many think it's a good time to buy.
So are shifts bad? Well, it depends. For the real estate industry in a
particular market, it certainly can be—the available income for everyone in
that market has dropped. For any single individual in their local market, it
doesn't have to be—there is still enough available income for them to
achieve their goals. The challenge for individual agents? Fear and how they will
respond to it.
When shifts occur, fear runs rampant, although not everyone responds in the same
way. Some individuals, though they do feel the fear, also know they are in an
equal opportunity, unequal reward business. It's really the 80/20 rule at
work—20 percent of the people will do 80 percent of the business in any
entrepreneurial endeavor. Those who understand this know that they must be
better than average to earn the better than average rewards. If individuals
understand a shift or have actually experienced one, they know they have to push
past the fear and face two tests—first to survive and then to thrive. They
have to hang tough until the Law of Equilibrium reasserts itself. Then it's
THE LAW OF EQUILIBRIUM
THE LAW OF EQUILIBRIUM is as old as the real estate industry itself. It is
simple and straightforward. The law states that the available income in a market
determines the number of agents in that market. As the number of transactions
rises, so does the number of agents. Conversely, when the number of available
transactions falls, so does the number of agents. People are attracted to the
industry by the perceived income opportunity and driven out by the reality of
the competition for it.
Since perception tends to trail behind reality, two lag periods show up in every
economic shift—the down-lag and the up-lag. The down-lag occurs because the
number of agents doesn't decline until the number of transactions has already
been dropping for some time. The low point of income opportunity then occurs
when the most agents are chasing the least amount of income. The up-lag works in
reverse when the transactions increase. The high-income opportunity point occurs
on the way up when the fewest agents are chasing the most amount of income.
With relatively few barriers to entry the real estate industry can become
flooded with practitioners during a prolonged sellers' market (an upshift).
Larger and larger numbers of agents are attracted to the industry and this
increases the competition for the existing business. When the amount of business
then declines (a downshift) the competition becomes untenable. There are more
people but less business and fewer deals. Fewer deals mean less money and less
money means lower income for everyone—and eventually it means fewer people
doing business. If you can ride out (survive) this initial lag period as more
and more people get out of the business you can find yourself in a less
competitive market. There is now more business relative to the number of people
working to get it. This is the time to thrive.
How long it takes to get from survive to thrive can vary greatly from time to
time and from person to person. There is the market's shift and its lag time,
and then there is your shift and your lag time. If you don't shift fast, your
lag time will parallel the market and you may be at risk. To thrive in the
upshift you must first survive the downshift.
Let's be clear here—there is nothing that says that an agent cannot thrive
before the market upshifts. In fact, we have known and worked with many agents
who had their best years in a "down market." This book is based on the
lessons learned from those agents who have actually accomplished this.
Here's the truth: not everyone will, but anyone can.
THE RESILIENCE FACTOR
Even though you know that history repeats itself, in order to profit from it,
you have to remember it. You must carry the lessons of the past into the
present. The past has taught us that "this too shall pass" and that success
comes to the resilient. Here is a tangible way to look at it: if your career
goes three steps forward then the market drives you four back, you're
essentially below zero and out of the game. If it's three steps forward and
three back all you've done is survive. But, if you've taken three steps
forward and the market only drives you two steps back, you're just absorbing
the hit. You're still in the game and you are more than just surviving.
The key is to be resilient and on your toes—take the hit, but don't get
knocked out. This is the survival strategy—adapt to the realities of the new
(downshifted) market quickly. Change what you need to change, do what you need
to do. Build a fortress around what you have. At the very least, this means
maintaining your number of sales while the market declines. The net effect will
actually be an increase in your market share.
When the natural lag plays out, you will be positioned to take advantage of the
inevitable rebound. You can then ride the wave of increasing transactions and
available commission income by simply holding the new level of market share
you've gained. If you do, your number of sales will increase dramatically and
you will thrive.
In order to survive and then thrive you'll need to shift gears. Can you put it
in another gear? Most people fear a shift because they don't understand the
Law of Equilibrium. They can't shift their thinking, so they don't shift
their tactics. If you can shift gears—shifting both your thinking and your
tactics—you will accelerate ahead of the rest.
So how do you shift gears? It's actually a very straightforward and pragmatic
process. Our research has identified the twelve tactics you must deploy. These
issues aren't special, unique, or new—they're the basic components of any
successful real estate career. And when business gets tight they become the
critical factors that determine the difference between success or failure. These
tactics represent the gear shifts that respond to the market shifts. Are you
ready? Are you willing? Let's get after it!
TWELVE TACTICS FOR TOUGH TIMES
1) Get Real, Get Right – Mindset and Action
2) Re-Margin Your Business – Expense Management
3) Do More with Less – Leverage
4) Find the Motivated – Lead Generation
5) Get to the Table – Lead Conversion
6) Catch People in Your Web – Internet Lead Conversion
7) Price Ahead of the Market – Seller Pricing Strategies
8) Stand Out from the Competition – Seller Staging Strategies
9) Create Urgency – Overcoming Buyer Reluctance
10) Expand the Options – Creative Financing
11) Master the Market of the Moment – Short Sales, Foreclosures, and REOs
12) Bulletproof the Transaction – Issues and Solutions
TACTIC #1 GET REAL, GET RIGHT – MINDSET AND ACTION
Decide what your priorities are and how much time you'll spend. If you don't, someone else will.
In The Traveler's Gift, Andy Andrews passes on the wisdom that "our lives
are fashioned by choice. First we make choices. Then our choices make us." I
wholeheartedly agree. We are what we decide we will be, and we do what we decide
we will do. We become our choices. The twelve issues you face in a shifting
market are really an opportunity. An opportunity to make the twelve most
important choices that will directly impact your career and power you through
any shift. Of these twelve choices the first and most significant will be to get
real about your situation and get right about what you're doing.
When a shift occurs confusion follows. Not only in the marketplace but also in
the mind and body. What to think and what to do becomes fuzzy because what once
worked is no longer working and you may not know why. Don't let yourself
panic. Keep fear at bay. When a market shifts there is only one thing to
do—shift with it. In truth, there are two shifts you must make. A mental shift
and an action shift.
THE MENTAL SHIFT
I believe that your life will be either about your problems or your
opportunities. You'll either be running away from something or running towards
something. It's your call. To survive a shift you must first make the mental
shift to run towards what you most want and avoid the temptation of running away
from what you most fear. One approach lifts you up and the other drags you down.
You must keep both eyes on your target and not the ever-moving market. Remember
that success is never about the chosen few, but always about the few who choose.
You get to choose and your life builds from there.
There are three types of people who emerge when a market shifts. First, those
that fearfully predict the worst and are unnecessarily pessimistic; second,
those who hopefully wish for the best, believe they can't fail and are
unrealistically positive; and, third, those who respect the fact that they might
fail, actively prepare for the worst and strive for the best. These are the
resourcefully realistic and are always the timely triumphant. They are matter-of-fact
about the market and sensible about their situation. They see things as
they are and openly acknowledge how they're doing. At the same time they stay
optimistic about their opportunities. As my friend Zig Ziglar says "they do a
checkup from the neck up" and make sure that even though the market is
reshaping itself it isn't reshaping their attitude.
You can't control the market but you can control your outlook and your
response to the market. Remain resolute. Know that while everyone won't
succeed in a shift, some will and anyone can. You must be an "anyone can."
This is not just a short-term attitude you adopt, but a lifelong posture you
take. It's a journey you embark on led by the mental choices you make. Be
certain of this—your mindset matters.
Most people lead a "flow with the tides" life. Their careers and their
fortunes seem to rise and fall with the tides of the market. When things are
going well anything and everything works—their boats float. What they fail to
realize is that literally all boats float at high tide and no captain gets
credit for that! When times get tough and the tide goes out, all of a sudden not
everything works. Their boats don't float. Those quick to adjust will have a
floating boat. On the rocks or out at sea—the choice is yours.
Be a low-tider—always be prepared for low tide. Know that it is always a good
time to be in the real estate market when you take a long-term view of the
market instead of getting caught up in its short-term volatility. Know that
there is always enough business for you to survive with a minimum income while
striving for your maximum. Keep your perspective. Judge your success over the
length of your career not the high or low of any single year. Know that growth
comes from clarity, priorities and focused-action. The first two are how you
think and the last is what you do. To make a strong mental shift be clear about
your situation and what it is you want. Write down and prioritize the necessary
steps you must take to achieve your goals. Now you're focused on what you
want, you know what you need to do, and you know what comes first. So what are
you waiting for?
THE ACTION SHIFT
Once you've gotten real, you've got to get right—right into action and
into the right action. For all the necessity of knowing what to do, taking the
right action now is just as necessary. Once you know then it's not about more
knowing—it's about doing. The difference between a career worth having and a
career worth heaving is the amount of focused action you take every day. It's
about knowing what to do and then doing it. Keller Williams CEO Mark Willis
often shares that his inspirational and energetic mother, Rachael Willis, always
taught him to "Do right—Fear not." When you do the right things you leave
Excerpted from "Shift: How Top Real Estate Agents Tackle Tough Times" by Gary Keller. Copyright © 0 by Gary Keller. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher. Excerpts are provided solely for the personal use of visitors to this web site.