My most sophisticated clients monitor their key performance indicators on a weekly or even a daily basis and they are all telling me that statistics such as the conversion ratio of instructions to sales, the average percentage of the sale price versus the asking price and the average number of days on the market are all deteriorating quite markedly.
There is no need to panic about this. A less buoyant housing market need not mean that your income will decline but 33 years’ experience tells me that when the market changes, the first agents to change their working practices will win market share from their competitors.
How to prepare for a tougher market
The first thing you need to do is to start valuing properties more cautiously. During the last four or five years, many agents, particularly in London and the Home Counties, have got into the habit of over-valuing by as much as 20 or even 30 per cent. This will have to stop.
The second strategy should be to improve both the frequency and quality of your vendor care calls. Try doubling the frequency of your calls and try to do every other review in person rather than over the telephone. Before each call, you should send each vendor a marketing report showing the number of page views, the click through rate versus the branch norm and the number of viewings. You should also send vendors the feedback from everyone who has viewed the property and, just as importantly, everyone who has declined to view it.
When the market changes, the first agents to change their working practices will win!
This must be price-related, i.e. Mr Smith would not pay more than £220,000 for a house on such a busy road rather than they didn’t like the traffic noise. This feedback will also be much more credible if it is in writing rather than just given verbally.
The vendor care report should also include details of similar properties that are competing with theirs. If the client can see for themselves that 4-bedroom properties are available for the same price as their 3-bedroom, or that other 3-bedroom properties are priced at £20,000 less than theirs, they will be much more likely to agree to a price reduction. Finally, your marketing reports should contain full details of all the other properties that your office has sold since you last spoke to the client. Clients need to know that other properties are selling and it is just theirs that is sticking.
In addition to improving your vendor care, you may also need to improve your applicant management. Try setting aside dedicated time each day to phone applicants in order to encourage viewings. Some top negotiators spend as much as four or five hours per day phoning their applicants. These sessions must be free from interruptions and every negotiator should be set specific targets for both call numbers and the number of viewings that they achieve.
The results of these sessions need to be closely monitored. For example, you need to check that every applicant has received a phone call within the last seven days, that every set of particulars has been followed up with a phone call within forty-eight hours and that every applicant is viewing at least two properties (once they commit to one viewing, they can always be persuaded to see another one).
It may also be worth running some training and coaching sessions for some of the negotiators. Many of them will never have worked in a tough market before and even those that have may have forgotten many of the techniques that they used to employ.
And another thing
If improved vendor care and applicant management does not increase the instructions to sales ratio to an acceptable level, then you will need to start making compensating changes elsewhere in the business. For example, you might need to generate more valuation appointments, to improve your valuations to instructions ratio or increase your average fee percentage, all of which are easier to do in a tougher housing market.
Even in the sudden downturn of 2008, some estate agents carried on making profits because they changed their working practices. Despite tougher mortgage rules, the election and the threat of higher taxes on homeowners, no-one is expecting the market to fall off a cliff in 2015. However, almost all the experts are expecting a slowdown.
The changes that you make in your business during the next few weeks will determine what impact the slowdown will have on the profitability of your company.
Adam Walker is a management consultant and business transfer agent who has specialised in the property sector for over 25 years. www.adamjwalker.co.uk