Realtio.com

A piece from New York Times show that online ad spend from some mortgage advertisers is decreasing:

“The once obnoxiously ubiquitous ads from the mortgage lead generator LowerMyBills.com seem curiously absent from major Web sites these days. The notorious ads, with their dancing silhouettes, shimmying green aliens and bizarre boogeying office workers, were once plastered across many major Internet sites, including NYTimes.com. They are now much harder to find.”, the NYT writes.

For a lead company like LowerMyBills, decreased demand means smaller media buys of course.

With tighter lending criteria and the end of the 100% LTV loan mortgage brokers appetite for purchase leads have decreased even further. Lendingtree, another online mortgage lead company, is trying to cut back on it’s purchase leads in the wake of the mortgage credit crunch a source told Realtio.

Being a consumer and making purchase decisions is not always easy when the actual purchase is a first time or extremely infrequent one. And that’s the case when it comes to real estate.

How do you know which agent is good or not?

Some really good blog posts lately have touched upon this topic.

Danilo and Tony at real/diaBlog blogged Monday and said “It’s time to clean up real estate”.

And they don’t think brokerages will do that job.

“(Brokerages)…. have their business models set up so that low producing, part-time and ineffective agents cost nothing to support/sponsor. Therefore, if an agent only sells one house they will in essence become a profitable commodity. The commission and fee structures are set up in such a way that the mediocre agents are the bread and butter of a brokerage firm. They will not be receptive to any restrictions that could limit agent counts.”

Many end consumers have problems separating a franchise brokerage brand from individual agents.

Maureen Francis of miOaklandcounty.com posted this last week in regards to “Separating the brokerage from the agent”:

“Our real estate licenses are kept with one broker who is responsible for supervising us. But we act very independently, and there is little that can be done to ensure that all of the agents working for one broker live up to one high set of standards. Unfortunately, that is just a reality of the way this business is structured. If you go to a McDonald’s Restaurant anywhere in the world, you can expect that the burger will taste pretty much the same. But if you go to a Re/Max, Century 21, or, for that matter, even a Sotheby’s International Realty, you cannot be assured that all of the agents are the same within that brand.”

So what’s a real estate consumer to do?

Maybe check out online review sites to find an agent with stellar reviews?

Leading online real estate industry analyst Pat Kitano has a great overview of the main real estate agent review sites at “Online Reputation Management for Realtors”

Sites include Homethinking.com, IncredibleAgent, Yelp, Judysbook, Angies List and upcoming site Agent Scoreboard.

All these sites have one thing in common: Lack of a true national footprint which will take time to establish. It’s not an overnight process for sure. Most reviews originate from agents soliciting testimonials from past clients. Absolutely nothing wrong with that what so ever.

But the real question is: How does a consumer determine which agent is both outstanding in terms of making the deal happen as well as acting with a true ethical fiduciary responsibility to his or her client?

It’s not easy at all.

We’re all used to find vendors based on referrals from sources we trust. There is only one problem: Many times the referral source does not know if the agent is truly good or not. Why is that? Mainly because they have nothing else to compare with and they may have only bought or sold a house 1 or 2 times in their lifetime.

When users have full information and lots of experience with a buying situation their reviews and referrals become very valuable. When it comes to real estate they are still important but not as valuable due to the lack of knowledge of the average consumer.

So what to do?

In addition to looking at user reviews hard metrics are necessary to look at such as number of transactions including listing and sales price histories. It will weed out the part-time hobby agent for sure.

I think that requesting references from the three to five most recent clients (not the clients that the agent would choose) is another very good qualifier. Used extensively in the builder and contractor industry it usually immediately weeds out the really bad apples.

An overlooked but critical component of an agents level of competence is his or her negotiation skills. This would be one of the areas I would focus on if I was in the market for an agent and was interviewing past clients. A good agent can save their client lots of money in the negotiation process leading up to a sale.

There are tons of “Questions to ask” lists out there, mainly used for promotional purposes. Like “Does your real estate agent do this and that for you?”. Or “Does your real estate agent have an active home selling system like this”?

But most of them do not focus on the hard-to-measure qualitative skills that are so important when hiring an agent.

I know there are much smarter and more experienced people than me reading this blog (And you’re probably one them! Thanks for reading this far!).

So let me just ask you… If you were a consumer looking for a real estate agent….

What 3-5 questions would you personally ask a past client of a real estate agent that would reveal useful information to help making your decisioning process easier?

Thanks in advance!

-Ola

:

Home owners who sold their homes themselves had better results than sellers that listed with an agent in Madison, WI during the period of 1998-2004 according to a study from two Northwestern University economists, New York Times reports.

When the agent’s commission was factored in, the FSBO’s came out ahead financially. It should be noted that Madison has a high traffic FSBO listing site that is well known in the local community. The authors of the study caution that they are not sure that their findings apply on a national basis. Most communities don’t have high traffic FSBO sites.

Anything in the report coming out in favor of the agent? Houses that were listed on the local MLS sold quicker.

The study was adjusted for several factors including timing, house and lot size as well as neighborhoods.

The big question is: Will the data hold up in a slowing home market? The authors are currently crunching data for 2005 and 2006.

I am sure this will be a study that will be debated quite a bit. If you knew what you were doing and had patience to wait a bit for your house to be sold… then going FSBO was a good idea during 1998-2004. At least in Madison, WI….

Best,

Ola

Pat at Transparent Real Estate posted an interesting interview and analysis about RedFin’s business model today.

One of the reflections Pat made was this: “Furthermore, the agent’s role becomes more akin to a Consultant, a natural evolution for Realtors who are now branding themselves to do more than just realty (loans, financial planning, etc.).”

Are they really? That’s about time….

Most real estate offices have an affiliated title and mortgage brokerage owned by the broker. The staff and office space is separate due to RESPA. Real Estate agents are not allowed to receive referral fees from these affiliated businesses directly.

As long as the proper disclosures are made and the client is being given a choice and not improperly steered to use the agent, he or she can very well originate a mortgage if he or she actually perform most of the tasks involved. (one exception: a real estate agent can not take an application for a FHA-loan)

Here is what I’ve never been able to understand: Why are so few real estate agents originating loans?

There are quite a few different answers to this question:

1. Lack of time. Better to focus on selling homes and leave loans to the mortgage side of things.

2. Lack of knowledge.

3. Lack of access to origination programs (broker runs separate real estate and mortgage operations and discourage agents to be involved on the loan side)

4. No need to. Agent already receives splits and referral fees through creative arrangements with their “preferred mortgage provider”. (Most of these creative arrangements are in violation of RESPA).

Any other reasons?

There is money to be made for sure.

In a 200,000 transaction a real estate agent that originates a loan could on average make around $1,400 if charging reasonable rates. (1% in origination fee with a 70% commission split to the real estate agent).

This would add 50% to many agents income on a transaction. Maybe I am missing something?

-Ola

Online lead generator HouseValues has been under fire lately. New layoffs, disgruntled customers and employees, and the exit of its COO and mortgage lead business.

In case you missed what’s going on here are a couple of links:

1. Shake up at HouseValues by Joel at Future of Real Estate Marketing
2. Layoffs at HouseValues by John Cook at SeattlePI.com (interesting comments left by ex-employees)
3. Interview with Ian Morris, the CEO of HouseValues

So what is the problem with HouseValues? Let’s leave management, support and client relations aside and just look at their business model. It has two main problems:

1. No quality incentive

The more leads you generate and sell the more you make.

Other companies that work on a referral fee based on closed listings have a built-in incentive to generate quality leads. HouseValues does not as long as they can replenish their pipeline with new real estate agents.

2. Completely wrong value proposition to approach the end real estate customer

The source of HouseValues leads are primarily from home searchers and home valuation requests. This is the biggest pool of real estate traffic out there. But selling these fairly unqualified inquiries as leads are really stretching it.

People are not filling out a form to be connected to a real estate agent. If they did you would see a whole different type of quality.

You will convert some of these into “ready-willing-able” type of inquiries but not if you don’t have a good follow-up system with good frequency, copy and encouraging engagement by the prospect.

One speculation that came out of the Ian Morris interview was that HouseValues would focus on their CRM / follow-up system and become more of a service company. It’s an interesting idea.

They’re facing a big problem though with a potential CRM strategy. Here is why:

Technology and CRM Systems does not have the same cachet and desirability as leads. The real estate industry is a sales industry. And in sales everybody want leads. Sure. CRM is important. But the average agent does not have or want to spend any large dollar amounts on technology or CRM systems. So when it comes to technology and services HouseValues would have to dramatically increase its client base.

And is their follow-up system good? I can’t speak for the technology itself but their frequency and copy is pretty average. And average does not cut it if you want to be in the marketing services business.

HouseValues has about 78 million in the bank and could afford to change direction. Their cash is their
biggest asset at the moment.

But is it enough to turn the company around? It all depends on one thing only. If they take customer
satisfaction and client retention seriously.

We’ll see.

All the best.

-Ola

Last month I wrote a post about “What’s Next? Five Trends For The Real Estate Consumer”.

One of the predictions was that we will see more salaried real estate agents in the future.

One of the commenters on that post was the fantastic blogger Teresa Boardman of the St Paul Real Estate Blog:

“Salaried agents? Can’t imagine how that would work. So many of us gravitate toward the business in part because we love being self employed. If I had a boss, other than my clients of course, it would just suck the joy out of my job. :)”

Teresa has a great point. Many agents become agents because they like the freedom to work for themselves. There are also a lot of agents who in reality are unemployed or selling houses part-time while doing something else.

I don’t see salaried agents being a dominant part of the future anytime soon.

Here is why: Starting a real estate brokerage is comparatively speaking fairly cheap. And recruiting agents on commissions keep fixed costs low. Nationwide companies are primarily franchises and don’t have the business model in place to support salaried agents.

But there will be more of them. And you will see them in companies that have the following in common:

1. They are great marketers.

2. They generate a lot of leads on a corporate level.

3. They value a consistent and high-quality experience for the end client.

4. The company will be the primary brand - not the agent.

Some of them will be newer companies that we have not yet seen. Or it could be a remake of a long-established luxury brand in the industry.

So to answer Teresa Boardman’s question… how would it work?

It would work like any sales-oriented organization. You would get compensated with a base pay and a bonus depending on your performance.

If you’re starting out you will likely work on inside sales and have more of a customer service oriented role. More agents will work in call centers in the future. That’s just the nature of where the industry is heading. Team work will be more common than in the past.

More experienced agents will of course do high-end sales and manage teams and would get a higher compensation.

Would most agents like to trade their commission based income against a regular paycheck? I would not be surprised, especially in a tougher market environment.

Are you an agent? Would you like a paycheck?

All the best.

-Ola

P.S. Teresa… Big congrats to being mentioned at Realtor.org for your blogging results! Keep up the great work!

2007 is here. Let’s make it a fantastic year shall we?

This year will likely turn out to be one of the defining years in the real estate and mortgage industries.
With a current slowdown in progress, generating leads and converting them into clients and closings
will be even more important.

Let’s have a look at three keys to real estate marketing success in 2007.

1. Be remarkable. And make sure you tell your story

We touched upon this earlier in the post
“Calling all real estate agents: Why should anyone do business with you?”

You really need to give prospective clients a good reason to do business with you.

And the stakes are getting higher and higher. Today’s consumers are not looking for a “me-too” experience. They are looking for companies that will make them go “wow!”.

Don’t settle for anything less than being truly remarkable.

2. Track and analyze the returns of your media spend

“I can’t afford to advertise or spend more on advertising”. It’s very common that
people tell me this.

This normally tells me one thing: Your advertising is not really working.

When your advertising is working you’re making money. And your goal is to invest
that money into more advertising and referral systems to make more money. That is how businesses grow.

Would you spend $500 to make $1,000? If you knew for sure, then of course you would.
You might say to your self… sounds simple, but it isn’t that easy!

The concept really is. It gets a little bit more difficult in the execution.

The problem most business owners face is the lack of tracking of the return of their investments.

The key is to being able to test and track your media spend, down to the initial request and all
the way to the closing.

You can’t guess if the ad you’re running will work or not. You need to know.

How?

In a small-scale environment it can be done simple by attaching a special code to each ad you run.
In radio spots you have dedicated 800 numbers. In print ads you have special coupon
codes for the special offers.

And on the Internet you can just put a tag on each ad or lead. That’s one of the reasons I got started in the Internet marketing industry 10 years ago. The ability to track and get quick data. Any direct marketers dream.

3. Implement or improve your follow-up systems

It’s truly one of the “secret sauce” elements of the real estate marketing world. The company with the best follow-up system wins.

It’s a very rare occasion when a user do something on the first contact. You always need to follow-up. It can take up to 20 contacts and 12 months before a lead is ready to do business with you.

This means that you’re not only in the lead generation business… you’re also in the follow-up business.

You need to touch your clients and prospect through multiple channels such as email, direct mail and phone. They have extremely short memory so you need to be there for them helping them and reminding them to do business with you.

All the best.

-Ola

P.S. What topics are you interested in reading about in 2007? Let me know at editor(at) realtio.com

It’s time for the 2nd feature of blogs from our Blog Roll: The future of real estate marketing by Joel Burslem. Joel works in marketing at an independent brokerage in Oregon and cover developments in the real estate industry.

One of the best things about Future of Real Estate Marketing is the great news coverage. Joel stays on top of new product and service launches as well as industry trends and tells it the way he sees it.

Today he has a great post about pay-per-click research and research tools like spyfu.com and keycompete.com .

You thought that your keyword lists and bids were secret and only available to you?

In the Internet marketing world nothing is secret.

We can see where you advertise, what your ads look like, estimate your spend, your average cost-per-thousand-impressions (CPM) and your average cost-per-click (CPC).

If your company has a partner or affiliate program we can even identify many of your best partners and recruit them on behalf of your competitor.

Nothing is secret on the web and it’s easy to copy or get copied.

I have been a huge fan of Velocityscape and their data mining capabilities for competitive research. Everybody can get a free beta account at their new service spyfu.com. Register for free and type in your competitor’s domain. You will get a decent sample of their keyword list and how much they are spending on the pay-per-click engines.

Head over to Future of Real Estate Marketing for the full scope and don’t forget to add the blog to your blog reader.

Happy Holidays To You And Your Family! See you next week!

All the best.

-Ola

Quick and easy fixes for your blog that does wonders in the search engines… who doesn’t like that?

Let’s look at three of them today:

1. Put the title of your blog at the end of all individual entries title tag.

Do your entries look like this? “Blogname - Entry title” Switch them around. Search engines like to see your keywords at the beginning. “Entry Title - Blogname” is the way to go. You will fix this in your template settings for individual entries. Look for the title tag in the beginning of the template file. Before you change anything in your template make sure you save a backup copy in case you make a mistake.

2. Incorporate your main keyword into your blog.

When people link to you they normally put either the name of your blog or your URL. So why not make it easier for them and the search engines.

Here are two examples:

1. Jay at Phoenix Real Estate Guy

2. Joel at Future of Real Estate Marketing

If you don’t have your own domain for your blog you should consider it.

3. Put your target keywords in your title when you write new posts.

The title of a page is hugely important. If there are no keywords in the title it’s not likely to rank high.
So if you write entries about your local marketplace make sure you use your top keywords frequently
as the entry title.

Best,

Ola

Since it is 2007 calendar and greeting card season (you haven’t got yours out yet?) in the real estate world I thought it would be appropriate to talk about customer retention.

What about calendars? A 2007 calendar might get used and keep your name in front of your prospects but many just throw them out. How is yours working out? Please comment and let us know.

A hand written simple thank you note is still one of the most powerful marketing messages a business can use.

You want to stand out among the holiday mail? Handwrite a holiday greeting to your customers if you can and just thank them for their business. Make it personal. It should read like you are writing a short letter to one of your friends. The envelope should also be handwritten.

If you really would like to stand out and also do some good here is another idea:

Let your client know that instead of sending them a calendar, chocolate box or fruit basket you decided to donate a sum of money to the less fortunate in their name.

If you can… do it individually for each client. Your clients will then receive a notice from the charity that you made a gift on their behalf.

It will make you feel good. It will make your clients feel good. It will deepen your relationship.

And it will change the world a tiny little bit.

All the best.

-Ola