If you are agent who carries a significant number of listings, you are familiar with the amount of time, effort and expense you have to dedicate to marketing and prospecting just to get in the front door for the listing appointment. Then you have to prepare your CMA and listing presentation. Once you have the listing you then incur additional expenses for listing signs, photography, flyers, Broker opens, open houses, magazine ads, etc.
If you are an REO listing agent, in addition to all the above, you may also have to contend with reduced commission rates, property management, obtaining repair bids, paying for repairs, weekly inspections, monthly BPOs (what REO clients call CMAs), tech and platform fees, all items that can and will cut into your bottom line and profit margin.
As business people, who happen to be working in the real estate field, we have to always keep an eye on our business’ bottom line and we have to continuously explore ways to increase our profitability.
One of the ways to increase profitability is to leverage each business opportunity (your listings) into additional opportunities. In the case of listings, you can leverage 1 listing into multiple buyer leads. Each of those leads is another opportunity to generate additional income. Further, since the expenses associated with working with buyers, i.e. the gas it costs to drive to view homes, are minimal, your earnings and profit margin can increase exponentially with just 1 additional buyer closing for each listing you have.
For example, if you had a $250,000 listing:
In this example, your profit margin is 62%. Almost 40% of the commission earned from this listing goes to expenses and that is if you are not taking into account desk or office fees, an assistant, phone, internet, car, gas and other miscellaneous business related expenses.
On the other hand, if you had a buyer who purchased a $250,000 home:
In this second example, your profit margin is a virtual 100%. Your customer acquisition cost for buyers is marginal, it can be as little as $0 (more on this in the next post), and there are few if any other expenses associated with buyer clients.
By leveraging a listing properly, you can easily generate significant number of buyer leads and at a minimum 1 buyer closing. By adding 1 buyer transaction to each listing transaction, you can effectively double your sales volume, but because of the lower expenses associated working with buyers, you can increase your income almost 3 fold!
In this post we looked at why as a listing agent it is important to leverage each listing you have into additional opportunities. In the next post we are going to explore several low cost options on how to leverage your listings and generate buyer leads.