If you’re an economics nerd (like me!), you may have heard chatter recently about the yield curve inverting. In fact, the yield curve has now been inverted for more than a full quarter. I won’t bore you with the nitty-gritty, but this is big news for real estate agents because an extended inverted yield curve historically indicates that a recession will start in late 2020/early 2021. So now is the time to prepare your real estate business for the changing market conditions.
In this post, we’re covering the ways your real estate business needs to change for the upcoming recession.
Let’s get something straight up front: housing markets are cyclical. Recessed markets are a normal part of this cycle and nothing to be afraid of. However, the things that worked for your real estate business when the market was strong are not going to work the same way when the market is weak.
If you want to thrive during the upcoming recession, you need to change a few things about the way you do business. Here are the 6 changes you’ll need to make.
6 Ways You Need to Change Your Real Estate Business Before the Upcoming Recession
1. Change your Expenses
One of the fastest ways you can transform your real estate business before the next recession is to change your expenses.
With fewer transactions taking place during a recession, your net commission on each transaction becomes more important. So savvy agents do their best to cut unnecessary operational business expenses.
This includes expenses like:
- Utilities: Your phone/Internet provider may be willing to offer you a discount if you explain that you’re looking to possibly switch providers to save money.
- Purchased leads: Now is the time to re-learn lead-generation so you don’t have to spend a fortune buying unproductive leads.
- Software subscriptions: With fewer transactions, you may not need to pay for premium software packages for the duration of the recession.
One area you should not cut: marketing. Most agents go overboard and reduce their marketing costs to save money during the recession. But this is actually the time to increase your marketing budget! Purchasing more ad space when others are decreasing their ads gives you a greater share of your local market, improves recognizably, and keeps you top of mind as other agents fall out of the spotlight.
Social media ad space is relatively inexpensive and can provide a solid return. Print and radio ads still work in many markets. And mailers/door hangers can also be a solid source of leads when done consistently over time.
Take a look at your non-marketing expenses to see if there are ways you can cut operational costs without sacrificing quality.
2. Change your Income
A down housing market may reduce your real estate sales income, but it also provides income opportunities in other areas.
There are a few services you can add to your real estate business to bring in more income while simultaneously providing value to your clients and growing your client base.
Here are some of the most lucrative examples of recession-proof income streams:
- Credit repair: In a down market, lenders are more cautious about lending to buyers with iffy credit. Bad news for agents who don’t know how to work with low-credit buyers; excellent news for agents who offer credit repair services! Not only do you help someone in need repair their credit (and get paid a reasonable fee for your services!), but you’re also saving your sale now that these buyers can qualify for a home loan!
- Property management: In many markets, a down housing market actually makes the rental market stronger. Lots of potential sellers don’t want to sell during a down market, so instead of selling when they have to relocate, they opt to rent out their home. And there is also an influx of SFR renters who can’t qualify for a home loan under the more stringent lender requirements. Offering property management services is a great way to earn a solid income while connecting with tomorrow’s buyers and sellers. It just takes a little organization to stay on top of your portfolio, so make sure you invest in some inexpensive, but effective, property management software.
- Property tax appeals: Only the savviest agents consider property tax appeals. Most agents just think boring… and completely ignore this killer opportunity. But real estate agents actually already have about 90% of the skills and knowledge needed to offer property tax appeal services! All you have to do is show your local taxing authority that the value of your client’s home has dropped due to the recession, so their property taxes need to be adjusted accordingly. In most jurisdictions, this just means filing an appeal application and presenting a CMA to the Appeals Board to show them the current market value of the property. Then you get a percentage of the tax savings/refund as your fee. It’s super easy to get started, and incredibly lucrative in a declining market!
- Turn your real estate blog into an income stream: Agents who want to show up in Google results know the power of blogging. So they blog for leads, not for a separate income stream. But why not do both? You can monetize your real estate blog through affiliate links, sponsored posts, ads, and/or members-only content.
Changing your income streams is generally far more effective than changing your expenses in a down market. Because you can only cut expenses so far, but your income potential is unlimited!
3. Change your Lead Generation
I’ll be honest, I’m not a huge fan of the pay-for-leads business model. In my opinion, this trend of buying leads from Zillow® and other platforms has led to less skill in prospecting, and inflated prices per lead. And many agents are stuck paying those high prices because they no longer know how to generate their own leads.
A recession is the perfect time to break this vicious cycle.
Let’s get back to lead-gen basics! Then we’ll bump up your impact by adding lead gen solutions for the tech age. And it all starts with your target market.
During a recession, there are fewer leads available. So you want to focus your marketing efforts on the groups most likely to be active under the current market conditions.
Your target market for a recession will be:
- investors
- banks (specifically the REO department which is trying to sell off foreclosures)
- expired listings (a higher percentage of listings expire in a down market)
- renters (now is the time for them to jump on the housing ladder while the entire market is essentially on sale)
- upgraders (buyers looking to buy a bigger, nicer home will offset the hit they take on selling their current house at a discount by taking advantage of the low prices on better homes)
Targeted social media posts are a cost-efficient way to reach these groups. By clicking on your ads, your target market can reach useful blog posts on your website that provide more information about how they can benefit from taking immediate action. From there, you can offer a freebie to help them get started (a CMA, a list of the best deals currently on the market, etc.). All they have to do is enter their name, phone, and email address. And from that point forward, they are on your CRM and ready for you to nurture as leads.
4. Change your Lead Follow-Up
In a strong real estate market, agents get some serious leeway when it comes to lead follow-up. If you miss an incoming lead, it’s ok because another lead will come along in a few minutes.
But in a recession, leads are harder to come by. So you need to make the most of every lead. And that means systemizing your lead follow-up so no lead goes unserved.
Here’s how to properly follow up on every lead:
- Respond immediately. Consider an auto-response service for leads that come in when you’re unavailable to reply.
- Get the lead exactly what they want plus something extra. For example, if they ask for info about a specific fixer-upper, provide that info along with your current market list of the fixer-uppers with the most potential.
- Ask for the appointment. I had a cancellation for today at 6:00, so I can be available to show you the home then. Or I have an opening at noon tomorrow. Which works better for you?
- If you can’t land the appointment, follow up the next day via text (or phone call if that’s your client’s preferred method): Hi Alex, just wanted to make sure you’re getting all the info you need about those fixer-uppers. Did you have a chance to review my Best Fixer-Uppers List? I’d be happy to show you some of those this weekend. Do Saturdays or Sundays generally work better for you?
- Follow up regularly, as appropriate for the lead’s needs. This may mean you email them new listings every morning. Or it may mean you send a market update once a week.
The most important thing is that you have a system for keeping track of your leads, their needs, your communication with them, and your next scheduled follow-up. And that you actually follow your system to keep in touch with all of your leads consistently. If you don’t already have a low-cost CRM that works for you, now is the time to get one!
5. Change your Scripts
Your scripts are going to be very different during a recession than during a balanced market or a seller’s market. Instead of explaining to buyers that real estate prices are rising, you need to convince them that the market will rebound. You need to create a sense of urgency in a market where homes are sitting for months.
You also need to be able to help sellers through the difficult process of selling for less than they would like. Or even taking a loss on the house, which is never an easy conversation.
The agents who can control these conversations through carefully-crafted scripts are going to be the agents who come out ahead in this market.
What if you’re not a big believer in scripts?
Maybe you feel scripts are inauthentic. And that’s understandable.
Here’s my advice to you:
Don’t use someone else’s scripts. Read some sample scripts, and use what works for you to create your own scripts (or at least a framework for each of those conversations). The purpose of scripts is to be able to communicate clearly. When you just wing it, you may accidentally leave out important information. Or you might get flustered by a question and reply with a rambling answer that doesn’t inspire confidence in your abilities as a competent agent.
Planning your conversations gives you more confidence, helps you communicate more clearly, and helps you remember all the details that are important for your clients to know.
6. Change your Day-to-Day Operations
One last thing that needs to change during a recession: your day-to-day operations. This isn’t business as usual! This is a recession, and you need to practice lean operations to thrive in this market.
During a recession, more of your schedule is probably allocated to lead-generation activities like blogging, posting to social media, calling expireds, and contacting your sphere.
Another good chunk of your day is probably spent on your recession-proof income stream (like the property management or property tax appeal opportunities we discussed earlier).
Practicing your recession-proof scripts and getting comfortable with creative financing are also valuable ways to spend your time.
As far as streamlining your operations, here are a few ideas to consider:
- Insist on pre-approvals for buyers. It’s more difficult for buyers to qualify for a home loan during a recession, so you need to know how much they qualify for before you invest your valuable time in showing them properties. Of course this is also a service to your buyers. They want to make sure they can acquire financing before falling in love with a home.
- Educate your buyers on the topic of credit. Explain the importance of a good credit score to a home loan. And give your buyers a list of actions to avoid during escrow so they don’t accidentally invalidate their pre-approval.
- Help your sellers stage their home. In a strong market, staging gets a higher price; in a weak market, staging gets the home sold.
- Invest in listing photos for your sellers. If you don’t already have a professional photographer in your pocket, get one! You don’t want potential buyers eliminating your listing from contention because of some poor lighting or jenky angles.
The Bottom Line
The next recession is likely just around the corner. You can’t stop it from coming, but there are plenty of ways you can prepare for it.
Make these changes to your real estate business today and watch yourself thrive through the next recession!
Get Your Complete Recession-Proof Guide!
If you’re serious about growing your real estate business during a slow market, check out The Recession-Proof Real Estate Agent. This book offers a complete step-by-step guide to recession-proofing your real estate business.
