Industry

How Diverse is your Contact List?

Diversity makes for a good contact list.

Think about the real estate needs of an average up-and-coming young person today (if there is such a thing..)

  • Young person buys a first house - a small starter home, or condo, probably on the outskirts of the neighborhood they really want to live in.

  • Young person gets married - the couple decides to sell one of their homes and live in the other one.

  • Family grows - a couple of kids later and the house is too small; the family needs to sell the starter home and buy a larger, more family-friendly house.

  • Pause - for many people, this will be the last house they need for a long time, as their focus turns towards raising their family.

  • Career grows - those fortunate enough to be climbing the career ladder (or whose businesses are thriving) may have one more purchase - the big house in the good neighborhood, before they pause to focus on family (and saving for college, and retirement, and vacations, and...)

So, from early 20s to mid 30s it's not uncommon for a person/couple to buy 2, 3, or even 4 houses. But then they might have a period of 15-20 years without needing any real estate help.

Sure, there are other reasons people need to buy and sell homes:

  • Job transfer / Relocating

  • Marriage / Divorce

  • Lifestyle Change (wants a condo, or doesn’t want a pool, etc.)

  • Empty Nest / Retirement

There becomes a trade-off, where younger people may buy and sell homes more frequently, but older people (let’s call them more mature, or more established people) may buy and sell more expensive homes.

If you’re going to be in this business for the long term, it’s a good idea to have a diverse mix of people in your contact list. Keep adding younger people to your list, as they will grow into mature people eventually. (Most of the time. Hopefully.)

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-Chris Butterworth

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And if you need help staying in touch with the large, diverse group of people you know, please consider my e-Newsletter service - I would be happy to help!

It's the Banks' Fault (op-ed)

Sometimes I hate being right.

I wrote an article 10 years ago called It's the Banks' fault, really. I was frustrated with the financial meltdown, and the government-bank bailout, but mostly I was frustrated with the lack of accountability.

image credit -  flickr ville misaki

image credit - flickr ville misaki

 

Have you been to Las Vegas lately? I get to Vegas every couple of years, and I'm always blown away by how fast it grows. There are always shiny new casinos, and each one is bigger than the last. Then the older casinos keep updating themselves, adding additional rooms and more extravagance in an effort to stay relevant.

This has been happening consistently since the 1960s. And why? Because the casinos control the game!

image credit -  flickr matthewpaulson

image credit - flickr matthewpaulson

 

The casinos have the money and they set the rules for each of the gambling games.

  • Who wins under every possible outcome - each turn of the card, roll of the dice, and bounce of the ball.
  • How much you'll get paid under every circumstance, and when you can cash out.

They have all the power and control, and they have set up the rules of the game such that they win more often than they lose. Period. The end. You can win one weekend, and I might win another time, but by and large, over the long run, the casinos win more than the people who gamble.

Could you imagine if the opposite were true?

What if the casinos set up the games for a short-term increase in the number of guests, rather than the long-term profitability? They would compete with each other to lower their winning percentage, a little at a time, until eventually they went below the 50% mark - and started giving the edge to the gamblers.

The gamblers would start winning more money, more frequently, and word would spread. More people would fly to Vegas from more parts of the world, and every casino's hotel would be fully booked. (Short-term goal achieved!)

But it wouldn't take long before that many gamblers, all playing with winning odds, would break the casinos.

In this scenario, all of the Las Vegas casinos would go bankrupt, and the city itself would collapse. And would we expect a government bailout?

This is exactly what happened with the banks in the early 2000s.

  • The banks had the money to make mortgage loans.
  • The banks wrote the legal language of the promissory notes. (You're not allowed to edit the loan paperwork at the closing table, right?)
  • The banks had made tens of millions of loans over the years, and had all the statistical data to determine which borrowers were more likely to repay their loan.
  • The banks set the pricing of the loan.
  • The banks were given fully compliant borrowers, and were allowed to investigate creditworthiness in just about any way imaginable.
  • And ultimately, the banks were the ones who decided which loans got made, to which borrowers, and under what terms.

But, instead of taking a Las Vegas Casino approach by setting favorable terms, the banks took the "what if" approach, and decided to give up their advantage. They stopped underwriting, and started making loans under whatever terms the borrowers wanted.

So what would you expect to happen? They stated making $500,000 loans to single-mom schoolteachers, and all sorts of other scenarios that common sense would say didn't make sense. Of course the banks lost money - lots of money. Tons of money. And rightfully so.

The banks who participated in this "close your eyes" style of lending should have been run out of business. And the people in charge - the top 4-5 levels of management - should not have kept their jobs. But they did.

The bailout let the banks, and the banks' management teams, avoid any real consequences. In fact, a few years later these same banks were reporting record profitability! It's the opposite of what should have happened.

And if bad actions don't have any consequences, do you think those actions are going to stop? NO! It doesn't matter whether you're a young child or a Fortune 500 CEO - everybody's behaviors are shaped by consequences to actions.

Grrrr. I'm still frustrated by the whole ordeal. So why drag all this back through the mud? Because I read something recently - Patrick Watson, a big-time, well-respected economist, and Neel Kashkari, president of the Minneapolis Federal Reserve Bank - totally agree with me! (see the article Capitalism Can't Work Without Losers). And worse, they think the table is being set for another round of bank-induced instability.

Being smart with your money is a great idea for us and our families. But then I guess we aren't cut out for running a big bank...

- Chris Butterworth

 

the trend is toward smaller homes

These numbers are from a national perspective, but I don't think there's any doubt that, all else being equal, the trend is towards smaller homes..

 

Source: realtor.org

 

I don't know yet if this is a "want to" thing, because people have re-set their values and are happy with a more-is-less philosophy, or if it's a "have to" thing, because home prices are rising faster than incomes and/or people are still recovering from the Great Recession, and they can only make the move into a different neighborhood if they go smaller.

Time will tell us more.

- Chris Butterworth

Realtor Population Density in Arizona

 Currently in Arizona, 1 out of every 110 adults is a licensed Realtor

(1 out of every 157 people in Arizona, but I'm going to exclude children and the elderly.) 

After years of being the most densely Realtor-populated state in the country, Arizona now has the second highest Realtor population density in the nation, according to numbers released by the National Association of Realtors. (thank you Florida for licensing 45,000 new Realtors over the last few years to take the top spot.)

 

It's an interesting fact, but what does it really mean?

Part 1 - the numbers

Let's take a look at the numbers and think about how we can use this information to do better work.

Number of Realtors by State

Here is a list of the top 10 states with the most licensed Realtors:

Data provided by the National Association of Realtors. Full data set here.

 

The top spots are held by the obvious states - California, Florida, Texas, New York. Obviously the states with the most people, and the most homes, should have the most Realtors. But after that it gets a little cloudy, as I don't really know which states should come next off the top of my head.

Total Population by State

Since I don't know each state's population, I went ahead and pulled data from the US Census Bureau.

Here are the top 10 states by total population:

 

Most of the states are the same as the previous list, which makes sense - the more people in the state the more Realtors you would expect to find in that state.

Realtor Population Density by State

Dividing the Number of Realtors into the Total Population figure gives us the Realtor Population Density.

Here are the Top 10 most Realtor-populated states:

 

There sits Arizona - the 2nd most competitive state to work in, where 1 out of every 157 people who live in the state is a Realtor.

But wait - it gets worse

We divided the number of licensed Realtors above into the Total Population figure, but that doesn't really make sense considering not everybody who lives in Arizona is a potential customer or referral source.

Anyone under the age of 20 is more likely to have their parents help them if/when they want to buy a house, and anyone in their eighties or older is probably going to have their children or financial advisor help, so we're really looking for the number of people between the ages of 20 and 79.

Fortunately the US Census Bureau breaks this data out for us.

From the link above, we can see there are 1,819,641 people under the age of 20, and another 221,678 who are 80 or older. Let's remove these 2 million people who aren't likely to buy, sell, or refer business and re-calculate a more accurate population density number:

 

Wow!

There is realistically 1 Realtor for every 110 people in Arizona between the ages of 20 and 79.

And you already thought the market in Arizona was competitive!

Part 2 - What does this mean for you?

Who Knows Whom?

It's been reported that the average number of friends on Facebook is 338, while the median number is 200. Let's take a very conservative number, somewhere between these two numbers but closer to the lower end, and we'll assume an average person will know 220 people.

In a husband and wife scenario, this would mean 440 people. EXCEPT some of their friends will be mutual friends - people both the husband and the wife would consider friends (or at least acquaintances.) Let's assume half of the husband's friends are mutual friends with his wife's, while the other half are people he knows outside of their relationship (office friends, high school friends, whatever.) Let's also assume the same thing for the wife's circle of friends.

This means the husband's 220 friends break out into 110 shared friends and 110 independent friends. The wife's 220 friends break out into a similar group of 110 shared and 110 independent friends.

Together, they know 330 friends.

  • 110 husband friends independent of wife
  • 110 wife friends independent of husband
  • 110 mutual friends shared between husband and wife

If they know 330 friends, and 1 out of every 110 of their friends is likely to be a Realtor, it stands to reason the average couple has 3 friends who are licensed Realtors!

This doesn't even include the other Realtors who are trying to win their business:

  • The "neighborhood specialist" who mails to them every month.
  • The guy who advertises on the tv or radio.
  • The website they found online which lets them search the MLS.
  • The random advertisement they happened to pick up one day.
  • The open house down the street they stopped by because they always wanted to see what that house looked like inside.
  • Etc., etc. - there are dozens of other Realtors out there who want to "meet" your friends!

Part 3 - How to win when there is so much competition!

Communication - is the most important word.

Communication, and Consistency - if I could pick a second word.

Well... Communication, Consistency, and Competency are the most important words. And Character - gotta have good character.

But after Character, Competency, and Consistency, it all boils down to Communication.

Eliminate the opportunities of "outsiders" by being a real friend.

If our average couple know three different friends who are Realtors, it would be an absolute failure from all three of them if the couple decided to work with a Realtor they didn't previously know.

You should be able to eliminate these outsiders from the competition simply by being a true friend. Stay in touch with your friends - not just by spamming advertisements at them, but by participating in conversations with them (you know - that communication thing again.)

If they know you're in real estate (communication), and they know you're active (competency), and they know you're a good person who will take good care of them (character), why on Earth would they call someone they don't even know?

Beat the other friends by being better.

You're not going to win them all; it's simply not possible. Sometimes the other Realtor is a sibling, or was the Maid of Honor at the couple's wedding, or is the best friend since elementary school - whatever the reason, sometimes the other friend is simply more of a friend.

The trick is to win more than your fair share.

You need to be a friend, but you need to also be a Realtor - a diligent, hard-working, knows what she's talking about, professional.

Sharing high-quality information with your friends on a regular basis is a great way to establish yourself as the "pro they know." Decorating ideas, market trends, personal "in the field" stories (as long as you keep the stories professional) - share topics and stories which build credibility with your name.

I've found that once you start sending out good information consistently, your friends will start bringing up real estate as a topic of conversation more frequently when you're together in person. This gives you the opportunity to be the professional, and to seal the deal. Once they think about real estate whenever they think about you, you're very likely to be their Realtor-friend, regardless of how many other Realtors they know.

Of course, I would be happy to help you get your email newsletters sent out to everyone you know - just give me a shout.

- Chris Butterworth