A simple strategy for agents who want to increase their income, is to decrease their rate of client attrition, according to Bernice L Ross, who is an internationally renowned real estate trainer and owner of www.realestatecoach.com.
“While most business plans focus on creating new customers and working with referrals, virtually no one addresses how to reduce one of the most expensive costs in the real estate business – the attrition of past customers and clients,” she says.
“This is so even though one of the major characteristics that differentiates top producers from less productive agents, is the fact that their past clients – the buyers and sellers that they have previously worked with – and their referral sources, keep sending them new business.”
Everyone knows by now that the cost of continually finding new clients is substantially higher than working with people who have already had a positive experience with your services, but few understand just how high the cost of attrition is. Ross explains: “Losing just one out of every five potential referral sources each year over five years will require you to replace 100% of your existing clients in that time, just to maintain your current rate of business.
“On the other hand, if you cut your attrition rate, that’s the same as adding new clients that you would have to generate from your prospecting activities – and much easier.”
Some ideas for reducing attrition in your business include the following:
- Stay in touch. Call all of your past customers and clients at least four times a year and try to see them in person at least twice a year. Send them useful information, such as a regular update of what property has sold in their area, and for how much.
- Don’t write off past clients just because they move away. Their previous friends and neighbours in your area could still be a source of business referrals, and if your real estate company has a national referral system, you might even earn a fee by helping someone who lives across the country.
- Check your service. If there is anyone who has stopped doing business with you or stopped sending you referrals, try to find out why. Being honest with yourself and taking specific steps to remedy any problems mentioned by past clients can literally make you tens of thousands of rands.
- Don’t forget to say thanks. Make sure anyone who makes a referral to you receives a thank you note, plus a small token of your appreciation – regardless of whether or not the referral ends up doing business with you. Never be afraid to let your contacts know how important a role they play in your success. Helping someone makes people feel good, and they will keep doing it.
The latest available building statistics from StatsSA show that the rate at which new homes are being delivered to the market continues to trend upwards – but that the average size of these new units is declining.
On a year-on-year basis, the total value of new residential buildings completed rose 25% in January and February, while the value of building plans passed for new homes rose 20,5%.
In the same period, the square metreage of new small homes (less than 80sqm) completed rose 20,2% compared with the first two months of last year, and that of flats and townhouses completed rose 38,7%, while that of homes bigger than 80sqm rose only 1,1%.
Meanwhile the square metreage of plans passed for new houses of 80sqm or more rose 2,4, and that for flats and townhouses a whopping 50,2%, clearly indicating that this is where developers believe future demand will be.
The major factor stimulating new housing development at the moment is the decrease in what First National Bank has termed the Replacement Cost Gap – the percentage difference between what it would cost to replace an existing home and the current value of that home.
This differential is variously estimated at between 21% and 33% now, but has definitely been on a declining trend since the start of 2012, making it easier for developers to bring new homes to market at prices that can compete with those of pre-owned homes.
However, the size of new homes is also steadily declining. The average has gone from 141sqm in 2006 to 111sqm now and is not expected to rise again in the foreseeable future, due to rising consumer preference for smaller, more secure and easier to maintain homes in the face of rising property rates and utility costs.
This is underscored by the fact that flats and townhouses now account for more than 27% of all residential building completions, up from 24% in 2011, and suggests that estate agents will increasingly have to hone their expertise in sectional title sales, and in working with bodies corporate and home owners’ associations.
Meanwhile, this is all good news for first-time buyers especially, because there is usually no transfer duty payable on newly-built homes (VAT being included in the sale price instead). This can significantly reduce the amount of cash they need to complete a purchase, at a time when the average deposit required by the banks is 17%.