Many new agents are coming into the industry once more, and while many have a good working knowledge of terminology, legal issues, and contracts after a few years, not many seem to have a real business plan that will carry them through when the going gets tough.
New agents often get started with help from family and friends, and forget to think past those contacts. Or they think that the companies they work for will make them successful. What they really need to understand, the experts say, is that they have to be responsible for building up their own businesses and ultimately, for their own success, using a plan with the following five main ingredients:
- A real plan of action for attracting and building a client base. Business won’t come to you – at least not in the beginning – so you need to devote a certain amount of your day to business development: client calls, cold calls, and creating relationships with other transaction service providers and contacts who may be able to give you referrals.
- A resolution to work with people who will work with you. Avoid people who slow you down, bring you down, or put you down. Spend more time with people who are making things happen and living life in a positive way.
- A proper plan for keeping in touch. You may remember all your clients, but they will probably forget you unless you regularly remind them who you are, and more importantly, what you do. Don’t lose business to other agents because your contact can’t remember your name, especially when technology makes it so easy to stay in touch. Remember everyone has a home, wants a home, or is in a position to refer others to agents who can show them homes or list their homes. When they make a decision to buy or sell, you want your name to come up.
- A commitment to keep learning. Take every opportunity you can to learn something new about real estate trends, property law, or different marketing methods. Everything you absorb will give you more confidence, help you provide a better service, and make you a more memorable agent.
- A love for what you do. Real estate is hard work, and you are also dealing with people’s lives, emotions, and their hard-earned money, which can make you the target of all sorts of negativity when things don’t go as planned. You need quantities of perseverance, perspicacity, and empathy just to get through every day, but it really will help you keep smiling if you find your work fulfilling.
However, says Shaun Rademeyer, CEO of BetterBond Home Loans, SA’s biggest mortgage originator, this is not expected to be severe, or lasting, unless more hikes follow in short succession.
“The current increase in the repo rate from 5% to 5,5% will only take the banks’ prime lending rate – and the mortgage rate – from 8,5% to 9%, which is exactly where we were before the last post-recession rate decrease, in July 2012. And there has been huge increase in the demand for property since then, even though consumers have had to contend with steep fuel and electricity price hikes and other significant cost-of-living increases.”
There are many reasons for this, he says, including a growing population, relatively low growth in low home prices and the banks’ increased appetite for long-term rather than unsecured lending. “But the major one is that many consumers have worked very hard since 2009 to clean up their credit records, reduce their debt loads, and not take on any new credit.
“This is clearly evident in the latest statistics, which show that the rate of new household credit creation has been dropping since November 2012, when it reached 10,4%, and was just 5,5% in December, compared to 5,9% a month before.”
“What is more, the rate of credit growth in the household sector is expected to remain below the rate of growth in disposable income, which is currently at 7%, for the foreseeable future. In short, consumers are in much better financial shape now, and actually much more able to deal with moderate rate increases, than they were at the start of the recession five years ago.”
Turning to specifics, Rademeyer says the rate increase means that a homeowner with an existing 20-year bond of R900 000 taken at 8,5%, for example, will see the minimum monthly repayment rise by almost R300, from R7 810 to R8 098.
“But it must also be said that a mortgage rate of 9% is still extremely low by SA standards – and that bonds granted at prime rate have in any case been a very rare occurrence for the past five years, with most being granted at one or two percentage points above prime. Our advice to those who have established a good payment record, and whose financial position has improved since their bond was granted would thus be to approach their lender now and see if they can negotiate a reduction in this differential.
“Alternatively, if they are worried about further rate increases, they may want to consider fixing their interest rate for the next few years. The banks usually charge a premium for this, but some consumers consider this a small price to pay for certainty when it comes to budgeting.”
Meanwhile, he says, first-time buyers should not be put off entering the market by the rates increase, but rather prompted to move quickly while it is still relatively easy to qualify for home loans – and before a steadily growing shortage of rental properties pushes rentals up even further.
“BetterBond statistics show that the average home loan currently required by first-time buyers is around R630 000, which at an interest rate of 8,5% meant a household income of around R18 000 a month was required to qualify. At an interest rate of 9%, that qualification level rises by just R1000 to R19 000 a month – while the monthly repayment rises from R5 467 to R5 668.
“However these figures are only indicative and prospective buyers should not delay getting into the market now, even if they have to buy a less expensive property to do so. A reputable mortgage originator will be able to advise them as to affordability and the best home loan options currently available to them.”