Building a Referral-Based Business

A few months ago I nervously posted the first content piece about real estate on my Facebook page. While most everyone knew I was now working in real estate, it was daunting to broadcast myself as an “expert” for the first time. Thankfully I have a wonderful community of friends that embraced it enthusiastically. Even better, I got a deal out of it.*

Herein lies an example of the magic of the real estate business - a friend saw the post and reached out to say she knew of two people planning a move. She wondered if she could connect us. I was thrilled. Finding prospective clients is never supposed to be that easy!

If you’re reading this, chances are I’ve asked you to “keep me in mind if you hear anyone in your network is planning a move.” This kind of request, though very common in the industry, is a bit unnatural. It can be uncomfortable directly lobbying friends to help your business, but I believe this to be the best approach to finding new clients. Here’s why.

“All things being equal, people will do business with, and refer business to, those people they know, like and trust.” ~ Bob Burg

The first 4-5 months into this job I followed the prescribed lead generation tactics taught in “Real Estate 101” once you get your license. Cold calling, knocking on doors, hosting open houses for other broker’s listings. I felt slightly uncomfortable doing these things, almost like I was keeping a secret from these people that my real motivation was to get them to buy something from me as I asked them indirect questions about their living situation.

Starting out in real estate is a slow build - the deals come weeks, even months, apart. I debated for months whether I could push myself harder and force more production by mastering scripts and cold call strategies, knocking on hundreds of doors a week, and email blasting anyone I had ever met at an open house. Kind of a Great Leap Forward policy for my business.

Yet something in my gut wasn’t aligning with this method. (Perhaps the fact that the Great Leap Forward caused millions of deaths should have been one clue as to why...)

I kept thinking about that lucky break after my Facebook post, and how all my clients thus far had come from organic introductions.

What I discovered over those few months is that I am not your textbook salesperson. I am a relationship person. I find it energizing to meet new people, build better connections with existing friends and acquaintances, and connect people in my network to one another. So I went against convention, deciding that even though I was new to the business I would double down on what I genuinely enjoy - staying in touch with people and nurturing my network - and hope the business followed. So far it has.

In addition to establishing myself as the preferred real estate resource for my network, I am committed to creating an environment of reciprocity. I want people think of me when they have a professional need. As my network grows, my ability to help others advance their career grows as well. This is my ultimate objective - to proactively foster an ecosystem where as I help more people reach their real estate goals, I can simultaneously introduce my clients and peers to connections that will benefit their business or career. 

I would love to hear if this is something that speaks to you, and take suggestions on how to do this more effectively if you have them.

And as always, “if you learn of anyone in your network planning a move, I would love to connect with them!”

...Had to do it ;)

Please reach out if there’s anything I might be able to do to help your business succeed.

If you’re interested in reading about referrals as a business strategy, check out these books by Bob Burg:

  • The Go-Giver
  • Endless Referrals

*I hesitate to use the term “deal” here as the Painted Door philosophy is “Beyond the Transaction.” This job isn’t about units and transaction count, it’s about helping people achieve their real estate goals, providing top-notch customer service, and remaining their go-to real estate resource for life.

Lucky Break: The First Deal

A few weeks ago as I was happily indulging in some mint juleps and horse bets at a Kentucky Derby party when my friend turned to me and said some very magical words:  

“Kerry, I’m in underwriting.”

“What??” I asked.

He replied, “Yeah, for a mortgage!”

“What?! Are you working with anyone to find a place?”

“Nope.”

“Mmk.. so you want to go check out some options?”

“Sure!”

Note to the reader: it is not supposed to go like this. Rule of thumb is that it takes an average of 6 months to ramp up in real estate. I had only been licensed for a month, if that! Yet my very sweet friend eagerly signed up to work with me and we started searching for his new home.

The Basics of Buying.

Before ever stepping foot into a property you’re considering, you should first get pre-approved by a lender (unless you’re paying cash). It only takes 15 minutes and will provide guidelines for your budget. To start looking at properties before obtaining a pre-approval will just risk heartbreak later on if you fall in love with something you can’t afford.

Typically your agent will have some lenders they recommend, but it is up to you to find the one you want to work with. It’s often best to steer clear of the big banks for this process, as time is of the essence with real estate and the bigger banks such as Wells Fargo, Chase, etc. will likely assign you to the next representative in the queue whereas a smaller lender, especially one recommended by an agent you trust, will have a smaller caseload and more personalized, customized approach to processing your file.

Once pre-approved with a budget in mind, the following steps are:

  1. Shop! Time to identify your needs & wants: which part of town, how many beds/baths, what school district? Is a chandelier over the bathtub really a need or should we maybe put that in the want category? (There’s a House Hunters episode where this guy’s requirement was “no ghosts” - so you never know…the client wants what the client wants!)

  2. Make an offer, negotiate the terms and settle on a purchase price with the seller.

  3. Both parties sign agreeing to key dates, terms, and the price. Now you’re officially “under contract!”

  4. Schedule the inspection, negotiate any major issues. Hopefully nothing comes up that kills the deal, but deals most often fall apart at this stage if buyer and seller can’t agree on a fair resolution for repairs/replacements.

  5. Schedule the appraisal, negotiate any discrepancy in sales price and appraised value of the property. The buyer’s lender is only going to approve a loan for the amount of the appraised value. Should the sales price be more than appraised value, the buyer can pay the difference out of pocket or the seller can come down on price. Or the deal could fall through.

  6. If you make it past inspection and appraisal, you are likely going to make it to the closing table. Time to cross your fingers.

  7. Title Work. The title company will audit the records of the property and identify any encumbrances, liens, back taxes, etc. that could cloud the buyer’s free and clear ownership to that parcel of land and attached home.  

  8. Closing Day! Both parties exchange funds, sign documents, and the deal is done. The title company representative will lead this process with all parties bearing witness: seller & listing agent, buyer & buyer’s agent. The lender can also attend. In Colorado it is customary to conduct closings in person at an actual “closing table,” with buyer and seller face to face, but other states have differing customs.

One Lucky Duck.

So there you have the high-level nuts and bolts of the process from the buy-side. I have been grateful to have the most cool, calm, collected first client. Together we have been fortunate to have a smooth closing with little to no negotiations and no drama. It’s been a great learning experience for both of us, and a lot of fun.

My friend has some amazing ideas to modernize his 614 square foot condo, built in 1982 (you should see this microwave!) and it will be fun to watch as he brings his renovation ideas to reality. I’ll track his progress here on the blog.

Until next time!

 CHEERFUL DERBY DECOR 

CHEERFUL DERBY DECOR 

Being an Agent 101: Step 1, Tell Your Friends.

Well, here we go! I am officially jumping into the real estate game. Sure, Denver is booming right now and a record number of people are deciding that now is the time to launch. Last I heard there are 25,000 registered realtors in the Denver metro area - that’s roughly 6.25 realtors per home on the market! However, real estate has been in the back of my mind for years. The draw here isn’t a hot market and a quick buck, but rather to build a business that serves the community and lasts (hopefully) beyond my lifetime.  A business that thrives when the market is up and survives when the market is down. 

How the job is structured.  
The #1 question I’ve been getting so far from friends is, “how does it work?” For starters, realtors work on 100% commission. You are an independent contractor. That means no small base salary, no retirement plan, no health insurance, no nothin’. You have to account for deducting taxes from each paycheck. If you don’t plan ahead for tax time, you will find yourself in a real pickle when that bill comes due. 

On the flipside, the way you structure your business is completely up to you. Many people decide to become a realtor because they want a flexible schedule and unlimited financial upside. Granted, that is appealing. But you won’t have the financial upside if you indulge in a flexible schedule. One of the first things I was told about this business is that your time is not yours - your time belongs to your clients. If they want to meet at 8pm on a Thursday, you meet at 8pm on a Thursday. If they want back to back open houses over the weekend, your weekend is dedicated to that open house. 

The brokerage relationship. 
So, am I employed by the firm I work for? No. Brokerage firms (think REMAX, Keller Williams, Coldwell Banker, Sotheby's, Douglas Elliman, etc.) enter into agreements with the agents whereby the brokerage provides a certain amount of resources (marketing materials, IT infrastructure, training courses) and the agent grants them a split of their commissions in return. Most firms have a cap on their commission splits, so if you earn over X in commission income (for ex. $18,000) in a year, anything else earned belongs entirely to you (...and the IRS). 

Each brokerage is different in terms of what resources they provide and how much they take in exchange. Some places just give the agent a desk and say good luck. Others, such as Keller Williams, have very robust training programs. The brokerage does not typically provide a computer or even a desk (unless you pay to rent one monthly). It’s BYO...just about everything. 

How do you get business?
I’ve been asked this a lot. Prior to researching the industry, I had no clue myself. 

Another thing brokerage firms don’t tend to provide is business leads. If I asked how you might go about finding a realtor, what would you say? The answer is likely that you know someone (a friend, friend of a friend) or maybe you saw someone’s name on a bus stop or some other crazy place. Perhaps you just know the name of a brokerage such as REMAX and give them a call. Perhaps you Google “top realtor in (your town here).” 

All of these avenues are pursued, but the “knowing someone” is what agents prioritize. The first rule of real estate is that your database is absolutely the most important thing. To get business, you must constantly engage with your existing database and also add new people to it. This is most often done by being out and about - you know, shaking hands and kissing babies. Being top of mind is crucial when someone decides they want to buy or sell. I assume most of the people reading this post have been directed to this site because they are friends of mine and therefore in my database. (Hi guys, flattered your read this far!) 

From there, every agent finds their preferred niche when it comes to lead generation. It could be cold calling expired listings or For Sale By Owner properties, it could be knocking on doors in a particular area, it could be buying Facebook and Google ads. Changing the industry is the formation of teams, whereby a top tier agent has other agents working with him and handling lead overflow. The team model is often structured more like a formal business (with designated roles in front office and back office, a cohesive brand, etc) and is rapidly gaining in popularity. 

So what’s the plan here? 
Well, I’ve always envisioned having a small portfolio of rental properties and I’ve always loved homes with a bold, painted door (and homes in general for that matter). After researching the ins and outs of being an agent and obtaining my license, a theme for a business, named Painted Door Properties, was born. 

Starting from the ground up, I intend to become a trusted real estate advisor and also manage that aforementioned portfolio of single-family rentals (all with a painted door, of course). There’s lots to do in order to get to that point, and I am excited to share the journey with you. As I continue to learn about this industry, you will too. 

But first, I must survive my first year as a real estate agent. Stay tuned to see how it goes - should be an interesting ride! 

 Getting the word out the old fashioned way.

Getting the word out the old fashioned way.