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Op/Ed

Brokers, agents taking on too many listings and hurting homeowners

With technology connecting agents and consumers in new ways, the industry has responded by taking on more and more listings, but who really pays the price? Homeowners. Let’s look at a new study on the topic.

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It stands to reason that with a finite number of work hours a week, agents, no matter how efficient or technologically empowered they might be, can handle a limited number of listings successfully at any given time.

Yet some brokers and business models today—and agents themselves–are flirting with disaster by taking on too many listings to reap rewards from a system built upon commission-based compensation. The emergence of discount models that seek to increase agent productivity with technology based tools may be making the problem worse.

It stands to reason that if this hamster wheel keeps spinning out of control, somebody is going to lose. Now there’s proof. The big loser is the home seller, but it stands to reason their disappointment will rub off on the agencies and agents that that push too hard for profits.

A new study published in the current issue of the Journal of Housing Economics, How Many Listings Are Too Many? Agent Inventory Externalities and the Residential Housing Market, was conducted by Scott A. Wentland, Xun Bian and Bennie D. Waller of Longwood University in Farmville, VA and Geoffrey K. Turnbull of the University of Central Florida in Orlando.

It found that agents who take on too many listings (15 or more) will end up selling them for 3.0 percent less and will take significantly longer to sell them (129 percent more time) than agents with modest listing inventories (2 to 7 listings).

Moreover, they found that home sellers are the victims of a system that rewards agents with inventories that are too large

Too Many Clients, Too Little Time

“Agents representing 15 or more listings may be trying to represent ‘too many’ clients at one time, resulting in a substantially longer marketing duration and an important source of illiquidity for numerous homes in this market…The compensation structure in the real estate brokerage industry constantly puts agents in situations where they must balance their own interests with various clients’ interests. Agents are rewarded only if the property sells, as traditional full service broker compensation does not take into account the effort exerted to sell a particular property,” the authors concluded.

The study looked at whether agents have an incentive to take on too many listings—at least from the point of view of their clients. Additional listings may represent additional broker commissions, but they also place greater claims on the broker’s time and energy, which in turn can have adverse sales performance consequences for their clients. The dilution of agent effort and agency costs by very large numbers of listings adversely affects home prices and liquidity, the study found.

The study consisted of 21,450 properties residential properties obtained from a Virginia multiple listing service (MLS) for the period April 1999 through June 2009. Roughly half of all listings were represented by agents with medium inventory, where the agent is representing anywhere from two to seven additional listings. Nearly 10 percent of listings were represented by agents with very high inventory where agent inventory exceeded 15 or more additional listings. Nearly 17 percent of listings in the data set were represented by agents with a high or above average number of listings, from 8 to 14 additional listings. Nearly 20 percent of homes sold with listing agents who had one or zero additional inventory on the market. The bulk of the low listings were likely represented by agents who work part-time.

Baseline results showed that a small increase in agent inventory is associated with a slight discount in price and a substantial increase in time on market. The magnitude of the marginal effects are small, which is consistent with the expectation that one additional listing may not impose a very high marginal cost. An increase in agent inventory (9 listings) reduces the sale price by only 0.6 percent and increases marketing time by 13.6 percent, or approximately $1,000 and 15 days on average, respectively.

However, if the listing agent representing a seller had a very high number of other listings (i.e., 15+), that home generally sold for approximately 3 percent less and remained on the market for 129 percent longer than a home listed with an agent with a more modest inventory (i.e., 2 to 7 listings). This amounted to 142 days compared to the reference group whose time on market was on average 110 days. Despite the fact that this group represented only 10 percent of their sample, the result was still striking.

Greater Inventory = Lower Price, Longer DOM

“It is clear from the results that there is a relationship between agent inventory and sales outcomes that sellers care most about: selling price and time on market. Greater agent inventory is associated with a slightly lower price and a significantly higher time on market,” wrote the authors.

The study also compared sales of agent-owned homes with homes owned by clients and found that agents generally sell their homes for approximately 1.6 percent more than client properties. Inventory competition increases the time on market by 26 percent for clients, but only 12 percent for agents. In sum, agent-owned homes still take longer to sell with additional inventory, but not as long as client properties. This supports the theory that the inventory effect is driven primarily by agent incentives.

In the end, the authors place blame on agents, not their brokers or business models. “The results imply that agent incentives to secure additional contracts and potential commissions generate negative externalities for other properties in their inventory. Greater inventory diverts selling effort from existing inventory, resulting in longer time on market for all houses in the inventory. Agent effort to list properties has a direct effect on selling effort itself—a relationship previously overlooked. Further, the effect appears to be causal as well, in light of the identification strategy of employing an owner-agent interaction. It is clear than agent incentives drive this effect,” they said.

This story was originally published on June 08, 2015.

Steve Cook is editor and co-publisher of Real Estate Economy Watch, which has been recognized as one of the two best real estate news sites in the nation by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, Cook was vice president of public affairs for the National Association of Realtors.

Op/Ed

10 small things you can do for your business while Netflixing

We know the holidays are a time to relax, but before normal working hours have returned, you can still do things for your business in between episodes on Netflix. Here’s 10 simple things that won’t cut into your holiday.

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For many real estate agents, the holidays can slow business down. It’s time for some #ProductivityAndChill.

Instead of spending all day binge-watching Hulu or Netflix, in between every episode take 10 to 15 minutes to do something for your business. Here are some great ideas for things that don’t take long, but provide some long-lasting benefits.

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Productivity and chill

1. Get inspired by your favorite websites. Where do you like to shop or get your news information? Browse through their site with one purpose in mind, to see why it draws you in and how you can implement their methods into your own business.

2. Catch up on the news. Read some articles here or at The American Genius that you might have overlooked or passed by because you thought they didn’t pertain to you. Keeping up with various industries can benefit you.

3. Use your social media tools to set up posts on Twitter or Facebook.

4. Improve your webpages by writing new product descriptions or to optimize images for SEO.

5. Go through the App Store to find new apps which can help make your life easier.

6. Learn to use a new social media platform to reach out to new customers.

7. Go through your social media feed. See what people are talking about and what’s trending. Make notes when you get inspiration.

8. Clean up the documents in your laptop. Organize them more effectively so you can always find what you need.

9. Clean up your email. Unsubscribe from newsletters that you don’t ever look at. Delete messages that are old. Set up folders to save information that you may need at a later date.

10. Customize your email. Set it up to pre-sort emails into different folders to allow you to work more productively when you get back to work after the New Year.

These little tasks can eat away at your time when you’re busy trying to get things done, but when you’re relaxed and just want to feel more productive, take a few minutes to do something that won’t overtask your brain, but needs to be done to keep you more organized throughout your week.

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Op/Ed

How calendars can stop your procrastination, boost productivity

(PRODUCTIVITY) As the old method of pen-to-paper planning comes back in style, see how its use can help with time management.

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writing pen paper productivity

My favorite part of writing for this publication, by far, is the fact that it always has me keeping my eyes and ears open for inspiration. The simplest comment from a friend can snowball into an idea that becomes beneficial to others.

Such was the case this past weekend when my best friend, Haley, stopped by to help me unpack my new house. Haley is a graduate student, pursuing a master’s in interpersonal communication, and is a much smarter version of myself.

We got to talking about what was on tap for Haley’s final semester and she told me about a workshop she’s creating for the graduate school on the topic of how using planners/calendars helps with time management. The girl has an affinity for pen-to-paper planners, and has created an organizational structure for her daily life through their use.

Naturally, I thought, “hey, sometimes I attempt to give people advice on time management and planning, let’s bounce some ideas off of each other.” Haley then gave me a rundown of the bullet points she’s planning on covering for her interactive workshop.

1) Take everything as it comes. As a new task pops up, put it down on your calendar (whether paper or electronic) so that you don’t forget to do it later.

2) With these tasks, schedule deadlines for yourself. It can be tough to be self-motivate and have tasks completed by your own assignment. However, putting them down in writing will help you stick to them.

Only work on something if you’re being productive. If you stop being productive, you should take a step back and work on something else for a while,” says Haley. “This is why my personal deadlines help because it makes me work harder but I still have my own time.”

3) Schedule out your week starting with events that you cannot change. Start by writing down your work schedule, then appointments, meetings, etc. Then schedule in tasks that have more flexibility in time.

4) After doing this, take all of these tasks and prioritize what must be completed first and assess how much time each task will take. Be sure to give yourself an appropriate amount of time for each task.

5) For bigger projects, considering breaking them down a bit. “For bigger projects I break it down into steps, normally using a concept map to understand the core aspects of my task and what needs to be accomplished within each of those to make it more digestible,” says Haley. “Once I have the pieces, I place the pieces into my weekly schedule of events I cannot change.”

All of the pieces of this puzzle come together to create a calendar that will help you juggle every aspect of your life and boost your productivity. By implementing these ideas in my own planning, it has definitely helped me to become more of a self-starter.

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Op/Ed

5 reasons teaching your kid magic could inspire them to become a Realtor

(EDITORIAL) Teaching your child could inspire their career track, perhaps even inviting them to follow in your footsteps!

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magic

There’s nothing quite like a good magic trick. You know there must be a solution, an easy explanation, but putting your finger on exactly what sleight of hand just happened can prove difficult with a seasoned magician. If you are the magician, you know it takes a great deal of practice, confidence, and persistence to keep an audience engaged in your magical wonders.

As captivating as magical skills are, many of the same skills that make a great magician, also make for a great Realtor®!

Here are five amazing ways learning magic as a child (or adult) can actually help someone become a successful real estate professional:

1. Build confidence

To skillfully and successfully pull off any feat of magic, you must have confidence in what you’re doing. No sleight of hand or magical illusion will be effective without the confidence of the magician. By practicing magic, you are in fact, practicing and reinforcing confidence both within yourself and your audience. A confident magician will create a confident audience – an audience that believes the magician is capable of impossible illusions, magical machinations, and captivating concealments.

This same skill set can be applied to real estate. You must have confidence in your ability to find the right home for your client. The ability to foster your clients’ trust is essential, or they will likely go elsewhere because let’s face it, the competition in the real estate world is nothing short of fierce. Starting your children out early in something like magic, builds confidence and having confidence in any industry they choose to venture into is always a good thing.

2. Hone social skills

Again, look at the audience – a good magician will have an audience practically mesmerized. The audience will be so transfixed on what the magician is doing or saying, they miss the sleight of hand. A good magician can read their audience. They know what the audience expects and will deliver appropriately. Many magicians also become well-versed in the art of nonverbal communication as well; reading people’s body language and social cues are an important part of an effective magic illusion.

Not surprising, these skills are also part of being an effective salesperson. A good Realtor will know and understand their clients’ requirements for a home, their budget, and how to effectively get them to their end goal with the fewest obstacles. Interacting with an audience is much the same as interacting with clients daily; be personable, be confident, and know your stuff.

3. Develop an eye for detail

Along with improved dexterity from manipulating cards and coins, magic routines can help improve hand eye coordination, timing, reflexes, as well as develop an eye for details. As new tricks are mastered, the eye becomes more sensitive to details of the objects being used and the magician’s surroundings. The same keen eye can readily be applied to real estate.

An attention to detail can help when staging homes, gauging your clients’ reactions to their surroundings, minimizing errors on contracts, and ensuring your safety when entering a new area. Attention to details means less errors, which in turn means happier clients and more sales completed – a win-win recipe.

4. Research

One area that you may be surprised to learn that magic can help you improve upon is research. Magicians are constantly researching new tricks to add to their routines or watching other magicians perform to see if they can implement any of their gestures or tactics to their own routines. After all, we wouldn’t remember Houdini as the greatest of all time if current magicians weren’t constantly reinventing and revisiting his tricks.

In real estate, you may be researching what your fiercest competitor is doing differently that you might be able to adapt. Are they using a different marketing platform? Are they networking in a different manner? Is there something they’re doing (or not doing) that might make a difference in your sales figures? The ability to research an adapt is another great tool to have in your box of skills.

5. Self-discipline and an ability to take criticism

When you’re first learning any new hobby, you typically “practice” on your family. They give you constructive criticism and you take that criticism and use it to improve. The more you practice, the better you get. After a bit of practice, you’re ready to give another practice run. Through continually trying to improve your skills, you’re learning self-discipline as well as the ability to accept and implement constructive criticism.

These are both skills that are necessary to excel in the professional world. You must continually hone your craft if you want to continue to excel. Continuing education, professional seminars, and workshops all exist so professionals can receive criticism on what they’re currently doing and learn what they might do better to improve themselves and their business. While you’re never too old to learn, beginning to lay the foundation for these skills in your youth with a simple hobby like magic, could be giving you more than just a way to entertain friends and family.

The takeaway:

Magic isn’t just for children; it’s never too late to have another hobby. If you’ve never dabbled in magic before, you might find you really enjoy it. If nothing else, you may find that magic teaches you and/or your children some patience, coordination, or at least a few good laughs. If magic teaches you nothing else, remember what Rumpelstiltskin said, “all magic comes with a price” and so does real estate – so hone your skills with some magical fun; you never know when it’ll come in handy!

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