-The realization by some sellers that although their company’s value may still be severely depressed, it may be three to five more years before they might see the kind of numbers that were flying around back in 2004 and 2005. These sellers may not be willing and/or able to wait that long.

-Other sellers will similarly come to the conclusion that their heart and/or pocketbooks are not prepared to do what it will take to reinvent their company and will acknowledge that selling will help their agents and put the onus of dealing with all the changes on someone else.

-On the buyer side, those who are reinventing themselves will have a value proposition that will allow them to approach sellers—not just as a buyer, but as someone who will be able to offer their agents things they are not able or willing to do and extract value for their business that is not there today.

-Buyers will also see that by consolidating market share through acquisitions they will be able to spread the cost of reinvention over more producing agents and potentially justify Internet marketing, Web platform, lead management and other important investments.

All of this brings us to culture
Unfortunately, many brokers don’t spend enough time considering culture before setting out on an acquisition strategy. Besides the actual financial considerations of a merger or acquisition, the next most important factor a broker must think about is whether their company’s culture meshes well with that of the target company. Many a transaction has looked good on paper only to end up being a bad investment because the cultures of the two companies were not compatible.

Questions you might want to ask yourself before buying or selling:
-Does the other company have similar ethics?
-Does the other company have a similar compensation plan? (i.e., tough for a traditional company to buy a 100% shop, for example)
-Will their agents get along with your agents and management team?
-What demographic are they selling to compared to your company and how well might they mesh?

In today’s environment of an emerging, new, real estate brokerage paradigm, culture also means a company’s willingness to reinvent. In other words, do they “get it?” If the buyer, for example, is forward-thinking, technology-oriented and operating in a café style office, they might want to think twice about acquiring a company whose agents don’t believe in Internet marketing and still expect to give all their agents private offices.

If you are growing and reinventing your company, embarking on an acquisition strategy could potentially help you achieve your goals faster and leverage the changing market. If you are a seller, finding someone to buy your company who is effectively reinventing themselves could help you unlock your agents’ potential by being able to bring in new tools and systems.

Reinvent yourself!

Jose Perez is the president of PCMS Consulting, a full service consulting, sales and management organization that specializes in real estate industry issues. For more information, visit www.pcmsconsulting.com or e-mail jperez@pcmsconsulting.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Have you heard about RISMedia’s Real Estate Information Network® (RREIN)? RREIN is an elite network of leading real estate companies dedicated to providing consumers and their agents with leading real estate information, and committed to the belief that Information Share Equals Market Share. Having only launched this past June 2010, the RREIN network is already comprised of 40 leading brokerages, which make up 575 offices, 30,000 agents, 167,000 closings and represents over billion in transactions. How can RREIN help your recruiting efforts and differentiate your company today? For more information, email rrein@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

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Kathleen O’Reilly of RE/MAX Horizon in Elgin, Ill., reports she recently set a personal record by showing one client 45 houses. The client then made an offer and purchased a home—the first one O’Reilly had shown him. That first home had everything the buyer wanted, according to O’Reilly, but he had to look at 44 other homes before feeling confident he was getting the most for his money.

“What I’m seeing,” said Ritter, “is that buyers have read a lot about foreclosures, short sales and how desperate sellers are. They feel there is this fabulous deal out there, a mansion with all the bells and whistles, and they are going to get it for 0,000. They are convinced the next house they look at will be a better deal, and with so much inventory now on the market, they keep looking and looking.”

How can buyers find their way in the current marketplace, with its shifting home prices and an extensive inventory that includes many distressed properties? Here’s some advice on how to speed up the process from experienced real estate professionals at RE/MAX.

-Do enough looking to get to know your local market. Mark True, an agent with RE/MAX Rock Valley in Oregon, Ill., thinks buyers benefit by looking widely, but are sometimes tripped up by inflated expectations. “Especially in a smaller market like ours, the inventory is limited even if it is large by historic standards. Each local market has its own character, and buyers must adjust their expectations accordingly. Otherwise they continue looking for a home that doesn’t exist,” he advised. At the same time, True urges buyers to do a fair amount of looking because it gives them an understanding of the market and the confidence to make a decision.

-Let your emotions help you. Too often today, buyers aren’t letting themselves fall in love with a home, according to Deborah Cassidy of RE/MAX Showcase in Lake Forest, Ill. “They are only looking at price and condition, and that contributes to their uncertainty because they always feel there’s a better deal out there,” she said. “Leaving emotion out of the equation makes it difficult for buyers to commit to a purchase.”

-Decide if a distressed property is really right for you. Foreclosures and short sales offer buyers great value when it comes to price per square foot, but these properties tend to have their own limitations, according to Dan Firks, an agent with RE/MAX of Naperville in Naperville, Ill. Foreclosures often, though not always, have serious condition issues and are almost always sold “as is,” meaning the seller won’t do anything to address those issues. As a result, buyers may need to carry out extensive repairs after purchasing. Short sales, while usually in better condition, can take months to get to the closing table, and in at least some cases these transactions eventually fall apart because the lender, seller and buyer can’t agree. “Buyers must decide if they have the patience and flexibility to pursue a short sale and the skills or resources to deal with repairing a foreclosure,” advised Firks.

-Don’t focus too heavily on price. Firks gently urges buyers not to become totally focused on searching out the best possible price because, “when they do that, they may fail to consider the other benefits of purchasing—the tax deductions they’ll get when they own rather than rent, the amazingly low mortgage interest rates currently available and the benefits of living in a home and a community that fit their family,” he said.

-Be ready to negotiate. According to Kathleen O’Reilly of RE/MAX Horizon, Elgin, buyers can miss out on a great home if they don’t initiate a negotiation. “When buyers find a home they like, I encourage them to make an offer at a price they are comfortable with, even if it is well below the listed price,” she said. “At worst, the seller won’t negotiate, but in this market that is unlikely. Sellers don’t want a viable buyer to walk away. If a negotiation is initiated, it often ends up in a place that makes the buyers happy because in this market sellers have to do most of the compromising.”

-Get plenty of advice but trust the professionals. The current housing market is complex and can be confusing. Sarah Ritter of RE/MAX Properties, Western Springs, urges buyers to realize that not all the advice they get has equal value. “I want buyers to talk to their friends and family about a potential purchase, but at the same time, that advice should be taken with a grain of salt because unless the advice comes from a local real estate professional—a lender, agent, inspector or appraiser—it won’t be grounded in detailed knowledge of the current market.”

-Don’t let negative comments about the housing market scare you off. Those who mean well may wish to warn you about the downside risks of the housing market, according to Mark Zipperer of RE/MAX Edge in Chicago. “However, buyers shouldn’t lose sight of the many positives in the current market, such as the fact that home affordability is at its highest in decades and that investors are flocking into the market to snap up bargains in all-cash purchases,” Zipperer said. He urges buyers to keep their eye on the numbers that directly impact them—property prices, interest rates and how those translate into monthly payments.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Have you heard about RISMedia’s Real Estate Information Network® (RREIN)? RREIN is an elite network of leading real estate companies dedicated to providing consumers and their agents with leading real estate information, and committed to the belief that Information Share Equals Market Share. Having only launched this past June 2010, the RREIN network is already comprised of 40 leading brokerages, which make up 575 offices, 30,000 agents, 167,000 closings and represents over billion in transactions. How can RREIN help your recruiting efforts and differentiate your company today? For more information, email rrein@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

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According to David Knox Productions, there are three fundamental responses to price competition, you can:

-Match their price,
-Differentiate yourself through value-added selling or,
-“Let Go” of the business

Matching price is painful and there will always be competitors who are at a lower price. If you go down that path, you may be busier but have less profit. And you’ll never reach a point at which a competitor will undercut you. Resist the temptation to compete only on price. Remember, market share is for kids, profit is for adults.

Value added selling requires skill. If you were buying a Blu Ray player and found one for 9, another for 9 and a third for 9, you’d probably ask; “What’s the difference?” Your listing presentation must clearly contrast the difference in service and results over a lower fee competition.

To differentiate yourself, you must cite specific benefits that are worth more than the fee difference. Relate all of these to the sellers’ net because the net equity is more important than any specific cost.

Demonstrate to them that by paying more for better service, they will net more from the sale and will do it sooner. Present your sale-to-list ratio, percent expirations, days on market, average sale price, guarantees of service backed up with cancellation clause, target marketing proposal and/or unique service.

‘Letting Go’ of the Business.
As important as value is, it’s even more important to be at a position of strength and stand on principle. Dialog and value won’t help unless you simply decide to say “no” to commission cutting.

If a seller asked you to violate a Federal law as a condition of listing, would you do it? Of course not. Attach that same position of strength to your fee. Once you decide not to cut your fee, you will carry yourself differently. The owners will sense this strength. Instead of wimping out on fee, you will pause, smile and gently explain that you’ve made a choice to deliver higher value and results instead of a lower fee. From this day forward avoid reducing your fee.

The good news is you will never have a low commission listing again. The bad news is—you’ll lose some listings. Many agents feel they would rather have 80% of something than 100% of nothing; bad philosophy.

If you hold firm to your fee, you’ll probably lose 10-15% of the listings you attempt. If you cut your fee by only 1% on all your listings, you’ll lose 15-33% of your profit. (Divide your commission rate into 1 for the real percentage discount. Do the same math on the co-op sales and average it out). What you’ll discover is that a 1% reduction in your fee on 100 listings will require you to list about 20 more homes just to break even.

When a seller says to you, “Another company charges 1% less,” your mission is to sell a net gain that equals the difference.

Make sure commission is the only objection. Ask the seller: “Other than our fee, are you ready to list with me?”

Convert the commission objection to a net equity objection. “Why is our fee an issue?” (Because we need the money). “So the net equity is most important to you, right?” (Yes). Net equity is not only a function of expenses, but of income. Let’s take a look at the three factors of income to you: a) ability to have the home sold at all, b) final sale price as a percentage of list price, and c) time on market.

Now you must compare your statistics: a) expiration rate, b) list-to-sale price ratio, and c) average market time. If you excel against the competition in these categories, then you can offer better results.

Demonstrate that while your fee may be a bit higher, the net is also higher. “Mr. and Mrs. Seller, if the other company doesn’t sell your home at all, can’t negotiate a high sale price, or doesn’t sell it in a reasonable time, you end up losing money instead of gaining.”

Finally, ask the seller, “If our fees weren’t different, who would you hire?” Hopefully, they say “you!” Either way, ask why. Listen to their answer and if appropriate ask, “If you prefer us because of the additional benefits we offer, then wouldn’t you expect to pay more?”

If they don’t see a difference, then you have not established your value added benefit.

Sometimes you just have to let go of business. The sellers that cut your fee will usually be the most demanding, difficult and ungrateful. So treat radical price competition like a storm of locusts…you might just have to ride it out until they’re gone. Spend your time prospecting for good quality listings.

One of the ways to teach sellers the value of an agent is to send them the video titled “Selecting Your Real Estate Agent.” You may e-mail it for online viewing at www.RealEstateConsumerVideos.com. For a free trial, enter Promo Code: “ris.”

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.