In recent articles, I’ve talked about how to Define Your Goals, Know Your Clients, and Evaluate Your Competitors. The fourth pillar of a solid marketing foundation is to know your business environment.

Real Estate Industry Statistics

The total number of licensed real estate agents has surged more than 70% in the last 5 years, from 1.5 million licensees in 2000 to 2.6 million licensees in 2005. Of those that get their license, about 50% leave the industry by the end of their first year. NAR reports that 85% of new agents have no sales background, while the other 15% have limited sales experience.

In 2004, the median income for new agents was $22,500, compared with $39,300 for all sales agents. Two in seven Realtors worked in other occupations and earned a median of only $14,700 for 25 hours of work a week. Full-time Realtors (both old and new) who worked an average of 43 hours a week earned a median of $36,000.

Situation Analysis

When creating your marketing plan, it’s important to keep an eye on the big picture so you’re aware of some of the trends that could impact the real estate industry. A situation analysis looks at your industry as a whole and tries to uncover opportunities for business growth and threats to your business. It takes into account the following trends:

1. Economic Trends – What are the major economic factors that are influencing your area? Who are the economists and real estate gurus talking about booms, bubbles and busts? Other economic factors can include anything from how inflation rates, taxes, or unemployment levels are affecting your business to whether you’re in a buyers or sellers market to the costs of running your business. Marketing and advertising costs seem to grow every year while third party internet sites sell leads to agents in exchange for referral fees. (See my article, Realtors’ Tech Budgets Exceed Marketing, for more cost considerations.) In addition, what are your competitors’ business models? Most traditional agents negotiate for a percent commission of between 5-6% but some go lower. Others charge a flat fee for ala carte services. Some charge a flat rate to list a home in the MLS. What do you provide that would make a prospect choose you over each of these companies? Finally, what is your broker offering you? With so many real estate firms to choose from, agents can pick and choose brokers who offer the best incentives, services and support. Getting your broker to pay for certain business costs or cut their commission can drastically improve your bottom line.
2. Social Trends – How does the public perceive real estate agents? Anthony Marguleas wrote an article about how real estate agents are qualified to sell homes with only 50 hours of training. The next lowest profession he looked at – beauticians – need 12 times the amount of training, or 600 hours to be certified. There’s also growing interest to set up standards for the profession as more consumers file complaints. What are your competitors doing to set themselves apart from the bad apples?
3. Political Trends – What issues are politicians pushing that effect your market? Does your state have incentives to help first time buyers? What are the tax incentives in your state for owning real estate? Are any politicians proposing to cut or offset property taxes?
4. Legal and Regulatory Trends – Every few months, there seems to be some new report raging against real estate brokers’ commissions (PDF) or the FTC files suit against Realtors for violating antitrust laws. Like the FTC, the Department of Justice has an active interest in how NAR manages its MLS listings and who should control and hold copyright for the database. In Maine, there’s even a grassroots movement to replace the MLS.
5. Technology Trends – According to the NAR, 77% of home buyers use the internet during their home search. Internet buyers spend an average of 4.8 weeks looking at homes and neighborhoods before they contact a Realtor. They also spend on average 1.9 weeks looking for a home once they work with an agent, compared to non-internet buyers, who take 7.1 weeks. Internet buyers tend to be younger, with an average age of 38.5 years, compared to 43.5 years for traditional buyers. The internet brings all sorts of competition from FSBO websites to thousands of competitors’ websites available through a Google search. In addition, websites like Craigslist and Redfin make it easier for buyers and sellers to connect without agents. Popular valuation site, Zillow, just got another cool $25 million from venture capitalists to improve its services. Clearly, the internet is changing real estate business models. Finally, Techno-phobe agents who shun technology will soon find themselves falling behind the curve as new agents spend money on laptops, cell phones, digital cameras, contact management software, and other productivity tools.

These are just some of the issues you may want to consider when putting together your marketing plan. For any situation analysis, you want to look at the macrocosm – the entire real estate profession – and the microcosm – the market for real estate services in your city.

Related Posts

• Create Your Marketing Campaign in 6 Steps
• A Marketing Plan Guide For Real Estate Agents