Most real estate agents focus on leads that are easy to close – prospects who want to buy or sell their home now. But what about those prospects who weren’t quite ready yet. Have you followed up with them recently?

Do you have a follow up system in place to convert some of those prospects into clients eventually? Or do you automatically assume those leads are dead and you forgot about them?

What Does A Lead Cost You?

Let’s take a hypothetical example.

• You send 1000 postcards
• It costs you $400 to mail them
• You get a 1% response, or 10 calls.
• That’s $40 per lead ($400/10)

Now let’s look at the return on investment.

• Let’s say your take-home commission is $2500 on sales
• You close 20% of the calls (2 sales)
• You make $5000 less the $400 for postcards = $4600

I know this isn’t exact math. If you are selling a home, you might have additional advertising expenses involved with selling the home – and your commissions might be higher, but go with me here.

$4600 is a good return on investment, but what about those other 8 people that never closed? That’s $320 ($40×8) you’ve spent with no return.

If you mail postcards regularly, how many of your leads don’t close each month? If you take my theoretical example, you’re wasting $3840 ($320×12) each year!

If that sounds discouraging, it shouldn’t be. Understanding your marketing ROI is important when thinking about your lead generation strategy.

Convert More Leads to Closings With Follow Up

Let me ask you – how many times do you follow up with someone before you decide the lead is a “waste of time”? One, two, five?

Maybe you’ve heard that it takes on average 7-12 contacts with prospects before they decide to hire you. If you only follow up with prospects a few times, you are dropping the ball and leaving money on the table – before they are ready to hire an agent.

The good news is that you can still start following up with to the leads you’ve already captured. Maybe their home didn’t sell. Maybe their credit wasn’t good enough to buy a home. Maybe it wasn’t the right time back then.

But maybe now it is!

How to Follow Up With Older Leads

Before you actively start marketing to older leads, you want to find out if they are still considering buying or selling. If you have previously spoken with them, give them a call and find out:

• Did they buy or sell a home (or are they still in the process)?
• If so, ask them how it went and thank them for their time.
• If not, ask them if they are still interested, their time frame for moving, and what they have been waiting for (or what has been preventing them from moving)

Note: for sellers, you can also check the MLS database to see if they listed with an agent, who they listed with, and details about the listing/sale. This can be one way to pre-qualify leads before you make the call.

For leads you haven’t previously spoken to, send another postcard to that smaller prospect list again. If they responded to your initial postcard, they may respond again, so send a personalized postcard offering them a free report or other educational materials.

You can also follow up with your phone leads by sending postcards as well. Be targeted and use any previous information you already know about them such as what they were looking for, what their time frame was, what was holding them back. Tailor your postcard to this specific issue or problem they were having.

The more personalized your message, the better the chances they will respond. Consider adding a personal note such as “I spoke with you 3 months ago about the possibility of listing your home because (whatever reason they mentioned last time you spoke). Were you still interested in moving? If so, feel free to call me at XXX-XXX-XXXX.”

Take Action

Look back through all the leads you generated in the last 6 months and commit to making at least three phone calls this month to follow up. Make lead follow up an active part of your real estate marketing strategy and you’ll start converting more leads into clients.

To help your buyers understand the home buying process, offer them a way to manage all the information they will collect during their home search. A great way to do this is by creating a home buyer’s kit. Here are some things your kit should include:

Home buying process overview – Provide a clear, easy-to-understand overview of each step in the home buying process including a basic timeframe, financing options, how to search for and visit homes, how to choose the best home, how to negotiate the best terms, how to present the offer, and how to open escrow. Include a list of financial lenders, attorneys, contractors, escrow officers and any other vendors that you recommend.

Services overview – Explain to buyers how you manage the real estate transaction from start to finish, what types of communication they can expect from you, your contact information, and an overview of your working agreement.

Criteria clarification checklist – Help buyers put together a list of what they need in a home vs. what they would like to have. What features and amenities are non-negotiable? Which would be nice to have, but they could do without? For instance, do they have a neighborhood or school district they prefer? How many bedrooms and bathrooms? What type of home are they looking for? And so forth. If your clients are a couple, ask both parties to fill out their needs and wants – often, they will have different priorities.

Property searches – Show buyers how to search your website and the public MLS to find listings. Inevitably, they will also search for homes in print media, mailings, and driving around neighborhoods looking for “For Sale” signs as well. Clearly explain what they should do if they find one they like – such as emailing or faxing you for more information on the property. If you don’t explain what your clients should do if they find a property they like, chances are, they will call the number listed on the sign, ad or website and talk with someone else.

Home evaluation worksheet – Include a worksheet buyers can fill out to rate different home criteria such as the property exterior, interior rooms, location, community features, and other amenities on a scale of one to five. The worksheet should also have a section where buyers can write down notes about what they like and didn’t like about the property.

Listing information – Each time you show homes, print the details of each of the listings they will be viewing so they can keep track of their home search. You may also want to include a map of the day’s itinerary so they know where you are headed and where you’ve been.

By creating a basic home buying kit for your clients, you can clear up some of the confusion and overwhelm they will face during their home search, while encouraging open communication throughout the buying process.

Most people have a short attention span and don’t want to listen to a long-winded sales pitch from a real estate agent. They want just the facts – how will the home be priced, how will it be prepared, and how will it be marketed.

1 – Price

How the home will be priced will determine its selling potential. While you can make suggestions for what the selling price should be, ultimately, it is up to the seller to determine the asking price. You can prepare a computer-generated comparative market analysis (CMA) to estimate the price, but that doesn’t take into consideration a number of factors – such as how the home is presented or what the turnaround selling timeframe is – that may influence the actual selling price.

Because many sellers will go with the agent who estimates the highest suggested asking price, it’s up to you to educate your prospects on the merits and drawbacks of CMA analysis and what components sellers should use to determine a reasonable price buyers are willing to pay.

In addition, you should clearly explain the difference between selling a home for top price and selling a home for a quick turnaround sale. If sellers have a set timeframe, they might not be able to get top dollar for their home. Finally, explain options for re-adjusting the asking price if the home doesn’t receive any showings or offers within a set timeframe.

2 – Home Preparation

The second part of your listing presentation should tackle how to prepare the home for sale. You will want to address any glaring obstacles, tips for how to remove clutter and personal items, how to increase natural light in the home, how to make the exterior more presentable, and what information buyers are likely to ask for such as community information, a list of upgrades, and appliance warranty information. You don’t have to get into the specific detail of what you would do to stage their home at this point, but give them an idea of what work might need done as well as tip sheets and checklists to help them make their home more presentable to buyers.

3 – Marketing the Home

Finally, how will you market their home? Have a step-by-step marketing plan that outlines where you will advertise their listing, what your flyers and brochures will look like, how will market it on the internet, whether you will hire a real estate photographer or offer a virtual tour, how large your list of email subscribers is, how many visitors your website gets, and so forth. Have plenty of samples of ads, flyers, brochures and websites you’ve used to market your clients’ homes available to show them during the listing presentation.

By educating prospects upfront about the key components of the home selling process that will influence how quickly their home is sold, you can manage expectations and set the stage for better client communications during the working relationship.

Great real estate agents have a feedback system in place that allows them to collect information from potential buyers and can uncover any red flags that may be making the home less attractive.

Method 1 – Survey the Buyer’s Agent

Call, email or fax a follow up sheet to the agent who viewed the home with the buyer. Ask them a few simple questions like:

• What attracted the buyer to this home?
• What did the buyer think about the price?
• What didn’t the buyer like about the home?
• Do you have any suggestions for improving the home?

Method 2 – Survey Buyers After an Open House

When buyers come to an open house, greet them by asking them to participate in an email survey about the home. Not everyone will agree to participate, but for those who do agree, you get their contact information and permission to follow up with them about the home. The questions you can ask are similar to what you’d ask the buyer’s agent after a showing.

• What attracted you to this open house?
• What did you like best about the home?
• What didn’t you like about the home?
• What did you think about the price?
• Do you have any suggestions for improving the home?

You can also ask the buyer if they would like any additional information about the home and invite them to join your mailing list. (If they don’t respond, don’t automatically add them to your mailing list! You want to make sure you have permission to follow up with them.)

By collecting information about what buyers do and don’t like about the home, you will have hard data to present the seller about any major turnoffs buyers have with the home and leverage to convince the seller to make any changes that might be made. After all, buyers don’t make offers on homes they dislike, and if there are any major issues, it could lead to fewer or lower-priced offers.

To effectively convert potential buyers into clients, put yourself in your prospect’s mind. When they call you up or walk through your door, they have a number of questions on their mind: What should I expect from the agent? What homes will he show me? What forms will I be expected to fill out? What types of questions will I be asked? Above all else, they expect to receive a sales pitch about your services, so their initial resistance is high.

From your perspective, you don’t want to waste your time showing homes to unqualified or defensive buyers, so here are a few tips for improving your presentation and building rapport during the home showing process.

1 – Make a good first impression

When you first greet buyers, make sure you are smiling and look professional. First impressions matter.

2 – Educate the potential buyer about the home buying process

If a potential buyer is already in your office, then you can easily take a few minutes to ask them about their home buying needs and provide them with a brief overview of how you work. If they are calling you, it is best to ask them to come to your office for a few minutes before you spend time looking at homes.

3 – Qualify buyers by asking questions about their home search

Before you take buyers out to search for homes, find out if they are both ready to buy and have the means to do so. Ask them questions about:

• Their ideal home – What area is it in? What features and amenities are they looking for? How long have they been searching for a home? What have they been doing to find potential homes? What price range are they looking at?
• Their financial situation – Have they spoken with a lender? Do they need to sell their home before buying a new one?
• Making a purchasing decision – Have they ever purchased a home before – and if so, how long ago was that? Who is involved in making a buying decision?
• Their readiness to buy – Are they prepared to move forward if they find a home that meets their criteria?
• Working with a real estate agent – Are they currently working with another agent? What are their criteria for hiring an agent? Do they have any questions about the home buying process?

4 – Decide whether to help the potential buyer

What happens if a buyer isn’t yet qualified? You can either refer them to another agent in your office (and potentially get paid if they buy in the future) or turn them away. It is up to you to set up criteria for whom you will take on as a client. Sometimes it is best to turn prospects away if they don’t meet those criteria – or ask them to postpone their real estate search until they are both ready to buy and can do so. If you do decide to refer business to another agent, put the referral agreement in writing – and make sure the agent to whom you refer business is professional and will communicate promptly with clients.

5 – Present an overview of the buying process

After you’ve decided to work with a potential buyer, give them a short presentation on the home buying process, including a basic timeframe, financing options, how to search for and visit homes, how to choose the best home, how to negotiate the best terms, how to present the offer, and how to open escrow. The home search process can be a stressful and overwhelming time for buyers, so clearly explain it in a simple, easy-to-understand format.

6 – Sign a buyer representation agreement

Finally, at the end of your buying process overview, present buyers with a written buyer representation agreement that states they agree to work solely with you as their real estate agent. If the “fee” is an issue, clearly explain how that fee is almost always covered by the seller and in most cases, no fees are due at closing. By having buyers sign an agreement, you ensure you will get paid for your services.

By taking time initially to qualify buyers and getting them to sign your representation agreement, you will work with only those buyers who can buy, are ready to do so in the near future, and will be loyal to you.

The best listing presentations are ones where you’ve created and memorized a planned presentation that concisely explains the selling process and any frustrations, concerns, and problems sellers may face. But they go beyond that.

If you simply memorize a pre-written script, you will sound mechanical and fail to build rapport with your prospects. You will be focused on what to say next, rather than focusing on your prospect, listening to his concerns, and observing his body language. To become exceptional at giving listing presentations, you must practice your script over and over until you are so familiar with it, that it becomes second nature to you. Once that happens, you can walk into any situation and customize your listing presentation to your prospect’s biggest issues and concerns.

Here are some tips for getting the most out of your listing presentation.

1 – Build rapport initially

When you first meet with your prospects, include a few minutes of small talk and potentially get your prospect to laugh at a joke before you launch into the heart of your material.

2 – Ask questions

If you’ve internalized your listing presentation, you should have specific questions you can ask sellers that will allow you to hit each point in your presentation without sounding like you are giving a sales pitch. The person who asks the questions is the one in charge of the appointment, so make sure for every point you want to address, you start with a question and let the seller do the talking. Some ideas for questions to ask include:

• Questions about the home – How long they’ve lived there. What they like best about the home. What aspects of the home caught their attention when they first purchased it?
• Questions about their selling motivations – Why they are now considering selling. Their timeframe for moving. When do they plan on putting out the For Sale sign? Where they are moving to. Which is most important: fast turnaround or a top selling price? What questions do they have about the selling process?
• Questions about the home – Have they made any improvements? What price range do they have in mind? Will they be leaving any items in the home? Can they offer any buyer perks or help with financing?
• Questions about hiring a real estate agent – What are their criteria for hiring an agent? What kind of marketing do they expect?

3 – Actively listen

The best presentations involve actively listening to the seller for the majority of the time. Your presentation should be 80% listening to the seller and 20% asking and answering any questions. Let the seller do most of the talking!

4 – Have visuals

While you don’t need a PowerPoint presentation to be effective, you should have samples of your advertising and marketing materials, as well as testimonials and case studies from happy clients. Show your prospects exactly how you’ve helped your clients sell their homes and what they can expect if they list with you.

By actively listening to your prospects and demonstrating your expertise through samples of marketing materials and case studies from happy clients, you can increase your prospect-to-client conversion rate and start taking more listings.

What if, however, you could generate additional streams of income that could sustain you when the market goes south – or help you grow your business without incurring high customer acquisition costs? Here are some ideas:

1. Sell your own products. Print on demand services like Amazon.com’s CreateSpace makes it easy for anyone to publish their own book or audio cd. What if you sold 60 minute audio programs for $10-20 on topics like preparing your home for selling, a checklist for choosing the perfect home, how mortgages work, and so on? What if you wrote a 100 page booklet about buying a home in your particular area complete with helpful service providers that they might need? Sure, you wouldn’t get rich quick, but you could easily make a few hundred dollars/month selling them on your website.
   
   
2. Hold seminars and educational events. There are many business organizations out there who hold seminars and educational events for their members. Can you go to your local Chamber of Commerce and give a talk on what to know if you’re buying commercial real estate? Have you been a successful agent for years and can design a program that helps new agents get their business started? Can you join with those who offer complementary services (a lawyer, a mortgage broker, a financial planner, etc) to hold a seminar for consumers on what they need to know before buying their first home?
   
   
3. Form strategic alliances. Look at all the other service providers out there that your clients must use during the home buying or selling process that complement your services. For instance – movers, interior decorators, staging companies, storage places, plumbers, gardeners, pool maintenance, mortgage brokers, attorneys, financial planners, etc. What if you set up a deal where you’ll refer business to them for a referral fee? What if you’ll give them a referral fee for referring business to you? (Check with your local ethics boards to make sure this is ok with your local group. In some states, for instance, attorneys can’t partner with non-attorneys.)
   
   
4. Cultivate referrals from past clients. Most real estate agents get the majority of their business from referrals, yet they don’t have a formalized system in place that actively asks past clients for referrals. Do you follow up 30 days, 60 days, 90 days to see if there’s a problem with the new home? Do you keep in touch regularly – such as holding a client appreciation party?
   
   
5. Agent referrals. Do you have prospects that aren’t right for you but who you can refer out to other agents for a referral fee?

The secret to generating more money is building trust. You must build trust with referral partners – people don’t refer business to those they don’t believe will do a good job. You must build trust with current clients so they become happy, satisfied clients who value your recommendations. You must build trust with industry and trade organizations by demonstrating you have the expertise and leadership skills to help out their fellow members – they won’t just recommend anyone.

This changed in 1983, when the Federal Trade Commission published a report called The Residential Real Estate Brokerage Industry. The report found that 72% of potential home buyers working with an agent thought their agent was working for them – not the seller. When the general public found out this was not the case, they began to see the real estate industry as deceiving and dishonest and were outraged. To change the public’s perception of the industry, NAR encouraged local Realtor groups to petition their state legislatures to create disclosure laws and mandates. During this time, the concept of buyer’s agency was introduced.

Today, when a buyer contacts a real estate agent to help them find a home, they expect that the agent has a fiduciary duty to protect their best interests – not to negotiate the most favorable deal they can for the seller. Many agents that work for buyers now ask the buyer to sign an agreement outlining their services and fee structure. Yet because the fees are still paid by the seller after closing, the question of “who really pays” the buyer’s agent still is a sore spot with many agents who have been in the business for 20+ years.

If you look at the real estate transaction as a whole, the seller sets the price. The buyer then brings money to the table – either through personal savings or various financing options – and hands the money over to the seller. After all fees have been taken out, the seller hands commission checks to the buyer’s agent and the seller’s agent and keeps the rest for himself.

While this may seem like the seller is still paying, keep in mind that the only person bringing money to the table is the buyer. If it wasn’t for the buyer, neither agent would get paid.

If you work with buyers, you should consider creating a buyer’s agreement that highlights:

• The buyer is entitled to negotiate your fee. When the buyer understands that they are paying your fee, they are more likely to take the home buying process more seriously. Too often, buyer’s agents explain that working with them is essentially free because the seller pays their commission. When people believe they are getting a service for, in essence, free, they tend not to value it as highly as if they were paying for the service directly.
• The buyer agrees to work with you exclusively. Just as the buyer would hire an accountant, lawyer or doctor, they should hire you exclusively to represent their best interests. However, you should also include terms in the contract that allow you or the buyer to cancel the contract if one party is unhappy with the relationship or if differences cannot be resolved.
• You agree to represent the buyer’s best interest. When the buyer is paying you, it is your duty to represent them as best you can. That means showing them homes listed at lower commission rates if that home will be a good choice for them.
• You agree to only represent the buyer. When people negotiate contracts, both sides usually have their own legal representation. In the case of real estate, you are negotiating on behalf of the buyer – so it would not be in the buyer’s best interest if you also represented the seller. How could you negotiate a fair price for both when you have vested interest in both sides?

Recently, there has been much debate in the blogosphere about divorcing buyers commissions from sellers commissions. Bloodhound Realty is maintaining an exhaustive list of articles on the topic. If you are a buyers’ agent, this should be required reading.

Update: This article is a Black Pearl Winner over at Bloodhound Realty Blog’s carnival of real estate, The Odysseus Medal. Woohoo!

Because there are so many agents out there, the problem seems magnified in the real estate industry. Home buyers and sellers see numerous agents competing for their business. They receive countless mailings, newsletters, magazines, emails and such clamoring for their business. Yet no one clearly explains how they are different than other agents. In such an environment where no one seems to have the competitive advantage, your prospects view your services as a commodity. The burden is on you to prove otherwise.

Imagine the scenario. You’re presentation has been going along smoothly until suddenly, the price issue comes up and the seller requests you cut your commission. What do you do? Here’s what you should not do:

1. Don’t get mad. The worst thing you can do is take it personally and get angry that the seller could even ask such a thing. They have every right to negotiate your fee – and should – so you should be prepared to discuss why you’re worth your fee.
2. Don’t criticize your competition. One of the quickest ways to discredit yourself is to start complaining about how other real estate agents do this or that or going on a tirade about how your competition won’t get the job done. Keep in mind that Article 15 of the Realtor Code of Ethics explicitly states that Realtors should not make “false or misleading statements” about their competitors.
3. Don’t tell them that if they don’t list at 6% or list with a discount broker, other agents will refuse to show their property. When you specifically state that “all agents charge 6%” or “other agents won’t show your property if you don’t list at 6%”, you are implying that the real estate industry violates antitrust provisions set forth by the federal government. 6% is not an industry standard nor is it set in stone. If it were, the federal government would have stepped in long ago.
4. Don’t explain that the commission is split four ways. You can explain that 3% goes to you and 3% goes to the buyer’s agent, but don’t get into the logistics of explaining that 1.5% of each goes to the broker. They don’t care. They want the highest price possible for their property, so if you get stuck in logistics, you’ll not only end up defending your commission, but that of the broker’s as well.
5. Don’t give in immediately. Sometimes, it seems like you could close the deal right then if you’d just knock a percentage off the price. However, if you are trying to win over a skeptical seller, caving on price immediately might raise doubts that you will negotiate top dollar for their home. If you’re willing to take less money just to get the deal signed, how will you react when it’s their home that’s on the table?

The best – and ethical – way to handle this situation is to explain the value they’re getting by going with your services – and by explaining that you’ll be willing to lower your fee but you won’t be able to do as much to market their home. Once your prospect sees the value you provide at the higher commission rate, they’re far more likely to choose that rather than the lower cost alternative.

Not all people who contact you are ready to buy. For each phone call or email you receive, you must determine:

1. Who is contacting you?
2. How did they find you? (so you can keep track of your marketing ROI)
3. What stage of the decision making process are they in?
4. Are they qualified to do business with you?

The next step is to classify each contact based on how good of a prospect he/she is at this current time. Generally, most people that contact you will fall into one of the following categories:

Inquiry: When people contact you in any way – via phone, email, website, etc – they are making an inquiry. They want to know more about you and whether you can help them. Here, you know nothing about them, while they know at least enough information to contact you. At this stage, you have no idea if they have a problem you can solve and can/will pay your fees to hire you.

Lead: Inquiries become leads when you pre-qualify them. This is the basic information you need to know to determine whether this prospect is worth setting up a phone or face-to-face consultation. If they are still in the information gathering process, you should get permission to add them to your mailing list and/or offer to send them free information – thus adding them to your follow up system.

Qualified Lead: Leads become “qualified” if they meet your criteria for your ideal prospect. Do are they ready and motivated to buy? Are they the sole decision maker(s)? (If not, who else are?) Are they pre-qualified for financing? Do they have a set move date? Some questions you might ask:

• how long have you been looking for a home
• where do you live now and how long have you lived there
• are you renting or do you own a home
• will you need to sell your present home to purchase a new one?
• have you seen any homes that you really liked?
• how soon are you thinking of moving?
• what price range are you considering?
• could you describe your present home, citing what you like and dislike about it?
• do you have any special requirements for your new home?

Keep in mind – just because someone isn’t yet a qualified lead doesn’t mean you should discard their information. Rather, you should put them back into your follow up system so that when the time comes and they do become a qualified lead, they think of contacting you first.