The purpose of prospecting is to develop prospective clients for your business. The real estate prospecting process involves two-steps.
- Identify and create leads by establishing contact with people who have interest in what you are offering and the ability to become clients.
- Secure a face-to-face appointment for a predetermined time in the future.
Realtors seek two categories of clients: Sellers, who become listing clients and buyers, who become real estate purchasers. The following sections provide tips on how to prospect for clients in each group.
Prospecting for listings
Listing leads come from past clients, those in your sphere of influence, expired listings, FSBO conversions, open houses, lead cultivation, and door knocking -- but they rarely come without some effort, and here's why. The tendency when people are sending you referrals is to send you prospective buyers. The public's perception is that Realtors sell houses, that we put people in our cars and drive them around and find them a home to buy.
To generate listing leads, you have to do some pretty active prospecting work:
- Listing referrals do not come naturally. Specifically ask those within your sphere of influence, your circle of past clients, or your referral groups to share the names of people who need or want to sell real estate.
- To achieve a greater listing inventory and develop a specialty as a listing agent, cultivate listing prospects by working expired and FSBO listings.
- To prioritize your efforts, follow the Prospecting Hierarchy of Value for help assessing which sources of listing leads are the most productive for your business.
Prospecting for buyers
Prospecting for buyers is easier than prospecting for listings, partly because referrals arrive more naturally, and partly because open houses attract prospective buyers and provide you with such a great prospecting platform.
If you are short on buyer prospects, increase the frequency of your open houses. The type of houses you choose to show will determine the kinds of prospects you generate. Obviously, higher priced and more exclusive properties draw more discerning buyer prospects, while lower priced properties attract less affluent prospects.
To build your business quickly, work to generate leads from more first-time home buyers by planning more open houses in the low range of your marketplace. The benefits of developing first-time buyer prospects include:
- First-time buyers can be sold into homes quickly, as they aren't burdened with the need to sell homes in order to make purchases possible.
- They lack experience with other Realtors. They do not have current agent affiliations, nor do they approach a new Realtor relationship with baggage that may have been acquired from a less-than-stellar past experience.
- They acquire strong loyalty when good service is rendered, allowing you to establish a long-term relationship that may span 10-15 years and multiple home sales and purchases over that period.
- They provide you with an opportunity to establish relationships with their friends who are also considering first-time purchases.
- To prioritize your efforts, follow the Prospecting Hierarchy of Value for help assessing which sources of buyer leads are the most productive for your business.
The Prospecting Hierarchy of Value
In prospecting, some approaches involve a shorter contact-to-contract cycle than others, therefore delivering a greater return on time investment and higher value to your business. In order, here are the factors that most influence the value of your prospecting approaches:
- Past Clients. The highest-value form of prospecting is calling past clients and those in your direct sphere of influence. These people have either used your services in the past or know you and your character. Asking them to do business with you again is described as canvassing. Asking them to refer their friends is described as prospecting for referrals.
These calls are the easiest to make because they reach those with whom you have established relationships. Typically, Realtors experience less resistance when placing calls to this group than to any other. They also make the calls with high expectations that their efforts will generate leads. How long it takes to acquire leads using this approach varies greatly. You could secure a lead on your very first call or on your 100th call, so the ratio of leads generated to time invested is difficult to anticipate.
- Expireds. I could make a case for this being the #1 highest-value prospecting approach, as well, due to the ease of locating expired listings and the relatively quick contact-to-contract cycle. Expired listings come up in the MLS daily, along with all the information you need to make the contact. Many go back on the market with another agent within a week, so the sales cycle is short, which is a key reasons that expireds offer such a high rate of return for the effort.
Few agents engage in calling expireds, largely because the sellers, who have not experienced success with their last agents, can be hostile toward new agents, as well. Many agents feel "it's beneath them" to contact these prospects, which further contributes to the opportunity for the ones who do.
- FSBOs. Converting for sale by owner contracts requires more work than securing expired listings. You have to seek them out through newspaper ads or FSBO subscription services like Landvoice. Once you target a FSBO property, figuring out whom to call takes another round of effort, which is why FSBOs are further down the value hierarchy than past clients, those in your sphere, or expireds.
The sales cycle for FSBOs is four to five weeks on average. FSBO sellers generally try to sell by themselves for that time frame before engaging the services of a real estate agent. Over that period, you must be willing to do lead follow-up weekly in order to secure an appointment four to five weeks away.
- Open Houses and Door Knocking. These face-to-face techniques provide greater time investment than phone contacts, simply because you can't see as many people face-to-face as you can speak with over the phone. The advantage: It's harder for people to reject you face-to-face.
- Cold Calling. This technique, tried and true since the advent of the phone, has lost effectiveness over the years due to the preponderance of two-income, busy families and the onset of No-Call laws. But there are agents who still make money cold calling. It is not something I recommend highly, since there are so many other techniques that provide higher returns with less effort. It is, however, better than waiting for the phone to ring
Following these tips on how to prospect for seller and buyer clients will help you maximize your efforts, thus delivering a greater return on time investment and higher value to your business.
