No matter your experience, a recession should put a little fear into any agent. Especially if you’ve never been through one. In my nearly 28-year real estate career as an agent, broker-owner, and coach I have been through several market ups and downs and one Great Recession.
No one can claim that they know exactly what to expect or how to perfectly navigate a shifting market. I can, however, share a few do’s and don’ts that I learned from the last recession that you can act on today to not only survive a recession, but to set your business up to thrive on the other side.
1. Don’t Overreact
It always amazes me when, at the first signs of a market shift, many real estate agents immediately adopt a “sky is falling” attitude. Even worse, they post their alarmist concerns to everyone on social media.
In my nearly three decades of practicing real estate, I can’t tell you how many possible market disturbances came and went with little impact on the long-term real estate market. Overreacting will always cause you to misjudge the response. Like a car slipping on ice, if you overcorrect you will slide in the opposite direction and, in some cases, you may crash right into the guardrail.
Instead, Stay Positive
Keep in mind that even during recessionary periods, millions of people still need to buy and sell homes, and homeownership has always been the best way for Americans to build wealth. Even those who bought their home just prior to the Great Recession have made hundreds of thousands in appreciation since.
So, despite a changing market, there is still plenty of opportunity for homebuyers who are willing to stay the course and live in their home for many years to come. You can be the one who guides them to look past the short term and put them on the road to long-term wealth.
People who must sell a home during a recession are going to look for an agent who is confident that they can get the home sold. Buyers who are looking to buy don’t want to work with a Debbie Downer agent who is preoccupied with all of the “what ifs.” They want an agent who focuses on the long-term benefits of homeownership and how great it will be for them to have a home to call their own.
2. Don’t Cut Quality
One of the biggest mistakes an agent can make during a slowdown is to cut back on quality. Reducing your standards on investments like client events, closing gifts, and professional photography will lead your business into a death spiral!
Quality can be expensive, but subpar quality will repel serious customers, lead to fewer referrals from your past clients, and worst of all, it actually attracts the customers who want cheap services. This attraction will make you think that “everyone” in the market is looking for a discount. This belief may convince you to cut your fees, leaving you with even less ability to provide quality services.
Instead, Reduce Fixed Costs
Take a serious look at all your expenses, especially fixed and recurring ones. Recent reports show that the average consumer is spending more than $150 a month on subscription services. Many of these are not used often or at all.
Review both your business and personal accounts to see where you can eliminate any unnecessary expenses. This includes things like websites, software, maybe even that extra car.
It’s time to get lean and mean, so if you are not currently using something, or you haven’t used it in the past 60 days, cancel it or even sell it if you must. The money you save can be used to retain quality services and pursue better opportunities.
3. Don’t Shut Down or Coast
During slower real estate times you will hear agents, sometimes boastfully, say that they are just going to take it easy or take some time off. This may sound reasonable, especially if you are sitting on a pile of cash from the previous three years. However, the market waits for no one, and if you slack off or shut down, you are bound to miss out on the opportunities ahead.
I learned this from personal experience. Prior to the Great Recession, I was one of the top-producing agents in Colorado. I had my finger directly on the pulse of the market. When the Great Recession hit, I shifted my attention off of my business and onto my personal investments and finances.
When I returned six months later, the market was completely different and I had to play catch-up. The short sabbatical I took set me years behind my competition and cost me hundreds of thousands of dollars.
Instead, Increase Your Communication
During recessionary times, customers need more attention. Sure they are less likely to move or refer you to others. Yet, reducing or completely cutting communication can leave them feeling helpless during the times they need the most help.
When people are under stress from job layoffs, late payments, or even foreclosure, they tend to not reach out for help. They believe that they are going to be able to find a solution on their own (or maybe by Googling). Therefore, they only ask for help when things are so far out of their control that they can no longer handle it. The worst part is, by the time they do reach out, many of the more favorable options they had prior are no longer available to them.
During recessionary times, you need to think of yourself like a firefighter. You are constantly scouring the landscape looking for smoke and other signs of danger, ready to run to the rescue at the first call for help.
You can do this with constant communication through your social media, past clients, and farm. Let people know (by shouting from the rooftops and driving a big red truck with flashing lights) that you are always there for them if they are in need of sound advice or just a listening ear.
These communications can be tricky, of course. If your social game isn’t necessarily where it should be, you might consider investing in a platform that offers templates and suggestions on when and how often to post. Check out our roundup of marketing companies that serve the real estate industry, or dive right in to see what Coffee & Contracts can do for your business.
At this time Coffee and Contracts has closed its membership until Fall 2023, however you can join the waiting list now and receive access to their free resource suite and get an exclusive discount when they open their doors again.
4. Don’t Discount Your Fees
As I mentioned earlier, it is easy to fall into the trap of slashing your commission during a recession. Many believe that if they cut their fees they will actually attract more customers. The issue with this belief is that in order to inform enough customers that you cut your fees, you must market, and to market you need money. The same money you just decreased from your fees.
Additionally, if you discount your fees, you have to cut somewhere else to make up the loss. If it’s not your marketing budget, then it’s your service and quality. And we already agreed not to cut that!
Lastly, during recessions, fewer people are buying or selling. So with fewer transactions available, discounting your fees is really the best way to put yourself right out of business.
Instead, Find Your Niche
You may have heard the saying “the riches are in the niches.” Well, this doesn’t only rhyme, it actually makes a lot of sense. Who earns more, a general practitioner or a cardiologist? We all know that the specialist makes more money than a common doctor.
This is because when someone goes to see a cardiologist, it is because they have to, not because they want to. Real estate is no different. When the real estate market is good, there are many opportunities to work with several types of customers. However, when the market shifts, your business needs to also shift to working with customers who are willing to pay for your services because you are the specialist.
There are many opportunities to specialize during a recession: first-time buyers, preforeclosures, and relocation, to name a few. If you’re not currently focused on a niche or your current niche has dried up, now is when you should focus your time, money, and marketing on a new demographic that is willing to pay you what you’re worth.
5. Don’t Take Moonshots
When the market is taking an about-face, it isn’t the time to make big gambles. A risky move or moonshot is when you take all your resources and put it into a one-in-a-million chance, like President Kennedy did with the Apollo mission.
Fortunately for him, it worked out. The definition of a moonshot is exactly why recessionary times aren’t the right moments to be taking those kinds of risks. The types of chances I’m talking about in terms of real estate include things like spending thousands of dollars on an unproven marketing campaign or online coaching, or even changing brokerages searching for greener pastures.
Instead, Focus on Improving Skills (Such as Prospecting)
With costs so high and the possibility of success so low, it’s better to avoid moonshots altogether and save your money. With fewer transactions happening during a recession, it takes more time and costs more money to get an appointment than it did prior to the downturn. Additionally, there are more agents fighting for the same lead—some of whom are willing to work practically for free!
Many agents have never had to compete for business before. If this is you, then it is extremely important that you sharpen your sales skills. This will ensure the next time you are battling for a listing, you walk away with the signature, without discounting your fees.
If you’re newer to real estate or your prospecting skills are rusty, then you will also want to replenish your prospecting abilities. These will come in handy during a recession. And calling, messaging, and door knocking doesn’t cost you a penny.
How to Train Your Real Estate Agents to Sell in a Challenging 2023 Market
6. Don’t Try to Survive
In a recent conversation with a coaching client of mine, they said that in order “to survive” the upcoming recession, they decided to stop spending money on marketing and advertising. The prior year they’d spent $16,000 on an online ad campaign through Dippidi, and they wanted to cancel it.
When I asked them how many leads and closed transactions they’d gotten from Dippidi, they said that they’d gotten six closings for the year at an average sales price of $650,000.
I responded, “If you gave me $16,000, and in return I gave you $100,000, would you make that deal? Of course you would; you’d be crazy not to!” In fact, my rule for marketing is $4 in return for every dollar I spend over a six-month period. That means that if, over the course of a half a year, I don’t get four times return on my marketing, I will reevaluate it.
Their desire to cut back marketing and advertising during a recession is completely normal, and now that you know the $4 for $1 rule, you won’t make that mistake. However, other agents who don’t know my rule are going to try to save money by cutting their marketing budget.
This makes it the perfect opportunity for your business to pick up more market share and not just survive—but thrive. Market share can be the number of homes you sell in your farm, the mindshare on Google, or the clients you convert from Dippidi or another platform.
Whatever the case, when everyone else is pulling back trying to survive, you know how to use the $4 for $1 rule to increase your marketing and advertising and gain market share during and after the recession.
A recession, without a doubt, isn’t something to underestimate. However many agents, like myself, have thrived through multiple economic downturns. The secret to coming out on top is to reduce your expenses, keep your focus on your customers, develop your skills, and increase the marketing that is working.
When you do this, by the end of the recession and when the good market returns—and it will—you will be stronger and possibly unstoppable. Best of luck!