I want you to remember when you went to real estate school and learned how to be an agent. It might have been a long time ago; it might have been just a few weeks ago. In order to get your license you had to do some fairly grueling math. How did you do? I’ll bet a lot of you had to spend some time refreshing your math skills!
I have found that after most agents get their license, they forget all about math again. Even basic math. But, here’s what I know. Math is a critical piece of your business.
For the sake of this discussion, I’m not talking about amortized loan calculations, or ROI numbers, or complicated spreadsheets. I’m talking about the kind of basic math that you should be using every single day. Math like calculating averages, ratios and absorption rates.
Using basic math can have a powerful impact on your business!
Here’s what I mean. Most agents bob along, grateful for each transaction that they get. They’re doing real estate ‘in the moment.’ But when I ask them, they can’t tell me what their average list-to-sale price ratio is, or what their average days-on-market number is, or what their offer-to-list price ratio is. They have no idea what their market’s absorption rate is. But all of these numbers are essential!
Even beyond today’s numbers, you need to use math to look at your past year’s numbers as well. You need to know what 3 years ago looked like. You need to know what 2 years ago looked like. You need to know what last year looked like. Because all of that data – all of that math – tells you a whole lot about your business!
How can you set financial goals that you can actually reach, if you don’t do your math?
How can you present professional services to your clients, if you don’t do your math and you don’t know your numbers? You can’t.
Let’s look at it a different way. If you know that your days-on-market number or your list-to-sale price ratio is better than your competition, you’re doing something right. Maybe you’re better at pricing. Or you’re good at getting price reductions. If you know what your market’s absorption rates look like, you’ve got critical information for your sellers. You understand all the nuances of your market, and you’re providing a high (and I mean high!) level of service to every one of your clients.
The bottom line is this: Most real estate agents do not use the power of numbers – the power of math – in their business. They should be tracking data like this year’s sales versus last year’s sales. They should be calculating absorption rates. They should be tracking pendings, average home prices and median home prices. Every agent should know exactly how each previous year compares to the current year.
An agent today needs to understand that today’s consumer is looking for more than great service and a feel-good relationship. Don’t get me wrong — that’s important stuff. But today’s consumer also wants, and deserves, an expert. They want knowledge and information and answers. They deserve solid, factual advice when making really important real estate decisions.
Gone are the days when you can survive on your terrific smile and stellar interpersonal skills. You are an expert. You aren’t selling a 10 dollar product. You are selling one of the most expensive items on the planet. You’d better be able to provide numbers. You’d better know how to do the math.
Get out your calculator. Do some research! Find out what ‘your’ math is. Then figure out how to take what you’ve learned and apply it to how you’re going to do business today, tomorrow and for as long as you’re in this industry.
By Denise Lones CSP, M.I.R.M., CDEI