Many agents who think about targeting a geographical farm choose that farm based on what they think will produce best results. But without verifying that research, this may not actually be the case. Other agents like the idea of farming their own neighborhood because it is convenient and people may already know them from that farm area. But you still have to do the research required to verify that the farm you live in is a viable farm in terms of sales.
There are many parameters one should consider before selecting an area:
- Total number of homes: Consider both the logical size and the cost to market. Choosing a farm with 400 homes can be cost-prohibitive. In fact, I recommend a geographical farm of 300 homes or fewer if you are just starting out or on a budget. However, you can always choose a smaller farm in a larger area to focus on.
- Average sales price: The average sales price in the farm is important because it will show you the commission the farm has brought in the past and you can get an idea of its potential in the future.
- Average commission: to be earned per home sold, depending on your fees.
These numbers are easy to figure out. However, take it a step further and go back at least three years (and preferably five) and to find the following numbers per year:
- Number of homes sold in that area per year
- Average days on market (the length of time it took a home to sell)
- Listing agents and selling agents that were active in the farm.
It is very important to analyze the existing competition in the farm. Is there an agent (or agents) already selling 30% or more of the homes in that area? If so, remove this farm from your list of possibilities. However, if you note that in year one, that number was 30%, year two they only sold 22% and last year they sold 17% of the listings, this may be an agent who is not doing a great job of staying in touch with this farm. If the rest of the numbers indicate cultivating this farm is the best fit for your goals, don’t take this farm out of the running.
For example, if there were 10 sales, then there was a potential of 20 sides and 20 agents could have been involved in those transactions. If you have one agent that listed 9 of these properties, then there would be a possibility of 11 other agents involved in those sales. You are trying to see if there is one or two agents who are already dominating that farm area. If there doesn’t seem to be a dominating agent, then you have a great opportunity to market to this farm.
When you pull these numbers you may be surprised to find the neighborhood that you thought would provide the greatest results is not the farm that does. What if the neighborhood with the appealing vibe actually has a very low number of listings and high days on market? Perhaps the neighborhood you lived in has only sold a total of five homes in the last three years but there are over 150 homes in that area, giving your neighborhood a very low turnover.
Once you have gathered this information, create a table as in the example below.
In the above example, Farm #2 is clearly the preferred choice. Although you cannot expect to earn ALL the commission available for that farm, Farm #2 gives you the highest chance of earning due to the high turnover, along with the lowest days on market. Additionally, in terms of the expense of marketing, this farm is right in the middle.
One thing about your budget to keep in mind: I am always asked about what the magic number of addresses an agent should have when mailing to a farm area. There isn’t a magic number, and although mailing to a larger number of homes will indeed give you better coverage, it is a better idea to stick with a smaller farm area to start and stay within your budget comfort zone. Rather than breaking the bank, start off smaller and comfortable and build from there.
Want to read more? You can learn more about Geographical Farming for free in Club Zebra by visiting this link: www.thelonesgroup.com/customer/vault.asp?op=item&vid=1086
Or if you would like to listen to Denise talk more about Geographical Farming and how she set up her system that helped her reach unprecedented levels of success, here is the link which is available for Club Zebra PRO members: www.thelonesgroup.com/customer/vault.asp?op=item&vid=1161