INTRODUCTION
When you become an estate agent, you join part of a group of professionals who perform a function in the selling and purchasing of a house. They rely on you to do your job smooth and legal. To stay in the business you must understand what role you play, stay apprised of changes in the law, research and gather new information on a continual basis and market yourself ahead of the competition.
There are those that specialize in certain areas of the real estate business, nevertheless you must acquaint yourself with all aspects of the business:
Appraisal
Finance
Escrow
Property Management
Being in the service industry, you must exhibit patience and be a good listener. Above all you must put the clients first. Communication is key as you will have to explain each step in the process for first-time buyers, busy professionals, newcomers to the community and those dealing with a death in the family. Get to know your clients to better serve them.
MARKETPLACE
Key thing to remember is the RE market is an imperfect market. Supply and demand play a significant role, but it’s not the only role.
“A buyer will determine what the most appropriate offer is, and the seller will decide if it is acceptable.”
Here are the reasons why the market is imperfect:
What the buyer knows. What the seller knows. Misinformed sellers or buyers make bad decisions and create discourse in the market. When the buyers and sellers have the information a more stable market is achieved.
Interest Rates During a low interest rate cycle, buyers are more inclined to make larger purchases (homes) that when interest rates are high.
Emotion A largely unknown quantity.
RE Agent Error In inexperienced agent may not quote the correct listing price due to inexperience or unethical motivations.
Stratified Market In a price range from $0 to $100M there will be greater demand for a certain price bracket over another. Likewise the availability across the different price points will differ greatly. This will manipulate the asking and selling price.
Production Differentiation Even exactly similar homes are different, or at least perceived to be by the buyer and seller. No home is the same.
Will Versus Must ‘Will” clients have decided to make a real estate move. ‘Must’ clients ‘have to’ and are not able to dictate a price as they would like to. These clients are more prone to negotiate.
Imperfect Knowledge Building homes is like a giant tanker in the ocean. It takes a long time to start-up and a long time to turn around. Sometimes the market can change on a developer and they can get caught short.
ECONOMICS
The economy and real estate are joined. They affect each other, sometimes working together and other times working against. A home has longevity, and depending on how it is built, where it is built and how it is cared for will determine how long it remains a viable investment.
Breakdown of the 4 levels: When working with these four sectors it’s best to work from the bottom up
NATIONAL
REGIONAL
CITY
NEIGHBORHOOD
Markets,Prices and Supply & Demand
The general understanding is that in market controled conditions, the buyers have no control over how much product the vendor creates. If there is more demand the manufacturer increases supply. If the opposite happend, the manufacturer can reduce the amount of units available.
In the imperfect market there are more buyers than homes available. Both the buyer and seller control the price to some degree.
Some factors in relationship to demand.
Income ‚-> Higher incomes = demand for goods increases
Advertising ‚-> Well written ads can increace desire to purchase a product
Population ‚-> As population increases, so does demand
Credit ‚-> Low rates and ease of qualification will increase demand
Consumer desires ‚-> Fads and fashion will dictate the direction of the demand
Manufacturers have the ability to increase or decrease production depending on the demand. This is described as ‘ELASTICITY’. In a manufacturing market almost all aspects are elastic. In real estate certain factors have varying degrees of elasticity.
Supply of land is not elastic.
Demand is.
Other forms of land use that could be used for homes is elastic.
RE Supply & Demand
There are essentially 2 kinds of markets, a ‘buyers market’ and a ’sellers market’. A buyers market, is one where there are more homes than buyers and buyers hold off to obtain a better price. This causes inflation. A ’sellers market’ allows the seller to hold out for their price as there will be more buyers looking at their property, this causes deflation.
RE Economic Principals & Theory
Assemblage: Is the joining of 2 plots of land.
Economic Life: Is the viable profitability of a home.
Economy of Scale: Building more units at once brings down per unit cost.
Subdividing: Smaller SFR plots = larger profit than 1 large plot.
Filtering Down: As the wealthy move on to better housing, the leave behind their old homes for less wealthy.
First Choice: If a buyer has a type of property #1 on his desire list he will pay a premium.
Competition: Highly desirable areas will create competition, but it can go both ways.
Change: Land use changes. Usually ending in housing.
Business has a 4 stage cycle process:
PROSPERITY
RECESSION
DEPRESSION
RECOVERY
Real estate has 3 cycles:
DEVELOPMENT
MATURITY
DECLINE
BROKERAGE
Agents working under a brokerage can expect to do the following:
Commercial, industrial and agricultural sales.
Mobile home sales. (DMV, licenced through Dept. of Housing
Business opportunities (As business moves on new lease negotiated)
Residential Income
Property Management
Leasing Agents
Lot sales
Loan Broker
RE auction sales
Salaried assistants
Appraisal
The relationship between broker and agent is that of independent contractor. The agent represents the broker and must conduct themselves lawfully and ethically. The agent will most likely rent a space from the broker. Other than that the agent is free to do what he/she likes. Hire a staff, choose hours of operation, etc.
ATTITUDE
A good attitude is important to successful sales. Good attitude breaks down into a few key points.
Be active
Persistent
Turn failure into success
Be excited about RE
Problem solve
Be confident
Actions & speech (positive)
Flexible and adapt
FIND THE RIGHT BROKER
It’s best to find the right broker for YOU. There are also enhancing factors to consider when choosing a broker.
Do they supply additional training?
Do they have a large and up-to-date resource library?
Are they specialized n your your area of interest?
How are the co-workers, successful, easy to get along with?
Does the work environment suit your personality?
MAINTAINING YOUR LICENSE
All agents must renew license every 4 years. Advance notices go out 90 days before renewal date. Both brokers and agents are required to renew. First time renewal differs in the fact that brokers must complete a DRE approved course (45 hours) and agents must (12 hours). After that both must complete 45h DRE continued education courses. You have a 2yr grace period in which to renew, but cannot continue to act as an agent. After 2 years you will have to sit for the state exam again.