I received some great comments on a previous blog that included an excerpt from the new Billion Dollar Agent book, so I thought I'd include another taste. Here's another sample from the Farm Marketing section draft. Please reply and let me know what you think:
Almost all real estate agents are confused about how often people move. If you ask an agent how often people move, they’d say every 5-7 years, which would imply a turnover rate of 14-20%. The problem is, that number includes renters who do not own a home and therefore is not an accurate gauge of homes sold turnover.
For most farm areas, the annual turnover rate is 2-10% with an average of about 4%. Thus, for 1,000 homes, there may be about 4% or 40 homes sold per year. To choose a farm area, it is important to analyze multiple potential areas and see recent turnover rates. Thus, a farm of 1,000 homes with 80 deals per year is better for marketing than 1,000 homes with 20 deals per year.
Market Share by Agent
Do not assume that any agent has or does not have a significant market share in a farm. The only way to review is to export data from MLS and analyze. We recommend exporting all the listings to Excel from the past three years for a potential farm area. This will allow you to analyze not just closed deals, but listings which expired, as well as the
shift in recent years. You need to export the listing and closed date, listing and sold price, and listing agent and listing broker. Using a simple Pivot Table in Excel, we can quickly analyze counts and sales volume by listing agent and listing broker.
Usually, no agent has 20% market share or more of a farm area. In fact, often no one even has 10%. If someone has over 20%, it may not make sense to pursue that farm area because, it may take longer to establish market share.
How much should you spend on Farm Marketing? We advise to spend 20% of marketing on Farm Marketing. Thus, if you are spending 10% on marketing, that would be 20% of 10% or 2% of GCI. For an agent doing $500,000 GCI, that would be about $10,000/year. We advise a budget of $15/year for Farm Marketing for each property. For example, for 1,000 properties, the budget would be $15,000/year for all marketing mailings, online media, and assistant services to run the entire campaign. In general, budget about $10/year for a monthly mailing, such as a jumbo postcard, and a separate $5/year for advanced farm marketing, such as neighborhood open houses, adopting buyers in your farm, and other activities listed below.
Farm Marketing is a long-term investment. You should not start Farm Marketing unless you can spend the budget for first year of marketing and receive no revenue or results for one year. Farm Marketing does not truly pay off for about three years. As a rough estimate, when done fully, Farm Marketing can result in 5% market share for Year 1,
10% in Year 2, and 20% in Year 3 and onwards.
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