Adapting to changing marketplace is essential for Realtors’ survival

First it was “60 Minutes.” Now it’s the front page, top of the fold, of The New York Times (June 8, 2007: “Home Sellers Do Better on Their Own in One City”). How many articles and TV shows is it going to take to convince every Realtor that the business of selling real estate is profoundly changing?

The Times article focused on just one college town and essentially made the case that during the red-hot market years, 1998 to 2004, extremely well-educated and patient people with flexible job schedules and lots of spare time can use a Web site to sell their own home. That’s what passes for news?

What should also not be news to anyone reading this is the rising sentiment that Realtor fees are too high. The Internet is the most powerful force for disintermediation ever invented. Many formerly very profitable businesses have succumbed to that force. But others, such as stock brokers, have gone on to thrive through more creative marketing and by rethinking their business model.

New Hampshire Realtors operate in a real estate marketplace that is more multifaceted than most and a place that is demographically shifting as well. In a fast-changing and complex market, one survival strategy is to simply be better informed than anyone else.

That’s extremely important, but not sufficient, because sooner or later that data will appear on somebody’s Web site.

Perhaps the best strategy for long-term success is a combination of superior marketplace knowledge and a marketing program that continually and credibly reminds customers of the value they receive for the fees they are paying.

The fundamental and primary purpose of spending time and money on marketing is establishing value. A critical part is in making sure that your value proposition is credible. U.S. car makers are in such bad shape in large part because their marketing messages about quality were not in sync with their actual product quality.

Taking on FSBO

Successfully competing against for-sale-by-owner (FSBO) Web sites is partly about making a list of the valuable benefits a customer will receive when listing with you versus trying to sell their home themselves. Perhaps guaranteeing a higher price for the home should not be on that list. First rule of marketing: Only promise what you can actually deliver.

The New York Times article reported that, based on a Madison, Wis., economist’s study, home sellers did not get a higher sale price when using an agent. But the article went on to say that homeowners, even in Madison, sold their homes faster when they used a real estate agent and that only two-thirds of the homes listed as FSBO actually sold at all that way, compared to over 80 percent of those listed on MLS.

It should be noted that a careful reading of the Times article (which few readers will do) reveals that the two economists who did the study are talking about it a lot, but it has not been submitted for peer review. In other words, it has not been checked for validity, accuracy or any statistical adjustment bias.

No matter, many readers will accept their basic conclusion as fact. And that leaves Realtors with the difficult marketing task of trying not to dispute those findings (a waste of time) but showing how their skill and professional work will actually pay off for the home buyer or seller.

No counter-study, thank you. Just facts.

Speaking of facts, we still do not know anywhere near enough about home buyers and sellers in our state. The complex nature of this marketplace (working people, retirees, second home buyers, commuters, etc.) means that future buyers and sellers may have very different needs or desires. A better understanding of the characteristics of each market segment and how to respond to their different needs could become a key element in a New Hampshire Realtor’s value proposition.

According to the Northern New England Real Estate Network, the average value of the roughly 4,500 residences sold in the first five months of this year edged back up over $300,000 (excluding condominiums). But about 440 fewer units were sold, a 9 percent drop. Only Rockingham County saw an increase in unit sales.

But most counties showed relative price stability, with any change being in the low single digits. The exception was Carroll County, which showed a 13 percent drop in average price. By contrast, Belknap County’s average price rose by 13 percent.

On a statewide basis, it took an average of nearly three additional weeks (for a total of 4.5 months) to sell a home in the first five months of this year compared to the same period last year. Despite the Times headline, this does not look like a real estate market where amateurs are likely to do as well as they did in easier times.

Peter Francese is a demographer who lives in Exeter. This article originally appeared in the New Hampshire Association of Realtors’ e-newsletter, Real Estate Market Trends.