Why 87% of Agents Won’t Make It In This Market

Dave:
Hey everyone. Welcome to On the Market. I’m your host Dave Meyer, joined by James Dayner today. How’s everything going James?

James:
It’s good. We’ve had a busy productive week. We’ve been getting a lot of deals done, so I’m excited.

Dave:
What kind of deals?

James:
I just locked up… Man, I just ripped a deal last night.

Dave:
What was it?

James:
We got a six unit townhome site, the land in a great area with a great structure on it for about 75,000 a door.

Dave:
Whoa.

James:
And not only that. I don’t even know if I’m going to build it out. It breaks even so we can keep it and land bank this property. It’s like a 2,000 square foot house. I think I’m going to actually keep it, not develop it.

Dave:
Oh, it’s a single family now, but you could build six units?

James:
Yeah, it’s a single family on an 8,000 square foot lot. You can put six units on. But it’s funny, I’m like, “Right now with the cost of build, it actually might be better just to land bank this. It basically pays for itself and wait till the next boom.”

Dave:
Nice. Well congrats. Well, we do have a great show for you today. We are joined by Nick Bailey who is the president and CEO of RE/MAX, which you’ve probably heard of. It’s one of the largest brokerages in the entire country. We have an awesome conversation with Nick all about, first, his story. He’s got a really cool story about how he got into real estate. But then we’d sort of talk about how to navigate this market and how utilizing a great agent is key to figuring out what to buy, where to buy right now. He also has some great tips if you are a real estate agent. I actually get a lot of feedback from agents. I think a lot of real estate agents listen to this show. And if you are an agent, you’re going to really like this show because Nick has some excellent advice on how to navigate these slower times and some tactics that you can use to boost your business even now.
James, as as an agent yourself, been an agent for a long time, what did you take away from the conversation that you think people should listen for?

James:
It’s just sticking to your basics. If you’re a broker or as a buyer, just exploring all your options and then getting focused, whether it’s a buyer, getting the right financing in place that where you can get into homeownership or as a broker narrowing that focus and getting back to old school tactics that you can do business. And honestly, it’s a really good time to do that because we talked about how many agents quit in 2008. There’s going to be space for you to grow your business right now if you want to get after it.

Dave:
Well said. Well, we’re going to take a quick break, but then we’ll be back with Nick Bailey, the president and CEO of RE/MAX.
Nick Bailey, welcome to On the Market. Thanks for joining us.

Nick:
Thanks. Great to be here.

Dave:
Can you tell us a little bit about your position at RE/MAX and how you got into real estate?

Nick:
Do we have time for that? I mean, it’s a long story.

Dave:
As long as you can go.

Nick:
No, I currently serve as the president and CEO of RE/MAX. And RE/MAX is a worldwide real estate brand, over 145,000 agents spanning 110 countries. And how I got started, it kind of all started back when I was 17 years old I think was when I first got the bug and I had an opportunity. I bought two commercial properties, retail properties when I was a junior in high school. Long story of why I did, but I ended up being a landlord and running a business out of the other one. And then bought my first house before I went to college at 18, got licensed at 21 and been an agent broker. Been on the tech side with the portals with Trulia and Zillow and a couple other brands and has led my path to RE/MAX a couple of times.

Dave:
Wow, that’s very cool. I am amazed. I don’t think I’ve ever heard anyone buying commercial property in high school before.

Nick:
Well, I’ll tell you, I was a music guy, so I was the dorky redhead that played the saxophone. We all know that guy in high school. And all of a sudden, my cool factor went up because I was a landlord to the coolest pizza place in town, and I got free pizza. So I was like instant friends. It was [inaudible 00:04:10].

Dave:
It was very strategic, yeah. And free food. I don’t know if you would get free food, but…

Nick:
I did. I put it in the lease. I had certain number of pizzas each month that I could get.

Dave:
That’s amazing.

James:
Would you resell them?

Nick:
No. See, that’s the true entrepreneur right there, James. I should have profited somehow on them.

Dave:
James always says on the show that he’ll flip anything, house, commercial, but I guess pizza’s also on that list now.

Nick:
No, pizza’s [inaudible 00:04:36]. Great.

Dave:
So tell us a little bit about from your seat as the CEO and president of RE/MAX, how business is going in this confusing economic and housing market that we’re in.

Nick:
Well, first off, it’s not confusing, and here’s why, is something has happened. I’ve been in this business nearly three decades. Guess what’s happened every single year since I’ve been involved in this industry. People buy and sell houses. And so real estate is timing, right? It is absolute timing, but it is not timing of the headlines or anything that people report on.
When I think back of my first house, when I purchased I was 18, I was going to college, I decided that as first time home buyer, low down payment was a lot better way to go than trying to pay for on campus housing. And so my rate was 6.5%. I didn’t know if that was a great rate, was it high, was it low, was it better than six months before, was it going to get better. I just knew that it was, “Did I have enough for the 3% down payment? Could I afford the monthly payment? Did I need to rent out a couple of bedrooms to help out I did the first year?” And so I think that that’s kind of synonymous with how many people are in their homeownership journey, is it’s more about life events. That’s the timing.
When is it right for you? And I look at people that are comparing and saying, “Rates are so much different today than two years ago. People can’t buy a home.” Well, there are people today that got a different job, maybe got a promotion, maybe got an inheritance, and they may be a buyer today in a higher rate environment than they were two years ago. And so the timing is really about getting married.

Dave:
Yeah.

Nick:
Divorce, having kids. And so the state of the market is really about each individual’s preference. That’s the headline that’s makes it not confusing. Where I think some of the confusion comes in is when you get to the investment side. Is now a good time to invest or buy or sell or flip or rent? And that’s a different conversation, but the vast majority of real estate is done through homeownership of individuals.

James:
Nick, when you… Hey, I love your story. I had a very similar story. I bought my first piece of land at 18 and then I ended up flipping the land and helped pay for college. So to make that decision when you moved, you decided to buy your first property going into college, how did you come to that decision? Because that’s something pretty rare in that most 18 year old kids are going to college, play beer pong and learn. And so how did you make that decision?

Dave:
And some of us only wanted those things.

Nick:
Fair. I don’t know. I had gotten involved… My parents were entrepreneurs, they had businesses all while I was growing up that I was involved working in. And so I think there was an entrepreneurial spirit kind of in our family that was absolutely the driver. When I looked at it, I just had in my mind that I couldn’t imagine renting something and giving someone else my hard-earned money because I was different in high school too. I mean, I was running my own business in high school and doing a lot of different things and trying to be a grownup way too fast. I’m a 10-year-old kid now and I was probably a 50-year-old man then.
So yeah, I don’t know. I just thought it was just better. And it turned out it was for me. It was an investment that having two commercial properties, my first home, and then when I got my real estate license, they said, “Hey, you’ll never amass any kind of wealth by just earning commissions but purchase a piece of property for every year that you’re licensed.” And so by the end of my first five years I had five properties and three homes. And that helped laid the foundation for today. And so I do believe heavily in real estate. Obviously, it’s just in my blood and bones.

Dave:
So given what’s going on right now and your story… And I agree with you that the majority of people who buy homes, I think it’s about 80% are homeowners, so that’s not investors, people who are buying based on life conditions as you said. Are you noticing though that you’re sort of having to educate buyers a little bit differently or have attitudes changed among buyers or is it still the same?

Nick:
Well, I think it’s constantly moving it’s constantly a moving conversation. It depends on where each buyer is in their journey. Okay, so you mentioned the word what’s confusing right now, inventory levels are. Because what we’ve seen with the historic low rates and refinance that happen over the last couple of years, for example, most recently we didn’t have the move up buyer come to the spring market like we historically have. And when you look at what’s driving that, 90% of homeowners that have a mortgage… First off, 34% of homeowners don’t even have a mortgage. But of the remainder, 90% have a rate under 5%. And of that 90, 50% are under three and a half. And so everyone’s in love with their rate right now and saying, “Hey, I might have a three bedroom home. I’d love to have a four because we’re expanding our family, but I’m good with my three right now.” And so that’s been one piece that has been a little difficult for many people, is there’s just not enough inventory out there to offer for the demand, especially in the first time home buyer category.
It’s estimated we’re short about five and a half million homes across the US. And interest rates people haven’t gotten used to them. When you look over even a 10-year period of time, we’re still extremely competitive if not lower on average than we have been over the last 10 years. But we have a recent hangover of these 2, 2.5, 3% things that are just totally abnormal. I was telling someone just yesterday I met with a lender and we were talking about some things and we were both born in the same year and I said, “From the time I was born, rates were not under 9% until one month after I had graduated from high school.”
So in the first 18 years of my life, interest rates were 9.3% or higher. And guess what happened over those two decades? People still bought and sold houses. And so right now we’re rebuilding the refi pipeline, but I think there’s something that buyers need to know. I do not believe that nine out of 10 home buyers need a 30-year fixed mortgage. I think the only reason that people do a 30-year fix is that security of nothing will change for 30 years. But the average homeowner across the US only lives in their home eight years and the median is 12.3. And so there are so many more mortgage products out there except for the 30-year fixed which favor the banks, not the home buyer that people need to be counseled very, very well from their lender about what different options look like and be okay with some level of flexibility as you move through your mortgage.

James:
Cost of debt makes a big difference when you’re buying a property. Like what you just said is you got to kind of look out not outside the box, but you just need to look at all options to really make a smart home buying decision. And so how do you guys educate people if you don’t like… Yes, I agreed, not everybody needs a 30-year principle and fix. I’m actually a person that actually really feels comfortable with it just because of 2008. I’m like, I’d just like to lock my debt. But for that new buyer that’s trying to get into a property, rates are expensive, pricing is expensive, what kind of options do you bring to them to try to help them make that decision? And what other kind of optional loan programs are you guys pitching to them right now?

Nick:
Well, number one, you need to have a good agent and a good lender. Period. That is number one the only thing that buyers need to know, is start with a great agent, start with a great lender. Because the reality is the vast majority of people only go through a real estate transaction on average two, three times in their lifetime. So this isn’t something they’re engaging in on a regular basis. And it’s awesome to have a really knowledgeable, trusted advisor. So that’s number one.
Number two, look across all of say the mortgage products. Look at adjustable rate mortgages. That used to freak people out. However, adjustable rate mortgages were more than 35% of the market pre-pandemic. They went to virtually nothing because the low rates on the 30-year fixed. And now like the 10/6 ARM is blowing up and people are saying, “Hey, we can refinance. We’ll fix for 10 years.”
But I’ll give you something that’s a great example of people have heard of the all in one mortgage. That’s one I was just reviewing with a lender yesterday, and it’s how you can utilize the equity in your home on a daily basis with an adjustable rate interest rate. Now it freaks a lot of people out, but this is the type of mortgage that if you look at how interest is calculated on a daily basis, this is a mortgage that you actually put, say, your paycheck in your account every two weeks and instead of just a cash holding account, your interest on your mortgage is calculated on a nightly daily basis and they go in and they sweep your account to zero every single night and apply all of the money that you have sitting, say, in a checking account to your mortgage every single night. So you have to wake up and be comfortable with the fact that your balance and your checking account is zero every single day.
But if say you have $10,000 a month that you have running through a checking account, if your interest on your home is calculated on a daily basis, every time you throw $10,000 and reduce the principle on your mortgage, that’s that much less interest that you’re paying on a daily basis. What’s interesting is this type of mortgage. And then you have a debit card that you use and you’re basically then using some of that equity as you would, say, cash in a checking account. It’s a very different mindset that most people wouldn’t be comfortable with, but when you see that you can take an average 30-year mortgage and shave off nine years just by sweeping your checking account on a nightly basis, it totally is a game changer on your ability to cashflow your property. And what’s cool, it works like a HELOC. So if you wanted to 10 years in decide to remodel, go purchase a rental property, your equity is locked at the value at the time that you close the loan and you have full access to your equity anytime you want without an application to a bank.
So it’s just an example of that’s something that people aren’t talking about, but it’s a mortgage product, especially for people that want to use their equity, play with their equity, pay their property down in a lot less time with a lot less interest. Those type of products, people need to learn and understand. They sound complex. Trust me, the first time I saw it I went, “Whoa, people are never going to wake up every day to their checking account being at zero” because it’s a security blanket. But once you start understanding what’s behind it, it can be an amazing way to drive or help the affordability and the rate questions.

Dave:
Yeah, that is kind of mind-boggling. I’m trying to wrap my head around it. I’m curious, so the rates are the same I assume, you’re just paying down the interest faster. Are there any risks you see in that kind of product?

Nick:
Well, I don’t think it’s as high risk as it sounds, but here’s where the risk does come in. It is fully adjustable, so the rate is changing basically on a daily basis. And so you have to be comfortable with the fact that your rate may be 5.5% today, five and three quarters tomorrow, and it’s calculated on a daily basis. But when you average it out over a period of time, it generally comes out to be lower. So there is some risk, but there is a floor and a ceiling. So you can look at your worst case and your best case scenario, and that’s where I think you should create your comfort level. Where there’s risk is the same with this product with any other homeowner using their equity. If you use your home as an ATM machine instead of an investment and using your equity wisely, then you can get into trouble.

James:
One question I have on that because I remember, is there any kind of guidelines or is there any kind of stipulations written in loan that the lender can not advance the balance paid out? In 2008, I remember when they changed HELOCs, it was like the banking market locked up, you had a $250,000 HELOC. And if it wasn’t used, all of a sudden you get a letter and it’s like, “Now your HELOC, you can pull up to 25 grand out” and they would adjust the balance. If you’re paying down the balance, can they change that based on loan-to-value saying, “Hey, we’re not going to advance you any more money.” Is there any risk in the product with that?

Nick:
Well, when we talk about the all-in-one product as one example, depending on the price point, anything under around 3 million is about an 80/20 loan-to-value that you’re guaranteed at the time of closing that they will guarantee it moving forward. Now when it comes to other HELOC products, read the fine print, understand what you’re dealing with. And if they have the ability to change the terms, that just needs to be something that you understand.
So the point is, I love what we’re bringing up, which is several examples of the fact that not all mortgage products with every bank or lender are the same. And so having a good agent and a good lender helps you go through and say, “What is a good option that you’re comfortable with?” versus, “I can only do a 30-year fix so I can either afford a house or not.” And that’s where I don’t want buyers to get stuck in that mindset because there are more options available to help people get into the home that they’re looking for whether they’re first time or move up other than a 30-year fixed.

Dave:
Nick, I want to get back to something you said earlier that you believe that most people just buy based on life circumstance, timing. But for investors you seem to be not sure if it’s a good time to buy. Can you elaborate on that?

Nick:
Well, let’s give you an example. So we had the iBuyer craze a couple years ago, which iBuyer was a fancy word for cash buyer. We always have cash buyers in the market, and what a lot of them were fix and flip buyers. And so you have to have a couple things on your side. Acquisition costs have to be in line, your hold time, your flip costs, and then days on market and your appreciation. Whether you flip one house or you flip a thousand, you got to have all of those variables on your side to make it profitable and get the margin for the fix and flip business.
What ends up when you see some of these institutional investors like we see right now, a lot of them went, “Uh-oh, we can’t fix and flip because we don’t have this huge appreciation on our side. So then what we do is we purchase to rent.” And with some of the institutional buyers that have access to capital, then they can cash flow it based on the rental needs versus just a short-term fix and flip.
And so it’s interesting to watch the profile of investors when the market moves pretty significantly or rates change significantly because you see the behavior flip pretty quickly as well. And we saw that start about a year ago that the fix and flips started to go into the purchase to rents. So it just depends on the timing. And then what we’re going to see is a number of these investors that have purchased and are holding for rental in 24, 36 months and you get a lot more price acceleration in certain markets again. You’ll see some of those renters then want to cash out. If they’re looking for a five year or less type of investment, they’re going to wait for that right time to start to see that appreciation. You’ll start to see that inventory hit the market.

James:
So with this pivot, then the market changes every 12, 24 months. Or every year’s different, right? We’re a broker team that specializes in working with investors up in the Pacific Northwest. And so RE/MAX is a really cool platform because it keeps cost minimal for brokers, they have really good training. And the RE/MAX brokers I’ve met over my career, they’ve always had these kind of niche specialty businesses. As a company, how are you guys educating your brokers on how to building out their business when you’re seeing those pivots going from fix and flip to buy and hold investors? Because sometimes the brokers need that little push and the little light bulb to turn on and then they can get going back to normal business. What are you guys doing inside your company to help get those brokers off the bench?

Nick:
You have a number of great things that I’m literally smiling ear to ear. Great question. Great question, James. Best of the day. Couple of things. One, for a producing real estate agent that is full-time in the business, we’re one of the least expensive options to be affiliated with the most value. If you are someone that doesn’t sell a lot of real estate and hangs your license, we can be one of the most expensive to be affiliated with. And so our model is really designed around production.
And so let me do my little brag for 10 seconds. The average RE/MAX agent has double the years of experience, 15 years of experience right now. The average in the industry, seven. Average RE/MAX agent out produces the next closest large competitor 2:1, selling twice as many properties as the next closest competitor. And so when you ask the question about what are we doing to keep people engaged or excited, one of the things that we talk about a lot is adaptability. And if you’ve been in this business for 15 years, you’ve seen market cycles. We’re celebrating our 50th anniversary as a brand this year. And so we’ve seen market cycles, we’ve seen changes. And it’s about us adapting very quickly when those agents that maybe don’t have as much experience and haven’t adapted to changes in a market kind of freeze.
Let me give you a great example. I was talking to someone just this weekend and they have a son that got licensed in real estate just 12 months ago and said, “He did okay his first six months, but now he’s back to bartending because the market’s gotten tough.” And I said, “Interesting. What made the first six months easier than the second?” And he said, “Oh, the market.” And I said, “Ah, good. Where was he getting his business that first six months?” He said it was just kind of coming from everywhere.
Well, that’s an example of the market was agents were order takers, that the phone was ringing and they just had to be there to answer it and drive and write things and show things and help with just answering the demand that was coming in. That’s not truly the foundation of every market. You’ve got to have a sphere, you’ve got to keep in touch with your contacts. Most top producers, the vast majority of their business comes from repeats and referrals. If you don’t have or don’t take time to build your database and make sure to interface with your sphere… I mean, I keep telling people people’s sphere of influence have been ignored for the last couple years during the frenzy of the market. Your sphere is hungry for your attention as an agent and that idea of every person that you engage with saying, “Hey, do you know someone interested in buying and selling real estate?”
And so those foundations that are absolutely key to this business in any market, they really come to light at a time like this when we’re seeing a market rebalance. And this is kind of the fundamentals of the business, the foundation of the business, the basics, however you want to refer to it, but that’s absolutely what we talk about. And agents also that have been in the business and gone through multiple market cycles, they say, “Hey, I may have had a top year. My income may go down a little bit 10 or 15%, but when you outproduce and you take it as a full-time job, you know that it doesn’t mean the difference of you being either in the business or out of the business.”

Dave:
I saw for the first time that NAR membership had declined for the first time in quite some time. And I’m always curious about whether that is producing agents, as you call them, people who this is their full-time job or is it people who jump in when it’s really sort of a good time and it seems like money is easy to make and anyone can do it. And it didn’t drop by that much, it was a kind of just a small percentage, but I always wonder if that’s really just a reflection of people who are doing it as a side gig just wanting to save money and dues and the quality agents wind up sticking around.

Nick:
So first off, let’s start with the headline. 87% of agents that get a real estate license don’t have it five years later.

Dave:
Whoa. Really?

Nick:
87% that get a license don’t have it five years later. The barriers of entry to get a real estate license to this business are low, but the barriers to success are high. And it’s not a get rich quick scheme. I mean, it takes a lot of hard work and people find that out. So that’s number one.
Number two, let’s rewind the clock. We had 1.5 million realtors in 2007. Through the Great Recession, we went to 983,000. We lost 34% of the membership. And in the last 10 years we’ve gone and had a run up to 1.6 million members. There are people that believe we’ll reduce by about 250,000 realtors across the US in the next year or two. The number I saw yesterday was year to date, it’s 60,000. But it’s always a delayed number because remember, people get their license, and depending on your state, you’re generally on a two or three year renewal cycle. And so it’s a lagging number to what’s actually happening.
There are people that are saying just like the gentleman I was just telling you about, that it’s back to bartending because he thought, “Hey, real estate’s hot and I’ll get my real estate license” and did okay for a few months. Well, you usually, as soon as you go back to bartending, he didn’t turn his license back in. Actually, he’s calling me next week and I’m going to talk to him about where he is at real estate and what happened and why did he get out and maybe can he get in the right culture environment, company, education to get him to where he wants to be because he really wants to be in this business. And that’s an example of he’s out of the business, but according to all the numbers that you see, even our numbers, he’s not out of the business. And so it takes some time. Are there people that retire? Are there people that say, “I’ve done this for 25 years and want to step side?” Sure. I believe the vast majority of the people though are those that have had less than five years in the business.

James:
When you’re a broker and you’re starting out, it is like you said, especially if your a bartender, that was the hotspot back in 2007 too because they had their clients coming in, then they’d sell them a property and it was like that easy lead flow. And then I remember watching that in 2008, it was like everybody was a broker and then nobody wanted to be a broker. It was kind of like, “Ooh, you’re a broker?” It almost gave you a bad vibe. It was like, “Ooh, how’s that going right now?” They almost felt bad for you. They talked to you with sympathy.
But as we’ve seen this market shift, inventory is key to selling property, right? Finding the product. Or having the client, then you got to find that product. And so it’s about becoming innovative as a broker, like how do you create the inventory. You can always create a buyer to… There’s a buyer for every market. Like you said, people are always buying and selling.
Have you guys explored it, your brokerage, how do you create more inventory besides your standard mailers? I know for us we’re optimizing call rooms and different things to generate leads for our brokers to have more opportunities right now. Like with that new broker who’s a bartender, he wants to get back in the business, what would those steps be for him? Because usually, it comes down to just grinding out and working the phones and working your network. What’s that step that he needs to make?

Nick:
Number one, get yourself around top producing agents. You will learn more, pick up more, even osmosis more through people that are producing real estate. I think one of the biggest tragedies of real estate are the water cooler agents that stand around and say, “Oh, the market’s tough, right?”
“Yeah, I haven’t sold anything this month.” That is not the environment you want to be around. You hear the cliche, “You are the product of the five people that you’re closest to.” And so when you get yourself in a culture of people that sell a lot of real estate, you’re going to end up selling a lot of real estate. That’s number one.
Number two is education. We are big here at RE/MAX about coaching. And we engage with a number of the major coaches, the Brian Buffini, Tom Ferry, Jared James, and the like. Because there are so many good programs that not only teach you ways to find that inventory is one example, but really to develop the life skills of this business to make sure that you’re around 5, 10, 20 years or as long as you want to be in this business, you’ve got to have those skills. If anybody knows the Savannah Bananas, have you guys ever heard of them?

James:
Oh yeah.

Nick:
Yeah, they’re awesome, right? This is the baseball team in Georgia. Dave, you haven’t heard of them?

Dave:
Is it a minor league team?

Nick:
They’re like the Harlem Globetrotters of baseball.

Dave:
Okay.

Nick:
Right?

Dave:
Like a novelty team?

Nick:
They’re out there dancing and they’re fun. But if you’ve ever listened to the founder and the CEO of the Savannah Bananas, he’s awesome. And I would encourage people to look him up. He’s got a few clips that you can see him speaking. And he talks about clients are transactional, fans are forever. He uses the fact that the three most powerful words in creating a fan of, “You wouldn’t believe if…” Or, “You wouldn’t believe this.” And it’s the idea if you go to the stadium or go to one of their games, you’re going to walk away and say, “You wouldn’t believe…” Fill in the blank. “You wouldn’t believe they were dancing right before they throw out a pitch. You wouldn’t believe that the ump is doing…”
And so all of a sudden I think that when you start translating that into the real estate business, it really aligns well, which is the idea of, I don’t believe in real estate we sell houses, I believe houses sell themselves. We sell getting people into and out of homes, which means connecting the right parties and the right service level to make the transaction happen. And in the process, you can create raving fans. And when you do, fans are forever and you build this wonderful sphere and database that can be absolutely your engine to finding listings, getting inventory and keeping your business humming through all markets.
And then there are tactical things. I mean, hitting the phones is a great thing. Some people aren’t phone people. I’ll give you one example on finding inventory whether it’s your listing or not. Statistically speaking, on a street, and define a street, it may be a couple, but a small geographic area, when one home comes on the market, statistically speaking in the next 30 to 90 days, two to three more homes on that same street are likely to come on the market. And so I see agents having success with door knocking, old-fashioned, knocking on the door and saying, “Hey, Mr. And Mrs. Homeowner, I’m Nick from RE/MAX. By the way, I just wanted to let you know the house across the street is going to have a for sale sign tomorrow. Are you curious what the price is because prices have been crazy in this market?” And then the idea of, “Are you considering selling at any point or do you want me to keep in touch with you to let you know what that property sold for, how many showings they got?” And all of a sudden you’re engaging in client relations.
And so that is just one tiny example of ways that coaching and education can teach you the foundations of how you can drive and find and hunt for this business when you’re not just sitting back and being an order taker.

James:
My ears perked up when he said door knocking.

Dave:
Yeah, now you’re talking James language. Before we were recording, James and I were just chatting and he was talking about how he was going door knocking. He has hundreds of employees, but he’s just doing it himself still.

James:
It 100% works. I was working with brokers for three and a half years down here trying to get a house and I finally just was like, “I’m giving up.” And I door knocked, I had a house within four days. It’s like banging doors. It’s like when the market gets hard, going out and just taking that extra effort and building that in front relationship, face-to-face relationship, in my opinion… And I know feel like I’m a dinosaur now, but banging doors works. It really does. You get to meet the people, you can shake their hand, you get to have a genuine conversation with them, and you have a reason to be there half the time. And if you have that reason to be there, it makes the conversation a lot easier to start, so I love that. Banging doors works. For all those brokers out there, just get after it.

Nick:
It does. Now, what I heard though out of this, James, when you talk about this, the vast majority of agents aren’t willing to bang the doors. It shows to me that in this industry, it’s very much the sea of sameness. And what I mean by that is we all send just listed cards or just sold, and then the flyer here, the email marketing piece here, sea of sameness. Agents have got to look and say, “How can I differentiate myself to be the expert in my farm area or my local market and make sure people know me?” And when you really start focusing on that, I bet in that area that you’re willing to door knock, those homeowners know you probably better than any other agent in their area because you’re always present there in many different forms. Yes, a card in the mail have just listed. Yes, knocking at their door, a email campaign or a marketing campaign, but you got to be present.
And speaking of this market, let me throw in one more thing on marketing. I tell agents all the time, “Do not get invisible right now.” One of the number one areas that agents start reducing or right-sizing their business, cutting costs, is marketing because it’s expensive. And that’s where we have scale as a brand. We provide all these free marketing tools, and year to date 4.6 billion impressions of the brand that you can’t get if you don’t have scale. All those things you need to be using right now to make sure that you’re not invisible. And when I talk about this, people kind of look at me and give me a funny look and I said, “Here’s an example. Think back to when you got your real estate license for the first time.” I did, I was 21. Guess what I spent money on immediately?

Dave:
Business cards.

Nick:
It’s marketing. I had to tell the world I was here to help them with their real estate needs. And yet sometimes we’ve done this for 5, 10, 15 years and now the market change, it contracts a little bit, and what do we do? We start pulling back those marketing efforts and now we start to get invisible. This is the market when people have more questions. It’s when buyers need more help around mortgage products. It’s when sellers need more help around pricing and staging. I just truly believe that a consumer in this market, compared to say two years ago, needs a lot more advice than they did. And that’s where we have to be ever present and in front and maximizing our market presence because people need and have more questions.

Dave:
Nick, that’s a great segue to the next question I wanted to ask you, which is, from a buyer perspective, if you are wanting to enter into this situation, how do you find a good agent? And particularly for the people listening to the show who are mostly small to medium-sized real estate investors who want to find someone who can help them with this big investment they’re making?

Nick:
Well, I think interviewing is important. If you rewind the clock even 15 years ago, on average, the number of agents that were interviewed before being selected was one. Because even a referral would take place. “You just went with who? Susie, your aunt, [inaudible 00:36:31].” I think in the online world, people are looking at ratings and reviews much more than they have in the past. Yes, they’re getting referrals from their friends and family. And now we’re seeing on average that people are interviewing two to three agents versus going with the first one that they met.
And so I think the ability to look at agents. And if you’re just starting fresh and you don’t have a referral, you’re going to go online and you’re going to start researching agents. Look at what they specialize in, look at the area that they specialize in. If we’re talking investors, there are agents that specialize in residential investments, whether it be single family or multifamily units or new construction. Look for those specifics. And then I always say look at those ratings and reviews carefully because they tell more of the story. We’re living in a world which is crazy that people will believe what absolute strangers say about you versus trusting what your neighbor will say about you. And it puts everybody on their toes. But do your research, look for the specialties of what you’re trying to look to buy and make sure to look at ratings and reviews and interview multiple people.

James:
Yeah. I think for the consumer right now, it’s really about finding that specialist that… Because brokers, a lot of brokers, especially new brokers that get in, they try to do everything. “I’m going to work with buyers, I’m going to work sellers, I’m going to try to do this.” And then you get so stretched out, coming back when the inventory shrinks and having that niche business really works well. You’re focused, you know what you’re going after, and it gives you that competitive edge for people to work with you. They’re focused on one specific segment, right? Because they’re just pounding. It’s like the broker that works the one zip code. They know that zip code best. They’re consistently going through and it gives them more inventory, right? They own that neighborhood.
I believe our business is very niche too. We work with investors, we do training, we source property, we help them through fix and flip project and strategic plans. And so we’re always able to create inventory based on our niche. What kind of niche training do you guys offer? Or talk about narrowing that focus to so people can keep the business going.

Nick:
I think some of that comes with time and experience. I think we could all be guilty of when you first get your license, you’re chasing any avenue of the business. I drove 75 miles to possibly get a horrible listing. I mean, you’re willing to kind of be jack of all trades, master of none. And yet I think when you then have the experience of figuring out what your specialty is and what you’re good at, I look at some of our very successful teams. You’ve got maybe the team leader, the rainmaker, and all they do is play listing agent. And then they have a number of buyer agents that are experts in working with buyers and they come together and form a team so they can service both buyers and sellers. But you’re right, each individual within that team is specializing. I think that that’s kind of a natural evolution of the business.
The vast majority of agents get into the business and say, “Well, I only want to work with sellers.” But as you know, I think it’s very difficult to only come into the business brand new and work with sellers without some of that buyer experience. And so I just think that that’s a product of the fact that given the fact that we just have doubled the amount of experience in the business, that that evolution of specialization comes to play.
I mean, I’m sitting here and on my desk… Let me give you a prime example. I’ve got Jordan Cohen’s book. He’s been the number one RE/MAX agent worldwide and he’s in California in the Beverly Hills area. The foreword is written by Sylvester Stallone. He’s got a lot of great stories because he works with big athletes and celebrities. He specializes in listings and just takes listings and has an incredible business. And by the way, the agents edge, it is a great playbook if people are interested in someone that’s out there on the front lines selling a lot of real estate on things that they can do, I would say pick that up. And by the way, just because he is with RE/MAX, we don’t make anything by me pitching his book. It just happened to be sitting on my desk and you asked the question about specialization. But I think that is a great example of specialization that he didn’t have day one, but years later in listing 10, 15, 20 million properties, he had to get good at it.

Dave:
Well, Nick, this has been super helpful. Before we let you go, is there anything else, any other advice you have for our audience?

Nick:
Gosh, you guys have asked a lot of great questions. I think we’ve thrown out a lot of pieces that people could dive deeper into. Let me just say this. I think for me, I hope you can tell I absolutely love this business. And being in it 30 years and seeing all kinds of different markets, buyers, sellers, recession, rest assured that if you’re in this business for the long haul, people buy and sell houses every year, that’s not the question, the question is which agents are going to be there to help those buyers and sellers. And those that want to be in this business, adapt, educate yourself and you’ll have an amazing career.

Dave:
Well said. All right, well, Nick Bailey, thank you so much for joining us.

Nick:
Great to be here. Thanks guys.

Dave:
All right. That was a lot of fun. I really enjoyed the conversation about specialization and picking a good partner at the end. I feel like the older I get, the more and more you just keep learning about like, you get what you pay for and just try to find the best person to work with. And I think that’s true so much in real estate, especially with an agent or a lender.

James:
Yeah, no, I think he’s got a really cool story. He’s been through the market cycles. What he talked about is that core business you have to be with a broker, like being with the right brokerage, the right partner, and the right focus. And it doesn’t really matter what’s happening with the market. If you have those three things, you can excel in any market.

Dave:
It’s so true. I really think if you’ve ever worked with a bad agent or a bad lender, you know the importance of these people and having them on your team. I should mention that if you are interested in finding a great lender or a great agent, we have plenty of them that you can get matched with for free on BiggerPockets. Just go to biggerpockets.com/agent for our agent finder tool. We have incredible people who really focus on working with the types of investors who usually listen to this show. Same thing with lenders. And yeah, I recommend still just talking to a couple of them too. I think that’s so true that most people who I know who aren’t investors, who are just home buyers, they just go with the first person that they meet. And that doesn’t always work out. Think about how many agents there are out there and how many of them are probably just doing this part-time and don’t really have the experience necessary to really help you.

James:
Yeah, and I think that’s why it’s so important for people to really narrow their buy box right now. It’s not just investment. As a buyer, what’s important to you? What are you looking for? And then especially with inventory so low, if you really know what you want to buy, then you can find a broker that sells that. You’re going to have a lot more success getting what you’re looking for by working with a niche, not your friend. It feels good to pay your friend, but at the same time, a home purchase is your biggest purchase in life typically, you want to make sure you’re getting the right one.

Dave:
All right. Well James, thanks for joining us. Enjoy the rest of your day. And thank you all for listening. We appreciate it and we’ll see you next time for On The Market.
On The Market is created by me, Dave Meyer and Kailyn Bennett, produced by Kailyn Bennett, editing by Joel Esparza and Onyx Media Research by Pooja Jindal, copywriting by Nate Weintraub. And a very special thanks to the entire BiggerPockets team. The content on the show On the Market are opinions only. All listeners should independently verify data points, opinions, and investment strategies.