Do 0% fee deals work?
There is a huge temptation to offer 0% fees to attract new house sellers and landlords as a new start up agent .. in fact, many established agents do it as well.…so every agent, new or old could learn something from this article.
The idea of 0% (free) is attractive, especially to new start estate and letting agents, because we think once people try what we do for free they will eventually upgrade to a paid version. These people will tell their friends and the cycle will continue until you’re making money hand over fist.
.. and why not?
It’s easy to see the attractiveness of offering something for free, since some of the biggest companies in the world don’t charge us a penny. Twitter, Youtube, Facebook, Linkedin and Google offer fundamentally everything you would want for free .. FOC (Free of Charge) .. but the significant thing to note is that these companies are the exception.
0% fees
I see it all the time, agents offering 0% sellers fees, 0% management for 3 months, even 0% management fees for 12 months… I have even heard of one agent doing 0% managed fees for life
On the lettings side .. most of you believed, that you could become a market leader by offering a 0% (ie free) fees and acquiring a ton of landlords. Naturally, some of these landlords would drop off but most would continue to use our agency at the end of the full fee deal.
On the sales side, by offering 0% it is hoped word of mouth will help your agency grow early on and continue to do so. Many think that by having more for sale boards out there, they would get more people talking about the agency, whether it be on blogs and social media or just friends telling their friends about us.
Foxtons offers 0% fees
If you are an agent, planning to open an new office, you have a number of ways of launching, but let me tell you one thing .. don’t try and outfox the masters of a new office opening .. Foxton’s. They are famous for their 0% opening deals
You can’t copy what Foxton’s do .. you haven’t got their budget, you haven’t got their fabled database, you haven’t got their brand name, their ability to sustain 0% for months and months, their self centred (said in a good way) belief that they are the best .. and they truly believe they are.
Never ever try to out-Foxton Foxton’s.
When someone, like Foxtons, stakes out the boundaries to opening a new office, showing the absolute limits, you would be foolish to attempt a pale imitation.
What’s important in estate and letting agency?
In Resi Sales, the most important issue an estate agent must answer is this …
‘How do you become one of the three agents asked out for a free valuation/market appraisal’
.. its a simple as that. If you don’t get asked for the FV, you don’t get a chance to pitch, no pitch means no chance of listing, no listing means no sale and no sale means no pennies. Foxton’s do it with their 0% fees when they first come into a town. Their boards pop up , they get market coverage, and as people are like sheep, after six months, everyone rings them up for a fv, by which time they are charge full fat fees .
Lettings .. Landlords don’t swap agents whilst there is a tenant in the property. The first chance they can swap agents (when the tenant hands in their notice), 99.999% of landlords just say to their agent to get it back onto the market (that’s if the agent tells them at all). Most landlords don’t love their agent just like most people don’t love their banks .. they just can t be bothered to move agents, its too much hassle.
For the same reason YOU won’t swap banks, even if they offer you 5% interest of £200 to swap, is the same reason landlords wont swap agents .. hassle, trouble, cost, you are all the same, better the devil you know etc etc.
The reason why 0% fee deals don’t work
I see it all the time, in fact we talked about 0% fee deals at our bi-annual convention of estate and letting agents (as I am sure you are aware, we are society/ club /group of over 400 estate and letting agents who share ideas, guide and support each other in helping each other grow ourselves and our estate/letting agencies. Its free to join and its called the ‘landlord farming club’ .) (NB When we started the society, it was just for letting agents, hence we called it landlord farming club, because we all cultivated and grew relationships with landlords to get them to make contact with us and use our agency. Its just by accident, we found the system worked for estate agents as well and attracted homeowners to sell their house with our agency’s .. its just we took it to the vote and and decided to retain ‘landlord farming club‘ instead of ‘landlord and vendor farming club‘)
Many agents in the room at the last convention had tried 0% fees in the past and had great expectations for their 0% fee plan. They expected lots of landlords/vendors to sign up for it, but those expectations were never realised. .. never. In fact, their free 0% fee structure ended up losing them money and stunting their growth!
This is what we discussed and mutually agreed at the last bi-annual convention (in June 2016) ..
- Paid agency carries more value
- Landlords whom are attracted by 0% bring more 0% landlords to you
- 0% fee landlords eat up support
- Homeowners attracted by 0% tend to be overpriced second hand stock from other agents
- .. and the big one … People take advantage of free
You see free is not a competitive advantage
People will say .. nothing is free in this world .. where is the catch?
You Need to Value Your Work
We all said that as an agent, you need to value your work that you do. This was the most important lesson that those agents who had fallen into the trap of 0% in the past had learnt from their 0% fee plan mistake.
Running a startup estate and letting agency costs money, just like any other business. You put cash into developing your agency service, marketing it, supporting your existing landlords and homeowners and so much more. You need to value what you have created, and if you want to keep building it, then you’re going to need to start charging. And charge a full fee from day one.
You need to value your work, and a big part of that is putting a price on it. You shouldn’t worry about driving away users by asking them to pay for what you have built. If you have built something useful and unique, put a fair price on it and people will pay.
How do you build something useful and unique in estate and letting’s agency? Easy …Be helpful, be interesting, be educational, be intriguing to your potential clients .. all those homeowners and landlords that need an agent now or in the future.
How do you be helpful, interesting, educational and intriguing ? Again easy, stop thinking like an estate or letting agent and start thinking like a human being.
Homeowners and landlords don’t care about you, your firm or your services – but they are interested and intrigued about their own property and what its worth .. in fact look at Daytime TV and the Brits are obsessed about property, property values etc etc… and us agents are at the centre of all that .. and all we end doing is talking about ourselves and how bl**dy wonderful we are.
Just start talking about the local property market, start talking about the house prices , landlords love rents and yields as well … just be human and talk about stuff your potential clients are interested in .. and you will come the most interesting, helpful, educational and intriguing agent in your town … I promise it
If you want some examples …
Examples of good ‘local property market’ blogs
Lancaster http://lancasterpropertyblog.co.uk
Derby http://www.derbypropertyblog.co.uk
Chelmsford http://chelmsfordproperty.blogspot.co.uk
Examples of Good Local Property Market Reports
Click on the picture to 21 examples of newsletters that agents have written
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