The Real Estate Sales Prospecting Hierarchy of Value
Some real estate sales approaches involve a shorter contact-to-contract cycle than others, therefore delivering a greater return on your time investment and a higher value for your business. In order, here are the factors that most influence the value of your prospecting approaches.
- Past clients:
The highest-value form of prospecting is calling past clients and those in your direct sphere of influence. These people have either used your services in the past or know you and your character. Asking them to do business with you again is described as canvassing. Asking them to refer their friends is described as prospecting for referrals.
These calls are the easiest to make because they reach those with whom you have established relationships. Typically, real estate agents experience less resistance when placing calls to this group than to any other. They also make the calls with high expectations that their efforts will generate leads. How long it takes to acquire leads with this approach varies greatly. You can secure a lead on your very first call or on your 100th call, so the ratio of leads generated to time invested is difficult to anticipate.
- Expired listings:
This may be the number-one highest-value prospecting approach, because of the ease of locating expired listings and the relatively quick contact-to-contract cycle. Expired listings come up in the MLS daily, along with all the information you need to make the contact. Many go back on the market with another agent within a week, so the sales cycle is short, which is a key reason that expired listings offer such a high rate of return for the effort.
Few agents engage in calling expired listings, largely because the sellers, who haven’t experienced success with their last agents, can be hostile toward new agents, as well. Many agents feel it’s “beneath them” to contact these prospects — which further contributes to the opportunity for the ones who do.
Converting sale-by-owner contracts requires more work than securing expired listings. You have to seek out these sellers through newspaper ads or FSBO subscription services like The RedX. After you target a FSBO property, figuring out whom to call takes another round of effort, which is why FSBOs are farther down the value hierarchy.
The sales cycle for FSBOs is four to five weeks on average. FSBO sellers generally try to sell by themselves for that timeframe before engaging a real estate agent. During that period, you must follow up weekly to secure an appointment four to five weeks away.
- Open houses and door knocking:
These face-to-face techniques require more time investment than phone contacts because you can’t see as many people face to face as you can speak with on the phone — but it’s harder for people to reject you face to face.
- Cold calling:
This technique, tried and true since the advent of the phone, has lost effectiveness over the years because of the preponderance of busy two-income families and the onset of do-not-call registries. If you are calling around about homes that have recently been listed or sold, it will generate business. Other people put their homes on the market after a neighbor lists or sells. Using a service like Cole Directory to secure phone numbers in neighborhoods is effective. They also provide cell phone numbers, which is highly effective.