The Real Estate Buying Cycle
Real Estate in The Online World
“Internet leads are an utter waste of time”, an old school broker was heard saying a few years ago – a phrase that he dare not repeat in today’s world! At Gupta & Sen, we started out with a fabulous website right from the early days of our existence. Being a relatively new entrant in the Real Estate Advisory space, we were privileged to use the latest web technologies and search-friendly features on our website with the result that high-quality leads from buyers constantly keep falling into our lives. We have a website that enjoys a good amount of traffic and we also have a system in place to capture the contact information of our website’s visitors through lots of marketing and lead generation activities.
Let us talk about how we turn a phone call that comes in through our web site or an inquiry sent from the contact form on our website into a paycheck. Let us understand how that the world we live in has changed and how the way we do business has changed drastically over the last two decades. Ten years back, only 10 % of home buyers were using the Internet for atleast a part of their home search strategy. That percentage has grown by leaps and bounds since then and currently it wouldn’t be presumptuous of us to say that over 90% of home buyers use the Internet to research and help them zone in on a developer or a real estate agent. Let us look at the profile of the buyers who choose the Internet to help their real estate search as opposed to the small percentage of buyers who do not.
- They are better educated
- They have more money
- They buy more expensive houses
- Their search time is shorter
- They like to be more involved in the process themselves
They sound like the perfect customers to have! But there is a caveat – these class of modern home buyers are also much more demanding than the ones who came before and they demand instant information. Tomorrow may not be good enough! They search the Internet for information and if you are not there, then someone else is!
We like to believe that apart from capturing business from the web, we also have processes in place that make us respond to today’s customers in a better way.
Internet Real Estate
Internet Real Estate is a different beast altogether than traditional real estate. A Real Estate agent who has been successful in the not-too-distant past in a traditional real estate model is frustrated and unsuccessful when he makes an attempt to transition to getting leads from the Internet. And then often it becomes a case of sour grapes. Because the veteran agent of yesteryear fails to generate high quality Internet leads, it is highly tempting for him to assume that the leads found on the Internet don’t translate into sales.
But the problem lies not with the quality of leads but the methodology of working. Many agents from the old school of real estate approach Internet customers as if they are customers coming from referrals. But Internet leads are different in the sense that these leads are coming in at an earlier point in the entire real estate buying cycle. And it is a fatal misunderstanding of the modern Internet real estate buying cycle that causes poor conversions for many Real estate agents who fail to grasp this crucial paradigm. Let us look at the real estate buying cycle in more detail which also entails a radical shift in how we approach and follow up with real estate customers on the Internet.
The Real Estate Buying Cycle consists of 3 phases:
Phase One: Information-Gathering
Phase Two: The Search
Phase Three: Escrow (or Contract to Closing)
The buying cycle has been untouched for many years but only a few Real Estate Agents know that Phase One even exists.
Phase One – Gathering Information
Research shows that home buyers begin the entire process of buying a home (Phase One) almost one to one and a half months before the start of Phase Two and about two months before the start of Phase Three. During the beginning of Phase One, buyers are thinking more on the lines of budget, design of home and amenities, neighbourhoods as well as school and college options. Most Indians fantasize about home ownership because we consider it a mark of success, which is why we are very picky and price conscious and ensure that the process has been thought out carefully and in a thorough fashion. In the Phase One Period which is the initial period of buying a house, the customer is still solidifying and cementing in his mind the type of home that he wants to buy. It is in this period that he / she is choosing the search criteria and the budget. But as any agent will tell you, most home buyers are far off the mark at this point when it comes to the budget!
This is a crucial stage of the buying cycle of the home buyer and this phase exists whether we as Real Estate Consultants like it or not! One has to remember that the Phase One process of the buying cycle is the only period in the entire Real Estate Buying Cycle when the Buyer wishes to be on their own. Our clients do not want their dreams at this point being influenced by real estate agents or even their family, friends or anybody else. They want to own the dream and make it theirs completely. This phase is going to last for 4 – 6 weeks. Any Real Estate Agent or Advisor who tries to influence the buyer at this stage can pretty much bid their chances goodbye if they come on too strong!
Phase Two – The Search
After the buyer is done with the info-gathering stage, he moves into the next phase and a mental shifting of gears usually happens at this stage. The buyer know what he wants and is on a determined and legit quest to find his ideal property. This phase lasts just about two weeks! Yes only two weeks! It is at this stage that real estate shoppers realise that they need the services of a real estate agent to help them in their search for a dream home. What they don’t want and what most real estate advisors fail to understand is this – they do not want us to shape their dreams! This is a very personal process for the customers and I am amazed to see some of the pressurizing and influencing that a lot of brokers do to the buyer at this point with the result that the potential client ends up becoming a no-show!
During the Phase 2 of the buying cycle, the customer wants to look at real houses – not brochures, not photographs or virtual tours. He will start visiting locations of upcoming developments or secondary houses on the market. Remember that the home shopper now knows what he wants and is determined to find it. Somewhere in the middle of the search process, he wants to start working with a bonafide real estate agent. This is a very crucial stage in the buying cycle when seen from a Real Estate Agent’s point of view. The Agent who is has top-of-the-mind recall in the mind of the customer is the agent who is most likely to close the deal and eventually pocket the commission!
I believe that you can be that agent with a number of steps starting with your own brand recall and presence in the market. In the traditional world, this is the period when most agents tend to pick up a customer.
Phase Three
With the start of the acceptance of the contract and moving forward to the closing of the contract there is the third and penultimate phase of the buying cycle and that is of course something that does not fall into purview of this article. But the bottom line of this article is: Leads from potential Internet Clients come in during Phase One. According to the National Association of Realtors, 75% of all buyers will work with the first agent that they get in touch with. When Gupta & Sen Realtors are the first source of contact with a prospect, the odds of us doing the deal is in the ratio of 3:1 in our favour. Period. That according to me is a huge first mover advantage. We identify the customer first and then create strategies to ensure that the customer is kept motivated and enthusiastic throughout his search. The rest takes care of itself.
Let us look at a simple yet very powerful example of the way we look at Internet leads. With Diwali 2017 approaching, think about the last time you shopped at your favourite mall. Like most people (except teenagers!), you do not have a lot of time to waste gallivanting around the mall. You go to a mall specifically because you want to buy certain things. You walk into a certain store and a smart sales guy comes up to you and asks, “Can I help you?” Be honest with yourself. What was your answer the last time that happened? Well, for most people the answer is the same. You say, “No thanks. I am just looking.” And well within 5 minutes, you are looking around for the same guy to help you find something! When you answer, “No thanks. I am just looking around,” did you actually mean that you were not interested? Or were you rather implying that you wanted to find out information on your own for a few minutes, and that later on you might need help.
Well, this process is not much different for a real estate consumer except for the fact that the buying cycle is much longer given the price and the complexity of the process. When most Real Estate Agents contact leads through the internet and ask them, “Can I help you?” the customer is still in the process of gathering information. The customer does need help but he / she is deferring it for some time.
In my opinion and experience, I have seen that there are two main reasons that an agent fails to make headway with an Internet lead. Either he takes the, “No thanks just looking” reply literally as though the customer really means it and does not want anything to do with him or on the other hand he will act pushy and try to take an appointment to start showing houses. This overbearing and aggressive approach alienates a customer and kills any chance of the agent getting business from the customer. But make no mistake – the customer will go on to buy but with another agent!
Is there a solution to this fundamental problem? There is and that is something I will discuss in my next article 🙂
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