The Good, Bad, & Ugly: How Do We Respond to a Rapidly Changing Real Estate Industry?

Alright, welcome back to the Business Freedom Podcast. This is Lars Hedinborg, the founder of Real Estate B School and co founder of High Performance Real Estate Advisors in Charlotte, North Carolina. This is the Good Bad Ugly edition of Building a Real Estate Team. And this is where I get to rant about things that annoy me about our industry, share things that are working well with my real estate team. So there'll be some teaching, but mostly it's to help you really understand what's coming in our industry and how to prepare for it at a high, high level. Today I want to talk about, you know, our industry is shifting and changing dramatically and if you don't, if you don't know what's going on with our industry, there's just really, there's a lot of money pouring onto industry. Most players, the Zillow, realtors.com, the lead aggregators, the Redfins, the different discounters and different models, they're all going after our commission checks. So it's technology. Well, companies that claim to provide technology to sort of displace the real estate agent or at least take a chunk of their, of their commission, right? Zillow is not free. So in our market we spend, we started at 40 bucks a lead for Zillow and then it went up to like 120 to 140 and we got out of that game as quickly as possible. We learned how to generate high quality buyer leads without having to pay for them, which I highly recommend you take a look at. And so in doing that, so let's take $100 per lead, you know, let's say it's a 5% conversion. You'll pay $2,000 to get one closing from a Zillow lead. In my market, that $2,000, that's eating into your commission check, right? If you can convert every one, then it'd be a great deal. But the conversion rates typically aren't more than 3 to 5% on the Zillow or 1 to 2% on a pay per click, if you're lucky. At least with pay per click you can control the cost somewhat. So anyway, diving down a little bit of a rabbit hole, my question to you though, with all of, with that stuff going on is what will your response be? Right. Which side of the line are you gonna go? You know, a good analogy is I'm sure everyone that's listening has been to a hotel, right? So there's like three classes of hotels. There's, you know, the Ramadas, the Holiday Inns, the best Western, the decent hotel. There's nothing wrong with it. If you have six kids, you know, that's where you're gonna want to stay because you probably have to get three rooms and you know, they're clean, but there's nothing premium about them. They're on the low scale of premium and they're low cost. Right. You can get a room for 129 bucks a night. Then there's the Marriotts, the Hiltons and Sheraton. And I know within each of those they have a luxury line, but the general line of those hotels, it's in the middle, right? So it's probably 249 a night. It's a little higher end, but it's not, you know, it's not like the Ritz or Four Seasons. And it doesn't really matter what decision you make. I feel like you need to make a decision now. The game is changing as I talk, and if you don't make a decision where you're gonna play, you will get lost in all of it. On another podcast, I talked about, you know, if you're not building a high performance real estate team, it's likely that you'll be working for one. You know, the days of the top producing agent, you know, that doesn't really have a differentiated service offering to buyers and sellers. That's going to be a tough business in the future, you know. So what got you here won't get you there. So you've got to make. You've got to make a decision. I've got a quick story about that is probably gonna. You lose respect for me when you hear me talk through this, but I'll do it anyway. I used to shop for clothing at TJ Maxx. I mean, I would crush TJ Maxx, right? You can buy like 17 articles of clothing for like $142. And you're like, oh, this is the best thing ever. And then my wife bought me like a design consultation or something with like a clothing. I don't even know what you call it. It's like a person that helps you buy clothing. And she's like, Lars, you know. Well, she didn't say Lars said, like, honey, you are kind of, you know, you're a big deal in your real estate team. You're on stage now, which I never thought in a million years I'd be on stage, you know, training up real estate team leaders. She said, it's time for you to sort of dress the part. You know, TJ Maxx was okay. And so she bought me this clothing designer person or whatever, personal clothing person and took me to Nordstrom. And so this lady had a relationship with the person at Nordstrom. I got there, they asked me if I wanted coffee. They had a dressing room with outfits already picked out to my size. They were explaining the material of the jeans, these $185 Je and I was like, these are the best jeans ever. Like, I have to own these jeans, right? And it was an amazing experience. I bought a pair of shoes where something happened with the shoes, like six months later. Like one of the heels came up on the shoe and I brought them back. I thought they were just going to fix them. They literally walked me over and got me a new pair of shoes and didn't even ask a question. Like, the service level that I received at Nordstrom was above and beyond anything I could have expected or hoped for. And so I've made the decision, my team has made the decision to be on the premium side of the equation when it comes to real estate services. I don't want to be the TJ Maxx there is. TJ Maxx is probably a profitable company, but it's not really somewhere that I don't want to live in that when it comes to the services I provide buyers and sellers, I'd rather work my butt off to build a business that. And I say work my butt off. You know, I've got a business partner and I only work one to two days a week in my real estate business. So I'd rather my team work their butts off to build out an offering on the front stage and the backstage. So front stage is marketing and sales, backstage is operations and sort of the backstage part of it, the delivery of the services. I'd rather build something that is on the Ritz Carlton four season side and not be in that, you know, sort of low end offering. There. There's one more story I must tell. I went to Carowinds recently with my family and Carowinds is like, it's a decent, you know, park, amusement park in Charlotte. And we went on this ride called the Vortex. And my daughter was super scared to go on this ride. And it was trying to remember the story. So we were, I was super excited. She was scared. And, you know, I'm trying to help them through this. You know, every, every person there was just completely apathetic. Like, you know, I could tell she was scared and you know, the person checking the buckle seat didn't want to be there. She could have said, you know, oh, sweetie, this is Going to be great. You're going to love it. You know, when we checked out of the ride, the people at the exit, you know, there was no line. We asked if we can go back, you know, and they're like, nope, you must get back in line. And they were just. Just seemed pissed off to be there. Contrast that to a trip we did to Universal Studios, where that entire business revolves around making sure you get an amazing experience, right? And the tickets are three times the price of Carowinds. Carowinds has some of the best roller coasters in the country. So they have really great stuff, but their service sucks. And Universal Studios, I don't even think they have, like, nearly as good roller coasters. Everyone there, you could tell, is trained to provide an experience to the people that go there that is above and beyond anything they can get anywhere else. Same thing goes for Disney World. Same thing goes for Four Seasons. Same thing goes, you know, so when I decided to kind of let go of the large group and I merged with Thomas Elrod, local in my market, we formed High Performance Real Estate Advisors. So it was this decision that the brand would no longer rely on us. And it stood for something that was different from every agent in our industry. So I'm not telling you to let go of your name or your brand or at some point you just need to make this decision of what you're going to stand for. And like I said, the industry is changing whether you like it or not. And a good analogy. And I wholesale my car, so don't judge me on this one. But I drive a Mercedes CLS 63AMG. It's like a beast. It was four years old when I bought it. I bought it a third of what it costs new. So don't judge. I paid cash for it because I don't believe in buying new cars. I think it's the biggest waste of money that you could possibly, possibly do. But a high performance team is kind of like a high performance real estate team is kind of like a high performance car. It will take some effort to build it right. It takes longer to build a Mercedes AMG than a Toyota Camry. I think Toyota Camry's come off every 11 hours. Rolls Royce takes six months to build, so it needs constant tuning. But it's worth the trouble because it accomplishes the thing you want to accomplish better than anything else in its class. And that's the way I want you to start looking at your real estate business is are you putting something together that's going to perform At a level higher than the other agents in your market. And change is constant and it's rapid right now. And you got to expect the unexpected. And your success depends on your ability to anticipate, manage and respond to this change. And I look at change as an opportunity. I mentioned 5,000 agents in our market. You know, when the market was low, 12,000. Now a shift is coming. That kind of change is exciting to me. And you could ask yourself, you know, why not just keep doing things the way that I'm doing and kind of be that, you know, economy model, that agent, that top producing agent, writers. 10 to 12 deals a year, maybe 15 to 20 is a top agent that's marginal. The time to invest into building that kind of business, which is a top agent in our market, versus the money you get. Everything I talk about is time and money and the trade offs. It's just not worth it, right? Not everyone is going to make this decision to go the high performance real estate team route. But do you want to be the agent that settled for going the economy route and the risk of being out of business in three to five years? Right. So I'm not saying this path is easy. I'm saying that there's a way better chance that you'll have a business worth owning if you make a commitment to go down this path. And the good thing about when you make a stand in your business to stand for something that is differentiated in some way from other agents in your market, it draws in clients, it draws in prospective team members, it motivates your existing team and it kind of instills this energy, this vitality, you know, that that is something that you could be proud of. And it doesn't have to be the same way. Right? Your high performance real estate team does not have to be the same as my high performance real estate team. It's just making a decision now on what you're going to build. And if what you're going to build is going to be around in the future. And if you're not, if you're making it, if you're making no decision, right? If you just, if you're just kind of doing business the way you're going to do it, that's a slippery slope. Really, A slippery slope. And so in terms of high performance real estate advisors and what we stand for, there is a big, a big difference between, you know, general brokerage just being an agent in general brokerage. That, that is a tough, a tough path. 82% of licensees don't renew their second year. And traditional success in that model is it's hardly anything worth being a part of. Right. At 20, 25 deals, that's the holy grail of being a solo agent. Those are the top producers in my market center, and we're number one in the world for KW. They're working seven days a week, 12 hour days. They're working every vacation. If you build this thing the right way, it's a real business that doesn't depend on you. And that is my dream for all of you that have it in you to build something special, something worth owning. So that's about all I have to rant on for today. Just think about the industry, where it's going, and make a decision where you want to end up in the industry. That's what I ask for you. So much love and respect. We'll see you on the next episode.