One good source of leads, as I mention in the Top & Bottom Funnel Leads manual, is postcards. In Gary Keller’s book, The Millionaire Real Estate Agent, he talks about the 12 Direct Program where you send out postcards to an area which you want to farm or establish as your area of expertise.
The book provides a ratio of 50:1, which is for every 50 homes to which you send a postcard once a month for 12 consecutive months, you can anticipate making one sale. So, for example, if you want to produce one sale a month through postcards, you will need to send out 600 postcards per month to the same homes over a period of 12 months.
Another way of measuring the sales to your farm area is determining your realistic market share. That is, use a reasonable percentage of the homes in your farm to establish the number of homes you can sell in that area.
A reasonable percentage or goal for your market share for your geographic area to which you want to farm is 40%. So, if in a particular sub-division with 300 homes, you find out through your local multiple listing service (MLS) that for the last 12 months, 11 homes were sold. Here, then, is the formula for your reasonable market share for that subdivision:
40% x 11 = 4.4 or 4-5 transactions.
Comparing the ratio of 50:1 from The Millionaire Real Estate Agent book, the number of transactions is:
300 / 50 = 6 transactions
So, the point here is to use both formulas as a check against one another. That is, the expectation is to capture 4-6 homes in that area. While the 50:1 ratio does not take into account the number of homes sold in your geographic area over the past 12 months or the turnover rate, it does provide a good rule of thumb to see if your market share goal is realistic and within reach.
One other metric is the turnover rate of the number of houses in your target farm area. The turnover rate is the percentage of homes sold over a period of time, usually one year. You want to target an area that has an active rate of 5-10%. So, to continue with the 300 homes in the farm area and 11 homes sold in the past year, the calculation of the turnover rate is:
11/300 = .0367 or 4%.
A turnover rate of 4% indicates that your area is on lower side of an active sales area. A more active rate would be:
300 x .05 = 15 homes sold per year
300 x .10 = 30 homes sold per year
Fifteen to thirty homes sold per year in a farm area of 300 homes is certainly a more active area. However, the more active the area, the more competition you will encounter in the target area. A less active area will see less competition.
Now we will need to calculate your possible commissions on 5 homes sold in that area based on a 40% market share. Table 1 below shows the assumptions used to determine those commission dollars:
|Average Price of Property Sold:
|Brokers fee before cap:
|Monthly and Other Fees:
|(Not used in this calculation)
Using the above assumptions and the market share of 5 transactions, your commissions would be:
$250,000 x 2.5% x (1-20%) x 5 =
$250,000 x .025 x .8 x 5 = $25,000
Postcard and List Sources
One source for the respective addresses is List Source. Another is your local county’s appraisal district. You can download the address information to a text file, which can then be uploaded to your post card service.
A couple of postcard services include Click2Mail and Yellow Letters. Both allow you to create a postcard from a template and upload the addresses from your geographical area. Also, you can either have the postcards sent to you to be mailed individually or you can have the postcard service to send out the postcards on scheduled basis.