The Importance of Inventory to a Real Estate Agency

I have something I would like to share with you. You woulda’ thought I had learned this a long time ago. It’s so simple. It’s a concept any hardware store, grocery store, and indeed furniture or automobile dealer understands well. You need inventory to attract customers.  Would you stop at a furniture store that had one brand or one style of furniture? How about a car dealer with only two cars to sell? Of course not.

But many real estate agencies are operating like the car dealer with two cars.  They just do not have the inventory. Sure, you may say, they can sell inventory off the multiple listing system and indeed all houses for sale are in their “inventory”. But in today’s marketing world, the agency with no inventory of their own has a phone that is not going to ring unless they have the houses for sale themselves and are able to capture the buyers interest and inquiries off of the internet, signs, direct listings.

A little over two years ago Market America Realty Group got into selling foreclosed homes for banks and their asset managers. Through this our inventory ramped up very quickly. We are now one of the largest listors of foreclosed properties (REOS) in Lee County.  The foreclosure market is hot.  For every listing we post, we might get a few dozen phone calls and for sure multiple offers. But only one buyer can buy each house. What do we do with the other buyers?  Well, we find them another house of course.

In order to manage this large number of inquiries that we receive we installed integrated customer relationship manager (CRM) software into which we input all the data on each client, their contact information, and what type of home they want to buy. We then keep in touch with that customer.

You see, the REO business is not very profitable for most agencies; the commission percentages are very low as are the prices. We also have to fork over all the past due utilities and HOA fees, pay for securing the property and maintaining it, and account for all those expenditures accurately so we can assure that we get reimbursed properly and timely. So in addition to a CRM to keep track of inquires on the REOs, we put in accounting and tracking systems to make certain that the slim margins were not eroded.  There are quite a few independent REO agents that went out of business because they could not make it work.  The systems we put in place, indeed attracted other REO agents to come work with us since we are able to support their business. They brought their REO inventory to Market America Realty.

Which brings me back to my point: inventory. This increased inventory made our phone ring and brought email inquiries on our listings. Without the inventory, we would not grow. Without inventory we could not attack MORE inventory. I kind of think of our REO inventory as a loss leader, of sorts. 

In our offices we have buyer specialists.  These are agents that work well with our buyers that call on our listings. If we didn’t have listings, however, the buyers would be going somewhere else and so would our buyer agents.

An interesting thing has happened, however. The REO business is now a smaller percentage of our business. What I call standard retail – the conventional seller and buyer – are an increasing part of our business.  The last two days we put 7 condos under contract. None were REO. All were our inventory; retail inventory. Normal margins. Not 70% of 50% of 5%, like the REO business.

It’s a great cycle, inventory gets us clients, clients get us inventory. As the cycle turns it gathers momentum and size like a snowball going down a wet snowy slope.

The quality of the inventory is also important. I want inventory that will sell AND make the phone ring. An overpriced listing will do neither. This is why we encourage every seller to get a BPO (Broker Price Opinion) on the real estate they want to sell before they list it for sale. If the offering price is not close to the BPO, we will not take the listing. Market America Realty Group has a BPO department  that just does BPO’s, this way there is no way the price can be influenced by an anxious seller or his agent. (To order a BPO – contact ) We charge $75 for a BPO – but this charge can be waived if we list your property.  Currently we have two BPO departments: one in our Fort Myers office and one in Sarasota.

My advice to you, whether you are a buyer or a seller, is to deal with a real estate agency that has inventory. They will have more buyers, more experience, and more momentum. And well, more inventory!



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