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Building the correct mentality solves half your problems.
It has been over a decade since I have been a part of the Indian real estate industry, and one of the first roadblocks I encountered was the way the agents in this sector functioned.
Originally hailing from the banking sector, I served there as a Wealth Manager. Now upon entering this new field, my subconscious drew comparisons between the two – a Wealth Manager and an Agent.
If you think deeply, the two serve a pretty similar purpose in their respective industries, but what is it that differentiates one from the other? It is the mentality of the two, their objectives, and how one builds a relationship while the other makes a transaction.
In this edition of Open House, I look to deep dive into how the current real estate agents aren’t maximizing their potential, when all it takes is a few small tweaks.
Wealth Manager Vs. Real Estate Agent
Let’s first understand why I draw parallels between wealth managers and real estate agents.
What is it that wealth managers in the banking sector do? How do they go about their tasks?
Even before suggesting the simplest of moves, they first study their client. They profile their clients based on:
- What is their age profile
- How much are they ready to invest
- Their appetite for risk
- What are their immediate and long-term goals
The wealth manager’s sole motive is now to take steps in the money market that maximize the benefits for their client. They show both pros and cons of a move but move forward with the sole mindset of earning profits for their client. The happier the client, the more handsome the paycheque for the wealth manager.
The approach of a real estate agent is not this holistic as their vision doesn’t extend beyond the upcoming transaction. The focal issue here is that the real estate agents’ incentives are not aligned with their customers’ benefits.
Example: The client must benefit for you to benefit
Suppose Rakesh is a real estate agent in Bengaluru in contact with Mr. & Mrs. Chopra. The couple has recently moved from Delhi and is busy house hunting. Rakesh is now responsible for taking them on site visits to a list of properties that he has in mind for the couple.
How does Rakesh benefit in this situation? Well, the agents in this industry earn on a commission-based compensation structure. This structure incentivizes the agent to close a deal at the earliest of the largest possible amount, disregarding their clients’ long-term interests. It may so happen that Mr. & Mrs. Chopra benefit much more when they buy a house in Sarjapur keeping in mind their finances and their requirements. But, Rakesh here, is on a mission to maximize his commission and instead shows them properties only in Indiranagar, one of the poshest localities of the city.
While the property might not be any bad, it just does not lie in the best interests of Mr. & Mrs. Chopra to move in here. All their requirements are being met living in Sarjapur while not having to empty their pockets.
What is our takeaway from this? The agent, Mr. Rakesh disregarded his clients’ best interests. He may think that he has secured a larger paycheque than he otherwise would have, but what he fails to realize is that he has burnt a bridge in the process.
Sooner or later Mr. & Mrs. Chopra are going to realize that they would have been better off living someplace else and this wasn’t the best decision.
Rakesh failed to build a long-term relationship with his clients. Next time when the couple is looking to invest in real estate or any of their near and dear ones are house hunting, they won’t turn towards Rakesh.
There are numerous ways in which agents these days prioritize their own interests over their clients’. For instance, an agent may encourage a client to accept an offer that is below their desired price to close a deal quickly, rather than waiting for a better offer.
Similarly, there are times when real estate agents may have exclusive agreements with certain developers or sellers, which can limit the properties they show to clients. What happens in such cases is, the clients miss out on properties that might have been more suitable for them. Instead, they are now viewing options that are more profitable for the agent.
Wealth Manager Mentality
This is where I kick in the “Wealth Manager Mentality”. Instead of being short-sighted like Rakesh, agents should study the needs and interests of Mr. & Mrs. Chopra and recommend the best steps moving forward. This could also include renting a property now if they believe property prices are soon expected to fall.
Some of my industry competitors earlier thought that I was a fool and that I could not sustain this mentality when I joined IndiaHomes. Well, they couldn’t see the larger picture in view. While I delayed the revenues for my company in the short term, I saved lakhs of rupees for my client, something that they never forgot.
The way my group differentiated themselves from the rest was we were not saying yes when we wanted to say no. As I had envisioned, owing to how we protected our clients’ interests at the first occasion, they now turned to us at every step that involved real estate.
We just went from securing one client and all of their property-related needs to providing real estate services to all of their friends and family. This long-term planning of adopting a wealth manager mentality in the real estate industry is guaranteed to bring in much more revenue than how an orthodox agent functions.
The more the number of clients, the higher the number of properties you sell. The more properties you sell, the higher your revenue.
In my experience, with so much money involved in the real estate industry, the sector rests on the pillars of:
- Honesty
- Long-term trust
- Preserving your clients' best interests
Looking at these three terms, aren’t they often a part of discussions about creating a sales funnel?
Up Next
In the next edition of Open House, I will explore how I adopted the concept of a scientific sales funnel following the adoption of the Wealth Manager Mentality to maximize your output. With an ever-growing population, this country’s real estate opportunity has no bounds.
With the correct mentality and a sound plan to tackle things in an organized manner, one can earn handsome amounts from here.
That’s a wrap for this edition, and until the next one!
Don't be trapped by dogma – which is living with the results of other people's thinking.
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