Setbacks and Perseverance: Sharing Lessons of Difficulty and Loss in Business (No, we don’t win every day!)
Everyone loves to talk about the good times. It's just easier to do in life and in business. Bad news sucks: it sucks to hear, it sucks to deliver, it just sucks all around. My team and I are just as guilty as everyone when it comes to (overwhelmingly) sharing our business wins. Who wants to hear about the hardships anyway? No one likes a complainer, we like winners! Isn't social media just supposed to show a perfectly curated image of the best parts of your life and business?
This concept of always portraying the perfect life or perfect business always fascinated me. You see someone in business who is crushing it and you think this person is just on fire and can't lose. All they do is win! We won’t lie - it can be awe inspiring, or sometimes make people a little envious, and I hate to say it, but maybe even a little angry (especially if you know this person you are watching “succeed” is truly NOT a great person). Either way, it certainly gets a rise out of me, and I am sure that is the point of it and the point of the social media platforms in general. Dopamine hits, good or bad, are critical to their success.
My team shares a ton of stuff on all of the social media platforms spanning from Facebook and Instagram to LinkedIn and TikTok. Each platform has a purpose and we don't want to miss an opportunity to connect with our next potential client. Most (99%) of what we share though is either real estate content or us winning in the market. This can come in the form of an "Under Contract" post, a "New Listing" post, or even a "5-Star Friday" review post. Whatever it is, it's usually 100% positive! Well I want to air out the dirty laundry today and highlight some of the tough times we went through this year in business and how we have persevered, and continue to persevere, as we near the end of 2024. This blog post is intended for a diverse audience and may resonate with many, but my main aim is to support others in this industry (and any industry, for that matter) by showing that they’re not alone during tough times. I also want to remind our clients, friends, and family that the business isn’t always as fantastic as it may seem.
Bad News Business #1: The $0 March
Our team came into the 2024 year on a tear. We had successfully gotten 9 people under contract in late December / early January with the pitch of "everyone is asleep at the wheel during the holidays, now is the time to seize opportunities." It's not a lie, and it certainly worked — a lot of folks were able to secure some pretty great deals in a very competitive market as the masses were off prepping for trips and the holidays. We were successful in closing a number of these - but as we got into February a number of things started to shift that led to a bloody March for the team. There were 6 deals in particular that were slotted to close in March of 2024 and by (mostly…) sheer terrible luck, literally all of them died before getting to the closing table. Here is a quick breakdown:
2 clients cancelled for seemingly no reason (1 of which just stopped communicating with me or the lender / attorney at all)
1 client wasn’t able to get their spouse on board and had to cancel when it was time to discuss the purchase
2 clients backed out over an inspection (which is very normal)
1 client's financing fell through
Regardless of the reason, it’s never a good feeling when a deal falls through. In total, over $2.5 million in under-contract properties vanished into thin air. Out of these clients, only two now appear interested in pursuing a purchase again.
Ok, so what's the lesson learned here? Businesses have to forecast some level of revenue in order to predictively plan and run a smooth operation financially. At DRE we have fixed costs (payroll for one) and many variable costs (events, marketing, etc.) and we need to be able to account for these expenses against our revenue. Having a month with $0 in revenue can significantly disrupt cash flow and, without proper planning, could severely impact your business. Luckily, we had enough reserves in the account to cover the bad month, and soon were able to recover once our solid April hit the books. While I’m not a fan of keeping money tied up in a checking account for too long, it is certainly helpful when the unexpected happens. Another lesson learned is that my team and I might have been able to prevent some of these issues by asking the right questions from the start or establishing clearer expectations. I believe many deals fall through due to poor expectation management or misunderstandings about acceptable behaviors and actions in the home-buying process. In total so far (in 2024) we have lost roughly $5MIL in under contract deals which is a devastating number, but since the bloody March we have continued to bounce back and had already surpassed 2023's record sales numbers by the midway point of the year.
Bad News Business #2: The NAR Ruling
Not to beat a dead horse, but the recent NAR settlement has placed the real estate agent world into a weird whirlwind. I believe that this has led to increased ambiguity and decreased transparency, which is detrimental to buyers, sellers, and everyone involved in the process. Either way, there is nothing we can do about this from our little mom and pop operation so we can only adapt and overcome. Our team is significantly affected by this, as we represent buyers at roughly a 4-to-1 ratio. As a result, we are beginning to shift our business model to prioritize seller leads over buyer leads. We are now in a world in which people may win over a buyer lead just because they will potentially charge them less. This “race to the bottom” is not a game we want to play, so we are doubling down our focus on sellers. HOWEVER, what this also made me realize is that our team does provide a ton of value to our buyer clients, especially in the veteran and investor niches. Now more than ever, people are going to value and, as a result, pay for strong expertise. So along with the focus on seller leads, we are going to continue to double, triple and quadruple down on our veteran and investor niches because we are leaders in this space. This will include increasing our meetup frequency, providing more relevant content to these groups and areas of interest, and doing whatever it takes to get in front of more of these buyers.
Bad News Business #3: The Bidding Wars
Many realtors love to brag about how they don't lose bidding wars. Well I hate to say it, but it ain't all about the realtor in the bidding war. You might encounter a client who is unwilling to increase their price or be flexible on any terms, leaving you with minimal leverage to compete in these unusual and often unprecedented times. Our team ended up in 18 situations this year where we were in bidding wars. We won over half of them, but the losses are really tough to stomach. There are always things that make you second guess yourself in these situations — Did we come in high enough on price? Were our terms right? Did I give my client the best advice? You get the idea. Losing a bidding war is painful for two main reasons: it damages buyer confidence and can undermine their trust in you as their advisor.
For the “wars” we did win, there are some themes that may have set us apart (and of course, who you work with in these situations matters):
We created GREAT rapport with the seller agent from the get go. This cannot be understated — CALL AND TALK TO THE AGENT. Brag about your buyer, talk about how awesome their lender is, how you've worked with the team before, how you are confident they will close this deal, how you are an easy person to work, and any other truths you can think of that will put them at ease. I have found that of all of the deals we won in bidding wars, the communication on the agent side was on point.
We tried to understand what was important to the seller. Sometimes price isn't the only factor in a deal, so understanding those terms that are critical really can set you apart. In one example, we knew that the seller needed another month to stay in the property as a rent back. Ashwin, one of my best agents, came up with the idea of giving them a free, 1 month rent back. This was the key factor that distinguished us from the competition; the seller valued our gesture and chose our offer over others.
Our contracts were clean and our buyers had their sh*t together. Submitting a disorganized contract with missing details, providing an outdated pre-approval, lacking proof of funds, or making any number of missteps can lead to losing favor with the other agent and diminish your credibility as a buyer. Sloppy paperwork makes for a sloppy deal.
Experience matters, period. We win many multifamily deals against other bidders because I instill confidence in the seller’s agents by demonstrating our expertise as multifamily agents. As an investor myself, I understand how to close these deals. This experience reassures other agents that we can effectively guide our clients through any challenges that may arise.
For the deals we lost, there was some of the inverse of the above items to blame, but here are some of the themes that we found:
We cared more about being "right" than winning. I often tell my clients, “Do you want to be right, or do you want to win?” What I mean is that sometimes agents and buyers miss out on deals because they fear being wrong or worry about their client overpaying for an asset. Certainly we have a responsibility to help our clients make practical decisions with a purchase, but sometimes if you want to win, there is a cost and a risk. Our job as agents and fiduciaries to our clients is to make sure they are comfortable and AWARE of the risks, helping them make informed decisions without emotions involved. Bidding wars can really wear people down and cloud judgement, so experience matters once again to help buyers understand all of the elements of a deal and what levers can be pulled to win.
Unfortunately, some losses were attributed to competing against cash buyers. It’s often challenging to compare a cash offer to a VA loan; they can feel worlds apart in terms of attractiveness. There is no real lesson to be learned here other than to be prepared to compete with folks who are pulling out all stops. We have discovered that many agents are unfamiliar with VA loans, and there’s a significant amount of misinformation circulating. One of my primary goals is to educate agents about the realities of VA loans. We are going to be sharing more content on our socials and here on the blog on this topic, and are making sure we are working with some of the top VA lenders in the US, including Jay Bunte, Jennifer Beeston, Patton Gade, and others, to give our clients an edge against the competition.
Time of year matters. Want to get in more bidding wars? Put in more offers between March and June. This is the time of year when you will see more buyers in the market competing over a limited number of homes (especially the last couple of years given how low inventory has been). If timing isn’t a concern for our clients, waiting could be a viable strategy, or they might consider looking in a submarket with more inventory.
Speed-to-action hurt us at times. I learned back in my consulting days that "time kills deals" and it is certainly no different in real estate. Sometimes it's hard to get into a property quickly or make fast decisions, but time is definitely of the essence in a lot of these purchase scenarios so not acting fast nor decisively can really hurt your chances of winning (and certainly has at times for us). Seller's agents will sometimes value and view quick decisions and fast timelines as "this buyer really wants this place" and will convey that sentiment to their sellers.
When buyers lost two or more of these scenarios, they started to lose faith in the process and in our team. This is quite common and can make your clients wonder, “Is our agent advocating strongly enough for us?” While we can attribute many of these losses to terms and circumstances, it’s difficult to shake the feeling that we could have done more or pushed harder.
While we will continue to focus on improvement and refinement of the top list, we always want to be cognizant of the bottom list, as fixing problem areas usually provides the most upside. The most important takeaway here is nurturing the client experience and ensuring they don’t get discouraged when losing a bidding war. Out of the seven deals we lost, two eventually resurfaced because the winning buyers were unable to finalize the transactions.
Bad News Business #4: Missing the Mark on Pricing Properties
There is nothing worse than a listing that just won't sell. Well priced assets in great condition will move, and in this market they will move quickly. Consumers today are more educated than ever when it comes to pricing, as their access to information is comparable to the professionals. When you overprice a house, the world knows it, and usually you do to. The trick is getting the seller to realize it. Mispricing a listing can be extremely harmful and has definitely impacted us this year. We currently have two listings that have been on the market for a year or more. These are commercial listings, so they do differ from your typical residential listing in a number of ways, but the issue remains: It’s entirely due to pricing.
So how do we address this? First, setting better expectations up front is key. In these two situations I gave my clients a range of pricing based off of area CAP rates, the condition of the property, the location, etc. While this is generally a good strategy, where do you think sellers prefer to start? Always at the higher end, and sometimes even more! This is often because sellers lack knowledge about asset pricing. Everyone thinks their baby is prettier than it is (or than other people think it is, at least), so as an advisor (pointing to myself in the mirror), I need to improve my ability to highlight the risks of overpricing and provide a clearer explanation of why their property may not reach the upper end of that range. When deals sit, people automatically assume either something is wrong or the price is off, and sometimes they are right on both counts.
So, what are we doing to fix this?
Price adjustments. I hate doing them, but admit that we are wrong, fix the price and move on. Learn from the pricing error and do better next time.
Getting better at the up-front pricing. We can't always let seller's dictate all of the terms, they are hiring us for a reason.
Improve marketing plans. What else can we be doing to get these deals in front of more eyeballs?
To conclude this saddest blog post I’ve ever written, I want to emphasize a key message I strive to instill in my team: we never lose; we learn. After all of the setbacks faced this year, we always came back stronger and wiser, and we’ve learned from the lessons encountered. The team here is resilient and will keep fighting for our clients and each other until the bitter end. At the end of the day, each of these losses was a mere "flesh wound" in the business world and it will take a lot more to bring down The Dorazio Real Estate Team! For those agents / brokers / property managers out there that are having a tough year, keep your heads up, keep learning, keep pivoting, and always get up off the ground to keep fighting another day!
One final thing I’ll add is that sometimes taking an "L" is a blessing in disguise (or, “Always look on the bright side.”). We had a couple of clients this year fire us — normally I would dwell on this and figure out what we could have done to change the outcome or win them back. However every time we’ve been let go, it has ultimately turned out to be a huge win for us. We’ve discovered some clients’ true colors and intentions, and in some cases, we’ve realized they don’t share the same basic values we uphold. It’s perfectly acceptable to be fired occasionally, and it’s also okay to part ways with clients who aren’t a good fit or intend to compromise the values and stability of you and your team.
