The guys over at Digsy have been busy. Not only are they running their leasing platform that connects interested clients with area brokers, they are also using their trove of data to help determine the best sales techniques. The reasons for this are obvious. They have developed a system that uses gamification and reminders to guide brokers into what they believe are the best ways to close a deal and get repeat business. This automated tool has become so effective that they are now being used internally by CRE firms like Colliers international and with certain agents at CBRE, NAI Capital, and Sperry Capital.
Now, they are sharing some of the insights with the industry at large. They have calculated the probability of closing a deal using the data from a healthy sample size of 2,077 deals. What they found was that providing a shortlist of properties to a new client, something that is standard practice in the industry, only brings the likelihood of closing a deal to 3.69%. Sending a list and then following up with a few emails or calls is obviously not as good of a strategy as many brokers believe it to be.
So, what are the ways to increase chances of closing deals. Well, the first big jump in outcome is meeting with the client face to face. When brokers and agents in Digsy’s survey met with a client in person within a few days of sending a shortlist of properties, they were able to bump up their success rate to 13.5%.
Building a rapport with a client outside of the digital realm is obviously important. This point gets further reinforced by the next set of conversion rates outlined in this video. Going on a tour with a client, even if it isn’t the property that they will eventually lease, brings the success rate to 25%. Speed is obviously a critical factor to a deal as well. Submitting an LOI within 45 days of the first tour then the likelihood of closing jumps to a stunning 49.5%.
Diving even further into the data Digsy is able to show that just drafting an LOI is not enough. Only 35% of the deals closed came from merely drafting an LOI. Submitting an offer bumps that up to 54% and getting a counter offer further increases it to 61%. The biggest jump comes when terms are agreed to. Then the likelihood of close jumps to a whopping 91%.
To Digsy, the takeaways are obvious. Sending a shortlist of properties is an easy first step, but it means little unless followed up by an in-person meeting, or better yet a tour. Then, when getting to the LOI stage of a transaction, submit it to the listing broker as quickly as possible and don’t just keep it as a draft. Next, instead of going back and forth with counter LOIs, just jump into a direct conversation with your counterpart on the deal and try to agree on terms directly. This way, there is less lag time and thus lowered chance of losing the deal altogether.
I have personally used Digsy and I really like the interface. I tell people that it is like having a mentor and an assistant all in one. What I love is that technology like this helps brokers forge their own path into the industry. The modus operandi for commercial real estate has always been to cut your teeth with a big firm before being able to go out on your own. The top firms know this of course, so they take the opportunity to work their new hires to death, often with little support. While this Darwinian approach seems logical, I think it keeps a lot of good agents from becoming successful in CRE. After all, the best salespeople are entrepreneurial in nature, so it seems silly that we would set up a system where only the new agents that are best at playing corporate politics will be able to float to the top.
The benefit of working for an experienced, large brokerage is learning best practices. But, even they don’t have a truly data driven approach to what those best practices are. Techniques that have worked for the top brokers in the past is often a good implication of what will work going forward, but is not a guarantee that others will experience the same success. Now, thanks the companies like Digsy, brokerages large and small will be able to more effectively quantify what are the most important factors to a successful close. This should help all of us do more deals in less time, something that I am pretty sure all of us can get behind.