In previous issues of Realty Times, we've addressed how to create an effective and balanced business plan. Today we look at how to adjust your business plan when the market takes a serious down turn.

Real estate, like the stock market, is a cyclical market. While no one has a crystal ball, the stock market, the drop in retail sales, and the drop in interest rates all seem to point to a potential recession. For example, for the last 50 years Southern California has hit its peak values in the years that end in 7-9 (i.e. 1967-69; 77-79, etc). The market has "retreated" in the years ending with "0" and "bottomed in the years ending 2-5 (1982-85, 92-95) and then started back up again. Like Southern California, many US real estate markets are on roughly a 10-year cycle. If you've been in a strong market for the last 3-5 years, it's a pretty safe bet that you're about to experience a downturn in the not too distant future. Instead of being ambushed by an unexpected change, here are several strategic adjustments to make in your business plan to keep you "up" and profitable even in the toughest "down" market.

1. Master market statistics. Are prices in your marketplace going up or down? How many months of inventory are currently on the market in each area where you currently work? Commercial brokers can routinely quote price per foot and can tell you exactly how many months of inventory are on the market. They can also tell their clients what percentage prices have increased or decreased in the last 6-12 months. Unfortunately, most residential agents simply don't understand how to calculate or use these numbers in their listing presentation to obtain a realistic listing price. Being able to explain "what the numbers mean" to your buyers and sellers is probably the most critical skill needed to survive during a changing or down market. One way to master this dialogue to obtain listings and price reductions is to take a "Market Trends" (interactive training via telephone) teleclass.

2. Be willing to quickly adapt as the market changes. For example, if you've been in a Sellers' market and listings stop selling, stop prospecting for new listings. Instead, focus on obtaining buyers by holding more open houses, working with people or companies who are relocating, and working with a "niche" such as "newly married" (or going through a divorce.) The objective is to work with individuals who have the highest probability of buying.

3. Watch the sales board. If a certain area in your marketplace is significantly more active than others, prospect for listings and hold open houses (even if they aren't your listings) in that area. The goal is to focus your efforts on areas experiencing the greatest number of closed transactions.

4. Prospect for first time buyers. When we experience a downturn in the market, an excellent source for new buyers is to prospect high-end rental apartments and rented houses for potential buyers. These individuals have nothing to sell and hence, are easier to "take to the bank."

5. Be even more diligent in working your sphere of influence. Since solid referrals are more difficult to obtain, regular contact with your sphere maximizes the probability you'll receive the referral rather than someone else.

6. Invest in yourself. Consider upgrading your skills whether it's hiring a personal coach, taking a teleclass, or improving your computer skills. When market conditions are difficult, only the most qualified agents get business on a regular basis. Some resources to consider:

Published: January 23, 2001

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Bernice L. Ross, Ph.D. operates RealEstateCoach.com, with her husband and co-trainer, Bryon Van Arsdale. A Professor of Psychology at Los Angeles Pierce College, Bernice also is a faculty member at Coach University and holds the designation of Master Certified Coach. She served as Executive Director of Training from 1993-1997 for Prudential Jon Douglas Company, and also pioneered the first real estate/coaching teleclasses for Continuing Education credit in California. E-mail Bernice at bernice@realestatecoach.com.