If you don’t keep track of your real estate business, you don’t know when things aren’t going right -- except maybe by looking at your bank account at the end of every month. Key performance indicators (KPIs) are how the majority of modern real estate brokerages keep track of their business performance metrics, particularly for real estate agents.
Types of KPIs
When considering your agent KPIs, be mindful that not all KPIs are created equal. Some KPIs measure the efforts made by team members, whereas others show whether or not those behaviours were effective.
In their book, the 4 Disciplines of Execution, authors Chris McChesney, Jim Huling and Sean Covey explain that KPIs can be broadly separated in two categories: lead and lag metrics.
- Lag metrics are the most common type of metrics that come to mind. They include things such as revenue, profits, sales numbers, etc. These metrics are the results of actions, and lag behind the actions taken that actually generate them.
- Lead metrics are metrics that measure inputs, or actions taken by team members. These represent the raw efforts attributed by agents.
The advantage of understanding KPIs in this way is that it allows brokers to better diagnose the source of issues. For some agents, they may be missing targets due to the lack of action, while others may be taking the expect level of activity but be falling short due to poor technique.
Real estate agent KPIs
To help you get going, we looked for the best metrics for any real estate business to track -- we’ll tell you what they are, and why they’re important.
1. Number of calls or contacts made
Prospecting is the core activity for all agents and is a clear example of one of the most powerful lead metrics. Many brokers provide a certain minimum number of prospecting calls required based on the historical number of contacts required to generate a sufficient amount of interest and to generate leads.
2. Database size
Measuring the agents database month on month can give you an insight into the number of successful contacts they are generating and their ability to generate listings or sales in the future. Poor database growth may signal that an agent is not prospecting at a high enough level or that another change, such as extra training in scripts is required.
3. Appointments generated
From prospecting activities how many generated appointments? Was the agent engaged by a higher or lower % of clients than those in the office? A lower % is not always a bad thing but can signal that the agent requires extra training or is employing the wrong technique.
4. Networking events attended
Some agents, particularly newer agents, may be tasked with attending a number of industry networking events in order to develop reciprocal relationships with allied service providers.
5. Total number of listings per agent
Knowing the number of listings a listing agent currently holds can give you an idea of whether they have the sufficient amount of inventory in order to meet sales target. When compared with historical data, changes in the number of listings can represent accelerated sales, a downturn in performance or change in the market.
6. Showings per sale
This metric can be measured by how many visitors attend a listing before the house is sold. If tracked, this number can show whether or not an agent is effectively qualifying buyers or effectively showing. Poor performance that is not due to the agent may be due to poor pricing or marketing of the property.
7. Average sales price
You’ll probably have a good idea of what properties in your area sell for. How do your sales match up? Are you able to exceed average price in the area? If not, you could set as a goal for your team to focus on finding higher-value properties.
8. Average commission
Average commission % gives you an idea of whether your commission (and profits) are being maintained over time, or becoming heavily discounted in order to win listings or sales.
9. Net income
This is what really counts: Calculating the correct commission, what goes into splits, agent salary, taxes and other costs. You’ll know exactly how much will flow back to you over the coming months and years.
10. Client feedback score
Are clients being properly served? Do your results show positive outcomes? A downturn in client feedback scores could signal the need for extra training or the improvement in relationship processes.
How many KPIs should you track?
There is an argument to be made that you do not need to track all the above KPIs. In fact, often this is impossible to do manually. Further yet, giving your agents too many KPIs may be confusing or overwhelming.
The alternative is to invest in tools that help you keep track of the right metrics broadly, while picking a basket of KPIs to follow in practice which have the highest impact to agent performance in your offices or area.