I was recently interviewed by the real estate news service Inman News about the current state of our market. The reporter was extremely inviting and did a great job in his strory. Unfortuntely for many Inman is a paid subscription news service. The report was kind enough to provide me with a copy of the stories. I wanted to share them with my AR community. Here is story #1:
What to do when buyers won't make a move
Part 1: Navigating a tough housing market
Monday, October 30, 2006
By Matt Carter
Robert Whitelaw, Robert Whitelaw Real Estate
Editor's note: In this three-part series, brokers and agents share tips and insight on approaching buyer and seller standoffs and ways professionals can keep a transaction moving in a slowing real estate market. (Read Part 2 and Part 3.)
With housing inventories in many markets on the rise and prices either appreciating more slowly, stagnating or falling, many buyers are hesitant to pull the trigger on a home purchase, convinced the next house they look at will be a better buy.
Add to that the fact that the Federal Reserve is taking what looks to many analysts like an extended vacation from interest-rate hikes, and many buyers aren't feeling pressure to act.
At the very least, some buyers want assurances that the home they buy won't be worth less than they paid for it if they need to sell in the near term, and that it's a good long-term investment.
But if sellers in a down market have unrealistic expectations (see Part 2 of the series) about how much their home is worth, buyers can be lulled into a false sense of confidence that housing prices are going nowhere but down.
In many markets, housing prices continue to appreciate. Even in markets where prices are stagnant, buying a home that will be a primary residence can still be a good investment because of the tax breaks for homeowners and the potential for long-term appreciation.
So what do agents do if they have found a property that they think is priced fairly and meets a buyer's needs, yet the buyer remains on the fence?
One key in working with buyers is to establish how much house they can afford before spending time house hunting, said Robert Whitelaw, a Realtor and real estate broker in Morgan Hill, Calif.
"Buyers -- at least for the most part -- tend to be worriers," Whitelaw said. "They are taking on a big financial burden when they purchase a home."
To help buyers "mentally take the plunge with as few butterflies in their stomach as possible," Whitelaw said he tries "to build a strong foundation of confidence."
That starts with the numbers.
"We sit down and work out how much home they can afford to buy," Whitelaw said. "I work closely with trusted lenders to get a general pre-approval for funding. Once I have this number, I stick to it and do not show them homes beyond what we have determined they can afford."
If you're willing to help a client look at many homes, you won't need to convince them that their home of choice is fairly priced, said broker Ira Freireich, an exclusive buyer agent with CFP Best Buyer's Broker Realty in Long Island, N.Y.
"We never persuade our clients, we provide them with our opinion based on years of experience," Freireich said.
"Our buyers usually know when they see the right home for them and usually are aware of the general market," Freireich explained. "They do know that we will abide with their decision and if they want to continue looking we will show more homes. We never persuade them not to look further."
Ira Freireich, CFP Best Buyer's Broker Realty
Even after a client has found a home and accepted an offer, Freireich said, he continues to supply them with homes coming onto the market until they are in contract -- which can take one to three weeks.
Broker Stephen McWilliam, the president of Florida State Realty Group in Ft. Lauderdale, Fla., also sees little point in persuading reluctant buyers to sign on the dotted line.
"We do not try to convince a buyer into buying," McWilliam said. "Generally, they've already made their minds up in this regard. They will either rent or buy when they feel comfortable and are tired of the renting game."
McWilliam said many people who move to Florida for work are not only worried about the housing market, but aren't sure where they want to live.
"One of the reasons they are renters now is they read the press and they think the sky is falling," he said. The days when a buyer could purchase a property in an unfamiliar neighborhood and then turn it around and sell it for a quick profit if they decide it's not really where they want to live are gone.
Migrants to the state say, "We don't know where we want to be. We like this area, and we want to be homeowners, but we want to kick the tires," McWilliam said. His firm helps would-be buyers lease condominiums and homes, often getting their business when they are ready to make the leap to home ownership.
"It's like planting seeds in the garden," McWilliam said. "They will generally all grow into buyers within 12 to 36 months. If you as a Realtor have enough planted, you will have a very good garden in the next few years."
Renters who can afford to buy a home soon become tired of rent increases and not being able to make improvements to their rental properties, McWilliam said. Or they want to build up equity in a home and take advantage of tax benefits.
He cited the example of a couple from the Midwest who moved to southeast Florida in January.
"We'd sold them a condo, and they backed out of it because they had the heebie jeebies," McWilliam said. "Today, they e-mailed us and said they are ready to buy. They know the area now, and they know where they want to be."
Realtors can't make tenants become buyers, McWilliam said. But rental inventory is low, and is getting lower. As quality rentals get harder to find, monthly rents will go up, and tenants will become buyers, he said.
"If I sat back and said I'm not going to do any rentals, we'd be crying, because that is where the business is right now," McWilliam said. "This is a full-service profession. If I turn that person away, I'm only shooting myself in the foot long term."
When clients are ready to buy, McWilliam said they are often surprised that the selection of homes is more limited than they'd imagined.
"Ft. Lauderdale is not as overbuilt as people perceive it to be," he said. When buyers spell out all their requirements -- for a certain number of square feet, or a backyard big enough for dogs -- "you eliminate 90 percent of what's out there. People are surprised when we tell them there are three places to look at that meet your requirements. We call it qualifying -- not financially, but what they are looking for."
Whitelaw takes an equally thorough approach with buyers in California's Silicon Valley.
"Before showing my clients homes, I like to get a good handle on what they are looking for. What are they hoping the home will do for them aside from give them a place to sleep and park their car at night?" Whitelaw said. "Once this interview is over, I keep it as a sort of check-list in their file."
When Whitelaw finds homes that meet a buyer's criteria, he puts the ball in their court by giving them "an opportunity to act."
"I run down the list of things the home has that were on their list and ask if we should write up the offer," he says.
If the buyer does not want to make an offer, Whitelaw's checklist can help them see if "their reasons are rational or emotional." He, in turn, can update his checklist and have a fuller picture of what a buyer is looking for as he continues to search for homes they might be interested in.
A buyer may be convinced they have found the right home, but there's still the matter of price.
Although there are many sophisticated tools for analyzing home values, Freireich said they may rely on old data. Because a property has many unique features, a fair price is often determined by negotiations.
"When we show a home, we are looking at position of the home on the property, interior layout, amenities of the home, as well as any apparent defects of the home," Freireich said. This information is relayed to our client. Any questions they have are answered. If they believe this home meets their need and they would like to make an offer, we then research the area and give our estimate of the price it will sell for. We then try to meet with the seller, and agent, to negotiate the lowest price we can get."
Marguerite Crespillo, Realty First
Marguerite Crespillo, a principal at Realty First Real Estate & Mortgage Services in Roseville, Calif., takes a similar approach.
"After a few days of looking at homes, a buyer can figure out for themselves very quickly what a home is worth and if they are willing to pay it," Crespillo said. "Then it is my job to negotiate that price on their behalf. If I tell them a value then I am responsible for that value, good or bad -- mostly bad. They don't complain if it goes up but they will complain and loudly if it goes down."
Crespillo tells clients that nobody can predict what will happen to the housing market, but that homes tend to be good investments and the only way many Americans ever save any money.
"I tell them that if I knew what was going to happen in the market I would be retired in Tahiti sipping Mai Tais," Crespillo said. "No one knows what is going to happen, and purchasing a home is just that -- a home. A place to live, a place for your family."
Broker Christine Forgione of Carollo Real Estate in Queens, N.Y., said buyers are educated, and realize that prices will only come down so far before interest rates go up.
Buyers "have watched prices come down, have read every real estate bubble article and have speculated that the market is going to bottom out," Forgione said. "My take on this is that to wait for the prices of homes to come down in price only means that the interest rates will go up. You cannot have both."
Like Crespillo, Forgione also makes a big picture pitch, telling potential buyers that owning a home makes good financial sense.
"I explain to them that it is better to pay more for a house and less for taxes than the reverse," Forgione said. "You will be paying the same amount in the long run, but it's better to have it building equity than going to taxes."