Adjusting To A Buyer's Market From A Seller's Market

Some interesting thoughts....

For agents used to brisk sales with multiple offers from eager buyers, a shift to a less frenzied market can be a shock. How do you regroup and get business into high gear again?

Realty Times responds:

I've long thought that the industry's concentration on sellers is a good thing, but there should always be an equal effort to cultivate buyers.

When markets change, then you have more of one than the other. If you have systems and strategies in place for both, then your business and that of your agents doesn't suffer as much.

Right now, you're putting a lot of marketing dollars, time and effort into homes that simply aren't moving, so it's time to regroup.

The first thing you have to do is educate your agents about the mindset of buyers in a changing market. Why do they take a herdlike attitude toward piling into or pulling out of a market. If they understand this, they'll better understand what buyers' needs are and you can help your agents develop services that will appeal to them.

The beautiful part is you can cultivate buyers without harming your business with your sellers because buyers are what your sellers want you to deliver!

So you have two areas you need to focus upon: bringing buyers into your brokerage and serving your sellers. Here's how to pull it off.

Buyers

Nearly two-thirds of buyers use the Internet to view listings, learn about the home buying process and meet service providers. What this means is that buyers are getting their information from other sources than you.

You need to intercept them first. Here are some ways to do that:

1. Start holding monthly or weekly educational seminars for homebuyers. Arrange speakers such as mortgage loan officers and title company representatives to explain borrowing and closing processes. Rotate your top agents (the ones who enjoy speaking or do this yourself) to explain where the market stands and where they can find good buys. Charge a fee for the seminar that is refundable if the buyer uses one of your agents to buy a home.

    

2. Arrange tours of specific neighborhoods where you have lots of listings. You'll get more play in the paper if your tours are coordinated efforts that include several homes. Selling a neighborhood is a fresh new way to get buyers interested in homes. It also is a way to make your advertising stand out from your competition, who may still be advertising homes in block ads. Getting several homes featured in one advertorial also gives you more bang for the buck.

    

3. Invite interior designers and remodelers to participate in "remodeling" seminars so you can educate buyers about buying properties that need updates. This also will help your sellers because it will demystify the remodeling process for buyers who want bargain homes but are afraid of the time and costs of remodelling an existing home.

    

4. Start using your seminars and neighborhood tours as selling points for your sellers. In a listing presentation, worried sellers know that a buyer's market could take a long time to find the right buyer at the right price. Show them your seminar/home tour schedule and they will know you are actively trying to cultivate buyers to bring to their homes.

    

5. Start an investor program where interested agents "mentor" investors through their first purchase. Invite mortgage brokers to explain the difference between mortgage loans for investors and those for homesteaders. Again, this is a program that could appeal to sellers at the listing appointment level, as they will see you are doing creative things to bring buyers into your brokerage.

    

6. Add property management services to your brokerage. If you don't already have property management services, now's the time to incorporate them. The reality is that some homes aren't going to sell, but might be candidates for rentals. You can train your agents to offer property management services to sellers in the event that their home doesn't sell by the date they wish. Getting the mortgage covered with some chance for a little profit might help some sellers.

Your Agents

Your buyers' programs won't be successful unless you get your agents on board, and the ways to do that is to remind them that their job is to put people in homes. That means renters as well as buyers. Look at it as a way to fish further upstream. If most renters become buyers at some point, wouldn't you like to be the agent(s) they use?

Also, last year over one-third of the homes sold in the U.S. were sold to non-occupying owners -- investors and second-home buyers. Second, a huge number of homebuyers purchased homes with exotic loans such as interest only loans. The MBA says that half the loans that are outstanding today were originated in the last three to five years.

What that should tell you is that you have a large number of homeowners who are at risk. They've either refinanced and used up their equity, or they haven't been in their homes long enough to build sufficient equity to sell without bringing money to the table. If they need to move to another home, they're in trouble.

No longer can you put a listing into the MLS and hope it sells. You have to have multiple strategies to help sellers in this position from helping them rent their homes to cultivating buyers for their homes.

Adding property management is simply being able to provide a different suite of services to the seller.

1. Bring in trainers and support staff that can help teach and show your agents how to include property management services in their bag of tricks. They need to know mortgages and strategies, such as 1031 exchanges, and they need to know how to work with HUD, Fannie Mae and Freddie Mac on foreclosures. They need to know how to educate sellers to keep their homes out of foreclosure.

    

2. Explain that housing rental commissions can be quite lucrative. In most markets homes rent for approximately one percent of market value per 12-month contract. On a $100,000 house, your brokerage would collect $1000 annually for every year the rental contract renews, plus you would be making monthly management fees. Just to be conservative, let's say to collect rents, deal with problems such as repairs or evictions, you collect an additional monthly property management fee of $50. That's $1600 annually, which is certainly better than nothing.

   If you were to sell the same house at 6 percent, you would collect $6000, which is hard to pass up, but let's look at the worse case scenario. Half the proceeds may go to another brokerage as cooperation. Now you're down to $3,000. Thirty-five percent may go to a relocation company or lead generation company. Now you're down to $1,950. That's only $350 more if you sold the home than if you rented it for the seller, not counting the revenues that could come in if the seller listed the home as a rental year after year.

    

3. Help your agents understand that markets are constantly changing but a buyer's market doesn't have to mean that you'll make less money. You just make money differently. You'll stay busy because you will do the things that are necessary to adjust to the present, while your competition may still be rooted in wishing and hoping things would change back to the way they were.

The Jay Shepherd Real Estate Update - RealtyTimes.com

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