How Big Data Can Help Your Tiny Real Estate Business
I'm just going to get the pitch out of the way. The data I have available (and perhaps even more importantly, the data I know how to translate and effectively communicate to clients) can help you close more real estate transactions. It can save you time, cut back on the amount of homes you show, and motivate your buyers like nothing else I've seen over the years (Ok...MAYBE the "you don't need any documentation and you can get however much money you want!" loans of the early 2000s were more motivating).
Now that that's out of the way, here's the good stuff. Big data can help you motivate buyers to buy - no more "we may rent another year, but you can help us with the lease". No more "we just want to see 472 more homes to make sure this one is the right one". No more "if the seller won't come down another $1.50 we'll just find another home". No more "the outlet cover in the kitchen had a smudge on it, so we think the seller should give us $10,000 toward costs to make up for it". Data gets rid of all those arguments. Data makes sense. It's no longer a sale, and it's no longer a negotiation - it's instead striving toward a goal, a very smart goal for many people - home ownership, with no imaginary hurdles in the way any longer.
Before we go any further, I want to clear up the fact that nothing I have or do is proprietary. I don't have any fancy algorithms, any "man behind the curtain", or any secret sauce that just showed up on the scene. All I have is data - from NAR, from MBA, from Moodys, from MLS. But what I AM good at, and where others fail, is I know how to understand it, know how it works in the big picture, and I know how to effectively communicate it to others. Here's the data I share that's a game changer. When most lenders take an application, quote a rate, and send a buyer (and their agent) out into the wilderness, I talk about:
That is, the equity a home owner pays themself back each and every month they carry a mortgage. Aka wealth accumulated that belongs 100% to home owners and 0% to renters.
"Mr home buyer, your home is going to increase in value 4.5% this year!"....whup...dee...doo.
"Mr home buyer, you're going to grow your net worth by $200,000 in the next 5 years." Now THAT is something to get excited about.
Both are the result of appreciation, but when you take the data, show that in most markets, even through the Great Recession, real estate investments are winners, and how much impact it has on net wealth and financial planning, it is EYE OPENING. And the benefits outweigh the price haggling, the small repairs, and all the other nonsense so many home buyers mistakenly get hung up on in the home buying process.
The Cost of Waiting
Amortization and appreciation go to the home owner, not the renter. And the first year of home ownership usually DOES lead to a loss (if you buy and sell within a year, most times you'll lose money unless you're doing a flip/rehab). So the data points out renting for a year equates to 2 years of loss, not just 1.
Improving your situation
"Well I'll fix my credit and then buy". "I'll save more money down to get a better rate". These obstacles to home ownership, more often than not, are faulty "penny wise and pound foolish" thoughts that hold people back. Your difference in rate, or the cost of PMI, or if you have PMI or not, or if you're going FHA VS conventional more often than not pales in comparison to the amount of money earned through appreciation, amortization, and tax benefits of ownership.
As real estate professionals, we've all heard that home ownership is the key to wealth in America. We've all told someone "if you rent you pay someone else's mortgage". These hackneyed phrases ring empty when they come from someone who gets paid only when homes sell.
With big data, we no longer sell. The clichés now have impact. People can SEE what their life will look like in 5 years if they buy VS if they continue to rent. They can SEE what they're missing out on in real dollars. They'll see first hand what's truly important. They'll make better decisions.
Data builds trust. It's transparent. One cliché that's true is "the numbers don't lie". Data is objective and allows for objective analysis.
People say "the house is sexy, the mortgage isn't!". I argue "6 figure increases in net worth is DAMN sexy!". And that's the result of home ownership for most people. But you have to have the data. You have to understand it. You have to be able to effectively communicate it. For those who take the time to invest in data and invest the time to understand it and effectively use it, the data is going to make a lot of people a lot of money. And it's going to leave everyone else behind.
Questions about market conditions, forecasts, or the data for your market? Reach out via our "ask an expert" tool and we can provide a completely free 15 minute demo to show you how our data can help you sell more homes and grow your business