Slow Market Survival Guide
How to Survive and Prosper in Today's Slow Real Estate Market
By: Ben Curry
The news has been full of Doom and Destruction concerning the housing market. Is this really what's going on in the U.S housing market? Real Estate Agents had it easy during the booming market. As long as you had buyers or listings, you were guaranteed to make money.
Homes closed quickly and banks were quick to accept sketchy loans. Borrowers with no job could buy a house. People with damaged credit could buy a home with little out of pocket. And agents in their first year in the business could make six figures easy.
Remember not so long ago, when you could make your fortune in real estate. It was nothing then to buy a home, wait a short while, and then sell it at a tidy profit. And then do it all over again. Investors and house flippers bought homes and flipped them for big bucks.
All the spec home builders were selling their homes before they were even finished. Builders Ire making $10,000 to $30,000 more if they waited to the end of construction before they sold because prices Ire going up so fast. Homebuyers were waiting in line to buy, and sending personal letters to homeowners who had a home for sale telling them how badly their family wanted their home. It seemed like everyone was buying at the same time.
So, what happened and why has everything seemed to have come sliding down. Ill, when home builders, investors, developers and banks saw the buyer frenzy get started they all jumped in at once. Many lowered their standards and let down their guard.
Home builders started building more spec homes than ever before and new builders Ire popping up everywhere wanting to get in on the money. Banks lowered their lending standards and lent money to anyone who could fog a mirror. Investors bought everything they could get their hands on and don't forget all the would-be house flippers looking to get rich. Developers built way too many new housing developments and communities.
They all made a fortune for a while until home sales started slowing down. But they could not stop because many new homes, developments and communities Ire halfway done and had to be finished. I'm sad to say it but now it's all catching up. Interest rates started creeping up again.
Banks and lenders lent money to home buyers with crazy rates and the buyers are defaulting on their loans. They are unable to refinance their homes to bail out of trouble. Banks are now investigating more before granting a loan. Buyers got scared and started to re-consider buying a home.
Builders who overbuilt are stuck with multiple homes and discounting them just to unload them. Developers have over developed and now there are is a flood of lots for sale. Many new subdivisions are not even completed. Investors and house flippers are freaking out and doing whatever they can to get rid of their homes. Not everyone will sell and already builders, developers, banks and investors have gone belly up. Despite all this sellers Ire still thinking that their house was worth more money than ever.
The housing market is controlled by supply and demand. When demand is high and supply is low it's a seller's market and Seller's are in control. That's what happened between 2003 and 2005. Now the reverse is true.
Supply is high and demand is low. We are in a buyer's market. Buyers are making the rules and have become very discriminating with what home their money buys. It's not uncommon to have a buyer look at a home and not like one thing and decide to buy a different home.
How do you get an unrealistic seller and uneasy buyer
to the closing table?
I don't have a magic pill answer to that question, but it is a lot of work. Us agents now have to figure out how to survive this slow market. What can I do to make it? How can I get our listings to sell? How do I make money in this market? I'll go through and answer some of these questions.
So sit down... relax... turn off the television and grab yourself a warm cup of coffee or a cold soda and find your favorite easy chair. I want you to relax and have your eyes and ears open because this is going to be one of the most important guides you may ever read.
Selling a home during the hot market didn't take any skill. Throw a buyer into your car and show them the few homes available on the market. Or, if you knew someone that needed to sell their home, when you got the listing it was almost like a guaranteed check. So thousands and thousands of brand new agents were able to make money in this business.
Today's market is a lot tougher
Buyers are scared that the home they buy today will be worth less tomorrow. Sellers still think their home is worth what comparable home used to sell for. And if they reduce their price, they want you to reduce your commission. So, how do I get homes sold?
If I look at selling a home from a very basic level, there are two things necessary to sell a home. A buyer that has the money to buy it, and a house that the buyer likes that is priced where they have enough money to buy it. There are buyers out there buying homes right now.
2007 will be the fifth highest year on record for existing homes sales. 2007 will be a better year for sales than 2002. The year 2002 was a record year for sales up to that date. There is business out there. We just have to go out and find it.
The Key is Motivated Buyers and Motivated Sellers
If a seller or buyer is motivated, they don't worry as much about the market. They want to sell their home or buy a home, come regardless. Let me explain. If a seller must sell their home to move to a different city for a new job, they will reduce the price on the home to sell it so they can move. See, a motivated seller just wants to sell the home and get moved on to the next one.
They might complain about a lower price, but they will accept it because they want the new job. If the motivating factor is stronger than the amount of money they are ‘'losing'' (come on, the market went up 38% from 2004 to 2006 and you are now still priced 19% higher than 2004) because of a lower price, they don't care as much.
Despite conventional wisdom that buyers are good in down markets, buyers are actually a worse source of business in a down market. Let me explain. Buyers take longer to make decisions, they "nibble" more, and they will eat away your net profit versus taking listings. The best way to make money in a down market is to list more homes at a much greater rate than during the boom. You are going to have to pre-qualify listings and sellers much more. Before even going out on a listing appointment, you must determine the seller's motivation. The reason is simple.
The only sellers who will sell in a down market are those who are motivated. Sellers that don't have to move and are overpriced will only whine and complain. They will call and ask; "You told us we could get $380,000 for our home. How come you haven't been able to find a buyer yet?" After hearing enough of this you will be pretty fed up with the constant blame.
I read somewhere that an expert said that people get stressed out most from one thing. Things they can't control. And we can't control buyers and which home they buy. It's not like I can put a gun to a buyer's head and tell him he must buy this home. And no amount of marketing will bring in the buyer who wants to pay more money for a home when he can buy the same home down the street for less.
How do I find Motivated Sellers?
There are several sources: FSBOs, Expired Listings, and Foreclosures. The key is to find sellers just like usual, but to determine how motivated they are before wasting time on them. For me, the absolute best source of new listings has been Expired Listings. When I realized what it took to survive this slow market, I focused most of my time on Expireds. Here's why.
Expireds are the easiest sellers to convert to a commission check. They have already listed with an agent (so they are willing to use an agent), they are motivated (they have already been on the market for 6 months), they aren't listing with the agent that promises the highest price, and they are willing to price the home right.
Now, there are lots of expireds to chase. And, they are very receptive to my sales message. Overall, it is much easier to grow your business and production today than it was during the boom. The trick is to know how to get the listings sold. That is what I learned how to do in 2006 and 2007, after the market had shifted. Prices were coming down, and you couldn't sell anything unless you asked for and got price reductions. I have actually put together a program that any agent can use to list expireds and get them sold.
Here are the three things you must be able to do to be successful with expireds:
- Get Your foot in the door for a listing presentation. I find that easy to do with my Mail-Call Plan. I get some appointments right upfront by calling the expired the day the listing runs out. But, then I keep calling and mailing them for another month or so. All the other agents have disappeared and I am the only one left standing.
- Once you get your foot in the door for a presentation, you've got to be able to sell them on listing with you. I have a Power Point Presentation that handles that. I shows them why they should not go with all the other agents, and how tough the market really is. Then, I show them why they need me and what I can do for them.
- You got to get the listing priced to sell, before it expires on you. After much practice I have figured out how to do this. It's not too complicated, because the key is keeping in touch with the sellers and building trust.
I have put together a solid system that handles all of these items. It comes with solid letters you can send, a good script to call the expireds, a listing presentation that closes them, and an explanation of how to get price reductions. I have packaged all of these for sale as what I call my Real Estate Agent's Motivated Seller Gold Mine System. You can get more info on this system here www.cuttingedgerealtormagazine.com/Motivated_Seller_GoldMine.html.
Not all homes are affected by the current market. If your home is priced under $200,000 in our area you're in pretty good shape compared to the rest of the market. The Gen-Y, First Time Buyers in our area are still buying home. Gen-Y is the people born between 1978 and 1998. These are called ‘'Echo Boomers''. Their number is estimated at 78 million population. These are starting to buy their first homes. Buying your first home is very exciting. First time buyers are not as worried about price declines that scare off move up buyers.
Also, in big cities like New York and San Francisco the expensive homes close to the urban center are going up in price and demand. With the rich getting richer, demand for premium properties is high. The rich people in these cities are willing to pay top dollar to live close to work and in the city. With ‘'Urban Living'' becoming popular again these big city properties are popular again and the prices are rising.
See, There Is Still Plenty of Business Available
For The Agent That Works To Find It
If you think there isn't enough business, you'll never go out and get it. And if you aren't trying to get business, someone else is. Right now, monthly home sales are comparable to the years 2000 and 2001. So people are still buying homes. We simply have to find the buyers that are buying and the sellers that are selling.
A lot of agents think that they won't make any sales in December. I know of several agents who make December their most productive month in the year. How? They work just as hard looking for new business in December as they do during the busy months.
They work hard looking for business while all the other agents stop working. The other agents say to themselves; ‘'Oh, it's the holidays, no one is buying and nobody wants to sell. I might as well stay home''. There are still sales in December. A lot of re-locating buyers have to buy before the end of the year for their company's tax purposes. And a lot of listings will expire in December and the first of the year. Whoever lists those homes will have a great spring when the buyers buy. And you have little competition because no other realtor's are working to list and sell homes.
Set a date to stop work in December and a date to start working again in January. I always go back to work on January 2nd because that is the day to list a lot of expireds. If you work hard in January, you will have a great, profitable spring.
Few Agents Do a Decent Job of Chasing Expireds
Expired Listings are the easiest listings for you to take. But nobody is doing a good job listing them. Sure, some agents call them, but that doesn't always break thru the frustration they feel. Remember, they are frustrated because they have been on the market for 6 months and few buyers have looked at their home. My letters ring a cord with the expired seller. Then they educate the seller on marketing to sell a home. Basically in a very roundabout way it sells the expired seller on using me to sell their home.
For more info, go to my website (www.cuttingedgerealtormagazine.com) that enables us to list a lot of expireds. Using this system causes me to get the best priced, most saleable listings.
Here are a Few More Tips on Succeeding in a Slow Market
Don't hang around with negative real estate agents! 95% of agents are negative about the market, and they aren't going to buy a house from you. Spend the time instead on finding new buyers and sellers. Don't listen to their negativity. If you think the market is bad, you won't go out and work to find new business. And right now, the opportunity to find new business is better than ever. And I'm talking about new business that will make you money. Motivated sellers who will price their home to sell and be happy that you can sell their home.
Finding new business is easier in a Slow Market. It takes more work to get homes sold and buyers to buy in a slow market, but it is a lot easier to get the business in the door. Most agents don't succeed because they are unwilling to do what it takes to make sales in a slow market.
Here are the items you must do if you want to be successful in this slow market:
- Ask your Listings for Price Reductions.
- Don't take responsibility or blame for the "losses" that sellers have to live with when selling their home. Even though prices have declined by 15-20% from the peak, prices are still higher than in 2004. So compared to then, sellers have made money. I couldn't take credit for the increase in prices during the boom and I am sure not going to take the blame for the current decline.
- Only spend time with the most motivated buyers that need to buy quickly. Buyer takes even more time to turn into a sale during a down market because they are much more picky and scared of making the wrong decision. They "nibble" more and suck up more of your time.
- Look at the MLS numbers. For example, last month in my area, 24 homes sold. And 456 are on the market. Based on just the homes on the market, we have a 19 months supply of homes on the market. That is 456 divided by 24. That's a lot of homes for buyers to go thru before making a decision to buy. Which one do you think the buyers are going to buy, the most expensive homes or the ones that offer the most home for the money? Even worse, last month 53 homes came on the market. Ultimately, this means that buyers have a lot of choices. Only the competitively priced homes are going to sell. Break up the numbers just like that and show them to your sellers. That, more than anything else shows them the reality of the market, and how even Superman or some crazy marketing plan can't sell their home if it's overpriced.
- Ask your listings to take offers that are lower than what the home appraises for based on past sales. If the sellers get mad that they can't get their price, then tell them; "A home is only worth what a buyer is willing to pay. If the US government collapsed and the US dollar wasn't worth anything, how much would your home be worth? Would it be worth what it appraises for? So, it's only worth what the person buying it from you is willing to pay you for it. No on has agreed to pay you what you are asking so far, right? It must be overpriced then.'' You just have to use common sense and explain it to them.
- Find Motivated Buyers. These can be first time buyers who are more excited about buying a home than if they lose a little money. With "Generation Y" starting to buy homes there are a lot of first time buyers out there. Generation Y is the people born between 1978 and 1998. Their number is 78 Million people, which is just a little less than the Baby Boomers. These are a great source of buyers that will pay off.
You must follow a plan. Here are the parts of the plan that I follow:
- First, have a plan for how much business you are going to do and how you are going to get it. For example, if you want to sell 50 homes next year that means you need to get 4 sales every month. Where and how are you going to get those sales? So many expireds converted? So many buyers? At the beginning of the year we must plan what we are going to do to be successful and hit our goals.
- The second important thing to consider is blocking time. Blocking time is when you focus on completing just one item or task at a time. For example, when I handle closings I don't take phone calls, check e-mails, or let staff people interrupt me. This enables me to complete the task at hand much faster.
- I schedule one afternoon a week for three hours to call my sellers, since my most profitable time spent is servicing my listings and getting price reductions. These cause my listings to sell, my sellers to get moved on with their lives, and me to make money. It takes literally hours of time to take a listing. Calling all fifteen plus at a time sellers takes less than two hours a week.
- I spend my mornings on Lead Generation. First I get all my letters mailed out. Then I spend a little time cold calling the best expired listings. Then I finish up with Lead Follow Up to any and all leads that I need to call that day. Finally when I am finished with generating new business I return any calls I received that morning.
- I usually take lunch when all the morning stuff is complete.
- After Lunch I first prepare for any listing appointments I have.
- Then I handle my closings. A lot of agents I know just jump from closing item to closing item. Before I start making any calls I write down the items that need to be done. For example: follow up on Walter's WDO, call the title attorney about the Daugherty Closing, call the lender for the King closing, etc. Then I decide which item is the most important and call on that one. I do not go to a new item until that one is complete. And, if I call on an item and can't get an answer I simply leave a message and forget about it until tomorrow (if we are a few days from closing then I will be more persistent.) Many agents spend all their time on closings. That is not in their best interest. I prefer to spend more time on Lead Generation and then I have more closings which means more are likely to close. No agent, no matter how skilled can save a closing if it is doomed to start with.
- Finally, I go on any listings appointments I have or work with a buyer. When I am done with that, I handle anything else that needs to be done and go home. During a slow market we have to be more productive with our time. We must make sure that each moment of the day is used to service clients or bring in more business. There is a lot of opportunity and business out there for the agent that looks for it. There are frustrated sellers that want an agent that can sell their home and buyers that need reassurance from an agent that they are doing the right thing. You can be that agent! Now, let's go find some business.