|
 For
months now, predictions of what lies ahead in the real estate
industry have been mixed at best, downright scary at the worst.
According to a survey, Phoenix Management’s quarterly
Lending Climate in America, two-thirds of lenders nationwide
believe a real estate bubble currently exists in the United
States, and half of them believe it has already begun to burst
or will burst in the next six months. Exacerbating the situation
is the latest trend in mortgage rates, which hit a four-year
high early in April.
However, NAR chief economist David Lereah takes a more measured
view: “We can expect a historically strong housing market
moving forward, earmarked by generally balanced conditions across
the country and fairly stable levels of home sales with some
month-to-month fluctuations.”
Perhaps surprisingly, most buyer’s representatives
I’ve talked with take an even more optimistic view of
today’s conditions — increased inventory and fewer
buyers — seeing a market that’s rife with opportunity,
for both buyers and buyer’s representatives. But how,
the Chicken Littles might ask, can they think that? Such optimism
starts with a shift in perspective.
REASONS FOR OPTIMISM
First, these buyer’s representatives understand that
despite the national picture “all real estate is local.”
That’s not to say they ignore the national scene, but
they’re careful not to confuse it for their own back yard,
and they make sure prospective clients don’t either. “Nationwide
statistics are weighed heavily by what happens in large markets
at the extremes,” says REBAC instructor and Hall of Fame
member Lynn Madison of Lynn Madison Seminars in Palatine, Illinois.
“The picture outside these areas can look quite different.
The national view doesn’t take into consideration specific
factors that impact local changes in pricing and inventory,
such as business growth, employment and other community aspects.
Buyers need to know these things.”
Beyond that, these buyer’s representatives also understand
that local requires even further clarification, especially in
times of market alterations. Properties that may have been able
to see benefits from the recent sales of more desirable homes
nearby probably won’t see such “rising tide lifts
all ships” effects. That could be a good thing for buyers.
Comparing a more favorable local climate to national conditions
and imparting this information to buyers might be all it takes
to heat up cold feet and exterminate stomach butterflies.
ADVANTAGES AND OPPORTUNITIES
But where are the opportunities? For buyers, the advantages
of the market are easier to see. Increased inventory means more
choices and more time for their homebuying process.
“Buyers are really shopping more carefully now, cherry
picking — as well they should,” said Curtis Hall
of RE/MAX Anasazi Realty, Phoenix, Arizona and REBAC instructor
and Hall of Fame member. There are other benefits for buyers
too.
“The latitude for buyers to negotiate has increased
tremendously,” said REBAC instructor and Hall of Fame
Member Terry Watson of E. V. Stewart of Chicago, Illinois. Closing
costs, special assessments, personal property and other terms
and contingencies that had become nonnegotiable in the hot market
are open for discussion again. “Offers that just a year
ago would have gotten laughed off the table are now getting
serious consideration, counteroffers and even accepted.”
That’s all good news for buyers, but what about the
professionals helping them find their home? For buyer’s
representatives, the market’s up side might not be so
obvious, but it’s there.
“In my market, inventory increased from 7,200 single-family
detached listings last May to 37,000 in this April,” Hall
said. “Agents are saying ‘I’ve got the listings;
I need buyers!’”
Or, as Watson put it, “The market’s shifted away
from the listing agent. If I have the buyer, now I have the
power.”
 QUALITY
VS. QUANTITY
Another advantage, according to Hall, is that while the “inventory”
of buyers has decreased, the market has, to a certain extent,
weeded out the ‘tire-kickers’ and buyers who are
likely to drop out in the course of the process. “It’s
quality versus quantity,” he said. “For the most
part, the buyers out there today are really serious.”
And competition for those serious buyers is going to be tough
— even as tough as getting the listing was a year ago
— so buyer’s representatives should be looking at
how they can differentiate themselves to prospective clients.
While statistics show that buyers often work with the first
agent they meet, Hall sees the buyer counseling session as the
key. “Fifty-five percent of the licensees in Arizona have
less than two years experience,” he said. “While
there’s a lot of competition for buyers, more than ever
experience, demonstrated in the buyer counseling session, will
be the difference between having a client in this market and
not having a client.”
But it’s not all bad news for buyer’s representatives
who can’t wow prospective clients with all their years
of experience. Slower markets offer opportunities for newbies
as well. “In a fast market with so many multiple offer
situations, newer agents are at a disadvantage right off the
bat. They just don’t have the experience to compose or
pre-sent offers that really grab sellers and listing agents,”
says Watson. “But in today’s slow-er market, sellers
and listing agents are much more receptive. They’ll usually
make counteroffers and provide explanations about terms that
are problems, giving newer buyer’s representa-tives the
opportunity to learn lessons they wouldn’t get in a hot
market.”
 TAKING
THE PRESSURE OFF
There’s also one aspect of the market that benefits
both buyers and buyer’s representatives. “[T]he
normalization [of the market] is healthy,” Lereah said,
“because it is taking a lot of the pressure off of the
decision process for both homebuyers and sellers.” The
pressures such markets produce can force buyers to make compromises
that they otherwise might not make. Patience can again become
the virtue that it should be instead of the victim it often
is in a hot market.
“A high pressure market really works against buyer’s
representatives,” said Hall, “against our training
and our ability to exercise our buyer representations skills.”
He noted that conditions in his market a year ago — which
led the nation with thirty-seven percent annual appreciation
— also brought added risk, with buyers expecting such
astronomic appreciation to continue indefinitely. Today, values
have stabilized, inventory has increased greatly, days-on-market
have gone from one or two days a year ago to sixty to ninety
days, with an increase in daily price reductions. “Every
CMA I present I date, have initialed and keep on file. I do
that regardless of market conditions, but it’s especially
important in a hot market.”
What’s more, Hall saw how the pressure of the market
also forced many clients who had to buy — transferees
or retirees — to just “settle” on properties
they wouldn’t have otherwise. “For a while, it wasn’t
a matter of helping my clients find a ‘home’, but
rather to help them buy a ‘box.’ The inventory was
so low a year ago there was nothing for buyers to choose from,
but they had to buy. Now I’m telling people that if they
don’t have to move, don’t move, wait. The supply-and-demand
pendulum is swinging in their favor.”
 BUYER'S
AGENTS SHINE
While reduced pressure on buyers is an obvious benefit to
them, it also plays to the strengths of buyer’s representatives.
Aiding buyers when homes last on the market mere hours certainly
takes savvy, but it hardly provides buyer’s representatives
with the stage to best display to their clients the skills and
training that make their services so valuable and appreciated.
REBAC instructor Rhonda Hamilton, Rhonda Hamilton Learning
Services of Longview, Texas, whose presentation “Conversations
With Clients: Getting a Buyer’s Rep Agreement Signed”
is part of the 2006 REBAC Day program at the REALTORS® Conference
& Expo in New Orleans on November 11, concurs. “I
think buyer’s representatives should view this changing
market as a new forum to bring to light the value they can provide
buyers, and place that information in their marketing materials.”
“In a hot market,” said Lynn Madison, “conditions
dictate so much of what buyers can do, and so much of what buyer’s
representatives can do. But in a slower market we can really
concentrate on our clients instead of letting the market drive
so many of their decisions. That gives us the chance to really
shine.”
To really shine, buyer’s reps don’t need to change
their strategy — to help clients find the home that’s
right for them while looking after their best interests —
but to change some of their tactics. “Buyer’s representatives
who fail to recognize changes in the market and adjust to them,”
says Hamilton, “will not benefit from the opportunities
these changes present. The motivating sense of urgency a hot
market engenders, and that buyers may appreciate in such markets,
won’t play with buyers when the market doesn’t mandate
urgency. Buyer’s representatives should regularly take
stock of their approach to make sure that it reflects the situation
of the market at the time.”
A more relaxed approach, reflecting the reduced pressure
of the market, affords buyers the latitude, time and luxury
to perform all those due diligence tasks that, as Hall pointed
out, a hot seller’s market just doesn’t allow them
to perform.
Watson thinks that buyer’s representatives should recommend
in-depth property research like loss-history reports in all
market conditions, but he understands that the market is going
to dictate whether or not such information will come into play
during the transaction. “In a hot market, when all you
can do is show the few properties on the market that meet the
client’s needs and write up offers, buyers don’t
get the chance to think much of your services,” he said.
“The more you can show your clients how much you can do
for them the more likely they are to become referral resources.”
Still, there are those agents who prefer working with sellers
and who will see the reduced pressure on buyers as just more
work for them. Hall disagrees. “Sure buyers are looking
at more houses — we recently showed one buyer-client over
fifty properties in a matter of days. But in a market where
listings are staying on the market sixty to ninety days, even
neurotically picky buyers take less time to find their home
than it takes for homes to sell.”
“The picture
outside these areas can look quite different. The national view
doesn’t take into consideration specific factors that
impact local changes in pricing and inventory, such as business
growth, employment and other community aspects.”
Lynn Madison
Lynn Madison Seminars
Palatine, Illinois
Every buyer’s representative who lived through the
hot market in recent years has stories to tell: homes on the
market for mere minutes; tens of offers on a property; bidding
wars that went on and on. As remarkable as these stories are,
they represent just other circumstances in which buyers purchased
their home. Always presenting challenges, regardless of the
climate of the market, this journey is similar to how traveling
the same route through various weather conditions can seem entirely
different. But knowing a journey through different conditions
makes you a better navigator of the route. Becoming a better
navigator of the homebuying journey is no different. And maybe
this learning opportunity — the chance to become a better
buyer’s representative — is the best opportunity
of all presented by this new market.
– Marc Gould
|
