Your Market is Changing. Are You? Real estate is always changing. The way you sold yesterday might not work today. Here’s how to prosper when everything around you is swirling.
“How many of you are working in a changing market?” That was the question I asked an audience of 1,100 Realtors® in January 2008 at the Certified Residential Specialist (CRS) conference. About 60 percent of the hands went up. The other 40 percent of attendees were in a changing market too; they just didn’t realize it.
They also didn’t realize that they might be changing careers soon, because long-term success in real estate depends on three things— acknowledging that the market will change, anticipating market movement and adapting to it. Acknowledge Change
Too many sales associates are missing opportunities today because they’re mentally stuck in yesterday’s market. If that living in the past mindset could be manifested in their appearance, they might look like the cast from the movie “Grease.”
You may not have to look farther than your office to find sales associates (or the empty desks they used to occupy) who are mentally still living the 2004 market. Most likely these associates entered real estate sometime after 2000, so they’d experienced the market that seasoned sales associates know comes around only about as often as Haley’s Comet.
Veteran sales associates also understand that the real estate market is like a Lava Lamp. Globs heat up and rise; then the globs cool off and fall. To survive these ups and down, it’s important to realize that markets, as fashions, change. So, focus on today’s reality, unless you dig wearing poodle skirts or tee shirts with a pack of Lucky Strikes rolled up in the sleeve. Anticipate Market Movement
There are very few things constant in real estate—other than change. This isn’t a difficult concept, because we can find ourselves in one of only three markets. There’s a buyer’s market, a seller’s market and a market that is in relative equilibrium. Most sales associates know the market they’re in, but few try to anticipate the market’s movement, which is important if your goal is to give your customers the best advice possible.
Most of the country, including Florida, is now considered to be a buyer’s market, characterized by heavy inventory and falling prices. But, real estate is very local. So, what is your specific market like? Is your market getting worse? If it is, then you should advise your sellers to get more aggressive and lower their asking price. If the market is improving, the price reductions may not have to be as deep.
There’s only one way to know if your market is improving, and it’s not by watching CNN or reading The Wall Street Journal. It’s by tracking the overall inventory in your market and the submarket in which you specialize. If inventory is growing, the market is continuing to move further from a seller’s market and deeper into buyer’s market territory. If inventory is shrinking, the reverse is true.
Inventory, or the change in it, is the market’s compass. A change in inventory indicates a change in market direction. At a bare minimum, you should track the number of listings every month, and in so doing, you’ll be among the first to spot the market’s change in direction.
When you do this, you can confidently advise your customers because you can base your recommendations on information you know to be reliable, rather than on the opinions of the many real estate experts. In addition, you’ll have elevated yourself above much of your competition because of your knowledge. Adapt to Market Changes
When the market shifted from a seller’s market to a buyer’s market, as it did in Florida about three years ago, you saw your seemingly endless supply of buyers dry up. The red hot market we experienced had conditioned sales associates to expect buyers to flock to their open houses with escrow checks taped to their foreheads. Those days are gone and so are many of the sales associates who couldn’t adapt to a changing market.
I teach sales associates a simple concept called “Fish for the fish that are plentiful.” During the seller’s market, every time we would throw our net into the buyer’s pond, we would bring up more buyers then we could handle. Why? Simple—buyers needed us. Homes were selling so fast that buyers would be at an extreme disadvantage if they were not using a sales associate.
That’s not as much the case during today’s buyer’s market. If you’re still throwing your net into the buyer’s pond, forget it. The buyers are there, but they’ve gone so deep that you couldn’t bring them to the surface with dynamite. They’ll show themselves when they’re ready.
Instead, start throwing your net into the seller’s pond. Sellers are the ones who need our help now. Your net will overflow, and you’ll be amazed at how easy it is to get listings. Don’t be fooled: a listing taken and not sold pays the same as the amount you receive when you spend two weeks showing buyers every home in town only to find out they have horrible credit. Qualify sellers the same way you used to qualify buyers. Determine if they’re willing or able to afford to sell at today’s market value.
There’s an axiom in real estate that says when listings are easy to get, they’re hard to sell and when buyers are plentiful, properties are not. That’s the way it is and will be. Don’t fight it; just learn to adapt to the market conditions, and you’ll enjoy a long and fruitful career.
Denny Grimes, MBA, CRS, ABR, is president of Denny Grimes & Co., a full-service brokerage in Fort Myers.