Scott Newman is broker-owner of Newman Realty, a family-run brokerage in Chicago focusing on short sales, foreclosures, and buyer representation. He has been a top-producing real estate agent in Chicago since 2008, is vice chair of the education sub-committee for the Chicago Association of REALTORS®, and is an original member of the Chicago Young Professionals Network. For more information, visit www.newmanknowschicago.com or follow him on Twitter at @newmanrealty and @newmanknowschi.
Working With Buyers in a Thin Market
Is buyer competition for good listings fierce in your market? Here are three strategies for dealing with the lack of sellers and continuing to grow your business.
December 5, 2012
Two years ago, REALTORS® were submitting offers for 70 percent of list price, and they were being accepted. Why? There were dozens of listing competing for one or two buyers. But today, the entire balance of power seems to have done a complete 180-degree turn. What gives?
What real estate professionals are experiencing is common as local housing markets continue to stabilize, shifting the power from the buyers to the seller. This is a great thing for the overall economy and our industry, but if you’re not prepared, it can throw a real monkey wrench into your business planning and bottom line.
In this article, I’ll outline some simple yet effective strategies for working with buyers in thin markets where good listings are few and far between and qualified buyers are plentiful.
Set Proper Expectations
Prior to scheduling appointments and conducting showings, and certainly before you start writing offers, it is imperative that you have a frank and honest discussion with your buyer about what to expect out there.
Most buyers aren’t up to speed on what’s happening in the market. They still feel that they’re doing sellers a favor by making an offer because they think the market is terrible. When you tell them that they will likely have to pay full list price — or perhaps even more depending on where you live — they are likely going to think you’re crazy. The sooner you can get them beyond this mind-set, the sooner you can actually get down to the business of helping them find a home.
Come prepared with data to back yourself up. For instance, show them how the last three one-bedroom condo sales in a popular building in downtown Chicago have sold for 103 percent of the asking price. Make sure to constantly reiterate how cheap money is and what it would have cost for them to buy the same home five years ago when there were much higher interest rates and much higher purchase prices. Even at or slightly over the asking price, buyers are seeing substantial deals today.
Leverage Your Connections
One of the biggest things I get on my agents’ case about is not reminding their buyers of the full scope of the value they bring to the table as REALTORS®.
For example, say you have a great reputation as a buyer’s agent in a neighborhood where your client puts in an offer alongside several others. What if all of the offers are nearly identical? Do you think that listing agent will recommend that his client choose to work with you because of your reputation?
This is why it’s so important for real estate professionals to build their presence in the neighborhoods they work in. Sometimes the only difference between two offers is the way the listing agent feels about the agent representing the buyers.
With this in mind, make it your mission every day to be the most professional, on-time, courteous, and easy-to-work-with buyer’s agent out there. Your clients will reap the rewards when those multiple-offer situations come down to a matter of a few dollars.
Think Outside the Box
I’ve been to so many networking events where I hear agents complaining about how their client has been looking in such and such a building or neighborhood, but nothing ever comes on the market or stays on the market for more than a few days.
Rather than wasting your time feeling sorry for yourself, you should consider being more creative in how you approach the situation.
I have clients right now who are looking to build in the Lakeview neighborhood of Chicago for about $1.6 million, but the competition for lots that hit the market is beyond white hot. We are constantly losing out to builders who are better positioned to get their offers submitted more quickly.
Instead of throwing my hands up, we simply decided to target off-market properties by searching the tax records and mailing hand-addressed letters asking home owners if they’d be willing to entertain the notion of selling us their home.
This strategy has allowed us to completely circumvent the heavy competition for those lots when they hit the MLS, and my clients love me for thinking outside the box.
This would also work particularly well in condo buildings. Even if no one bites at your offer to work with your buyer right away, this gives you a great opportunity to make contact with future sellers.
A thin market, in many ways, signals the stabilization of the real estate market. But unfortunately, it brings with it some unique challenges you will need to address if you want to continue to grow your business in the current economic climate. With a little planning and creativity, you can easily turn this challenge into a catalyst for getting buyers off the fence and making 2013 a banner year for yourself.