It’s 2011. Not 2010 or 2009. Viva 2011
What’s your real estate market like this week? Is it better than it was a year or two ago?
Back then we had the difficult task of sharing mostly bad news. A rational Fear Of Loss kept buyers who wanted to move from making a move. It was simple logic, buy too soon and home values might fall, resulting in a financial loss.
Last year the Federal Homebuyer Tax Credit artificially stimulated 1st Quarter home sales. The free-money party ended in April of 2010 and real estate sales activity went from gangbusters to bust. It pretty much stayed crappy until January 2011.
From what I can see across the inter-webs and personal experience, the unstimulated 1st Quarter of 2011 is equal to or better than the artificially stimulated 1st Quarter of 2010. Which means that most likely, the balance of 2011 will be way better than 2010. Not a month to soon, amen.
But I’m worried. Real worried.
I’m Worried About Shell Shock
It’s been so crappy for so long, some us may be suffering from Shell Shock. When someone asks if now would be a good time to buy, we start mumbling, our shoulders slump and the light in our eyes dim. We hem and haw. Because we’ve been so beat up for so long, our answer limps from our mouth to their ears. On occasion we allow past emotional scaring to over ride current intellect and logic. This is normal human behavior, but we’re not paid to be normal. We’re paid to perform.
People are counting on us for unbiased and expert real estate opinion and analysis. When they ask the question, “Is now a safe time to make a move?” they expect a thoughtful and intellectual answer. Not an emotional reaction steeped in Shell Shock.
It’s Time To Bury The Past and Rise UP
Note from the editor: The video at the top of this article is of Maya Angelou’s “And Still I Rise,” particularly relevant to the theme of this article.
The Fear Of Loss is perpetually valid. Yesterday, the likely hood of suffering a financial loss by buying in falling market was high. Today’s and tomorrow’s market is 180 degrees different. If our buyer clients want to make a move and they don’t, waiting may cause them financial loss.
It’s a new day and a new market. Let’s think, advise and act like it.
Let’s start by reviewing and sharing a few important factors with our homebuyer clients.
Price & Value and Cost & Expense Factors
Advising our buyer clients to Not-Buy-Now because home values may go down, and they will have lost money by overpaying, is an example making a decision based on the Value & Price factor. Last year in many micro-markets this was smart, simple and logical.
Today, if we’re sincere about helping our clients avoid financial loss, we’ll want to include Cost & Expense factors in our advisory analysis.
Unless our buyer clients are paying cash when they buy, they’re going to use mortgage financing. Their mortgage interest rate determines the Cost & Expense of buying and has a bottom line effect on whether waiting to buy will result in a financial Win or Loss.
Here’s an example of what I’m talking about:

Here’s how we can use both Value & Price and Cost & Expense Factors in our advisory analysis. To figure out if it’s better to wait or make the move, consider alternate future outcomes.
Three What If Scenarios
Keeping in mind that our local and national economies are improving, inflation is real and mortgage interest rates, are rising, We can evaluate the financial risks by asking ourselves which of these three scenarios is most likely:
- Home Prices stabilize and mortgage rates rise. Using the example in the picture above, if mortgage rates rise to 6%, waiting may cost our buyer clients the extra expense of $175.86 more per month. If the value of the properties they’re interested in don’t drop more than 13% in value before mortgage rates inflate from current rates to 6%, the decision to wait would create a financial compound fracture. Waiting would mean they’ve lost on two fronts, Value & Price and Cost & Expense.
- Home Prices drop more than 13% and mortgage rates rise to 6%.
- Home Prices drop and mortgage rates stay the same or fall too.
If you believe that home values in your market will fall faster and further than mortgage rates will rise (2. or 3. above), then advising your buyer clients to stay put is the way to go. Keep your eye on the market and when you see a favorable entry point, advise them to make their move.
If you think prices won’t drop more than 13% before mortgage rates rise to 6%, then your logical left brain will tell you it’s wise to advise your buyer clients,
“Because home values are less likely to fall more than interest rates will rise, now is a safe time to make move you’ve been waiting and wanting to make.“
Do your homework on property-value-trends for your micro markets, consider the implications of rising mortgage rates, Rise Up and advise with confidence.
Here’s what I think about my micro-market. . .
I think home values are stable and some neighborhoods will enjoy a rise in prices/values. Mortgage rates have risen about 1% in the last four months and will continue to creep up.
When my clients who would like to move, ask me if it’s a safe time to move, I would discuss Price & Value and Cost & Expense factors with them. Afterwards, we’d be out the door dream home shopping. Pronto.
What do you think?
What’s happening in your market? What are you advising?
~~~~~~~~~~~~
Cheers and thanks for reading.
Teresa Boardman
March 27, 2008 at 11:55 am
Benn – I am finding that my buyer clients need me more than ever. They find “home valuations” that are all over the place. They find some of the listings on one web site and some more of them on another site. They read a national web site for advice but the advice does not apply to our local market and state regulations. They call, they write, they ask what this means and what that means and why one web site says one thing and another web site says something else. They read my blog, they see me as a person, not as a company. They see were I work and what I do and they read about how I do it. They see someone that they can count on. I love what the internet has done to educate buyers in my market. When they contact me they are totally ready for my help.
Benn Rosales
March 27, 2008 at 12:05 pm
We all need Teresas in our lives, and yes, you make a valuable point. Your market is troubled, you and I have spoken at great legnth about what is happening to buyers and sellers. But taking that point further, what are performing markets seeing, and middle of the road markets? I’ve always believed that when the markets get wierd is when consumers look to the pros, but I’m looking for the other side of the table…
Benn Rosales
March 27, 2008 at 12:07 pm
or outside of the midwest…
BawldGuy Talking
March 27, 2008 at 12:41 pm
Benn — Great stuff as usual.
Do you think this trend will begin to reverse as the tipping point is reached?
I’d define that point as when the number of ‘I don’t need no stinkin’ badge’ crowd finds themselves in problems, big and small, due to their false sense of security — which was the direct fruit of their various levels of ignorance. We all are injured to one degree or another when taking action in areas for which we don’t even know all the questions, much less the answers.
What’s your take?
Jon
March 27, 2008 at 12:45 pm
Benn — You pose the question, “Is our future more hands off and less hands on?” and I wonder if our future isn’t more a question of “WHERE and HOW do we place those hands?”
Today, we’re caught in a sometimes-difficult period of transition. Clearly, the role of the agent as the “gatekeeper of information” is diminishing. But the transition isn’t a neat one. As Teresa correctly points out, today we’re faced with, “some of the listings on one web site and some more of them on another site”. And as professionals, we know that this lack of consistent information is not in the best interest of our buyers. But time will cure these transient kinds of issues.
The real question to be wrestling with is, “Now that we’re less hands on as the keepers of information, how can we be more hands on as the deliverers of outstanding service or the developers of brand new business models and customer experiences?” And these are tough questions. Agents can keep repeating the mantra that “as long as I take care of my clients, I will always be able to make a living.” But I would argue that there were some great blacksmiths and buggy-whip makers who got swept away with so many more inefficiencies as the industrial revolution grew. it’s likely to happen to some great realtors, too.
You point out that “revolution = chaos”. Well, chaos = opportunitiy. And we each have the opportunity to assist in the re-invention of our roles and, to a larger extent, of our industry. If you look at the web sites attracting today’s buyers (google, zillow, trulia, etc.) none come from within our industry. And that’s just giving away opportunity to those who, by definition, start out knowing less about our business than we do.
It’s time for the great majority of realtors to abandon their defensiveness and stop building protectionist walls around their industry and start becoming agents…of change.
Anthony Longos
March 27, 2008 at 12:55 pm
Model of the future is not hands on or hands off….its “Hands Together”. (not for everyone…but for most)
ines
March 27, 2008 at 12:56 pm
This is a really difficult question to answer but an extremely valid one. Of course there are clients that will find our value and will be loyal to their death, but we are encountering a lot of stand alone buyers that only want a key turned.
I have been able to convert many of those stand alone buyers into loyal customers – but many are not remotely interested. We can take 2 roads on this – make it complicated for those stand alones to see your listings (ie. are you pre-approved, fax me the letter before I show you the property) – or simply make it easy for them and empower them even more. Both business models are interesting….in the end, for listing agents, the job is to sell the property. Rick and I accommodate everyone knowing we all have different personalities and different needs. (and there’s also an “obnoxious” factor to take into consideration)
Teresa Boardman
March 27, 2008 at 1:31 pm
Makes sense Benn. Even when the market was great here I got a lot of business because of the internet, however I beleive it might be different in other parts of the county.
Jonathan Dalton
March 27, 2008 at 2:02 pm
There always will be people who view me as an extension of my lockbox and want to see a house right now or never because it has to be right now. Those folks are going to have a lower priority than clients who see the value I bring and want to work for me. I’m not going to cancel appointments I have with loyal clients to meet with someone who only wants my key. It makes no sense to do so.
You need to ask yourself what happens after you open the door and then lock back up. If they decide to write an offer, are they going to call you? Or are you incidental to the process? If you’re not sure that they’re going to use your services to purchase, why show the property?
This all assumes we’re not talking about one of your own listings, incidentally.
John Lauber
March 27, 2008 at 4:02 pm
I’m new to this community and between this post and Teresa Boardman’s from yesterday, I have to say this is great stuff and has captured some of my thoughts very recently.
I too am tired of the “I need to see it tonight” people. It took me a while to start (though I knew it) to better qualify people before showing them a home. I couldn’t take the burns anymore after I had showed a house multiple times to a couple, prepared an offer and then find out they had procured another agent to put an offer in on the same listing at the same time we were to meet to sign everything. Now I meet with everyone and have them sign a BA, even just for one house. Preferably I have them in my office for a meet and greet first . Are people more reluctant to sign or get pre-approved? Yes. But I’d rather have the first time buyers in my car from the other day (with everything ready to go), then someone I haven’t sat with or discussed their wants and needs.
You can’t write the prescription without a diagnosis of the problem, IMO. It finally got through some of the layers upstairs.
Charleston real estate blog
March 27, 2008 at 6:41 pm
Benn, you asked, “Is there a way you believe that this trend will actually hurt the buyer in the long run?”
Don’t you think the current real estate downturn is a direct result of buyers who thought they knew it all and didn’t bother to read the fine print?
Chris Johnson
March 27, 2008 at 7:34 pm
When i was an agent, I refused to show houses routinely without a greet first.
One client complained to my broker. Bought a house through my broker, who threw me under the bus, and the broker didn’t pay anything.
That was my last month with the broker, and he has since been stripped of his RE/MAX franchise. I still think it was worth it to have a policy of prequalify-before show.
Cyndee Haydon
March 27, 2008 at 9:16 pm
I am seeing 2 extremes – those that just want the key and nothing more and then those that are our best referral source. Unfortunately I come across many people who didn’t get “professional” services from a previous REALTOR and their thought is I can do better than that – getting past the wall is a major hurdle – when we do they become great clients.
Elaine Reese
March 27, 2008 at 9:57 pm
I was going to respond as Charleston did. In our market, a lot of the buyers that got in trouble financially were those that bought direct from a builder without the benefit of an agent because they knew everything.
I do agree that younger buyers think they can learn everything they need to know from the Internet. They’re more likely to want to see the home ‘NOW’ and haven’t even considered visiting a lender first.
Well, as I was writing this my phone rang. Guess what! Young sounding buyer wants to see one of my listings and hasn’t considered talking to a lender. He was on the Internet while we were talking. I hadn’t yet turned off my phone – it was 11:20pm when he called. Yes, you’re right I shouldn’t have answered, but at that hour I was fearful something was wrong with my kid’s families so I picked it up.
Bill Lublin
March 28, 2008 at 3:06 am
Benn;
Great post – and really interesting questions – Our market in the Philadelphia MSA is one of those where there is some adjustment but we’re not as severely troubled as states like California or Arizona or Nevada since our incredible appreciation wasn;t as huge as there’s so the “adjustment” is not as severe. And we still see the buyers who don;t think the agent adds value to the transaction – but I’m not sure that its just because of the proliferation of information – All the information a buyer feels they need is the information about the specific property that they are going to see at any given time – “Back in the day” (pre-computer MLS – let alone pre-web) buyers who had less information still wanted to disengage with the agent at the earliest opportunity because they didn’t want to be “sold” they wanted to buy – so it was necessary for agents (who at that time were caught in the dilemma of being seller’s representatives who needed to build relationships with buyers who would become their referral base) still had to prove their value to the consumer really quickly, or lose the opportunity to work with them for more then one showing –
As I watch the discussion of qualifying buyers before showing properties, I think that the agent’s situation hasn’t really changed as much as we like to think (at least from the consumer viewpoint) Though we know may represent the buyer, and bring them even more value as well educated advocates for their cause, we still need to demonstrate to them (very quickly) that we add value to their experience – when I was an agent taking my CRS courses 30 years ago, we talked about the sales process being qualifying (building trust rapport, determining needs) them demonstrating (showing properties, comparing properties, weighing benefits and options in properties and financing) and then closing (asking the consumer to do something in their best interest which they might not have done if you weren’t present) – The accompanying visual showed the first part of the process as an uphill effort – the demonstrating as a level amount of effort and the last part as easy if the first two parts were done right like /Q==D==\ C but the point was made that most people made the process look like this ___Q _____D /C with all of the effort taking place at the last part of the job –
I would posit that the situation today is the same – when the agent takes the effort to build the rapport and demonstrate the value of the their services, the rest of the process becomes easier –
I would submit to you that good real estate agents need to engage the buyer in a dialog that will demonstrate what they can bring to the experience – regardless of the amount of housing information the consumer enters the process with – I know that when I bought my last personal second home- in Los Angeles – a continent away from the markets I know best- the knowledgeable agent who worked with me there made the buying process much less stressful – and I brought decades of experience and financial stability with me to that process that was stronger then many buyers we work with on a regular basis- Sometimes I think we should all be forced to be consumers every couple of years in a strange marketplace so we feel what our buyers feel when they come to us in the beginning 🙂
Greg Cremia
March 28, 2008 at 6:50 am
I have been working internet buyers since the mid 90’s and I love working with clients educated in the process. I try to put everything I know on my site so they can read it before they make a call. The more educated they get the easier they are to handle. The more they learn the more they realize how much they don’t know.
Now, I work second home resort buyers so they don’t typically call about looking at one house and I don’t like showing one house. I remind them that they would not be making an educated decision if they bought a home without comparison shopping so we may as well look at some of the competition.
It sounds like it is different in home town real estate and first time buyers.
Bob
March 28, 2008 at 8:29 am
@Bill – I would agree with the entirety of your comments 100%.
@Greg – “the more they learn, the more they they realize how much they don’t know” – dead on.
The problem didn’t originate with the buyer, but with the glut of inexperienced agents turned loose on the public during the boom by brokers who abdicated their responsibility to train their new recruits who thought the job was simply to be an order taker.
Charleston real estate blog
March 28, 2008 at 8:36 am
Bob, I would suggest that a large number of buyers went into model homes at new construction communities without representation and either didn’t fully understand (some) or didn’t bother to understand (more) what they were signing.
Benn Rosales
March 28, 2008 at 9:36 am
@Jeff yes, there is a tipping point. I feel like we have a radial left agenda and a radical right agenda right now in real estate and the country will find its way back to a center and real estate will not look entirely different when it happens. 1.0 agents wont be happy but neither will the 2.0 agents- it will be more like the 1.5 model that will in the end become the new paradigm for re consumers.
Bob
March 28, 2008 at 9:42 am
Charleston, No doubt, but I saw many agents represent buyers on new construction and not do anything more than than fill out the registration packet so they could get paid. Many builders used their own contracts and the advice frequently given to these buyers by their agents was “if you want the house, you have to do what the builder says or they’ll sell it to the guy behind you”.
In many cases, the perception of the buyer that the agent brings little value to the table is true. Until the reality changes and agents actually have to know what they are doing, then the debate favors the buyer.
Floyd Wickman said that “the problem with real estate is that it’s too easy to get into and to easy to get out of”. He is right, and that needs to change.
Charleston real estate blog
March 28, 2008 at 11:52 am
Bob, call me Howard. And I agree that many agents do little to nothing and add no value to the transaction in new home sales as well as preowned. As a result, it is up to any agent that cares about reputation and an opportunity to do business in the future to do *more* than just open the door.
BawldGuy Talking
March 28, 2008 at 11:52 am
Benn — I see your point, and it’s persuasive.
I wonder though, if guys like you, who have such an unfair advantage technologically, and in marketing savvy, will then be in a position to dominate?
It seems there’s a perfect storm out there brewing just for guys like you. Am I seeing clearly?
Benn Rosales
March 28, 2008 at 1:24 pm
Absolutely, it will be guys like us that define the new brokerage model which I will be discussing very soon. But even disruptive companies are moving very quickly back to the traditional center with a techie polish running the experience. It just isn’t possible to remove the human element from home buying or selling any more than a car dealership can trick you into kicking tires on your computer screen. It is done, but it is a very tiny segment of the market place.
The vast difference in how we market is what will radically change in my opinion, but not to the demise of any particular 1.o method. In fact, I feel like all of these tools will roll together into a very cool, more relaxed method of pulling consumers much like brown & brown does.
I’ve never seen you hard pitch, I’ve only ever see you in your real estate taxi with the light on- technology will simply allow your taxi to remain idle while faires come to you, rather than driving around aimlessly. Social methods have been working for you (Jeff) for over 30 years, and social technology today will become a beacon for your already perfected approach to consumers.
I feel like social methods will soothe a lot of the disruptive crap in the market place and lend to that more one on one conversation between a realtor and their consumer. It is in that relationship that (like Teresa uses) that will bring trust back to the transaction, multiplied by a million or so professionals one at a time.
BawldGuy Talking
March 28, 2008 at 1:34 pm
That answer, Benn, has just made hundreds if not thousands of agents’ wives across the country very happy — but only IF their husbands are following your model. Thanks again.