Managing a Market shift
In a market shift, there is a switch between a seller’s market, a buyer’s market, and a balanced market. We are entering a shift towards a buyer’s market. All markets will eventually feel the pressure of the buyer’s market. Therefore, here are some things you can do to stay afloat during this switch between markets.
What does a market shift look like?
Before you can manage a market shift, you need to know what the different markets look like. A seller’s market is when demand exceeds supply. It is when homes are scarce and sellers can price their homes at high prices. It starts with a decrease in homes on the market and the price of those homes increasing. Also, those homes have multiple buyers, creating a bidding war. In addition, a buyer’s market is the opposite of a seller’s market; when there are lots of homes on the market, buyers keep the prices down. The supply exceeds the demand. The number of homes on the market increases and the prices of those homes decreases. Those homes get left on the market longer because buyers can negotiate lower prices. There can also be a shift to a balanced market. A balanced market is when supply equals demand. The amount of homes on the market is not too high or too low and there is a good amount of buyers looking for homes. The homes are fairly priced and buyers are buying those houses at a decent rate. Moreover, knowing what a shift is will allow you to prepare for that shift.
Getting ahead of the shift
At the moment, we are in a seller’s market. Inventory is down and supply and demand are not equal. Unfortunately, supply and demand will not balance out in the upcoming months as we enter a buyer’s market. We are entering it because the number of buyers is decreasing, so more homes are being left on the market. Buyers going through inflation of mortgages and house prices, and a decrease in the stock market. All goods and services are increasing in prices as we reach the end of the pandemic, so loans and house prices are going up. The stock market decrease is causing portfolios to diminish, so buyers are backing out on any immediate purchases. As they go through this, they are also waiting for house prices to decrease and cherry-picking houses. This causes more and more houses to stay on the market. Thus, you need to stay ahead of the shift by looking at the market and keeping your seller clients in the know.
Pay attention
The first step you need to take is increasing your inventory. Go through your phone contacts and customer relationship management (CRM) document to strengthen your relationships with your old customers. Ask them how life is going and if they are ready to relocate. Then, you can go to open houses that are “for sale by owner” (FSBOs) and check out their asking price and how many offers have they gotten. Also, build relationships with other professionals and workers in and around the real estate industry to check what properties are for sale, have sold, or have expired listings. These are some steps to increasing your inventory, but increasing is not enough.
You also have to pay attention to the comparative market analysis (CMA) of the neighborhoods you service. A CMA has information regarding the selling prices of similar houses in a neighborhood that was either sold, are still on the market, or have an expired listing within a certain period. It tells you the market’s conditions for that neighborhood. Also, websites like FortuneBuilders.com can help you gain comprehensive data for your neighborhood. Also, pay attention to the news. Read articles about the trends of the industry and what is happening in the markets to see signs, like the ratio of homes to buyers, to stay in the know. Networking with other agents can help during this time. Be respectful and polite when asking about the market and how they are dealing with shifts. Bounce off ideas of how to stay afloat during shifts like these. Keeping yourself in the loop in the trends in the industry will allow you to not only help yourself but your clients that are selling.
Helping your clients
You can help your clients that are selling by providing them with information that will be essential to help the sell. Here are some ways to get your clients’ houses sold.
1. Don’t buy before selling
A major piece of advice you can give your clients is to not buy a home before selling theirs. Since we are shifting to a buyer’s market, it is a good idea to wait to sell their house, so they don’t have to pay for two mortgages at high-interest rates. Buyers are causing homes to stay on the market longer, so making sure the home sells, guarantees you to be able to move into another home with one mortgage. Telling tour clients this in a buyer’s market will take the pressure off of them and give them a better chance are prioritizing the current home to be sold.
2. Price at the “sweet spot”
Helping your clients sell their homes are the right price is going to allow them to get the best price for their house at a time when lots of lowball offers are being thrown. Before negotiating a good price with your clients, make sure to tell them that the price is not set in stone. The “sweet spot” price is only to make sure they know the maximum they can sell their house at during the switch. If they can sell it at that price, then that is great. However, prepare them to look at all offers that come their way even if they are lower than the “sweet spot” price. The “sweet spot” price is not higher than the last price the house was sold at, but not too low that buyers won’t see your house as valuable. To achieve the right price for that home, you will need to find the price the previous owner sold it for and the prices around the neighborhood. The right price would be less than the prices of houses close to the last selling price, but higher than the low prices in the neighborhood. The right price for your client’s home will help you and your client understand the market at this time and what it will take to get the house sold in a reasonable period.
3. React quick but be patient
Once you recognize the shift, help your client react quickly to the change. They won’t be able to recognize it right away and push away low offers. So talk to them about a new “sweet spot” price for them and their house. It will not be what your client wants to hear, but you have to get them to see that they might not be able to the house in their time frame if they don’t look at all offers. Then, tell them to take deep breaths and be patient. In a buyer’s market, houses do not sell quickly. So, they will have to be okay with their house not selling in the first couple of weeks. You and your clients will sell houses, but you have to be proactive and sit tight.
4. Preparation is key
Buyers are cherry-picking houses, so your clients’ houses have to be stage expertly to attract buyers that will want to pay a good price. This is a part of marketing the house. To stage a home, you need to de-clutter the house, set up the important rooms first, and go for a vivid and airy look. Staging can get expensive, so doing the important rooms and renting any furniture you might need will get costs down. Arranging furniture and adding special touches in a visually appealing way will attract buyers through the beauty the home can become for them. Most importantly, do not forget about the outside of your house. A client’s “curb appeal,” the appeal of a house from the sidewalk or street, needs to be excellent to entice buyers to come inside. Your clients can clean their windows, mow the lawn and trim overgrown greenery, and place a welcome mat at the front door. The more enticing the house looks the more offers the house will get during this shift to a buyer’s market.
Key Takeaways
As we shift from a seller’s to a buyer’s market, there are several things you need to remember. Pay attention to things happening in the industry to better understand the market. Help your clients be proactive, prepared for long stays on the market and showings of the house, and have the right price for their house. Unfortunately, this is one of many shifts this year, so watch out for them and move quickly to get ahead of the switch.
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