Middleton Elite Coaching is currently working with hundreds of top agents in the real estate industry.
We are fortunate to be able to have thought-provoking weekly conversations with our real estate coaching clients on topics that are relevant to the current real estate market. We’ve been speaking a lot about winning with buyers in the market of the moment.
Over the last six months, we’ve watched the real estate market change two or three times. An agent in today’s market must be proactive for their buyers. An agent in today’s market must help their buyers WIN!
Winning With Buyers: Low Inventory Real Estate Market
We work with top brokerages, top real estate teams, and top agents nationwide who are currently experiencing inventory locked up by several factors.
1. Sellers as homebuyers
Homebuyers are often also sellers. If we are able to help them with a winning offer on the buyer side, it can often unlock the listing side of the transaction as well.
Many sellers are opting to buy a home before selling their current home due to the low inventory in today’s real estate market. With homes selling so quickly, most sellers want to have a new home locked in before selling their home.
2. Short-Term and Long-Term Rentals
The current rental market is seeing a mortgage positive cash flow. We’re experiencing many short-term and long-term owners choosing to hang onto their investments rather than sell. As a result, we’re not seeing that inventory hit the market that may have hit the market in years past.
3. Rising interest rates
Today’s real estate market is experiencing a steady increase in interest rates. Borrowers are seeing rates like we’ve not seen in a very long time.
As of today, interest rates are at roughly 6%, or slightly over 6%, on average. Buyers are having to more closely examine affordability before making offers.
4. Top-of-the-market prices
In addition to interest rates increasing, we are also seeing homes at top-of-the-market price points. Today’s real estate agents are tasked with helping buyers navigate a market where affordability is decreasing and inventory is scarce.
Winning With Buyers: Helping Buyers Understand The Market
In a fast-changing market like real estate, agents should evaluate their market data on a weekly basis. And to go a step further, agents should evaluate the data of their submarkets as well. The condo market data for your area will likely be different than the data of your single-family home market.
Some key data points to focus on in each of these submarkets are:
- Price ranges
- Current interest rates
- What is happening with the fed and its impact on your market now, 6 months from now, 12 months from now, 24 months from now, and so on.
Considering that the market of the moment changes quickly, it will be advantageous to both yourself and your buyer to know some actual data points and current figures. Doing so may also help you to future-pace for your buyers, and create some urgency around buying now vs. later.
Winning With Buyers: The 85% Home
When there is a surplus of inventory, homebuyers can afford to be more selective. When there is a lot to choose from, buyers can look for the rainbows and the unicorns and all of the things they want in the ‘perfect’ property.
In today’s market, real estate agents must counsel their buyers to be less selective when possible in order to secure a home. We use The 85% Home as a starting point. The 85% Home is a home that meets 85% or more of the criteria they desire. This will require that a buyer is able and willing to leave the other 15% on the table, or do the work themselves after purchase. This means that the buyer would need to make renovations after purchasing in order for the home to meet their 100%.
A discussion with your buyers about their criteria beforehand will help both you and your buyer identify when a property is The 85% Home, and potentially be ready to write an offer sooner.
Educate your buyers on market data and how waiting for a 100% home could potentially reduce their buying power.
Winning With Buyers: Effectively Over-Communicate
There is no such thing as over-communication! Stay in constant contact with your buyers on what you are seeing in today’s real estate market.
It is a good practice to make sure your buyers know what is happening at every opportunity. A rule of thumb we follow is to never assume your buyer knows what is happening in the market. Don’t assume your buyers know how to write a winning offer or the urgency needed in today’s real estate market. Make sure they know.
Assess what you are doing to over-communicate how properties are coming on and going off the market.
The average person moves every seven to ten years. And because Mr. and Mrs. Buyer have done this before, they may be inclined to follow what has worked for them in the past. As their trusted real estate professional, it’s important to set an agenda and expectations around what happens next.
Over-communicate the steps of each stage of the buying process.
BUYER: We want to buy this house
AGENT: Okay. Here’s what’s going to happen next. I’m going to call the listing agent. I’ll find out about any other offers. We’ll pull all necessary data so that we can be prepared to negotiate our offer.
Keeping your buyer in the loop on the process will avoid unnecessary confusion and overwhelm.
Winning With Buyers: Future-Pacing The Market For Your Buyers
When one of my buyers has written an offer that they don’t win, I share the closing data with that buyer. I show them what the home actually closed at vs. what was offered. I’ll show them the type of loan and at what rate the purchaser closed. Doing so helps us identify trends.
If we know that this home closed at 3.85%, this rate will, at minimum, be the baseline for what we can anticipate paying for the next home that hits the market in that neighborhood.
Ideally, you’ve had a conversation about the future pacing of this market before your buyer begins looking at homes. You’ve discussed the average list-to-sales-price ratio, X amount of earnest money, any special considerations, the terms of other winning offers in the same neighborhood, etc. If we can future-pace our buyer’s target markets, it will be less likely that we are pricing ourselves outside of these neighborhoods.
In our experience, future-pacing for our buyers allows us to more confidently say what it’s going to take to write the winning offer in the market that you’re in.
Winning With Buyers: Pain vs. Pleasure and Creating Buyer Urgency
Most people are innately geared either to avoid pain or to seek pleasure. This is a big opportunity for us as real estate coaches to help our clients. We understand the logic of the market to effectively help our buyers and now we want to understand the emotion.
It’s about slowing down and holding the space for your clients to answer questions about their desire to make this purchase.
Why do they want to make this move? Why do they want a different size house? Why are they choosing this geographical location? What will life be like for them in their new home?
Going through the emotional side of the purchase with your clients will help bring them (and you) clarity for writing offers. It will also gain commitment from your buyer because they will have worked through any reservations they may have had about buying.
To be empathetic and sympathetic to the needs of your clients requires practice and patience in the process. Many agents often tend to be transactional and business-oriented in their pursuit. It really helps to be aware of pleasure vs. pain when working with buyers.
Winning With Buyers: Assessing Your Buyer’s Urgency Scale
Your buyer may determine their urgency to buy at a 10 on a scale of 1-10, however, with some pain vs. pleasure conversation, you may be able to more accurately assess their urgency.
Using our pain vs. pleasure exercise, a conversation with your buyer might go something like this:
Assuming your buyer’s urgency begins at a level 10 –
AGENT: Why are we getting in the car to see these homes?
BUYER: Well, because I want to live closer to work.
AGENT: Perfect. So if you don’t move closer to work, Is it going to make or break your day?
BUYER: Well, probably not.
Okay. So that to me took the urgency scale down to a 6 or 7 for me right away.
BUYER: We’d like to have a lower mortgage or if we sold, when we sell our house, we can buy for cash. So we wouldn’t have a mortgage.
AGENT: Okay. Well, is the mortgage payment killing you?
BUYER: No, it’s not.
So the urgency scale comes down, again and again.
It’s really about assessing this level of urgency so that if your buyer gets in the car to look at homes, it won’t eat up your entire day. If you have a pipeline full of buyers at a 10 on the urgency scale, you will want to dedicate your time to helping your more urgent buyers.
Winning With Buyers: Build A Bigger Pipeline
In the market of the moment, the majority of agents are having to double the size of their pipelines for buyers. This is necessary because buyers are submitting offers that aren’t being accepted.
Let’s imagine the number of units in your market is down 20% from last year. This generally means that in order to hit the same goal as last year, you’re going to have to close 20% more transactions, or at least get that many more people in the pipeline to get under contract. We can help you with that.
And in markets like those we are seeing at this moment, many agents would ask…
“Why have more buyers in my pipeline? I’m having more conversations, I’m sending more properties, but I have these buyers who just won’t make a decision.”
We’ll start by stressing the importance of qualifying the buyer.
Is the buyer truly qualified for this market? It isn’t enough right now to know they can afford the house and have a pre-qualification letter. Are they really ready to move? Are they a 10 on the urgency scale?
If buying this home right now doesn’t make sense to your buyer, would they be okay to stay in their current home for another five to seven years? If the answer is yes, then they are not a highly-qualified buyer for this market.
Continue to show them the right homes as they come up. And again, we can’t get everyone in the car. Our pipelines are full. We’ll need urgent buyers and decision-makers in the market of the moment.
Winning With Buyers: Where Have All The Buyers Gone?
With recent interest rate hikes, we’ve experienced a diminished buyer urgency in some markets.
For example, a friend in the Phoenix market who is used to having 50-60 people attend their open houses had a whopping 3 people attend their most recent open house.
The market changes often and, as agents, we don’t make the market, we interpret the market.
What does that pipeline look like? Are we watching? How motivated have your buyers been lately? Are they at an 8 or above on the urgency scale? Are you seeing a decrease in the number of urgent buyers?
Nobody has a crystal ball to know where the market’s going to be in 24 months. Right?
When we’re experiencing a decrease in our own buyer’s urgency, it’s important to have a conversation about the market of the moment.
BUYER: With increasing interest rates and a shortage of inventory, we think we’re just going to put everything on hold for a year and then we’ll pick it back up.
AGENT: If we touch base a year from now interest rates are higher than they are today, how will that make you feel? If it’s not very stressful for you, then don’t worry about it. You need to do what’s right for your family.
Then provide examples of market statistics such as the average sales price a year ago, 2 years ago, so your buyer can make a sound decision.
We have so much data at our fingertips. I would just encourage you to review your market data points weekly.
You can send videos, emails, text messages to your clients after reviewing this data and explaining why now is or isn’t the right time to buy.
Winning With Buyers: Combatting Buyer Fatigue
We are currently seeing more and more markets experiencing buyer fatigue. In markets where we are seeing a steady decline in buyer urgency, buyers are likely just tired.
For any of your buyers with an initial 8-10 on the urgency scale who are currently considering pulling back, you can ask:
“If I called you in three weeks to tell you I found the ideal home for you, would you still be interested in purchasing?”
If their answer to the above question is “yes”, your buyer could just be tired of the multiple offer market.
If they’re going to continue working with you, stay in communication. Explain that you are seeing a decline in buyer urgency in your market overall, like with our friend in Phoenix who saw a decrease in open house attendance. Ask them to consider getting back in the game.
Winning With Buyers: Provide Buyers A Baseline For Your Market
You can point to data from your market analysis report to track the number of showings over the last 30, 60, and 90 days. You may be able to tell your buyer that it’s possible you’ll only have to write 3 offers instead of 23 offers. They may have a very good chance of being able to pick up the right property.
If you don’t have a baseline for your market right now, that’s your homework. Go get the baseline for:
- Number of showings
- Number active inventory
- Your market’s going percentage over list price
- Your market’s appreciation
This way you can communicate at a really high level to make sure that you’re winning with your buyers.
Who Will Help You Help Your Buyers Win?
Working with Buyers is a PROCESS.
Working with Buyers is an ART and a SCIENCE.
We have over 30+ years of real estate sales, training, and coaching experience and want to share it with you!
If you are interested in working with a real estate coach or growing your real estate business, we’d welcome the opportunity to chat with you and talk with you about some more of the ideas we have for both the buyer and seller sides of the business.
You can also check out Middleton Elite Coaching’s on-demand virtual skills courses. We currently offer a skills course for ‘Working With Buyers’ designed to help agents grow their buyer skills.