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Bernice Ross
Are you still in a red–hot seller’s market or are you slipping into a slowdown? Do you know how to tell and if so, do you have a strategy to capitalize on the shift?
The first step in coping with any type of market shift is recognizing when a shift is occurring. In most places in the country, the first-time buyer market continues to be strong, primarily due to the high demand and the lack of supply of entry level–properties. In contrast, many luxury markets are seeing increases in inventory, which can often be the harbinger of falling prices.
The easiest way to spot what type of market you’re in is to determine how many months of inventory are available in a given price range and location. If there are five or fewer months of inventory, you’re in a seller’s market with increasing prices. Six to seven months of inventory is a flat or transitioning market. Eight or more months is a buyer’s market with declining prices.
Strategies for Working a Seller’s Market
In a seller’s market, there are too many buyers and too few sellers. The result is multiple offers, short market time, increasing prices and declining commissions.
The secret for winning in a seller’s market is to make sure that you’re the agent the owner has most recently seen face-to-face. The reason? According the 2018 NAR Profile of Buyers and Sellers, 75 percent of all sellers only interview one agent, whom they hire. Another 13 percent only interview two agents.
To achieve this goal, instead of messaging, calling or mailing, hold regular client appreciation events, be active at your place of worship, at your children’s school or any other activity where potential seller leads see you repeatedly.
To generate new face-to-face leads, you can also door–knock, hold open houses, conduct first-time buyer seminars or network.
If you are working with online leads, cold calling or other strategies where there is no face-to-face interaction, your No. 1 priority is to schedule an in-person appointment as soon as possible.
In a seller’s market, little skill is required to place a property under contract, although it does require considerable skill to guide the sale to a successful closing. This is especially true when there are multiple offers.
In a flat or transitional market, there is a healthy supply of buyers and sellers. However, sellers often find it difficult to believe that prices are no longer increasing. This makes them less likely to price their properties realistically.
How to Capitalize on the Shift
Buyers’ markets have too many sellers and not enough buyers. To succeed in a declining market, focus on generating more buyer leads. You must also aggressively price your listings slightly below market value, or your sellers will end up “chasing the market down.”
Change your business plan: Because listings take longer to sell in a flat or declining market, you must allot more time and money for marketing each property. Making matters even more difficult, buyers want to see everything on the market and feel little urgency about deciding which house to purchase.
Specialize in listing first-time buyer properties: Unlike the luxury market, where slowdowns are often felt first, the first-time buyer market is usually the last part of the market to be hit by a downturn. Because many first–time buyers struggle with saving up for a down payment, market to them by letting them know they may qualify for down payment assistance. DownPaymentResource.com aggregates all the various down payment assistance programs across the country and up to 84 percent of all homes qualify.
Discuss market statistics with your sellers: When you go on a listing appointment, be prepared to use market data to show your sellers that prices are no longer increasing. Alternatively, calculate the average sales price for the last six months for all listings in your marketplace. Then calculate the average sales price for the preceding six months. If the prices are the about the same, your market is flat or transitioning. If the prices during the last six months are less than the preceding six months, you are in a declining market.
Listings are no longer the name of the game: Smart agents always control the listing inventory. Nevertheless, when few listings are selling, it’s smart to have buyers who are ready to purchase. Agents who survive down markets do so by having a balance between aggressively priced listings and motivated buyers.
Monitor activity: Actively prospect and hold open house in areas experiencing the most sales as often as possible. Pay attention to your office sales board as well as the MLS to determine where the activity is the greatest.
Recognizing when your market is shifting and changing tactics to adapt to the change will keep your production strong. On the other hand, agents who fail to spot the shift will soon be wondering, “What happened to all my business?”
Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.
