Are you set up for success in 2016? Join 2,500 real estate industry leaders Aug. 4-7, 2015, at Inman Connect in San Francisco. Get Connected with the people and ideas that will inspire you and take your business to new heights. Register today and save $100 with code Readers.
Takeaways:
- The number of years before home turnover used to be six to seven — now it’s 10.
- The market has stabilized, and agents must prepare to sell themselves to clients, as homeowners don’t typically use the same agent.
- What questions agents should be prepared to answer in this new era of homebuying.
Many real estate experts expect to see a surge in first-time homebuyers this year, and that influx of new buyers might be the push that current homeowners need to move out — and up.
Since the housing crisis, inventory across the country has been historically low, and that tight market can discourage both first-time homebuyers and those looking to move up to a larger or better home. That all might be about to change.
According to the National Association of Realtors, homeowners have historically lived in their homes for about six to seven years before selling and moving on to their next home.
This past year, however, that number increased to 10 years. The length of homeowner tenure can be attributed to many things: the housing crisis and the resulting loss of home values, historically low-interest rates and the overall uncertain economy.
According to NAR, the economy has stabilized, and home prices are up an average of 25 percent in the past three years. In addition, despite recent small increases, interest rates are still quite low. After nearly 10 years of waiting, pent-up sellers might finally be ready to make a move.
As these buyers move into the market, however, they represent a unique set of challenges for real estate agents. Although these buyers likely will consider themselves experienced in real estate transactions, the truth is many of them haven’t been in the market in 10 years — or perhaps longer.
The market is not what is was in 2005, and real estate agents should be prepared to introduce their clients to the real estate realities of 2015.
Research shows that most homeowners do not return to the agent they used to purchase their last home, so these consumers will be on the lookout for a new agent to help them move up.
These clients offer the opportunity for agents to earn listing rights to their current home, as well as help clients find their new home. However, sellers might have outdated ideas about how to market their property, or they might cling to home values that were possible only at the peak of the housing bubble.
Many markets have recovered significant value since the bubble burst, but most are still below that peak. Be prepared with your extensive market knowledge to let them know what a realistic price to sell their home is, as well as what they can expect in terms of price and size for their next property.
Getting their current home ready to sell might be one of the biggest obstacles for both the sellers and the listing agent. If they’ve been in their current home for 10 years or more, agents will have to consider several issues before coming to a realistic sale price.
How well has the home been maintained? Has the owner invested in any upgrades or updates? Have they made any customizations that will limit the buying pool? What is the local inventory like? Is there an influx of new developments nearby that will make the seller’s house look dated?
Have a frank discussion with your seller about what they are willing to invest in their current home to get it to sell quickly and at an optimal price.
In terms of financing, move-up buyers are, in many ways, easier than first-time homebuyers. They will often roll significant equity from one property to the next, and they often have larger incomes and more savings than those first entering the market.
Down payments likely won’t be an issue, and they might already be prequalified for a new mortgage from their current lender. They can offer other challenges, however.
If they are looking to move into a larger, more expensive home, they might need to seek a jumbo mortgage or might wish to make their purchase contingent on their sale.
Again, your local market knowledge here is critical. Which lenders offer higher-balance mortgages? How competitive is your area currently? Are houses going for more than asking price? Are bidding wars common?
Be prepared to help your clients not only find a lender that fits their needs but also to place themselves in the best position to get a quick and profitable sale and to acquire a new home that satisfies their wants while fitting into their budget.
With a stabilized economy and increasing home prices, many current homeowners are in a position to sell their homes and move up into bigger and better properties.
First-time homes are in demand and inventory is tight, so homeowners who have been waiting for nearly 10 years to make their move should get off the bench and get back into the real estate arena.
Real estate agents who know their local market well and are prepared to work with these clients can build their business significantly as pent-up sellers finally return.
Wendy Forsythe serves as executive vice president and head of global operations for Carrington Real Estate Services LLC. Follow her on Twitter.