This is not a post about washing your hands or social distancing. You should have that advice well-internalized by now. This post is about marketing.
If you sold real estate or mortgages during the downturn, you probably remember the drumbeat that started in 2006: “It’s a great time to buy a house.” But sadly, we didn’t know that in most markets, values would continue to drop for the next several years and won’t begin to balance out until 2013. In some markets, especially at higher price points, home values are still below their 2005-2006 highs.
So, I cringe when I see agents run marketing that may mislead the public. Over the past few days, I’ve seen cringe-inducing posts from real estate agents urging people to “Call today! Rates will drop!” and “Sellers, it’s a great time to list — there are tons of buyers.”
Why am I cringing? Because the mortgage market is incredibly volatile right now, and no one knows what interest rates will do in the next week, much less the next month.
In the mode of “explain it to me like I’m 6,” here’s what I understand: The fed funds rate is for short-term loans. Mortgages are for long-term loans. In the U.S., most lenders package loans and resell them. If those loan originators don’t have buyers for those bundles, then they can’t underwrite and close loans.
I like understanding all the moving parts of our business. Some articles that made sense to me about the mortgage market are here and here. But as a real estate agent, I’m not qualified to advise anyone on anything related to mortgages. I’m keeping my mouth shut — the only thing I’ll say is that all agents and homebuyers should work with a reliable, experienced mortgage loan officer.
Next, years of disappointing experiences during the last recession taught me that interest-rate buyers can be the worst possible clients. In my opinion, they are one step below the want-a-deal buyers.
While lower interest rates generally draw buyers into the market, APRs have been historically low for a long time. Why would you solicit new buyers who might buy based on a hope for even lower interest rates? If you did happen to hook a want-a-low-interest-rate buyer, what are you going to say if rates increase? You’ll look foolish (at best), and that’s hardly a way to begin a client relationship. Or you’ll waste your time showing properties to someone with a possibly unachievable requirement for buying a home.
Over the past few days, I’ve gone back through my email and document archives to relive that long, slow decline when we simultaneously counseled people who were losing their homes and endured marathon showing sessions with the want-a-deal buyers.
I’ve read up on advertising and marketing during a crisis. I reviewed notes and articles from Steve Harney at Keeping Current Matters. Harney was, and is, one of my all-time heroes. Here’s some advice for framing your marketing and advertising going forward.
Good marketing in bad times
I’ll bet that all of us are feeling uncomfortable about what to say to clients and prospects. Some of us freeze up and don’t say anything. Others spout out what they read in Facebook groups at 2 a.m. Some of us, knowing that our income is disappearing before our eyes, are trying to find a balance between getting a deal done and not being responsible for anyone dying.
I think that the most effective marketing approach today will:
- Acknowledge that lives are being upended in ways none of us could have imagined.
- Establish yourself as a professional, experienced agent who is a reliable source of relevant information.
- Differentiate yourself as the agent who acts as trusted adviser and always puts her clients’ interests first.
This isn’t all particularly easy when you dig into it. Will property values rise or fall? How will a particular municipality or school district weather this difficult time? Is it dangerous to have home showings?
One of people’s greatest fears in listing their home is whether they will have somewhere to live if the house sells. Contracts, mortgage commitments, liability — pretty much all the questions buyers and sellers have are going to be compressed into extremely anxious moments of decision-making. Now is the time for carefully thought-out conversations that come from a place of service.
I believe that market data must be fundamental to advising your current clients. Looking back to 2006-2009, most of us shouldn’t have assured people that “prices have stabilized, so this is a good decision.” Because in most cases, we would’ve been wrong.
I believe that it would be irresponsible to advise clients based on your guesses or hunches. The market data you deliver must be local. If you don’t already, study your hot sheets every day so you can tell people what is happening right now.
Going forward, I will build out community pages on my website with detailed, up-to-the-minute market snapshots for a dozen or so communities in the western suburbs of Chicago. I want to be a trustworthy source of reliable, useful information. I like having data and reports instantly available for people to look at while we have a conversation.
Next, given the uncertainty we’ll be facing for a long time, it’s time to revisit the fundamentals of why people buy and sell homes. In my opinion, if potential clients don’t have their “why” firmly in place, they’re unlikely to buy or sell a home in uncertain times. As always, I rely on the National Association of Realtors Buyer and Seller Trend Reports.
People buy houses for so many life reasons: the desire to have a place of their own, for a job opportunity, to accommodate a growing family or multigenerational living, downsizing or to be closer to family. These reasons aren’t going to change. Great agents identify with and support their clients’ goals.
What will be more difficult for our clients, and thus for us, will be the timing of a purchase. People without a truly strong “why” are unlikely to buy a home based on the promise of a tiny decrease in the APR of their mortgage.
Only 3 percent of all buyers in the past year report mortgage financing (low rates) as their primary reason for buying a home, although I suspect that “improved affordability” is linked with lower interest rates. It will be much better for your clients if you’re aligned with their motivations.
People sell houses because of significant life changes, including a growing or shrinking family or a job relocation.
You’d have to have been living under a rock not to know that inventory has been generally constrained and that prices have been rising. Sellers in many markets expect to have the upper hand in negotiations. But since I doubt that we will see a new surge of buyers hopping into the market as we enter a time of profound social and economic uncertainty, buyer demand may drop off, especially at higher price points.
This may mean having difficult conversations about buyer demand, market uncertainties and expectations for their selling price. I don’t think that there’s any way to know right now, thus the importance of paying very close attention to the local market.
You may have sellers right now who need to sell for economic reasons, and we might see many more in the very near future. Since last summer, I’ve been preparing for a downturn by reacquainting myself with short sales, deed-in-lieu of foreclosures and reverse mortgages. Some primary resources, for you and for homeowners, are here and here.
As a reminder, all conversations with homeowners in distress should start with: “Call your loan servicer.” Especially with all of today’s unknowns, we can’t even begin to advise on what programs will be available for homeowners having problems.
I’m starting with a rewrite of every single email in my campaigns. Both the tone and content need a total rehaul. I’ll share my programs on the agent area of my website just as quickly as I can get them written. I’m also easy to reach on Facebook if you’d like to chat.
I genuinely believe that there will be great buyers and sellers this year. This first phase of a crisis is terrifying, but if you’re a super-knowledgeable, trustworthy agent, people will seek you out.
In the meantime, deeply educate yourself on your local market, seek advice from your broker, and connect with the brilliant agents who are sharing their work. Then educate and inform clients, prospects, neighbors and friends. Above all, tell the truth.