Current market conditions of low inventory, continually increasing prices and rising interest rates have everyone stressed out and on edge. Buyers are chasing the proverbial carrot, all running after the same homes. Sellers think they are “kings of their castles,” waiting to hit the jackpot with offers.
And agents? Well, they are stressed out, exhausted, frazzled and, unfortunately, used and abused. Welcome to the “drop what you are doing right now and attend to my needs” economy.
These are unprecedented times, and there is no playbook for this. With droves of people continuing to be on the move, many affordable markets are no longer that and are stressed by huge population swells that are making everyday life more challenging for everyone.
People migrating from more expensive areas typically to less expensive ones are bringing their wads of cash and leveraging their equity and cushy work-from-home salaries to cause a drought in many luxury markets across the country.
Given the relocation craze and the turning tides, buyers and sellers need to change their strategies (and their etiquette) in this market. Here is what we wish clients understood in this shifting market.
Stop testing the system to see if you are right
Every agent has a story about their relocating clients right now. Based on many I’ve talked to, I’m hearing much of the same, no matter where they are coming from.
They thought they could negotiate, that homes that “lagged” on the market more than a few days meant they were ripe for deal-seeking, and if the home was still available a week to two weeks later, only then would they revisit and maybe put in an offer.
Then when they see the house go under contract, their agent is reaching out to the listing agent asking, “How solid is that offer?”
Stop. You are putting your agent and every other seller through a vicious cycle that is causing a lot of stops and starts. You are not the only buyer looking at that home and having the same thought.
When the house comes on the market and you like it, you need to pull the trigger, and quickly. Your offer should be strong and not leave the door open for a lot of negotiation.
There are too many people starting to swoop in from the time your offer is submitted (if you are not already in a multiple-offer situation) and depending on what the seller gets, they just might elect to hold on for a few more days or a week to see what else comes in. After all, they know their agent is getting pummeled with showing requests.
Stop expecting perfection in the price range you are searching
Prices are up, but that doesn’t mean properties are going to be turnkey. If they were, they would likely be priced out of the range where you are looking.
Accept the state of what is available, and go with the flow. Inventory is low, choices are slim, and a turnkey property is going to have even more intense competition and go that much over its asking price.
Rome wasn’t built in a day, as they say, and if you have to buy something that needs work, you can renovate it over time.
When it comes to writing offers, you have one chance to get it right
This is not the time to hold back. Make your first offer your strongest offer, but also stay flexible in case the seller comes back and wants to counter yours along with a couple of offers.
Escalatory addendums may look enticing, but there is no point in offering a crazy sky-high price if you can’t guarantee that number to a seller without an appraisal contingency or at least guaranteeing that you’ll pay a certain amount above appraised value should it not appraise.
Listen to your agent. Don’t test the waters. They know what it will take to be a contender. This is not a game of “I’ll try it my way until I see fit, and after I’ve lost several homes, I might start to believe you and do it differently.”
When it comes to sellers? The old rules still ring true — your first offers are your best offers. Given a high volume of showings in a short period of time, the market is speaking to you immediately, and it is telling you something.
Holding out a week or two longer is likely not going to change the numbers offers are coming in at, and it could result in lower offers. Plus, you risk alienating the most decisive buyers who may opt to pull their offers and look elsewhere or wait for the next one.
Buyers, by this I mean, have your proof of funds showing your down payment and closing costs, lender letter (preferably you’ve been fully underwritten approved versus just pre-approved) at the ready — if it’s been a while, make sure you can provide updated information — and not just a screenshot from your phone. Have your lender on speed dial, and make sure they are aware when you are putting in an offer.
Coordinate with your agent to have them reach out to the listing agent to introduce themselves and vouch for you and their process. Make sure someone looking at your information can easily see and understand the statements provided and that all adds up to the numbers involved in your transaction.
Sellers, have the information your agent has asked you to compile ready before you go on the market. This means having all seller’s disclosure forms completed along with whatever else your agent needs — average utility bills, costs of property insurance and carriers, vendors and costs associated with taking care of your home — pool, lawn service, etc.
Time is of the essence and once the listing is active in MLS, it will be pedal to the metal with a flurry of activity and likely offers. This information will need to be provided without delay to a buyer who may hesitate on their decision pending this information.
Greed is not good
What? That’s why I hired you as my agent: to get me the most obnoxious, ridiculous price the market will bear! Well, yes of course, but based on what the reality of the market will deliver.
I know you are trying to defy the odds and make an unheard-of profit on your home, one that is only possible in today’s market. That being said, understand that buyers may not be offering you well over asking or full price, depending on the price range, particularly as you move into the luxury ranges.
If your home is nice but not super updated, don’t expect the market to overpay you for that. So you moved in and did a little bit to it or put money into things that only you would appreciate?
Today’s relocation luxury buyers expect turnkey and perfect. Many of them are high-earning millennial families who don’t have the time or the inclination to do any work. So, while they still will put offers in on homes like yours, they won’t be making them at list price or going well over asking.
Now that interest rates are sky-high, expect some pull back with that, and no, it’s not your agent’s fault.
This is not Mission Impossible
This one goes for both buyers and sellers. While we try to be miracle workers as much as we can and make the impossible possible, there is only so much we can do. When you come to us with an impossible set of criteria and timeframe, have not studied the market you plan to move to or from, and you have a budget, like everyone, it may be very tough to make all happen the way you want it.
We understand the stresses involved in moving. But, trying to guarantee that you can get X price and close in X time so you don’t miss out on buying a home in another market that has zero inventory, or close on X date because you don’t want to move twice … it may not be as easy to accomplish depending on the buyer audience for your home.
Also, guaranteeing that you won’t have to do any repairs or address inspection issues in some way, shape or form is not something we can do.
Stop acting like whatever goes wrong, it’s your agent’s fault
We understand it is a high-stress environment for all involved. If you are selling your home, you can expect a high volume of traffic in a short amount of time. We can’t control what buyers (and the agents they work with) choose to cross our paths and make offers, nor do we know how that buyer will be to work with — or even, potentially, the agent if they are newer to the marketplace, and we haven’t encountered them before.
Keep in mind there have been thousands of new agents that joined the profession as a result of the pandemic. Although we may be familiar with a lot of the agents showing your property, we may not know all of them.
Buyers and their agents can say and do all the right things to get their offer accepted, but that doesn’t mean it will be a cakewalk. Given the high prices buyers are paying, a seemingly minor issue in a transaction can be a big deal. And it can often be “buyer’s revenge” upon a seller now that they’ve locked in on a crazy price for your home — they may feel more empowered to make demands.
Although everyone can walk away if you can’t reach an agreement on repairs, for example, do you as a seller really want to start all over in an environment with rising interest rates, while having to disclose the findings from the buyer’s inspection report? The probability of you being able to receive the same price with another offer you did before is unlikely.
If your home should hit an appraisal snag, unfortunately, it’s a game of roulette with which the appraiser accepts an assignment to conduct an appraisal for a property. Agents can provide information to the appraiser, if they will accept it, regarding comparable sales, features, details, lot size of the home, etc., but ultimately they have zero influence over the outcome of the report.
If you are trying to buy a home and your offers are continually not accepted, don’t blame your agent unless they are not on top of things or proactively doing all they can on their end to help you. If you are choosing not to follow their advice or decide to delay putting in an offer pending what else might be available on the market, they can’t wave a magic wand and make it all come together, as much as they would love to.
Trust me, they don’t enjoy taking hours out of their day to write umpteen offers and all the legwork that goes with that to have their offer rejected. Top agents are in it to win it just as much as buyers, and as such, they know what it takes to win. You just have to follow and trust their advice.
Agents are people with lives and livelihoods. It can be easy to forget in this frenetic market that your agent has been tirelessly working on your behalf and hasn’t been paid a dime as of yet. This could be months or in some cases a year or more, especially if they are working with a handful of buyers.
The cost of inflation hits agents too, so don’t assume that just because you hear how hot the real estate market is and how fast homes are selling that your agent is instantly grabbing a share of the pie. It is taking multiple tries and that much longer to sell a home to a buyer than it did before the pandemic.
Large numbers of people are on the move everywhere, which is contributing to this challenge. Prices have gotten so high that the “locals” in many markets can’t afford to move, thus adding to the inventory squeeze along with the strain of new construction supply.
The cost of gas along with all other expenses of doing business impacts agents, too. Don’t assume they can just throw in some commission to make a deal work. Also, consider that while asking prices may be up, commissions are down for that very reason.
Your agent is giving 110% in this market
The perception that in hot markets agents don’t have to work hard to sell a home couldn’t be further from the truth. They are just working harder in different ways in a very compressed timeframe. Today’s transaction is all about speed and certainty, and today’s consumers demand that in a highly competitive environment.
What other profession is literally available 24/7 with very few boundaries with zero guarantee of compensation? While the consumer receives their guaranteed paycheck every two weeks, for the most part, buyers and sellers need to remember that agents are often juggling and/or sacrificing a huge part of their personal lives to be available and sometimes the more available they are, the more thankless the buyer or seller is.
Given low inventory, agents have to be available or have someone on their behalf at the ready to show a home the minute something comes on the market, and despite “coming soon” listings that give us a heads up to what is coming on, not all is put into that status, so you just never know. Agents receive numerous listing activity updates for each client they are working with and have to stay on top of each one.
For the seller who wants to lowball their agent on the commission before they’ve had a chance to even launch the property, understand that there are approximately 125 things that an agent is involved in when working on a new listing from end to end. That doesn’t account for multiple offers where an agent has to organize each offer into a detailed spreadsheet along with sending the seller all of the offers.
If you think reviewing, evaluating and compiling information on 15-20 offers takes no more than an hour, not including conversations with selling agents to answer questions or clear up any vague terms, you are sorely misled. Not to mention all the backlash of frustration we may receive from selling agents when they hear their offer wasn’t accepted, despite it being extremely strong with all of them coming down to a hairline difference where things really could have gone either way.
It can be easy to get caught up in the momentum of the market and forget the person who is working for you on your behalf is working tirelessly to do so. Today’s real estate agent is an adviser and translator of the market. Now more than ever, it’s important to listen to them and follow their advice so you don’t lose time, money or the property that you want to go for.