The current economy has made things challenging for real estate professionals. Interest rates have been climbing for more than a year, which means mortgage rates have also been on the rise. Those increases have discouraged both sellers and builders. As a result, the supply of homes has dipped to an historic low, pushing prices up and edging many potential buyers out of the market.
To make things even worse, slowing consumer confidence has kept many people from spending on big ticket items. Should rumors of an inevitable recession prove true, the situation would likely become even worse. The overall environment is one in which real estate professionals face a long line of hurdles as they seek to sell homes.
Here are a few steps that real estate professionals can take to stay active, effective, and profitable in today’s economy.
Be Upfront About the Challenges
The current economic conditions will keep many buyers and sellers out of the market. Still, there will be those who need to make a move at this time. To gain their confidence and their business, real estate professionals should be upfront with potential clients about the challenges they will face.
Explain the issues brought on by the current economy. Let them know what could go wrong. Tell them why this is a less than ideal time to sell or shop for a home.
Then, once all the problems have been presented, provide some solutions. Show your potential clients why you are the ideal professional to guide them through the pitfalls in the market. They need to know that challenging times require the type of extraordinary services you can provide.
Communicate All of the Possibilities
In today’s real estate market, the best solutions will likely be creative ones. Real estate professionals who want to thrive will need to go above and beyond how things are normally done.
For sellers, this will include offering some special incentives to draw buyers in. Real estate agents can encourage their clients to include seller incentives to buyers, such as helping with closing costs or committing funds for buyer-directed upgrades.
Real estate agents may also want to encourage those looking to sell to consider seller financing. Obtaining a mortgage is a key challenge in today’s market, as lenders have become stricter in evaluating potential borrowers. Higher mortgage rates also mean higher monthly payments, which can scare buyers away.
Seller financing is a legal agreement in which the buyer makes installments to the seller over time, instead of providing the full sale price at closing. This provides many benefits to buyers, including lowering closing costs. Overall, seller financing takes the lending organizations out of the picture, meaning the number of potential buyers increases.
Real estate agents can also help buyers think through creative solutions. For example, buyers will rarely think that buying a house, knocking it down, and building a new one on the cleared lot is the most economical solution. However, this can be the case.
For instance, in a neighborhood where the average home price is $500,000, a home in need of considerable repairs could be obtained for $200,000. With the current cost of new construction averaging approximately $130 per square foot, a new 2,000-square-foot house could be built for $260,000. Taking this path keeps the total cost for a new home in the neighborhood below the $500,000 average price.
Guide Buyers to the Right Loans
Real estate agents can add value to their service by guiding buyers to the right loans, as well as the right homes. As I already mentioned, current economic conditions have made it challenging for many buyers to obtain a loan. If agents can connect buyers with agreeable lenders, it can significantly streamline the buying process.
First-time home buyers are one example of clients who may have access to creative financing solutions. There are a variety of first-time buyer programs aimed at making it easier to purchase a home. Some of the more popular programs lower the down payment. Others provide loans to those with certain qualifications, such as VA loans for U.S. veterans, or to those willing to purchase homes in certain areas.
Focus on Foreclosures
During the Covid-19 pandemic, many federal and state regulators implemented foreclosure bans. These bans, sometimes described as foreclosure moratoriums, were designed to keep those who were unable to make mortgage payments due to the pandemic from losing their homes. As 2022 came to a close, many of those bans had expired, leading to a spike in foreclosures.
Foreclosures typically allow buyers to get homes at reduced prices, which can help those intimidated by the current mortgage market. Real estate agents can take advantage of the active foreclosure market by tracking opportunities and guiding their clients to take advantage of them.
In the end, the most valuable resource that real estate professionals can bring to their clients in this market is positivity. A variety of conditions have made both buying and selling difficult, but not impossible. Professionals willing to be creative, patient, and focused will find that opportunities exist to help their clients and to achieve their goals despite the challenges.
Jonathan Rundlett, who serves as president of EXIT Mid-Atlantic, has been in the real estate industry since 2005.
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