A recession is defined as two consecutive quarters during which there’s economic decline. With inflation jumping up to the highest level since the early 80’s and the 15% rollback in the stock market through the first two quarters, we know one thing for sure:
A recession, along with a shift in the market, is here.
Although historical data shows real estate typically does well in recessions, it doesn’t ease the stress for buyers and sellers. That’s because a strong real estate market does not equate to a consumer’s financial stability.
Many agents have never been through a market shift like this before. So how can you guide uncertain consumers while keeping your own business thriving?
That’s where the shifting market playbook comes in. Keep reading to learn how to shift your business along with the market.
Find motivated buyers and sellers
What I’ve found during my career – especially when I went through the 2008 crash – is that you have to find the most motivated people in the marketplace and be able to empathize with them.
Seems obvious, right? The problem is, a lot of agents don’t know how to do that.
Over the past two years, homes were selling themselves, buyers were buying on their own, and the realtor was there to walk them through the process. There’s nothing wrong with that, but today’s situation is different.
Pretty soon, days on market will rise, and the number of homes you have to show a buyer will increase. These are all signs of a shifting market. Many agents take one of the following approaches:
- Those that say, “Don’t worry. Real estate’s still going up. Nothing to see here. Don’t worry about it.”
- Then there are the opposite kind who are yelling, “The sky is falling! The world’s ending!”
Neither of those strategies will work. The first lacks empathy, and the second is a fear-based tactic to induce sales. Here’s what you can do instead:
Determine who is Able, Ready, and Willing
In the book Shift by Gary Keller – and this is a great re-read right now – he talks about creating urgency and the myth of “timing the market.” You see this with buyers who were on the fence and start to act when they see rates going up.
When it comes to identifying urgency, there are three factors to consider: ready, willing, and able buyers. But what Gary says in the book about this is really important: that’s not the right order. He states the order is: able, ready, and willing. Let’s break it down:
- ABILITY to transact. Ability for sellers and buyers right now is critical. For buyers, you must ask if they can actually buy a home right now. This means they qualify for a mortgage at the current interest rates, have cash on hand for a downpayment and closing costs, and have the ability to get out of their current residence in 30-60 days. For sellers who want to cash out high, being able to transact means they have a place lined up where they can live, because we’re still dealing with an inventory shortage.
- READINESS to transact. Being ready is more personal than being able, and it is tied to the motivation to buy or sell. Over the past two years, people moved because they wanted to, they had the ability to, and they were taking advantage of lower rates. Now, we’ll see people move because they have to, often because of a life event or personal reason that drives their motivation. As an agent, being able to ask questions and dig deeper about your clients’ motivations is essential.
- WILLINGNESS to transact. Finally, the consumer must be willing to take action in the current market. This includes being willing to mentally and emotionally make a move. A consumer can be able, and they can be ready, but if they’re not willing, they’re just waiting. A shift in the market can absolutely impact the willingness of the buyer or seller, making them a little more or less excited.
Guide Consumers through the Shift
Once you break down the ability, readiness, and willingness of the consumer, you must determine the best ways to help people through the process.
There are a couple of key ways to help buyers and sellers through the changing market:
- Talk to more people. You can’t just catch the hot lead anymore. Those days are over. The number one factor deciding on how many homes you will sell in the coming year is the number of conversations you’re having every day. It’s going to take longer to help people transact. They’re going to want to look at more homes. Days on market is going to go up for sellers. Talking to more people – over-communicating with them – is going to be a very important factor.
- Educate yourself so you can educate your client. You have to know what you’re talking about in your conversations. You have to be the knowledge broker. Read and analyze reports from sources like Keeping Current Matters, HousingWire and BAM about what’s going on in the economy and how to assist consumers in the changing market. Be able to inform clients what a decision could mean for them short term and long term. Be able to answer questions like, “Are prices going to crash?” and “Is there a bubble?” Your ability to help people use that information to navigate a real estate decision will set you apart a lot of different agents out there.
The top agents are going to be those who talk to the most people, deliver the most value, ask the right questions, and guide people through a very stressful process. Because this is going to be more stressful than ever.
If you think it was stressful the past two years, I’ve got news for you: that’s nothing. That was just a feeding frenzy. People were getting stressed out losing out on homes.
Now, we’re dealing with the angst of ‘Well, I’m uncertain as to how our business is going to look next year.” Or “Consumer spending is down, and that might affect my income.”
Having emotional intelligence, having empathy, and having real conversations with people – and these are difficult conversations – are going to help you energize that urgency.
Ask the right questions. Go deeper and tap into the consumers’ “why?” and remind them why they’re making this move in the first place. If you are not determining motivation and not addressing issues, you’re not going to be closing sales.
Have those conversations with the right data and the right information to overcome concerns – these are the plays you need to take in the shifting market.