Get Ready For Buyers To Start Calling The Shots
Industry veterans know that even the hottest markets eventually begin to cool. When they do, it’s a whole different ball game for buyers and sellers.
Suddenly, those packed open houses turn into sleepy, quiet affairs. The offers slow from a flood to a trickle, or even worse—total silence. Properties sit on the market for weeks.
As total inventory increases, the dynamic shifts. The buyers start calling more of the shots. Perhaps they bid under the asking price or add a contingency to their offer. At the same time, mediocre real estate professionals who were coasting on the strength of the market are exposed. Like an inexperienced farmer, they haven’t prepared for the dry season by collecting the resources required to get through it.
On the other hand, a slowing market brings out the best in truly great real estate professionals. They knew this moment would eventually arrive, and they’re ready with big ideas and an address book full of contacts.
No matter which side of the table you’re sitting on, here are some pointers for navigating the inevitable return of buyer power—which could come much sooner than you think.
A Buyer’s Guide to a Slowing Market
In hot markets like the Bay Area, buyers have been getting short shrift for years due to lack of leverage. In response, short-sighted realtors simply brushed off prospective buyers who couldn’t meet their outlandish demands.
Many realtors forget, however, that buyers will eventually buy somewhere. In an industry that’s all about relationships, the buyer you brush off today could be exactly the prospect you’re looking for tomorrow.
Buyers: when you spot the market beginning to change, know that you have more options. With more inventory sitting on the market for longer, you can start exploring contingent offers that sellers will be much more likely to consider. You can begin to use your leverage to structure a better transaction.
What exactly should you aim for? We’re a big advocate for negotiating origination points, which is sometimes a better option than lowering your asking price. In this arrangement, sellers give the buyers credit, and the buyers use this credit to pay origination points and buy down the interest rate. This can potentially save you hundreds of dollars each month on a 30-year fixed mortgage.
This is just one option of many—the key is to work with a resourceful real estate agent who is excited to find the best deal for your situation.
A Seller’s Guide to a Slowing Market
As with buyers, a seller’s first and most important step is to be sure they’re working with an engaged, experience realtor who has been through downturns before. Sadly, a considerable proportion of industry professionals don’t keep up with industry innovations and can't offer you the creative solutions that often make the difference in a slowing market.
So what does a great seller’s realtor look like?
First, a great realtor cultivates contacts. If they have valued the importance of relationships, they could have hundreds of prospect buyer contacts who weren’t quite eligible during the stronger market, but now make the perfect candidate for your property. While less experienced realtors simply ignored these prospects during boom times, good realtors dealt with them honestly and fairly, making them much more likely to come back into the fold.
Second, a great realtor is prepared to get creative. This could be in the form of a unique marketing campaign, or a more enticing offer, such as providing a mortgage credit or discount to the buyer. No matter the circumstances, your realtor should be excited about the options available to you and not default to simply lowering the asking price.
Change Always Comes
No market moves north forever. In slower market conditions, truly great realtors begin to shine. If and when that time comes, do your due diligence to make sure that’s the kind of realtor you have in your corner. And make no mistake, that time will come for even the hottest market.