The Leverage Has Changed

Anthony: Has the leverage changed? When you’re a listing agent, do you notice that you don’t have nearly the same leverage that you did even 60 or 90 days ago? Of course, you don’t. The market has changed. There are less buyers out there. John Burns Consulting out in California put a study out yesterday that said about 40% of the buyers up to $400,000 got knocked out of the market due to the interest rates changing. Think about that. You multiply that and then you say, those buyers, then those folks can’t buy houses. Then those sellers, they can’t buy as much. I’m screwing up how I’m explaining that.

My point is you cannot expect to have the same leverage on your listings that you had when interest rates were at 3% as when they’re at 6%, the market that we’re in now. Now this comes as a surprise to many, many sellers. Many of them are shocked about it. They’re like, “What do you mean? How do you figure?” The Case–Shiller index came out today, was a good report, but if you redefined print, that was March, April sales, I believe, or February, March, April sales, it’s like a lagging three months, those sales got negotiated in the winter with lower inventory, lower interest rates.

You as a listing agent have to understand this because if you don’t understand what is going on, why it’s going on, you’re never going to be able to explain it to your client. Then your client’s not going to understand. They’re far more likely to be unreasonable, which truth be told, a seller’s knee-jerk reaction is to be unreasonable anyway. That’s what home sellers do, especially in the stage that we’re in right now, which is market deceleration, slow down. Not collapsing, but deceleration.

If you can’t properly explain that, that’s going to be harder for them to understand. You’re the professional, you have to teach them. I’ve been talking about this for weeks. I feel like a broken record, but I want to point this out to you all. I’m hearing from a lot of agents that are talking about how unreasonable sellers are and how they’re angry. They only got three offers, two offers, one offer. They’re mad at their agent. Folks, here’s the deal, here’s the truth. Us realtors, we get more credit than we deserve when home sell fast. Yes, we do. You’re not a hero, but we also get more blamed than we deserve when a home doesn’t sell. That’s the key.

The last two years, we got our asses kissed. We got all the praise in the world, “You’re the greatest. You sold my home so fast. Oh my God.” Now that’s changing. Now the buyers are getting back a little bit of leverage. Some of the buyers are going to overplay their hand and think this is 2008 and think they can undercut people and all that, but the ones who play their cards right will be smart and will be able to land themselves a good home for a decent price and a better price than probably they could have 90 or 120 days ago. We are finding that the homes that are in very good condition, they still have a good amount of leverage. They’re still selling for over asking. There’s still multiple offers on those.

The ones that aren’t in such good condition, they’re having a little bit of a harder time. If you’re noticing that you don’t have the leverage that you did before, don’t be surprised. That’s the point I’m getting at it. You have to understand how and why that’s happening.

Then on the buy side, when you’re representing a buyer, you have to understand what’s going on as well. If you’re looking at a property that’s a gem, that’s beautiful, in a neighborhood that there isn’t much for sale, maybe inventory’s gone up across the board, but maybe this happens to be one or two neighborhoods because things are still spotty that inventory’s not that high, you should be looking at how many homes are for sale in the immediate area of homes that you’re making offers on when you’re representing buyers. If there’s not many, if there’s only one or two and those are overpriced and the one that just came on is priced well, then it’s going to have multiple offers. That particular seller is going to have more leverage.

The point of my video here is to get people to understand that there’s still leverage out there that exists for sellers, but the amount of sellers that have lots of leverage has decreased. It’s still spotty, it’s still out there, but be aware of that decrease. Understand that there’s a decrease and understand when there still is a listing that’s going to have a good amount of leverage. The same when you’re on the listing side, you’ve got to have those detailed conversations.

Here’s the deal, folks, truth be told. It’s been pretty easy to be a listing agent in the last two years. It’s been money in the bank. You go out, you list a home, you’re literally can say, “Oh, six to eight weeks, I’m going to get that much money. End of story.” That’s not a real market. You got to actually work to sell the homes. Not to say you weren’t working when you’re navigating 40, 50 offers and having to deal with all that, it’s difficult, but now the work’s a little different. Now you got to make sure that marketing’s on point, you’ve got to make sure those seller expectations are perfect.

You’ve got to make sure that the seller understands that they have less leverage and why they have less leverage, especially if they price higher. The higher they price, the less leverage they’re going to have, because they lower the price– Let’s say the marketing’s equal, marketing is strong. What I mean by that is, if there’s strong marketing, if you price too high, you’re going to have less leverage. You’re going to have less people interested and that’s going to give you less leverage.

If your marketing’s on point and the listing looks solid and you price right on the money or even a little bit less than you think the home is worth, the seller prices for a little less, how I price my listings, we flip homes constantly, folks, never ending. We’ve bought about 17 homes this year and resold probably 10 of them here to date. When we relist stuff, we relist a little under what we think it’s worth. Why? Because it brings in droves of buyers and we have leverage and we can dictate terms more.

I just want to make sure you’re understanding that leverage and that leverage shift. Sellers were in favor way up here. They had this much power, buyers had this much power. Now it’s done this. There’s still more sellers with power than buyers, but it shifted. It didn’t shift over the course of the season like it normally does, it jerked, it went fast. Be prepared for that. I hope that gives you a better understanding of leverage.

I’m here in Chicago meeting some corporate clients for dinner and I’m heading home after that. Can’t wait. Been away for too many days, can’t wait to get home. Happy home selling, folks. I’ll be back. One of the things we’re going to talk about in the next video is managing that listing while it’s for sale. Right now I just talked to you about understanding the leverage and negotiations and all that. I’ve talked to you about making sure your price is on point and working harder to get that price right.

Next thing we’re going to talk about is managing that listing while it’s for sale and decreasing the amount of sellers that are going to get mad at you. Believe me, there’s going to be more angry sellers out there in the month to come because they don’t get it. They don’t understand what’s going on and it’s up to you to get them to get it because you are the professional. When you educate, you attract. When you educate, you have better clients. When you set expectations, you have better clients. I’ll be back with that. Heading out to dinner. Happy home selling to everyone. See you soon.