Yesterday the stock market took some body shots (technical term I learned in business school) and was down over 1,300 points (though it is bouncing off the bottom this morning) the reason was this: inflation. We thought the inflation genie was getting put back in the bottle but the number missed. And missed pretty bad. A big part of why was: rent. 

This makes me think of, feel for and have empathy for the first-time homebuyer. I really feel for first time home buyers in this market. They have also been hit with a few punches over the last three years. 

The first punch was the massive rate of appreciation in housing across the country over the last 36 months made them feel like they are missing the boat and it could be slipping past them as they watched prices rise. 

The follow up punch was a pretty unprecedented rate shift. Interest rates for mortgages have spiked. A lot. And really really fast. So while the market has been slowing down in appreciation (and even correcting in some markets) it didn’t feel cheaper because rates were way up. 

Now the most recent punch to the first-time homebuyer: rents are spiking. So even the choice of sitting on the sideline is costing them more. Like can the first timer catch a break? Prices went up up and away. Rates made that pace of change look slow and now it cost more for their apartment they are renting. Bleh. 

Buying a home anytime is a deeply personal decision, even more so for the first time. I would never presume to tell someone what to do. Even less so based on market conditions since I think people buy more because of timing in their life than timing in the market. And one of the things to factor into that decision making process is the cost of renting. I don’t see this trend tapering off soon. I think rents will continue to rise.

If you’re a first-time home buyer reading this I want to tell you that we, as an industry, feel for you. There isn’t much that is more rewarding for people in the industry than helping someone get their first home. It’s so powerful and emotional to help people hit that milestone in their life. I’m not sure if a virtual hug will help but we’re here to give them to you.

Keith

The post Keith’s Musings Vol. 8: Virtual Hugs appeared first on Forge Capital [Crafted for Real Estate Investing].

The most important thing in a shifting market is your client’s “why”.

This is the foundational element for working with buyers (or really any client but I’ll use buyers in this example) in a shifting market. Because things are by nature changing (I mean that is what shifting is right?) its very natural for people to be worried, scared, confused and more. The more you can understand WHY they are thinking of buying right now. Buying a house is stressful. Buying a house in a shifting market is even more stressful. They’ve gone from “I may never be able to buy a house” to “is now the right time to buy a house”. You’ve got to discover their why because we either move towards pleasure or away from pain. To help them thorough the process you’ve got to understand the pain they are experiencing, the pleasure on the other side of buying and moving and do those equal enough desire to move forward in the current market conditions.

This is helping them see the shore. There is a famous story about Florence Chadwick who  was the first woman to swim the English Channel- a round trip… there AND back. And she did it. After that she decided to swim across the Catalina Channel and she swam for 16 hours in the fog and was just a half a mile away from the shore when she quit. She is even quoted as saying: “Look, I’m not excusing myself, but if I could have seen land I might have made it.” She quit because she couldn’t see her “why” and she didn’t know how close she was to the shore. A link to her whole story is here.

Not to wax poetic but our role is to be the wind the blows the fog out of the process so they can always (or usually) see the land. So they can understand WHY they are going through all this. At it’s most simple that is what we do. You’ve got to get really good at understanding, discovering and sometimes helping them discover their “why”. And then push as much out of the way of their vision (aforementioned fog) so they can see the shore.

We all get programed with default answers to questions. The things we say are often not a lie their just the mental scripts we’ve developed for answering questions. To really get to someone’s “why” and get past their mental scripts they have I have found two things to be really really important:

Be Present

Eliminate all distractions. Put your phone away. Clear your mind and for that time just be full present in the moment with your client. Be a very active listener and focus all your energy on them. Listen. Listen hard. Like to the point where you’re scooching forward in your seat to hear better. You’ve got to literally and figuratively “Lean In” to the conversation.

Be Curious

One key to this conversation is to ask a ton of questions. Have a real desire to learn about them. Ask them to restate things if you don’t understand or even if you do a simple “tell me a little more about that” can often help them to articulate it better or open new doors. I had a trainer once who said “Just ask them questions and they’ll give you all the bullets to load your gun when it’s your turn to talk”.  Yuck. That is just gross. Like super icky yucky nasty gross. That isn’t what curiosity is at all. There is no “gun loading” there is only how to serve them better. In real curiosity there is no space for manipulation. Period. Just keep asking questions until you have a firm image of what is important to them. And remember its usually not the first thing they tell you. Those are those mental scripts we talked about earlier.

So show up. Be present. Ask questions. And most importantly help your clients see the shore.

Keith

The post Keith’s Musings Vol. 7: Finding the Shore appeared first on Forge Capital [Crafted for Real Estate Investing].

Widen the aperture of your business. Expand it. If fewer people are going to be buying and selling over the next 18-24 months (which there will be) then you’re going to have to have more access to more people to do the same number of deals.

The silver lining here is that when the market expands later your business will expand exponentially since you’re reached places you haven’t been to before and you’ll be there for the expansion.

So I started thinking about different ways to expand ones real estate business and came up with three.

Dial in your Sphere of Influence

Yeah I know I’ve seen some of the emails about how hard onboarding kvCORE is. Like it’s a lot. A lot a lot. A lot to learn. To process. It’s all new.  How do I set a tag? How do I upload my list. I uploaded my list and they’re all coded wrong and on and on. I say this with love: it’s hard because learning new things, ways, processes and habits is hard. And look, this isn’t about using kvCORE, this is about getting organized in your database. I don’t care if it’s transferring all the bar coasters with names and phone numbers to an excel sheet and then setting reminders to call/text them. That’s something. That’s more dialed than nothing. But your SOI is the shortest path to you and more transactions. Period. There are deals in there. And you’re going to miss them. If your SOI follow up plan is less than a 9 or 10 on a scale of 1-10… there you go. Shifting market solved. Get it to 10 and watch what happens.

Widen your Geographical Reach

We all fall into our comfort zones. We have our “service area”.  I remember when I got my license people would ask “where do you cover” and I would say “the piece of paper they sent me says California”. And I meant it. Of course in time I settled into a comfort zone of cities and neighborhoods that I knew and understood. One way to do more deals is go more places. Go to that next town over. Look for that new neighborhood. Cross that bridge. Start visiting new home developments (they’ll be happy to see you now lol). Lock in on that condo building you’ve seen 1,000 times. If you can’t get more humans then widen the area that you serve humans, which gets you more humans.

Widen your Client Reach

Look for a niche that you have passion around. Never worked with investors? Jump on YouTube and search “how to learn excel” masterclass party people. Download a “deal calculator” there are a lot of them and start to work with investors. Maybe become an expert in helping Boomers lend money to their kids or grandkids to buy their first house. Get with a lender and learn the best process for gifting funds, a structure that works and market to it. Maybe go to the biggest employers in town and talk to them about setting up an employee program so their people can take advantage of this shifting market. Think about how to get access to more humans to be their trusted advisor and ways to convert people from haven’t met to met.

Keith

The post Keith’s Musings Vol. 6: Expanding appeared first on Forge Capital [Crafted for Real Estate Investing].

I probably should have started with this but in a shifting market mindset is EVERYTHING. You’re going to feel scared. You’re going be frustrated. You’re going to be stressed. You’re going to be surrounded by negative thoughts and people. It is going to be hard to stay motivated. 

Step 1: Define what steps you need to take today (and every day) to move your business forward. Call past clients, do 50 open houses in the next 52 weeks, start geographic farm, start marketing to investors, stand on the corner with a sign like the Mr. Pickles guy every day… whatever. Define what you have to do to get your business moving. You may only spend one hour thinking about this, let’s be honest you’ve been thinking about this for days, weeks, months.  You already know. 

Step 2: Start. 

Step 3: Don’t stop. 

Of course you can course correct along the way. Of course you will have bad days where you slip up and don’t do your key tasks. Just don’t have two in a row.  

Here is the secret: forget how you “feel”. How you feel is a horrible barometer for what you should do. Do it when you feel motivated and excited. Do it when you feel like crap and don’t want to. Do it when it’s too hot. Do it when it’s too cold. Do it when you’re pumped up. Do it when you’re drained. Do it badly. Do it well. But do it. (that got a little Dr. Seuss-ish at the end lol). 

Action leads to Motivation.  Not the other way around. 

Keith

The post Keith’s Musings Vol. 5: Staying Motivated appeared first on Forge Capital [Crafted for Real Estate Investing].

A shifting market is the time for creativity, problem solving and thinking outside the box. I was in a meeting once where they said “Keith… there is outside the box. Then there is you, you threw the box in the driveway and ran over it with your truck”. Not sure if he meant it as a compliment but I took it as one.

So this morning here is just a quick journal brainstorm on some creative ways I can attract buyers to my listings. None of these are new. All of these have been done before. It is about doing them and (maybe more importantly) promoting them. If you’re doing a seller buy down you’ve got to shout it from the mountain tops. Make that be part of what makes your property different than the other 3-4 choices the buyer has.

Seller Buy Down

Often you can get more for a buyer in a rate buy down of $5,000 than you can in a price reduction of $5,000. Same amount to the seller often much more powerful for the buyer.

Lender Buy Down

Same as Seller buy down but lender pays.

Seller Second

For someone with equity in that first time homebuyer space they could create multiple offers with this. You could take a 3% down buyer and turn them into 13% or even 15% if the seller had enough equity they could just carry the paper and be the only home being offered that gives the buyer more buying power. So long as the note performs the seller actually gets 100% of their desired price plus interest carry.

Home Fund

A product through NextMortgage that allows crowd sourcing for down payment. AND for a first time homebuyer we match $2,000. That is a free two grand for your first time home buyer.

Bonus Buyer Conversation not tied to a listing:

All In One Loan

This is another program from NextMortgage that is basically a big giant HELOC and pays off faster than conventional 30 year fixed. And it also allows the owner to tap the equity in the home whenever they need it. So your high net worth people who might want cash flexibility in the next two years heading into recession this could be something your buyers are interested in.

This will be/is paramount as we continue to slow down. I mentioned a bit yesterday that sellers are often slow to accept the new reality.  You’ve got to help them self-discover that new reality.

And I say self-discover for a reason. That is my first mindset piece I think about when approaching this. Look, we don’t know for sure what it is going to sell for. We have a more educated, experienced  and informed idea than the seller but we don’t KNOW know. They don’t either. So this should be an experience where we talk, share and explore what the right marketing price should be together. Since it’s really worth what someone will pay on the day you’re ready to sell it. Prior to that it’s educated (or not so much) guessing.

Keith

The post Keith’s Musings Vol. 4: Shifting Market appeared first on Forge Capital [Crafted for Real Estate Investing].

Today I was journaling about: Speed To Lead.

I even jokingly wrote: It’s going to be the wild west when it comes to leads. There will be the quick. And the dead. 

I used to have marketing company that serviced the real estate and mortgage industries. We did a study and filled out hundreds of lead forms  and less than 1% responded within 5 min and a fraction of a percent responded within 1 min. 

Our industry is used to moving at the speed of paper and being measured on a calendar. But as deal flow slows down lead conversion will matter. A lot. So up your urgency on lead follow up. Up it a lot. If you think your fast just ask yourself: are you responding within one min? 

This isn’t just online leads. Peoples patience is decreasing every year. Technology has taught us to expect instant. We’ve got to catch up, speed up and get comfortable with fast.

Keith

The post Keith’s Musings Vol. 3: Leads appeared first on Forge Capital [Crafted for Real Estate Investing].

Today I am meditating on the price discussion.

This will be/is paramount as we continue to slow down. I mentioned a bit yesterday that sellers are often slow to accept the new reality.  You’ve got to help them self-discover that new reality.

And I say self-discover for a reason. That is my first mindset piece I think about when approaching this. Look, we don’t know for sure what it is going to sell for. We have a more educated, experienced  and informed idea than the seller but we don’t KNOW know. They don’t either. So this should be an experience where we talk, share and explore what the right marketing price should be together. Since it’s really worth what someone will pay on the day you’re ready to sell it. Prior to that it’s educated (or not so much) guessing.

My three keys to pricing something properly:

1. Know your numbers. COLD. Like Ice Cold. Like Ice Man from TopGun cold. Like you’ve walked the comps, hand selected the best ones and have a deep understanding of the comps and what makes them what they are.  Go the extra mile here to really have knowledge here.

2. Condition matters more now. We didn’t have to really get properties ready to sell in the last few years. Buyers were so squeezed they’d take things in inferior condition. Now (or soon) they will have choice again. Talk to your seller about the importance of paint, carpet, landscaping, decluttering maybe even staging. Get the house as show ready as you can. Explore the NextHome prep program if NextMortgage is in your state already. Or think about lending them the money for “get ready” as part of your service. Just know buyers don’t have vision (in general) so the more you can have it show ready the better.

3. Explore motivation. I talked about this a bit yesterday but this is hyper critical in this market. Why. Are. They. Selling? Dig in there. Be lovingly open to having the conversation “What would you do if you didn’t sell?”. Be ok if that is the result. Some people maybe should wait. Advise them. Consult them. Advocate for them. Be a fiduciary for them. That is the job. Make sure you’re helping them explore all their options and help define their motivation. 

Also we have to think inside and outside the box when it comes to price. 

Inside the box

Pre negotiate a price reduction. “We can try it at your price for one week but if we don’t have significant activity we’re switching to mine. That “Dangers of overpricing” slide should be your gospel. You should talk about it, teach it, think about it all the time. Help them understand and reframe it this way “When you go look at a house… and its been on the market 65 days what do you think?” They always say “What is wrong with that house?” You say “Exactly! I don’t want buyers thinking about your house that way”.

Practice the price discussion. A lot. Like a lot a lot. Like daily if you have to. Get with people in your office and practice. Get with people outside your office and practice. Ask past clients if you can swing by their house and practice. They get a great CMA, you get to practice and look like a pro in front of your past clients. Wherever/however practice your price discussion.

Outside the box

Hire a 3rd party expert to solve price debate. You hire home inspectors because they’re better at that than you. You hire transaction coordinators because they’re better at that than you. Why not talk to an appraiser about an “opinion of price” and if you can’t agree on price with your seller then you pay an appraiser to give you an “opinion of price” and get the seller to agree that you’ll both work with that number initially.

Keith

The post Keith’s Musings Vol. 2: Pricing appeared first on Forge Capital [Crafted for Real Estate Investing].

Now more than ever in a shifting real estate market you need to make sure you have Level 3 clients. And because we’re early shift you need Level 3 buyers on both sides of the aisle. 

What is a Level 3 client? They meet all of the following criteria:

1) Motivated

2) Realistic

3) Loyal

If they meet two they are a Level 2 client.

I bet you’re guessing if the meet one they are a Level 1… nope.  If they only meet one of the criteria they aren’t even a client. They are a lead. 

Allow me to unpack.

Many sellers are slow to accept the reality of the market. They think their house is different and will buck the headlines. Many buyers are too but on the other side: they think it is time to get their pound of flesh from the real estate market. Neither are true.

As an agent you have to get more purposeful about prequalifying possible clients. If someone isn’t motivated, realistic and loyal they aren’t bad humans… they just aren’t ready to dive headfirst into the market today. It is ok be present for them, answer questions, be a resource for them but save your full energy for the Level 3 clients. Here are a couple of ideas to help define what level they are.

Well if they aren’t loyal to you then you’re kind of out of the game. So we’ll just move on from this one. 

Realistic: for a seller the price discussion is a great way to define this. Maybe send them some articles before the listing presentation about the market and ask them their thoughts. Don’t steer it to set up your conversation make it an open dialog to really learn: how realistic are they about the state of the market. One of the things I have been recommending for a while is if you can’t come to terms on price have them agree to having an appraiser put value on the home. You pay for it but you both agree that you’ll take the appraisers valuation into consideration when pricing. It will be a lot closer to your value most of the time. And appraisers have more time than they had a few months ago so they’re probably willing.

Motivated: ask a seller “what would you do if you didn’t sell the home”. NOT in a “take away” close kind of move. That is just yucky. Please don’t be yucky. But do have an open/thoughtful conversation about all their options. Once of which is, of course, to just stay put. That shouldn’t be some conversation you fear that should be something you explore to find out how motivated they are.

There are a ton of ways to approach this but be alert and aware of explore all three criteria with your people. If they check all the boxes then work tirelessly for them. Over communicate, exceed expectations and dazzle. If they don’t then pause, have more exploratory conversations with them until you can identify the best way for you to work together. Which might be to hit the pause button and circle back. Keep your peak energy for the Level 3’s. 

And I know I’ve said it twice already but please don’t read this as “find the motivated and forget the rest”. This is a service business. Some of what we do every day is to sacrifice to the real estate gods. You’ve got to serve them all. But know who to give maximum energy to… or you’ll run out.

Keith

The post Keith’s Musings Vol. 1: Level 3 Clients appeared first on Forge Capital [Crafted for Real Estate Investing].