The Great Recession has caused Detroit to reinvent itself; Main Street to redefine itself; Wall Street rethink itself; Silicon Valley to reboot itself and the American Realtor to retool them self. In fact all of the above will have retooled themselves in one way or another by now. The way business was done before has forever been changed and those who’ve not adapted themselves will have fallen the way of the video tape. This is neither new nor surprising. It’s the nature of the every economy dating back to the earliest of mankind, that to survive, we must adapt…
Gor: “Thag, how much you want for rock with hold in middle.”
Thag: “2 Fish and sharp stick”
Gor: “Bong ask one fish and one stick!”
Thag: “Bong Neanderthal . Rock with hole, roll. Make work easy. But today lucky day, give, one Fish, one sharp stick and club.”
Gor: “OK, deal.”
Thag: “Deal. Now give club, me need go find Bong, hit in head… 1 fish and 1 stick, who he think he is?”
In 1990 I started selling real estate for a new home builder in Northern California. I had many customers from companies I‘d never heard of; new companies called Sun Microsystems, Adobe and Oracle. Apple I’d heard of but those people weren’t buying where I was selling; I was selling to young employees of the “start ups”… The thing was, I was the new kid on the block then. Having only just become licensed, I didn’t experience the market boom of 1988-89. Someone would come in and I’d hop right up and hand them a brochure; ask if they’d like me to show them around and I was always very proud of this line; ask them, “Are you a home owner form the area”? To this they would either say yes; or we own a home but not around here, or no, we’re renting… Ding, ding, ding… alarms went off and I knew I had a “live” one. By contrast the guys I was selling with – and they were almost all men back then – would sit at their desks, reading the newspaper, smoking a cigarette; they did that in the office in those days, and when someone would walk in, they would say, without looking up from their paper, “The models are over there, grab a brochure and let me know if you’re interested”. They continued to do this until they went broke and went into home appliances or mortgage lending or cars. Was the reason for their failure a bad market or perhaps their lack of effort, or maybe failure to adapt? Obviously the bad market was a big part of it, but the main reason was their failure to adapt; to recalibrate their approach and recognize that the old way of doing business no longer cut it. As a newbie, I didn’t know any better; heck if I sold a house I was over the moon. I wasn’t used to selling out 20 homes on lottery, with people lining up to buy.
Just as the American Auto Industry has been forced to make fuel efficient, technologically advanced, safe and reliable cars, Realtors today have had to become expert in everything from staging and decorating homes, to human psychology and counseling, aiding and assisting people on the verge of financial ruin. Who knew 8 years ago that there would be such things as distressed property specialists?
I just had a short sale deal fall apart after bank approval because the other Realtor failed to properly educate their client. They failed to tell their buyer that the bank that was forgiving the debt by agreeing to allow the property to be sold “short”, was not going to agree to do any repairs. You can imagine my disappointment and frustration when, after inspection, the buyer wanted things repaired. The bank even accepted their ridiculous repair estimates and I was able to get an additional $35K off the price, but the buyer wanted the repairs done, not the lower price. Aaaargh! How dumb does that Realtor feel now? They went from having a deal about ready to close, to uh.., nuthin’. The Realtor had failed to adapt to the conditions we find ourselves in, didn’t properly educate their client and they lost the sale.
Adapt or die. I don’t remember who said that but it sure is true. So what’s next? Most Realtors, those who are still around anyway, have reeducated themselves to this tough market; grinding sellers down off their price 10% or more in some cases. But can they sit by now and expect the market to remain this way forever? The answer is no, and they’ll need to retool themselves again if they want to keep up.
The British rock band Keane, wrote a beautiful song a few years ago with a chorus that went, “Everyone’s changing and I don’t feel the same”; it’s a great song by the way, in case you haven’t heard it, but the message resonates with me because it serves as a reminder that nothing stays the same forever, even though we might not feel the changes right away.
The housing market is changing as we speak. It’s shifting to a balanced market from a buyer’s market and my hope is that it stays that way a while and doesn’t just blow through that barrier and quickly become a seller’s market. The pendulum always swings too far to one sided and then the next. It seems there’s never Goldilocks’ middle porridge that’s “just right”, it’s either too hot or too cold.
The Existing Home Sales numbers came out yesterday in line with Wall Street estimates… thank heavens, because I wasn’t worried that the numbers would be more bad news, on the contrary, I worried that it would be too much good news and the bond market, which dictates residential home loan interest rates would tank, causing rates to rise significantly. For you doubters and fence sitters, just wait until the pending homes sales data comes out towards the end of the month and then hold on tight. Like in the recent hit movie “Hugo”, this rocket’s going to the moon. By the way, rates are up about a quarter point, just in the last week, so interest rates are already changing. You can always count on Bond Traders to show the way of things to come…usually anyway.
As for us Realtors who want to be doing this into the next cycle and the one after that, adapt or die; that’s the battle cry. We better get ready by watching and listening and be prepared to retool again, because the numbers don’t lie and the numbers suggest the market has shifted. We’ll need to reeducate our buyers, because if we don’t, they will miss out on homes by offering too low, and Realtors will be left wondering what’s going on and why we’re not getting paid. Then we’ll make our way to Sears to sell refrigerators… that is if Sears still sells refrigerators.
Bong: “Thag, what want?”
Thag: “Why you offer sell Gor, wheel so cheap”
Bong: “Wheel old, take too much space in cave, wife complain. Me now sell fire, want see?”.