Adapt or Die! It is truly that simple. I have been writing here for months now about how challenging the current real estate market has become and just yesterday after a lengthy and intelligent conversation with my friend and fellow blogger, Noah Rosenblatt of UrbanDigs, it dawned on both of us that those who are fighting against market forces whether agents, sellers, or even buyers are experiencing significantly more challenges than those who are adapting to current market conditions. I have noticed in my own business that since I have accepted that I am no longer an order-taker as I often was in the past decade, but more of a mediator, I’m experiencing fewer "challenges."
Relative to the last decade, there is no denying that we are in a new era of real estate sales, marketing and negotiation. Having said that, we’re not in completely uncharted waters here. Most recently, the market of the late 80’s and early 90’s presented a similar set of challenges where inventory and time on market rose and buyers and sales prices descended. Again, I’m not trying at all to downplay the severity of what is going on locally on Wall Street, the nation, or the world. In many ways, we just can’t compare this time to the late 80’s/early 90’s. But in some ways we can and having sold Manhattan real estate since 1992, here is my personal experience with both from the perspective of buyer’s, seller’s and agents:
Buyers: Trying to guess the bottom of the market? Good luck. There will absolutely be a small percentage of you who successfully buy at the bottom. There always are and there were those who "stole" apartments back in the early 90’s (mind you I remember people saying to me that they would never pay $500K for a Classic 6). That said, determine your wants, needs, and time line for home ownership. Do you have to move? Do you want to move to a larger space? To a new neighborhood? How long do you plan to reside in this new home? Calculate what you can reasonably afford and take advantage of increased inventory with the understanding that only a small percentage of sellers are going to entertain ultra low offers. It is just psychologically too painful for most to sell at a loss and although some may indeed be in that situation, you will find that most will chase prices down before selling at a large discount up front or they simply won’t sell. Remember that your home is not a liquid asset but a place to hang your hat, perhaps raise a family, and prevent more shelter from the elements than a cardboard box. No one is going to talk you into moving…the market is what it is and if you want to move, you’ll move. If not, stay put.
Sellers: Determine your motivation. If you don’t have to or want to move anytime in the next few years then don’t. These markets are not the time to "test the waters" because buyers are leery and fearful of catching a falling knife. My experience has been that in order to sell in a market that is perceived to be declining, you must price ahead of the downward curve in order to give a buyer the perception of value. Fight this buyer psychology and you lose money…I promise. (Example: seller received bid last Spring for $1.85M on an ask of $1.995M and said "no way, we will wait for our asking price"…that same apartment is now receiving bids in the $1.2M range). Also be mindful that if you are trading up or across a market for larger space or change of location, you may actually benefit from a declining market. Find a real estate agent whom you trust with a proven track record and follow their lead.
Agents: Don’t compromise your integrity or be short-sighted by focusing on a single transaction. If we treat our clients like family who may sometimes need some ‘tough love" then we are doing them a greater service than simply promising them the world when we aren’t at all certain we can deliver. Do your homework and cooperate with your colleagues so that you have the best information to provide your sellers and prospective buyers. We all need to cooperate and share contract prices on things that haven’t closed or making sense of this market will remain a difficult task indeed. Buyers and sellers alike look to us to help them make sense of a very confusing marketplace and it is in their best interest to have us accurately analyze and interpret CURRENT housing data in a way that helps them make an informed decision, even if that decision is not to buy or sell.
So what I’m saying here is that once the parties involved (buyers/sellers/agents) accept the new market dynamics and embrace reality, the market will no longer seem so challenging but more like a normal housing market where offers are made, negotiations take place, and homes change ownership. We’re not there yet but the path doesn’t have to be such a complicated one.
Acceptance is the key!