By Dave Robison
How many times have your clients or friends asked you about your crystal ball? My clients ask me all the time. It’s almost daily you hear, “If I buy this house, how much do you think it will appreciate in the next 2 years, or 5 years?” or “How much more money will I make on my house if I wait a year to sell it?” Practitioners need a new core course to renew our licenses titled, “Gypsy 101,” or “Palm Reading 201.” Or you can just read this blog entry and you can become pretty good at being psychic. There are two parts in being psychic right now to know what is happening with the market: know how to price listings, and to know what to tell your clients.
First, you must follow the rules. In 2006 when the market was booming in Utah, there were numerous people that came to me and asked, “Should I buy this home? All I have to do is use my credit and flip it the next day.”
Many of you now are thinking, that’s common sense. But then it wasn’t. It was very enticing, someone’s friend just made $100,000 doing one flip supposedly. I asked 2 questions.
First, are you buying a home in a majority owner-occupied neighborhood? Second, are you buying at the median price range? I had two different investors buying above the median price range in a neighborhood where all were investors doing build jobs hoping to flip it.
After reviewing the rules, one backed out and lost his earnest money. The other said he was going to back out but a year later I got a call, “Remember that home you told me not to buy? Well, I bought it.” We had to short sale it. Whenever you break the rules you know your client is at HIGH RISK! You can predict what is going to happen.
The next rule to remember is that the numbers tell a story. In 2007 and 2008, we have recorded numerous homes that sold for up to $100,000 more than the exact same home in the neighborhood that was for sale the same time. Other agents weren’t following the numbers.
In many cases we showed a supply of 100 homes on the market with only seven homes selling a month. That is a 14 month supply of homes on the market. That only means one thing, prices are going to come down.
We priced our homes lower than what they were worth because we knew prices were coming down and we didn’t want to play catch up. Our listings sold, and the other homes sold up to $100k less than ours. On our Web site we created a crystal ball that tells us in any zip code and price range what the numbers story is for that area.
One of the two most important attributes of a true leader is their ability to predict. Get to know the rules and start following the numbers and you will be able to help answer questions for your clients.
One last tip of a predictor. If you go to quantcast.com you can view the statistics of Web traffic for your most trafficked real estate Web site. In our area Utahrealestate.com is the most trafficked Web site. It shows that people looking online for a home is still decreasing. This tells me that home sales aren’t going to pick up until that number picks up.
If you go to Realtor.com you can see January of 2009 was the lowest level of people surfing online looking for a home. It looks like that might have been the bottom for realtor.com.
Remember though, its best to look at things in a neighborhood at a micro level as all real estate is local. Good luck looking into your crystal balls!
Dave Robison, known as “Utah Dave,” is a broker of Robison & Company Real Estate.