How Do You Educate Clients About Real Estate Market Realities?
Navigating the complexities of the real estate market can often leave clients feeling overwhelmed and uncertain. In this article, a Business Development Manager and a Founder share their firsthand experiences of educating clients about market realities. From refocusing on budget-friendly properties to broadening search criteria, the insights from ten experts offer a comprehensive look at client decision-making. Discover the strategies used by these professionals to help clients make informed choices in an ever-changing market.
- Refocus on Budget-Friendly Properties
- Use Market Data for Competitive Offers
- Advise Against Retail Space Investment
- Adjust Price for Home Condition
- Guide Through Zoning and Permits
- Submit Competitive Offers
- Educate on Market Realities
- Monitor Foot Traffic for Pricing
- Adjust Price Based on Market Data
- Broaden Search Criteria
Refocus on Budget-Friendly Properties
It's pretty common for clients to come into the real estate market with high expectations that don't always line up with reality. For instance, I had a client who wanted to buy a property in a high-demand area, expecting to negotiate a significant discount. They had heard stories of others getting great deals and thought the same would apply. I had to explain that the current market was highly competitive, with multiple offers driving prices up. We discussed recent trends, comps in the area, and why sellers had more leverage at the time. Helping them understand this context allowed us to refocus on properties within their budget that still met their core needs, without unrealistic expectations of drastic price cuts.
My approach in these situations is to find a win-win. I want clients to feel informed and confident in their decisions, even if it means adjusting their initial vision. This way, they aren't just reacting to market conditions but actively making choices that work within them. By the end, my client had a more realistic view of the market and felt prepared to make a competitive offer. They ended up with a home they loved and were grateful for the upfront, honest discussions that helped shape their expectations.
Use Market Data for Competitive Offers
One example that comes to mind is while working with a first-time homebuyer in a competitive market, who initially wanted to submit offers to purchase far below the home's asking list price, assuming that it would still leave an opportunity for negotiation. I took the time to educate them on the realities of low inventory and high demand, sharing market data to illustrate why competitive offers were the key to winning bids. We also discussed strategically using contingencies, such as utilizing various times to complete inspections to make their offer stand out while still protecting their interests. For instance, I introduced them to a trusted home inspector who could conduct a pre-inspection, allowing us to submit a cleaner offer. By balancing their need for due diligence with market-savvy strategies, they were able to secure the home they loved. Seeing their understanding grow and their confidence in the process was incredibly rewarding—it's what makes this work so fulfilling!
Advise Against Retail Space Investment
In the commercial real estate world, understanding market trends is essential. I once worked with a manufacturing client who wanted to invest in a large retail space. Given the rise of e-commerce, I advised against it and suggested industrial spaces, such as warehouses, would be more lucrative. This insight changed their investment decision, and they eventually purchased a warehouse, which has increased in value by 22% since.
Another example involves a tech company looking to lease an office in a less-developed area, thinking costs would be lower. I explained that while initial costs might be economical, future growth and infrastructure developments often lead to increased property value and desirability. We found them an office space near a planned subway line, and as expected, the property's value appreciated once the transportation link was completed, benefiting their long-term leasing strategy. During my career in commercial real estate, I've often had to bridge the gap between client expectations and market realities. One memorable instance involved Rick and Monica P. from KGEL Steel Inc., who were looking to expand their operations with a new warehouse in Riverside. They needed the space but were restricted by a tight budget. Despite their initial thoughts on what they might afford, I helped them understand how leveraging local market data and my network could pinpoint an optimal location within their financial parameters. We successfully found a property that not only matched their needs but also provided room for future growth.
Another case was with Blaine from Living Water Hospice. He was initially focused solely on leasing a new space. After discussing the local market dynamics and highlighting potential tax benefits and long-term gains, I demonstrated the advantage of purchasing a property with extra leasable spaces. This strategy allowed him to secure additional revenue streams, which significantly impacted his decision-making process. These examples illustrate the importance of aligning client ambitions with practical, market-driven strategies.
Adjust Price for Home Condition
A client once wanted to list their dated, non-functional home at a price comparable to fully-updated properties in the area. I had to explain how the current market conditions, including competition from move-in-ready homes, would affect pricing and time on the market. We reviewed comparable sales and discussed the likelihood of a longer listing period and lower offers if we stuck with their original price. After our discussion, they agreed to adjust the price to reflect the home's condition, which helped us attract the right buyers and close the deal more efficiently.
Guide Through Zoning and Permits
In my role at RG ProBuilders, I often guide clients through the complexities of zoning and permit processes, which can be eye-opening experiences. One notable case involved a client in Portland who dreamed of turning part of their property into a rental unit via an ADU. They had grand plans but underestimated the impact of local zoning laws. I walked them through the constraints and realities, including property-size limitations and utility easements, which altered their project's scope significantly.
Another time, a client in Vancouver wanted to convert their detached garage into a luxury guesthouse. They were unaware of setback requirements and the potential need for zoning variances. We examined local regulations, conducted a feasibility study, and recalibrated their expectations, ultimately leading to a beautifully designed ADU compliant with local codes. These experiences underscore the importance of understanding market realities, which can prevent costly missteps and refine the client's vision to align with actual possibilities.
Submit Competitive Offers
One buyer we were helping was looking in a sub-market that was very hot at the time. Many listings were receiving multiple offers. We advised the client that only the most-aggressive offers were winning out. After losing out on many prior offers, we came across one competitively-priced listing that our clients were particularly interested in. Many people attended the open house, and the listing agent indicated it would be a multiple-offer situation and to submit highest and best right from the start. We advised the client to consider how well the house fits their target characteristics, and to consider how it compares to what else we were finding available in the market. The client was very interested and decided to submit as competitive an offer as they could justify. We offered $50K above list price, but in the end, we still lost out to a higher offer. Despite this setback, we were able to eventually help the client find and purchase a home that fit their needs.
Educate on Market Realities
I have encountered multiple instances where I had to educate clients about the realities of the market and how it could impact their decision-making. One particular experience stands out in my mind.
I was working with a couple who were looking to purchase their first home. They had saved up for years and were excited to finally enter the real estate market. However, they had certain expectations about what they could afford and the type of house they wanted. As their agent, it was my responsibility to guide them through the process and help them make informed decisions.
As we began our search, I quickly realized that the current housing market was highly competitive and prices were on the rise. Despite their budget constraints, my clients had set their hearts on a specific neighborhood with high-end homes. I knew it would be difficult for them to find a property within their budget in that area.
I sat down with them and explained the realities of the market—how supply and demand were driving prices up, and how their desired location was in high demand. I showed them data and statistics to support my claims and helped them understand the current trends in the real estate market.
At first, they were hesitant to adjust their expectations or increase their budget. However, I continued to educate them about the market and the potential risks of overstretching their finances. Eventually, they understood the need for flexibility in their search and were willing to consider other areas and options.
In the end, we found a beautiful home for them in a neighboring area that met their needs and fell within their budget. They were initially disappointed about not being able to live in their dream location, but I reminded them of the potential financial strain it could have caused. They were grateful for my guidance and appreciated the fact that I had their best interests at heart.
Monitor Foot Traffic for Pricing
On January 20th every year, we give our clients a reality of the marketplace. Echo Fine Properties is based in South Florida. Most offers from snowbirds and renters looking to purchase take place between mid-February and the end of April. The reason why January 20th is so critical is that it's a gauge of foot traffic. Foot traffic pre-offers is a leading indicator of what type of season we are going to have. If the traffic isn't there, then we have heart-to-heart talks about pricing. The first set of buyers go home at the end of March, which is only 9 weeks away from January 20th. Therefore, if we have sellers who are in a need-sell situation or don't want to carry it over the summer/fall, we push to get ahead of the marketplace. Most sellers wait until March first to make price reductions, but they all do so en masse. Therefore, if a client is priced at $600,000 and should be at $550,000, I'd rather make the move on January 20th and get ahead of everyone else and get it sold in February. If we wait, the problem is that we don't stick out anymore and in a way are priced right back where we started.
Jeff Lichtenstein, originally from Chicago, got his start in the home furnishings textile business, where he traveled over 35 weeks a year selling fabrics. After the family business was sold, Jeff moved to Florida and became a real estate agent. Today, he is the owner and broker of Echo Fine Properties, a luxury residential brokerage based in Palm Beach Gardens, Florida, voted best brokerage of the year. Jeff manages a non-traditional model of real estate that mimics a traditional business model. Echo has 100 agents, an average of one million dollars per transaction, and over 500 million in annual sales. Between traveling for work and annual family trips to national parks with his wife and two now-adult children, Jeff has visited 49 states. He is also one of the few Chicago White Sox fans you'll ever meet. Some publications he has been quoted in are below.
Author of business & leadership book "How Making a Sandwich Can Change Your World - The Amazing Success of the PB&J Strategy."
https://www.echofineproperties.com/press/
https://www.pbjstrategy.com/
Adjust Price Based on Market Data
What I've learned from working with property owners and investors is that educating clients about market realities is crucial to ensuring they make informed, confident decisions. One example that comes to mind involved a property owner in London, Ontario, who was considering selling a multi-family rental property. They had a strong affinity for the property and believed the market would support a much higher sales price than they could then obtain.
From what I can tell from the market data, I said, recent trends in the local market showed a small decline in prices, especially for older rental properties needing a lot of updating.
I showed them comparable sales in the neighborhood and explained that their property, although well-maintained, couldn't command the same price as newer or upgraded buildings. I also said that more people are now choosing to rent newly built or recently updated properties.
I also took a moment to explain to the client the risks of overpricing, including the chance that the property might take longer to sell or that prices would have to be reduced later, possibly signaling to buyers that the property was less desirable. We talked about striking a balance between asking a high price and having the property sell in a reasonable time since holding costs like property taxes and maintenance were adding up each month.
After this talk, the client decided to adjust their price to what is going on in the market today. They put the property on the market for a good price, and it helped bring in interested parties sooner. The property eventually sold for a fair price, and the client was satisfied with the outcome. That was an experience that showed how important open and honest communication with clients is. The more one can teach them about the market, the more everyone is on the same page, enabling clients to make decisions based on facts and data rather than guesses or feelings.
Broaden Search Criteria
I recall working with a young couple, first-time homebuyers, who were eager to purchase a spacious house in an upscale neighborhood—far beyond their budget. Despite showing them several affordable options, they remained fixated on the expensive property.
I took the opportunity to explain how market trends and demand impact property prices. By sharing data and statistics from recent years, I illustrated how increased demand had driven up prices in that particular area. I also educated them on the principles of supply and demand, highlighting how limited availability could inflate costs. Additionally, I pointed out that choosing a more affordable home could allow them to save for future investments or upgrades.
Initially, they were disappointed and skeptical. However, after conducting further research and consulting with other professionals, they gained a better understanding of the market realities and decided to broaden their search criteria.
