Most real estate agents are taught to prospect their personal sphere, neighborhoods and renters-becoming-first-time-buyers, but do classic “textbook” strategies still work in today’s market? Time to look beyond.
What happens when the market is moving but buyers aren’t coming from traditional segments? Real estate professionals need to know. Contrary to popular belief, there are sales happening – and perhaps more could be – if agents go beyond traditional prospecting. In “normalized” markets it might make sense to target classic sources of leads – past clients and referrals – but even then markets fewer than 1 in 5 agents generate much business from these sources. It’s not surprising that they might yield even fewer leads during a downturn.
The problem with classic prospecting isn’t the methods, but the targets. If you’re looking for traditional buyers and sellers in a non-traditional market, well, good luck with that. Even if “mom and pop” could sell their current home, securing financing going forward isn’t easier in the lengthening recession. What about historically low mortgage rates? Aren’t such buyers in a good position to “move up” and take advantage of record low home prices?
Traditional consumers are much smarter than the media, government and the segment of the real estate industry that’s been urging them to move today! take on new debt! refinance! and so on. They understand that recessions recover through savings, not consumption. Savings fuels stability and investment in job-creating industries. Positive cash flows for households and companies alike stabilize, then energize, recoveries. Not new consumption on credit, no matter how cheap.
That’s why today’s real estate buyers are mostly using cash.
Deleveraging can exist with growth, but it won’t come from traditional “main street” buyers that most real estate are taught to farm. First, a little data from a Housingwire news story:
Cash was the top source of financing home purchases in September, as more homeowners look to deleverage their debt. According to a recent Campbell/Inside Mortgage Finance survey, 30.5% of home purchases during the month were financed with cash, up from 24.4% in January. The survey attributed this jump to the amount of distressed properties on the market being purchased and a decrease in the number of first-time homebuyers.
There was a time when the first-time buyer was king, especially when Helicopter Ben was dropping tax credits from the sky. But those days are over, and first time buyers accounted for just under a third of the market, says the Cleveland Fed.
As the old adage says, follow the money.
It looks like the clean-up phase of the real estate downturn is entering full swing. This means investors start moving in and snatching up super-distressed properties to hold, flip or rent. That’s what investors do, not buyers, in the classic real estate sense.
Yet investor-targeting isn’t normally taught in real estate sales courses, nor would most office managers know where to begin to advise their agents to find them. For starters, here are a few suggestions (also not taught in most agent sales courses):
- A recent search for “real estate investors” in LinkedIn Groups yielded 1,135 groups, some with as many as 15,000 members.
- Check Listorious for “real estate investor” lists and start following some movers and shakers in the investment world, like Donald Trump’s tweets (@realdonaldtrump)
- Connect with a chapter of the National Real Estate Investors Association (didn’t know there was one?) who could introduce you to one of its 40,000+ members.
One more thing: Put away your scripts and e-templates. This group is way too savvy for such kids stuff. Don’t expect them to desire classic real estate services either: everything from what you do to what you charge for it will be on the table. Investors don’t just rewrite the housing markets, they rewrite the way housing markets are bought and sold. If you’re flexible enough – to change your prospecting targets and your sales approach – you could still get in on what’s going to be a fast-cash cleanup of a lot of local markets.