Monday, December 12, 2022 / by Dave Magua
The pandemic disrupted Miami residential real estate in extraordinary fashion, dramatically inflating prices and demand for housing and forever altering the way people think about work, education and lifestyle. At the peak of this unprecedented cycle, bidding wars erupted as soon as listings hit the market, to the spectacular benefit of sellers and agents like me.
But this cycle was never sustainable and has obviously come to a bumpy end. Data clearly shows that the great rush has been over for months, with today’s Miami buyer pool cutting a sharply different profile. Last year, they were making quick decisions; now, they are much less desperate and infinitely more discerning. Time and patience have taught them that they don’t need to be tied down to any particular location, and decision-making has become more difficult. Economic concerns about interest rates, jobs, the stock market and a looming recession that did not exist in 2020 and 2021 are also major factors. Today’s buyers also know they are very much in control now and are comfortable taking a “wait and see” attitude about prices.
Seller expectations, however, remain wildly distorted, with many of them demanding the same pricing that made their neighbors rich in 2021. This standoff between stubborn buyers and nostalgic sellers forms the backdrop of today’s stalled residential market. Since time travel hasn’t been invented yet, it’s up to us agents to convince our sellers to get realistic. While no strategy is perfect, here are five tips I’ve found to be useful.
1) COLD HARD FACTS: There’s no substitute for seeing data in plain black and white. When I contract with a new seller, I make a point to meet – in person – and clearly show them what comparative properties sold for then versus now, emphasizing the degree to which the market has changed. These can be difficult conversations, but they need to be had.
2) IT’S ALL RELATIVE: Once I’m done playing “bad cop” to make this point, it’s time to play “good cop” and deliver some positive news. This critical step involves showing my sellers pre-pandemic (2019, early 2020) pricing versus today, demonstrating how they might not make as much as they hoped last year but can still sell at an excellent price. By using this timeframe (and not the pandemic) as a point of reference, clients see they have an opportunity to make a profit and purchase their next homes at a relative discount.
3) NOTHING TO FEAR: Which leads me to my next point: concerns about reduced profits are not the only thing holding back hesitant sellers. Many of them confide to me that they’d be happy to sell in this shifted market but are worried about where they would move next if they wanted to stay in Miami, with inventory so low. This is when I show them the trends showing gradually increasing inventory as well as actual listings available now for purchase and rent in the neighborhoods and price ranges for them.
4) KNOW THE WHOLE MARKET: In a market like this, agents should expand their territory and get educated outside their comfort zones. If you specialize in a building, get to know the entire neighborhood; if you know the whole neighborhood, find an adjacent one to master. This will really help to find appropriate housing for your sellers. (See above point.)
5) EXPLAIN THE “SNOWBALL EFFECT”: I recently had a listing where my clients were dead-set at a particular price point and refused to budge for months. We received multiple offers within a reasonable range, but still no-go. I finally sat them down and explained that the last contract in their building had closed months ago and that legitimate offers like the ones they had received were in short supply. (In other words, the longer they waited, the lower the final selling price was likely to go.) Eventually, they reconsidered and sold for $75,000 more than the most recently-closed three-bedroom unit in their building, which gave them the “victory” they sought.
Convincing a seller that the wild party has ended is certainly no fun, but everyone involved will be better served with a helping of sober reality. And if nothing else works, you can always bribe your clients into selling. (Seriously! Sort of…whenever a client asks for discount or forfeiture of my commission, I counter them by offering to donate 10% of my earnings to a charity of their choice at closing. You’d be surprised how often this seals the deal!)
Written by Karen Matluck December 08, 2022