Illinois REALTOR® Magazine | January 2014
By Theresa Grimaldi Olsen
The momentum for economic recovery and a stronger housing market are gaining speed. That means REALTORS® are challenged to help buyers and sellers respond to an economy in transition and stand out from the competition.
REALTOR® Jeff Gregory, managing broker-owner of Realty Executives in Plainfield, likens today’s real estate market to Columbus discovering America. The market is evolving into a new normal to be navigated with care. The path is uncertain. Yet, Gregory is optimistic he will find a new and improved base.
“Clients are reading about the economy improving, and they are getting a bit overzealous in their expectations,” Gregory says.
Sellers want to see their property bring a lot more than has been possible in recent years. Buyers want to find a deal and take advantage of low interest rates.
REALTOR® Sheryl Grider Whitehurst, managing brokertrainer with Traders Realty in Peoria, says the typical sales talk with clients doesn’t work in today’s market. “You must do your homework. Study the neighborhood. What is the current competition and how do you stack up against it?” says Grider Whitehurst, president of the Illinois Association of REALTORS® (IAR) in 2011.
As a REALTOR®, you are the expert, Gregory says. Statistical presentations for clients are essential to explain the changing market forces. “We need to be even more conscious of what the comparable data reflects,” Gregory says. “We have to give consistent and reliable advice.”
The trends are more regional than individual communities, but there is no doubt that REALTORS® today must know their community intimately to stand out, he said.
REALTOR® Kay Wirth, a broker with RE/MAX Unlimited Northwest in Crystal Lake, had a record sales year in 2013, with a 56 percent income increase over last year. That’s an achievement after coming through the worst five years in real estate ever, she says. Still today’s economy is one of the most difficult markets to deal with and pricing can be a challenge as lower inventory spurs a more competitive market, says Wirth, 2008 IAR President.
REALTOR® Scott Newman, broker-owner of Newman Realty in Chicago, says price is a perception of value and the REALTOR® guides the seller. “We don’t set the price. We suggest a list price,” he says. “The market decides the value.”
The unknown can be unnerving to sellers who want to see prices rise substantially to make up for year of stagnant or falling values, Newman says. That’s when clients need the knowledge of a REALTOR®.
“If my seller isn’t willing to listen to my pricing advice and accept the reality of the current market, the trick becomes proving you’re right without alienating your client,” he says. He takes the seller to look at other houses in their price range and the higher price point they want to list at so they can see what their competition would be.
Even with solid research and wisdom, segments of the market don’t always move together. Buyers and sellers can agree on a sale price, but appraisers and lenders also must concur.
Wirth says she had three sales fall apart last spring because the homes didn’t appraise at the same level as the buyer was willing to pay. In one case, she had a contract to sell a house for $227,000. The list price was $239,000. The appraiser said the house was worth $210,000. Weeks later, another broker sold the same house for $225,000 and the appraisal held up.
In Joliet, Gregory says many appraisals are coming up short and the price recovery isn’t consistent with appraisers. To combat the trend, he meets the appraiser at the home to see what the appraiser is looking for in properties. For instance, should a third bedroom add $20,000 to a list price? The appraiser may only place the value on the extra bedroom between $5,000 and $7,000.
Grider Whitehurst meets the appraiser at the home armed with her own comparisons. Getting appraisers who aren’t familiar the area is frustrating. The art of negotiation and compromise become essential when the appraisal doesn’t match the sale price, she says.
REALTORS® need to focus on the basics, Grider Whitehurst says. The condition of the home not only makes a difference in attracting a buyer, it also helps in the appraisal.
“When you put a house on the market, it becomes a product that competes in a region and a price range,” Grider Whitehurst says. “Do the home improvements that you have been putting off. Buyers are getting picky.”
Even banks have caught onto the advantages of a move-in ready home, she says. In the past, banks mostly sold a foreclosed home in “as is” condition. Now, banks are spending money to remodel prior to sale, she says.
A strong client relationship is a necessity in helping your buyers stand out in this transitional sellers’ market. It wasn’t that long ago when there were few interested buyers. Now, there are some areas throughout the state where buyers are bidding over the full asking price and still losing out.
“There are a lot of properties flying off the shelves in Chicago right now – literally overnight,” says Newman, of Newman Realty in Chicago. Sales to first-time homebuyers are especially competitive. When representing a buyer, “It’s not really about sales,” Newman says. “It’s about providing excellent customer service and guidance to help them understand the market and make good decisions.”
Newman says REALTORS® should set realistic expectations from the beginning. Go through the MLS listings together at your office to learn what they are looking for and ask a lot of questions.
“Become friends. Talk. It’s becoming more important than ever that REALTORS® take the time to build strong, and long-lasting relationships with their clients; we’re no longer just keepers of information, our clients expect us to have a deep understanding of their wants and needs and be able to make a customized plan to help them make it all happen,” he says.
Wirth says it is important to explain to buyers not only the real estate market trends but also the trends in financing, new regulations and other pitfalls. Short sales and foreclosures are still working through the system, but also have become more competitive even as banks are presenting counter offers, she says.
“You need to be able to communicate what’s happening,” Wirth says. “There’s a lot of misinformation out there.”
Prices are rising, but so are interest rates and every one-point increase in interest rates reduces the buyer’s purchasing power by 10 percent, Wirth says. She likes to provide visual aids to her clients explaining the competing forces such as how long a property has been on the market, the comparable properties and the property history.
To find the right property, sometimes buyers need to be directed to think outside the box and consider listings that may not seem to fit the buyer’s original description, Wirth says. Gregory’s market in the Plainfield-Joliet area is a competitive one for first-time homebuyers and he encourages them to be pre-approved by a lender. If there is a competitive offer, the buyer can show that all that is needed is an appraisal and title. That could be the competitive edge that would make a buyer stand out if there are multiple offers, he says.
It’s a REALTORS® obligation to be knowledgeable about the market area, but it is also important that they listen. “We have to be careful not to let our goals become their goals,” Gregory says. “I want people to be comfortable with their decisions.”
Theresa Grimaldi Olsen is a free-lance writer based in Springfield. She can be reached at email@example.com.
1. Prices are rising, but sellers need to be realistic when it comes to listing price
and what their market will bear. Show them comparable homes and move-up properties.
2. Appraisals are still coming in low in some areas. Meet the appraiser at the property armed with comparisons that reflect what is happening in your market.
3. Remind sellers that today’s buyers are picky and want properties
that are move-in ready. Even banks are remodeling distressed properties
to get them ready to sell.
1. Prepare your buyers for a more competitive market where multiple offers
and properties selling overlisting price are more common.
2. Properties are selling faster. Buyers should be pre-approved for financing
so they can move quickly.
3. Step up your customer service. Buyers look to you as a trusted expert in this changing