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Embrace the Heat: Setting Client Expectations in Hot Markets
July 22, 2021

Embrace the Heat: Setting Client Expectations in Hot Markets

by The CE Shop Team

Buyers and Sellers Alike Are in for a One-of-a-Kind Housing Market

Homeownership can be an emotionally taxing process in the best of times, never mind in the wake of a global pandemic, COVID-19 recession, and period of record-low mortgage interest rates. Luckily, stellar real estate agents are here to save the day, imparting knowledge and wisdom to buyers and sellers alike.

Suffice to say, setting expectations is critical in today’s crazy-hot real estate market, regardless of client type. By prioritizing foundational knowledge, championing a strategic approach, and staying positive, you can successfully support your buyers and sellers in the best of times and the worst of times.

How to Set Expectations for Buyers

It’s no secret that it’s a seller’s market, so you’ll want to mentally prepare buyers for the potential struggles ahead. As soon as you and the client commit to a working relationship, get to work explaining the current climate. Be sure to back up any claims with hard data or personal anecdotes, and always maintain a positive, can-do tone. After all, clients will rely on your expertise and tenacity, particularly in this whirlwind market.

When working with buyers, follow a few simple steps to set realistic expectations: 

Build Their Knowledge

When it comes to homebuying, knowledge is power! Set your clients up for success with local market insights, average prices, comparable neighborhoods to explore, and any other relevant stats.

For example, Denver, Colorado, is one of 2021’s hottest real estate markets. Instead of battling hordes of fellow buyers in Denver, could clients explore nearby Wheat Ridge, Arvada, or Brighton? Or perhaps sales in their neighborhood of choice historically drop after the hot summer homebuying season and simply waiting a few months could get them into their dream home. Regardless of your market, providing clients with a good foundational knowledge of the current climate and trends can help temper expectations and avoid any surprises once the home search really begins. 

Help Craft a Compelling Offer

In today’s highly competitive market, a client’s offer is everything. Sit down with clients to hash out any distinguishing factors that they can leverage, such as pre-approval, cash-on-hand, or a waived home inspection. Some buyers have even found success by including a note from their dog or child, though The National Association of REALTORS® (NAR) recommends agents decline to partake in any “love letters” to avoid any potential Fair Housing violations.

In the same vein, explain to buyers that they may need to make multiple offers. In February 2021, the average home received four offers, up from two-to-three offers the previous year. Of course, only one of those offers will win the home. To avoid potential heartbreak, convey that clients shouldn’t focus on any one offer but instead understand their unique value proposition and develop a process for crafting compelling offers time and time again. 

Prep Clients for a Bidding War

Unfortunately, many agents and their clients will find themselves embroiled in a bidding war this year. Dan Johnson is an aspiring homebuyer who has viewed more than 40 houses throughout his home search, many of which received more than 10 offers and sold in a matter of days. "You show up at an open house, and they're like, we already have an offer. You've got to beat it basically," Johnson told NPR. 

While you might be used to this kind of pressure, clients may balk at the concept of direct competition, particularly when the emotional dream of homeownership is on the line. Discuss the bidding war process, escalation clauses, and any applicable price cap well before the need ever arises. Then you may also want to talk about stress management strategies, as homebuying in this market is undeniably emotional. “I meditate a lot, practicing non-attachment," said Johnson about staying cool during his home search.

Boost Morale

The sad fact of the current market is that many buyers may not get into the first home with which they fall in love. While you may feel confident that the right property is still out there, clients might feel like their dream home just slipped away. With emotional aspects like personal finances, the American Dream, and even a school or neighborhood of choice for their children all wrapped up in the process as well, clients are likely to get at least a little bit discouraged at some point in the process. Depending on the situation, some buyers may need to temporarily put off buying entirely.

As an agent, it’s your job to bring positivity to the situation and, as applicable, encourage buyers to keep going. While they might not get the house that they initially wanted, the real estate market is constantly changing. More homes are steadily hitting the market, with 20% more listings year over year in the nation’s 10 markets with the highest inventory. Remind clients that the right home is out there and, once they find it, their offer will shine.

How to Set Expectations for Sellers

Embrace the Heat: Setting Client Expectations in Hot Markets

As it is a sellers’ market, the outlook for these clients is a bit brighter. Their largest obstacle will likely be managing a multitude of offers and lining up their next place of living as homes are selling like hotcakes.

To set realistic expectations for sellers, follow a few simple steps: 

Determine What’s Important

Sellers will likely be juggling offers in the double digits and can quickly get overwhelmed. Advise your clients to expect dozens of eager buyers and their agents, and help them prepare by determining just what they’re looking for.

Some sellers are after the highest offer, while others won’t settle for anything less than cash. Still, some are more sentimental and would like to sell to a family or other bidder that tugs at their heartstrings. Buyers are even offering waived inspections to generate record-fast closings, so prepping your clients for this whirlwind market is critical. Each and every seller is different, but when the offers undoubtedly start pouring in, it can be overwhelming to determine what they want after the fact.

Help Set Parameters

In the same vein, it can be helpful to set parameters that automatically weed out certain offers. For example, are the sellers unwilling to go below a certain amount? Or maybe they only want to work with those whose offer doesn’t rely on selling another home. Narrowing the scope of offers in any way possible can help make the process less overwhelming in this highly competitive market.

Plan an Exit Strategy

Have the sellers given much thought to where they will go upon selling? Remind them that it could be difficult to turn around and experience this market as a buyer. Some sellers might plan on renting for a time, or they may even have a second property to which they can relocate, but the thrill of a hot market can sometimes mask the inconvenience of storing furniture, coordinating a move, and otherwise uprooting their life.

Regardless of their situation, ensure your clients have given the transition some thought. Timing a back-to-back move is often difficult in the best of circumstances, let alone in a fast-paced, low-inventory market.

Expectations Are Everything

Whether you’re working with buyers, sellers, or both, this market is nothing short of cutthroat. With offers $1 million over asking price, stranded sellers, and record-high home prices, realistic expectations can make or break a streamlined transaction. In this truly wild housing market, buyers and sellers alike are relying on your expertise. 

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