At our brokerage, entrepreneurs and self-starters know that anything is possible, and we can achieve more together as one. Last year was a trying one, but it taught us to stretch ourselves, our business brains and our mindsets to realize that there are many different ways to succeed. Sometimes stress-tests are healthy.
Let’s candidly talk about the top 11 challenges that Realtors face today and possibly over this year. There are many “expert” opinions today, most with a negative tone, but I’d like to approach this as a real estate professional.
1. No longer location, location, location
“Location, location, location” is becoming “connection, connection, connection.” Especially in the last year, consumer behavior and lifestyles have changed dramatically, and more people are buying homes with different wants and expectations.
For example, a home close to walking trails is more important than the convenience of being next to a shopping center because of online grocery delivery. We’re also seeing more people buying “Zoom homes,” or vacation homes in new undeveloped areas.
I’ll repeat the power of connections today because I think it’s imperative for real estate professionals to know that relationships are No. 1 in this business. Listen more to your clients, understand how their lifestyle is changing, and then provide professional guidance. Listen, then guide.
2. Low inventory (macro versus local views)
Low inventory issues aren’t going away anytime soon. But, this is an opportunity to stretch your business minds and to stretch your business.
We will also see a huge influx of foreign capital in the months to come. That means it’s time to connect with prospective international clients and create new relationships and new opportunities.
Don’t avoid this huge set of money flowing into our country. America is one of the most stable countries globally, with little unrest, low interest, stable oil prices, etc.
Home appraisals could become a legal nightmare. I recommend real estate professionals avoid this possible landmine and that you work with your branch manager on the latest disclosures and how you should educate your clients.
4. Rising rates
Watch for a couple of things here. First, a rebalance of inventory and rates is coming. And while we know the real estate industry is cyclical, rarely can we predict it. In the meantime, prepare your clients for rates to possibly hit 4 percent (which is still ridiculously low). Prepping is educating.
Secondly, and specifically for investors, remember that when interest rates rise, rental rates rise. Buy something that cash flows today, and you’ll be in great shape in the long run.
5. Affordable housing
New home construction costs are soaring due to increases in the price of housing material, such as lumber, concrete and copper — some of which have doubled or tripled in price over the past few months.
New home builders are forced to put buyers into a sort of “lottery” game, dashing the hopes of many who want to purchase new homes. Those buyers who lose out might rush to make other emotional decisions — which are often irrational — overpaying just to land an offer.
As discussed earlier, this raises red flags around appraisals, which could become a legal matter for the seller — and potentially for you as a real estate professional.
Equity loans and selling have helped push consumer wealth to record highs as housing is always a key part of Americans’ core assets.
We are part of a global economy, so watch global housing trends because they can be indicators of what will happen domestically. They also broaden your knowledge of international real estate.
For example, some cities in China are proactively cracking down on real estate speculation amid surging housing prices. People have so much money, and they don’t know where to put it other than third and fourth homes.
6. Commission compression
We might be nearing an end to the current real estate cycle over the next one to two years in which commissions will continue to feel downward pressure. As always, it’s our job as real estate professionals to show our value.
Through our business coaching at Realty ONE Group, we caution real estate professionals about being hyper-focused on just one lead source. Cast your net far and wide — like international and new local networking — and make investments into your business that’ll pay dividends in the long run.
Everyone’s always watching Zillow, especially now as it has transformed its core business from a lead gen business to a controlled ecosystem of real estate services with many verticals.
ShowingTime is the latest news, but local MLS’ are already exploring alternative programs. I encourage you to not fixate on any new news — there will always be more.
Zillow is not saying that it will replace the real estate agent. Change your mindset. The best thing you can do is harness knowledge and continue to demonstrate your value.
The National Association of Realtors predicts that in 2022, 6.44 million homes will be sold.
Although we’ve seen some rise in iBuyer transactions, we also know that sellers give up lots of equity in most of these. The message is this same to professional real estate agents: demonstrate value. Although saving money is important, the current homebuying generations value meaningful relationships even more.
Relationships are key, and Realtors have a unique opportunity to be intimately involved in every transaction.
10. Lack of professionalism
Right now, there’s an influx of people getting into real estate, and the vast majority have no training of any kind or, for some reason, have not taken advantage of the training available to them. Quite bluntly, they really don’t know what they’re doing.
Time is an ongoing challenge for listing agents who have to review 20-30 offers — or more — to help their sellers make the best choice. At the same time, buyer’s agents have to show a significant number of homes and submit many, many offers before one is accepted. Both agents are working three times as hard in almost every closing.
The opportunity, however, is in the connections you make today. The relationships you create today will pay dividends in the future. Remember that if everything is a priority, nothing is a priority, so I encourage agents to focus on what matters most. Open your mind to new ideas, and find time to experiment along the way because you are entrepreneurs, and entrepreneurs reach for the stars!
In summary, I think the next years of real estate will be about “non-obstacles.” Real estate agents have proven they don’t frustrate easily. It’s not about one deal that went awry or one listing lost. In this profession, we’ve proven we can be tried and tested if we treat it as a career with many market cycles to come. We know instead that creating one new relationship today will pay dividends in the future. It’s not time wasted, but rather time invested.
After all, connection, connection, connection is the new location, location, location, and trust is the new currency.