The current real estate market remains unsettled with buyer and seller perceptions often at odds with each other.
Last year we saw sales in the luxury market decline to their lowest levels in the last four years. This wasn’t due to lack of demand. Low inventory levels, but more specifically a lack of the types of properties buyers were looking for, combined with economic and interest rate concerns caused buyers and sellers to hesitate.
Today, we are dealing with an economy moving in the right direction as well as increasing inventory levels (although availability varies considerably by market). However, many buyers still have “sticker shock” because overall prices have remained consistent. And for properties that check “all the right boxes,” there are even competing offers!
Couple this with contradictory media rhetoric and it’s easy to appreciate the conflicted mindset of sellers and buyers. We aim to provide some insights into how you should be setting your clients’ expectations in the current market:
SETTING SELLER EXPECTATIONS
Market Analysis and Pricing:
Never has it been more important to provide a truly comprehensive market analysis. Do not rely on the one you can pull from your MLS. Instead, build a report that deep-dives into the details of recent comparable sold homes and be ready to showcase the similarities and differences.
It’s important that your seller understands the sold price difference – many would-be sellers know the list price but will be ignorant of the actual details of the final negotiation! Luxury homes are, for the most part, unique, which can be a blessing and a curse, so it’s important to explain why these nuances need to be considered in line with buyer current trends.
Marketing Strategy, Potential Challenges, and Flexibility:
Outline your marketing strategy and how you plan to showcase the property to attract potential buyers by taking advantage of current trends. Discuss the importance of professional photography, staging, niche marketing, and online presence.
Be transparent about potential challenges that may arise during the selling process, such as market fluctuations, property condition issues, or financing obstacles. Encourage sellers to be flexible and open to feedback and adjustments throughout the selling process. Emphasize the importance of adapting strategies based on market feedback and buyer interest.
Communication, Negotiation, and Legal Obligations:
We all know how important communication is, but one of the biggest mistakes agents make is believing that luxury sellers (even though these are highly successful people) know what’s involved! Not only is it important to establish clear communication channels and set expectations for regular updates, but you need to do this on your seller’s terms. Determine how they want to hear from you – email, text, phone call?
Educate your sellers about the negotiation process. This will help them be ready and available to appreciate their options and potential outcomes of different negotiation scenarios. It’s not always about price. Many areas such as renovations, financing, contingencies, and closing dates are all part of the negotiation process. Explain the legal and contractual obligations involved in selling a property, including disclosure requirements, inspections, and closing procedures.
SETTING BUYER EXPECTATIONS
Purchasing Power, Requirements, and Market Conditions:
Even the affluent have an expectation of the amount they wish to spend, but remember that budget is not always the most important consideration when it comes to securing the right home. Educate buyers about current market conditions, especially about inventory levels, competition, and pricing trends. Set realistic expectations about the availability of properties that meet their criteria.
Like sellers, a detailed market analysis of homes currently listed showcasing the similarities and differences can really make a difference in setting their expectations as well as enhancing your knowledge.
Property Searches, Conditions, and Timelines
Luxury properties are unique and the more specific your buyer’s requirements, the longer that search is likely to take. While you can advise your client to be patient and open minded, you can also appease their frustration by being pro-active and contacting homeowners whose properties are not currently on the market. You never know!
If inventory levels are low, discuss the possibility of finding the perfect “move-in-ready” home versus one that may need some updates or renovations. Be pro-active in offering assistance with trades people or making the update a contingency of sale.
It’s important to manage their expectations on the timeline. Whether it’s how long it will take to find their perfect move-in-ready home, complete the required renovations, or what will be the expected selling process timeframe.
Negotiation, Contingencies, and Closing Costs
Help your buyers to appreciate market value and other factors that can influence negotiation outcomes. Prepare them to understand the process and how current market conditions can impact the success of their counteroffers.
You should explain both the importance of including appropriate contingencies in purchase offers, and what their rights and responsibilities are during the contingency period.
Inform buyers about potential closing costs, including lender fees, title insurance, taxes, and escrow expenses. Provide estimates and explain how these costs factor into their overall budget.
By setting clear expectations and providing guidance throughout the home buying and selling process, you can help your clients make informed decisions and navigate the complexities of the luxury real estate market. You will help your clients feel confident and informed, leading to a smoother transaction and greater satisfaction with the outcome. More importantly it will build trust in your expertise.
Stay Ahead with The Institute
Are you looking for more guidance on how to grow your luxury real estate practice and develop your skills when working with the affluent? You can learn more about the Institute’s training options here.
Becoming a Member of The Institute is a valuable investment in your future success as a luxury real estate professional. Learn how to succeed in the luxury market through training, certification, advanced learning experiences, and connecting to a network of successful real estate professionals throughout the United States and Canada.
Our Certified Luxury Home Marketing Specialist™ (CLHMS™) designation is recognized throughout the globe. Take advantage of the training offered and the information you’ll receive through The Institute’s Local Luxury Market Reports, published monthly only for Members.