On Being a Real Estate Strategist
On Being a Real Estate Strategist
By: Suze Cumming
Strategy is best defined as: “Determining how we are going to win” where winning is getting the best outcome for your client. Winning doesn’t mean the other side loses, just that your side get their needs met first.
I’m racing across the Pacific Ocean this summer in the Vic-Maui international sailboat race. (link to Salient site. http://www.salientracingteam.com/). Our objectives are: finish safely, finish the race being great friends, podium - in that order so our strategy focusses on safety, preparedness and team building rather than strategies that are just about beating our competitors. While a first-place finish would be nice, if we didn’t meet the other objectives, it wouldn’t be a win.
What makes a win in real estate differs with each market and with each individual buyer and seller. Our job as agents is to determine what’s truly important to our client and then to build the best strategy to obtain that outcome. It’s something that a computer can’t do, at least not as well as we can, because it involves a deep understanding of the market conditions including the subtle nuances, the psychology of the people involved, careful timing and an ability to pivot when situations change.
I’m going to share two interesting strategic examples below but it’s important that you understand that being an effective strategist does not involve doing what other agents have done – it’s having the ability to see what opportunities exist in the moment and act on them to get a better outcome for your client. No two situations are ever the same so best solutions will differ but we can learn from examples and case studies.
#1 – Listing a property that is in high demand (seller’s market)
When a property is in high demand in a seller’s market, it’s going to sell. Toss it on MLS and the offers will come.
A smart strategy will sell it for more money and get more of the terms that are valuable to the seller. In many cases, what started out as strategies have become common practices – for example, underpricing a property to attract a large number of offers and force serious qualified buyers to pay more was once a courageous strategy and now, at least in the Toronto market, it’s the norm.
I had a client that recently used a reverse psychology strategy that worked amazingly well. He was listing a building lot (small house in good condition but highest and best use was as a lot) in a very high demand central neighborhood where he knew that several custom builders needed lots for clients who had committed to building new homes. Common practice in this situation would be to; stage it, have a prelist home inspection done, list it under market value, have it appear on the MLS early in the week and during the day to maximize exposure, make it easy to view, have full documentation readily available and hold back offers for several days to force a bidding situation.
He took a different approach. He listed late Friday – after most agents had booked off for the night. He listed it at market value with no offer holdbacks. He didn’t stage the house or do a home inspection but he did have a current survey and all relevant zoning information ready to share via PDF. He then sent an email to each of the builders in the neighborhood letting them know about it and including the survey and the zoning package. The email was casual in tone and let them know that they could contact him or they could reach out to their own agent as he was happy to cooperate. He let them know that there were no offer holdbacks as the seller would like a quick sale. As hoped for, this created a frenzy. He had four different builders that not only wanted but needed to buy the property. Their end user clients were pushing them. He pretended to be surprised and managed an offer bidding war that saw the property sell for far more than anyone expected.
Why did this strategy work? It was unpredictable which made people react in ways that they didn’t have time to evaluate. It threw them off their game but at the same time, it’s casual friendly tone made them want to engage with the process. The builders felt a real opportunity to buy a property that wasn’t fully exposed to the market. They could be seen as the expert to their end-user clients by telling them about a property first. The agents, if called by their builder clients, felt a little humbled by not having the information before their clients but found it difficult to be angry at the listing agent as he was fully willing to cooperate and collaborate. Each of these things added to the power advantage that the seller and the listing agent held. Once the parties were emotionally involved with the property and the bidding war, no one wanted to lose and so they bid the price up higher than was likely prudent.
#2 - Janet’s story – brilliant strategy for a transitioning market
This strategy came about part way through a complicated series of transactions and is an excellent example of an agent adding huge value. This is an agent we work with but this bit of brilliance was purely hers. This one involved three houses and three families. Let’s call the houses property A, B and C and the families, Red, Blue, and Green. There are two different markets – one is HOT and one is NOT.
Family Red buys house A in the HOT market- they are moving to a more prestigious neighborhood. As the market is hot, they buy the house unconditionally with a relatively short closing date. They currently own a home, property B in the NOT hot market that they want to sell. While they can afford to carry both homes, it would be financially very uncomfortable for them. They are excited about the move but pretty anxious about getting their back up home, property B, sold.
The agent lists property B doing everything possible to give them market advantage and after a few weeks, they get an offer that is conditional on the sale of the buyers’ (family BLUE) current home (property C). Family Blue is very conservative and not in a financial situation to take a risk of not selling their back up property (property C). House C is in good shape in a nearby neighborhood and is worth about $300,000 less than property B. The agent lists property C for sale, again, doing everything possible to give it market advantage but it is also located in the NOT hot market. It sits. After another couple of weeks, family Red is getting nervous. They talk about their options with their agent and renting property B is explored. It’s a reasonable option but hey really need some of the equity out of property B to make their financial world comfortable.
The agent ponders all the variables and suggests to family RED that they could purchase property C. This would allow family BLUE to close on property B and Family RED to pull $300,000 equity out towards their new home, Property A and leave them in a healthy financial situation. In addition, property C would be easier to rent.
They agree. After the closing of properties A and B, Family Red lists property C and it sells for a fair price to family Green. All three families have achieved their desired outcomes in difficult market conditions and the agent has worked smartly to earn the respect of her clients and a fair commission.