HANDLING MULTIPLE OFFERS, THE 3RD GREAT MIGRATION, & THE REAL ESTATE BOOM!
If you are only interested in 10 tips to help you manage your multiple offer situation scroll to the bottom. If you would like a bit of analysis on why the market is the way it is as well as some speculation on where it is going, feel free to read on. As an Autistic person, when asked a basic question, I will first start by explaining why I have come to the conclusion. As a result, I tend to overexplain. For those who enjoy the insight on this market, read on, for others looking for a few quick tips on the toilet quickly scroll ahead!
There is a third great migration happening right now in America. The first two great migrations followed WWI and WWII when people pursued better opportunities for them and their families. What followed was the massive expansion of the American city, the birth of the American suburb, and massive opportunities for wealth generation. However, government practices like “red-lining” denied this opportunity for generational wealth, using our industry as the platform, from entering into communities of color. We are now getting ready to oversee the largest private transfer of wealth in American history. Most of it will happen through real estate. We need to enter into this period with both eyes open if we are going to create opportunities for our families and our communities.
The last six months have changed both the commercial and residential real estate industries. People who are no longer required to commute into work, or those who can’t afford life in the high priced cities, are taking their exit in pursuit of a life in the suburbs. Major cities like San Francisco and New York have had real estate vacancies go up significantly since the start of Covid19. This is just the beginning of what will have a massive effect on the real estate industry. In the last 6 months, the cost of an average 1-bedroom rental in San Francisco has dropped by 11.8%, residential vacancies went up from 3.9% to 6.2%, and commercial vacancies from 5.4% to 9.8%.
People are now considering what is necessary for the success of their businesses and families and many have found not just the office on the chopping block, but the whole city. In Northern California residents are leaving the Bay Area for Sacramento County resulting in a real estate boom in Sacramento! Similarly in Southern California residents in Orange, San Diego, and Los Angeles Counties are headed inland to Riverside County for bigger homes on better lots, with superior schools. The average home in San Francisco costs about $1.68 million dollars, whereas the average home price in Sacramento is about $395,000 and is going to include a whole lot more bang for the buck.
Many California suburbanites throughout the Golden State are leaving for Texas, Washington, Idaho, South Carolina, Arizona, and Tennessee. This is making it possible for many cities such as Dallas, Austin, Seattle, Boise, Nashville, & Phoenix to experience a real estate boom while other cities like New York had their average sale price fall by 17.7% this year alone. This will continue to create suburban sprawl around America as those with opportunities leave to pursue them. While others living in underprivileged areas, where massive investment dollars are currently being spent, are finding themselves being choked out of the neighborhoods they grew up in. This is creating massive gentrification of many inner-city neighborhoods.
People are being displaced today just like they were in Seneca Village, New York. It just happens more discreetly through gentrification programs with fancy titles like “Urban Renewal”, “Redevelopment”, and “Opportunity Zones”. When the time comes for an area to “gentrify” areas are purchased, policing intensifies, rents go up, and new people and businesses move in. Recently, there was an attempt by the investment group, CIM, to purchase the Baldwin Hills Crenshaw Plaza and turn the mall into low-income housing and office space. This attempt was blocked by people in the neighborhood who saw the writing on the wall for people in their community.
Gentrification often creates a hostile living environment for those currently living in the communities gentrifying. In Louisville, for example, on Lincoln Avenue the street where Breonna Taylor was killed, there is a direct assault on homeownership. Right now, the city is under private investigation and things in the community are heated. Mayor Fischer of Louisville finds himself in the hot seat as it was recently exposed; since 2017 the city has quietly acquired 22 properties, which accounts for approximately 40% of the street, on the street where Breonna Taylor was killed and they are actively foreclosing on another 7 homes. What happens in these areas and to the people who are being squeezed out, who cannot afford to leave, and can no longer afford to stay? The area “improves” and entire communities are lost.
As wealth concentrates on the super-elites, the fastest growing market throughout both the United States and the United Kingdom is the Ultra-Luxury Market. This market is classified as any home worth more than $6.5 million dollars. During Covid19 we witnessed a massive acceleration of wealth for billionaires. The world might even see its first trillionaire in Jeff Bezos. Say what you want to say about the concentration of wealth, I clearly have my thoughts on it, the best way to get your hands on some of it is through real estate.
Most every war in history has been fought over real estate. 8 of 10 of the wealthiest zip codes in America are concentrated around Los Angeles and the Bay Area next to historically underprivileged areas experiencing record unemployment partnered with skyrocketing cost of living. There is now an entire generation entering a hostile job market. Many Millennials, who tend to work in service-related career fields, are finding themselves out of work through no fault of their own. Generation Z is entering the most hostile work economy the working class has experienced in years and it is only being made worse for the people at the bottom through automation.
The best way for Generation Z and Millennials to control generational wealth is by exiting the working class and entering the owning class. The old saying is “no one washes a rental car.” This isn’t the case. Much of Generation Z and the Millennials, my own generation, have been washing rental cars for years and we have little to show for it. We need to stop washing rental cars and start owning them. In my opinion, in this shift, we will see a lot of people realizing this and entering into new career fields in new places, and many of them will decide to work in real estate. The younger generations are starting to realize how quickly they are put onto the chopping block during times of recession or innovation for the sake of a bottom line.
So, rest assured, if you have recently found yourself working in real estate you have made a solid decision. A lot of people are getting ready to follow suit. In my opinion real estate is one of the best careers one could choose to get into right now and will continue to be in the years to follow, in part, because of our very powerful lobby on the State and National level. Our industry is protected, as we were shown during Covid-19, as Realtors were quickly added to the essential worker list. All of this said, the wealth changing hands throughout the Third Great Migration will pale in comparison to the wealth which will be created in the following decades through the Post-Boomer Boom. Baby Boomers own a great deal of real estate, businesses, and major corporations.
There will be an incredible amount of wealth transferred during the next few decades. Economists have estimated $30 trillion in the United States and $100 trillion worldwide. Much of this wealth will be inherited through real estate. There is a great deal of opportunity coming. A study conducted in 1959 shows 70% of households that inherit money have spent 100% of the wealth within 5 years. I can’t imagine much has changed. People tend to be more frivolous with the wealth they were not instrumental in creating. We are getting ready to witness a massive private redistribution of wealth.
Money is going to continue to be spent all over the country as people settle into new places, pass away, and pass on real estate. More life, and often improved life, comes out of natural death cycles, as we are getting ready to witness in the following years in our own economy. If you have entered this career and are fortunate enough to get a listing, there is a pretty damn good chance you are going to get paid. Don’t miss the opportunity! Don’t assume you are not up to the task! Say “yes”, get the listing, and get paid, my lab-coated friends.
How do you manage your clients’ expectations, all of the showings, and net the “highest and best offer” without ruining valuable relationships within the industry?
Here are 10 tips to help prepare you for your multiple offer situation:
1. Don’t oversell the market to your client.
Don’t oversell multiple offers to sellers in any market. As likely as it may be, it is always better to under-promise and over-deliver than it is to put your foot in your mouth. Let your clients know multiple offers are a possibility but you must be priced and marketed right.
2. Don’t overspend on your listing.
Zig when everyone zags. Take some photos and get them listed. In this market, conversations with curb kickers, elaborate virtual tours, and even listing signs are unnecessary. I haven’t put up a “FOR SALE” sign recently and my clients are loving it.
3. List on the right day.
Don’t list on a Monday, Tuesday, or Wednesday. Listing too early in the week makes it difficult to allow the full weekend for showings without causing ill-will. List later in the week and let buyers know, after the first offer, you are reviewing offers on Sunday night.
4. Give everyone a chance.
Don’t accept the first offer which comes into your inbox. Give your sellers a call to inform them once the offer has actually come in, review it, and advise them accordingly. I like to give every buyer who has scheduled a showing an opportunity to actually see the home.
5. Schedule the showings in time blocks.
We listed a house Friday and had over 30 showings, 12 offers, and several waived appraisal contingencies by Monday. Make showings convenient for your sellers while following Covid19 guidelines by asking for two to three large blocks of time in advance.
6. Don’t prioritize dual agency.
In this market, you will get offers to represent buyers directly. Every listing should hit the open market regardless. An agent doesn’t have to turn offers down in order to have integrity, but truly make sure it is in both of your client’s best interest before finalizing.
7. Don’t get greedy in your Seller multiple counter offer.
Pigs get fed. Hogs get slaughtered. People don’t like to be raked over the coals. What is more important to your sellers; the timeline or the bottom line? What is their risk palate? The interactions during agent negotiations will set the pace for the entire transaction.
8. You do not need to take every phone call.
Despite what you may have read in the LCA threads; it is completely okay to miss a phone call. Heck, it’s even okay to not return some phone calls. You have to protect your time like an organ. Spend it on things that are important to you while you still have it.
9. Be kind.
There’s a kind way to say things and often listing agents forget it. It comes back around quickly to bite them, or their buyers’ agents when the shoe is on the other foot. Above all else remember there is a human being behind every transaction. People are important.
10. Don’t drag people through the mud.
Once you get your first offer call those who have already seen the home and those who are scheduled to see it, and tell them when you will be reviewing offers. I suggest letting the showings go through the weekend, but the choice is ultimately your sellers.
There is always opportunity in real estate whether your market is on the incline or decline. Wishing you the best in making the most of the many opportunities in the years to come! Real estate isn’t going anywhere, my LabCoated friends. Act accordingly.