A real estate industry veteran since 1996, Nobu Hata is a student of real estate sales, marketing, communications trends, consumer trends, social media, and technology in the real estate industry having adapted new school techniques into multiple successful real estate sales businesses.
Nationwide, there’s a continuing decrease in mortgage applications, fewer home tours, and fewer searches online, all signs that point to a portion of exhausted buyers choosing to sit out this late spring / early summer sales season on the benches.
While buyers will likely still face bidding wars, they potentially aren’t as intense or as frequent. In 2021, appraisal contingencies with conventional loan and all-cash offers were increasingly needed to win a bid. But right now, a buyer might be a tad more flexible with the terms of a purchase contract, even if the price is still outrageously high.
Now, this is not to say that demand is not still out there – it is and it’s especially driven by two groups: older millennials, aged 32 to 41, as they reach the point in their careers and personal lives where they look to make that next step, as well as younger millennials / Gen-Z cuspers, aged 23 to 31.
What this means for our current environment is that with higher rates, buyers can eat into their buying power compared to last year. Yet industry experts generally agree not to time the rate market and buy when the time is right for you, whatever that looks like.
People everywhere are getting creative when it comes to owning property. Here are three methods and tips to effectively search for a home:
BFFs… and homeowners?
Look, we’re in this weird environment for the long haul. It’s not subsiding soon. Many people can not afford homes on their own, so we’re witnessing friends and siblings or even business owners go in together to buy a piece of investment or vacation property as a way to get their foot into the market.
A 2022 survey by Realtor.com of over 1,000 adults in the United States reported that nearly one in three Americans have bought a primary home with someone other than their spouse. And what’s more, more than half of Americans have or would consider co-buying with a friend or family member.
Risky, of course, to the friendship or relationship, but there are questions you can address at the beginning that will help determine whether it’s a solid idea:
- Who will primarily own the home?
- What are your credit scores to see what you both can feasibly buy?
- Are you both willing to prenup yourselves when it comes to the house if one wants out of the investment?
- How and who will handle the ongoing finances, such as tax breaks, shared expenses and upkeep?
- Is this relationship secure?
Help clients go in with eyes wide open to a situation like this. While it may make buying more feasible, splitting up money is challenging to deal with over time. Each party should come to the table with honesty and be willing to show financial statements so everyone knows the reality.
Help buyers check their emotions to search smarter
Competition and bidding wars aren’t going anywhere, and they’re just subsiding a tiny bit. Help clients think creatively and strategically about where they want to look and when. If possible, wait until after Labor Day, when markets traditionally cool down as summer vacation ends and school resumes.
Buyers may also consider waiting until you see that more and more inventory is available. Again, in doing so, that move also involves a degree of uncertainty about whether interest rates will continue to rise or fall along with home prices in general.
If buying with a mortgage, buyers should get their financing aligned well ahead of time to quickly lock in rates when they find the home of their dreams. Do not let them just find any ol ‘lender out there in the market. Find one who can answer the following questions:
- What types of home loans do you offer?
- How do you handle underwriting in-house?
- What’s your average loan processing time?
- What will my interest and annual percentage rate be?
- What’s the loan estimate?
Have an understanding of proptech (and perhaps cryptocurrency, as well)
In its most basic definition, proptech utilizes technology to overcome challenges and provide solutions specific to the real estate industry. Proptech’s goal is to leverage tech-based tools to make services more efficient and effective for agents and buyers. In this market, an agent must have a good grasp of how to help buyers understand and utilize it before, during and after the transaction.
Proptech can involve a host of processes and applications, including 3D virtual walkthroughs of homes and neighborhoods, interactive floorplans, augmented reality staging, AI chatbots, checking out real home valuations rather than computer-generated numbers, or using big data together with machine learning of listing pictures to make informed choices.
Since so much of your client’s information – through social media use coupled with web and home search behavior – is compiled and used in algorithms, they are as big a target as a beneficiary of big data. As an agent, you can help them protect themselves online by helping them decipher big tech and data.
Blockchain and cryptocurrency in real estate have started to open up pathways to evolve the homebuying process. Blockchain technology enables assets to be tokenized and traded with cryptocurrencies.
While real estate nationwide and internationally is starting to witness a disruptive evolution with blockchain acting as the driving point, the technology is still in its infancy in real estate itself. But as the industry catches up to the blockchain-led concepts of quick, verified, encrypted and streamlined transactions, the cryptocurrency powering tomorrow’s transaction is emerging today as a portion of many consumer investment portfolios and as collateral for real-world mortgages.
The regulatory landscape is evolving in these matters, however. Hence, it’s important to have a thorough understanding of these issues to guide your clients through a volatile process if they want to use crypto in their home purchase or if your seller clients choose to accept it.
Buying a home is hard, but it is not impossible. As a knowledgeable expert with a fiduciary duty to your clients, it’s your role to help buyers weigh and evaluate their options.
Nobu Hata is the CEO of the Denver Metro Association of Realtors. Connect with him on Facebook and Instagram.