Showing posts with label real estate sales. Show all posts
Showing posts with label real estate sales. Show all posts

Friday, June 26, 2020

Real Estate in the Time of Pandemic

Photo by CDC

With our country beginning to find its way to a new normal at the end of months of quarantine, we in the real estate market are all left with one nagging question—What should we expect from here? 

Like most people, I do not have definitive answer. If you are over the age of thirteen, however, this pandemic is certainly not the first market disruption that you have experienced and with each such occurrence, we all learn some valuable lessons about the real estate industry. With that said, here are a couple of lessons that we can learn from this particular time of change: 

1. COVID-19 Wasn't The End Of The World
Photo by Anna Shvets

The Corona virus pandemic is clearly a historical event and one of the most pervasive pandemics ever. Pandemics are an unfortunate part of human history and have happened a number of times in the last century. The world-wide nature of this particular pandemic, coupled with the inter-connectivity of today’s world, may make our current situation historically novel, however, despite the idyiosyncracies of this pandemic, humans have a history of overcoming pandemics and moving forward. The loss that COVID-19 has caused, in lives, wealth and production cannot be replaced. It is important to remember, however, that while the results of this destruction must be mourned, the real estate market will come back and has rebounded from worse. 


2. With Every Disruption Comes Opportunity

Large market disruptions and crises are much like forest fires--they are extremely destructive to everything effected. Also like forest fires, these events clear a path for growth that may not have been possible prior. The real estate market, like most other markets, will rebound and it is the duty of every real estate professional to be diligent in looking for ways to contribute toward the structuring of a new normal in our changing world. 

3.Things Will Not Be The Same

There are a number of lessons that the past couple of months have taught us, not the least of which are the capabilities of our remote learning and working infrastructures and the importance of residential real estate in times of crisis. Unfortunately, the pandemic has also made many of us leery of in-person interaction and created a hypersensitivity around perceived health. Some of the changes that have resulted from the pandemic may dissipate over time, but no one who has lived through the quarantine will ever forget the experience. That said, it is important that real estate professionals stay alert to changing trends as we all quickly try to determine which of the adjustments made will become a regular part of our lives. 



4. Home Will Take On A New Role

One thing that has been apparent throughout the quarantine is that there is no place like home. Residential real estate will certainly be viewed differently going forward. Consumers are bound to be much more beholden to their preferences and the sanitary status of a property may be its selling point. Newer construction may be able to demand more of a premium initially, given its modern features and shorter owner history. Additionally, working-from-home will become a continued reality for many. Homes that are best able to accommodate remote workers, may also be able to demand premiums.

Photo by August de Richelieu

5. Workplaces Will Have To Adapt

Photo by Ivan SamkovThe concept of work has definitely been redefined during this time of pandemic, as we have learned that the nation will not fall apart if most of us work remotely. This realization, coupled with the shriveling of the economy during the past few months has caused some serious adverse effects in the commercial real estate market. Although warehouse space and industrial properties may be less effected by the move to remote working, as these property types are driven by the physical needs of companies, all property classes have been effected by the slowing of the economy. Social distancing has not been kind to office and retail properties. These property types may need to undergo some significant reimagining, as they are tailored to inter-personal interaction. Further, the required increase in online-purchasing has only served to further accelerate what has been an apparent reality in retail real estate for sometime—a new normal is on the horizon. Flexibility will be key in the office and retail markets, where the spoils will go to the nimble. 

6. Sanitary And Sterile May Be Trendy

Photo by cottonbro In the wake of this national health crisis, sterile is in. As the nation continues its path toward reopening, we have already begun to see businesses retooled in order to work toward the eradication of COVID-19. The concern over this virus will inevitably lead to an increased concern for the sterility of dwellings and structures. Demonstrable sanitary feature, systems and practice can allay health concerns and are certainly welcomed, if not mandatory, additions to any property. 


7. Fundamentals Still Rein Supreme

In the end, real estate is still real estate. It will continue to be a relatively illiquid asset and it will continue to have significant market lags. It will also continue to be a valuable resource and a viable way to build and shield wealth. All of these factors are why we love real estate so much. It’s indicators will remain the same: e.g. the employment rate, housing starts, mortgage rates, local economic factors, locations of major employers, etc., although, it is wholly possible that some new indicators may arise. I will avoid trying to speculate on which indicators may be significant, but one thing is clear, change is coming and it is important to be ready to navigate toward our new way of life. 

This has been my take on the impending changes to real estate coming in the wake of the pandemic. I’d love to hear your thoughts. Please comment below.

Wednesday, August 8, 2018

The Real Estate Sales Game (Part 2)

In Part 1 of this post, three aspects of real estate sales were addressed--lead generation, asset valuation, asset management. These real estate sales characteristics require a specific approach when applied to real estate sales. In this post, the remaining two aspects of real estate sales will be discussed--marketing and customer relations. These aspects of sales are more uniform across all sales profession, both in and out of the real estate industry.

As a reminder, the term real estate salesperson includes all real estate professionals that spend a significant portion of their time selling real estate assets, including property salespeople, real estate capital markets sales professionals and commercial and residential loan officers. 

Marketing

Sales professionals across industries must concern themselves with marketing. If lead generation is the bloodline of sales, then marketing is the sales lifeline. Few owners of real estate assets are well known enough to sustain consistent sales without advertising their assets or needs on the market. Even further, marketing is not merely advertising, but also the market research necessary for the sales force to conduct a successful sale. This includes market, customer and competitor research. 

Admittedly, marketing takes on a different appearance in the different types of professions that engage in real estate sales. Direct customer advertising and research are very common among property sellers, whereas marketing in the real estate secondary and capital markets may consist of networking, listing on exchanges and purchasing market data from data providers. Despite the idiosyncrasies of the industry-established method, effective marketing is absolutely necessary to the success of any sales professional and any business, as no one will seek to purchase an unknown asset. Real estate salespeople are not exempt from this essential business function.

Customer Relations

Much like marketing, proper management of customer relations is key to success in business. Sales professionals should seek to ensure that the needs of their customers are met, as satisfied customers are great for business. Research has shown that the overwhelming majority of business referrals come from customers who have had a positive experience with a company. The bottom line is that satisfied customers are one of foundations on which a successful business is built and real estate companies are not exempt to this business tenet. The profile of a customer may vary among the different types of real estate professions, but be they consumer, corporate, governmental or institutional customers or clients, their satisfaction is integral to the success of the real estate sales professional.

Bringing It All Together

Although the various sales roles present in the real estate market each have their own characteristics, they all share a concern with the five aforementioned sales concepts. The most successful real estate salespeople have implemented systems to manage these five aspects of sales in an effective manner. Real estate sales professionals that lack in any of these areas would do well to assess where they lack and address any such shortcomings. That is my take on real estate sales, please feel free to provide your prospective on the matter below.

Monday, August 6, 2018

The Real Estate Sales Game (Part 1)

Interestingly, I have over 10 years of experience as a real estate salesperson and attorney and have yet to write a post on the mechanisms of real estate sales. An understanding of real estate sales can be useful in informing the perspective of a real estate investor. Real estate salespeople have an intimate understanding of market activity, market trends and asset valuation that can prove valuable to all real estate investors.

Real Estate Salespeople

Before continuing, it may be necessary for me to provide a working definition for the term “real estate salesperson.” For the purposes of this post, the term real estate salesperson will include all real estate professionals who spend a significant amount of time disposing of real estate assets in the market. This definition includes property salespeople, such as Realtors, but also includes sellers and agents in the real estate capital markets, as well. Such secondary market participants include whole loan sellers, traders of mortgage-backed securities and loan officers of the various types of residential and commercial real estate loans that exist.

It may be tempting to think that such a broad definition of real estate salesperson includes a number of disparate professions that do not have much in common, however, each of the aforementioned professionals engage in real estate sales. Remarkably, real estate asset disposition has certain immutable aspects that transcend asset class distinctions. These aspects are lead generation, asset valuation, asset management, marketing and customer relations. This post will address the first three aspects, which have very specific concerns in the real estate market. A subsequent post will address the final two, which are more uniform across all sales.

Lead Generation

Leads are the bloodline of all sales, but real estate salespeople differ from other sales professionals in that they almost always seek out their customers and clients from the market. This is especially true of properties sales, where product placement is predetermined. In fact, since a real estate purchase is most frequently not seen as an emergency, real estate salespeople are not only required to find their customers and clients, but are also often tasked with having to impart a sense of urgency into their target audience in a way that is not as necessary in other sales professions. Admittedly, the methods of lead generation vary wildly among the different real estate sales professions. Direct marketing and customer engagement is frequent among property salespeople and residential mortgage professionals, whereas more indirect approaches, such as networking and informal referrals, are prevalent among capital market professionals. Despite these differences, leads are essential to all real estate salespeople and must be actively managed.

Asset Valuation

Asset valuation is an integral part of the role of all real estate sales professionals. Real estate assets are price idiosyncratic, in that their prices are determined at arms-length and not by the market. Except in the case of some government mortgage backed securities, which have fixed bid-ask prices, the price of a real estate asset is determined after some bargaining between the buyer and seller. As such, the seller’s asking price is merely an initial offer and not a firm price. It is the responsibility of the real estate salesperson to ensure that the seller’s initial asking price is attractive enough that buyers will bid, while retaining sufficient value that the seller is able to reap an acceptable profit upon the close of the sale. These competing concerns can only be mitigated through an intimate knowledge of the market and a strong sense of the value of the asset sold. The best real estate sales professionals have an uncanny ability to determine an asset’s value and its demand in the market place. They use this ability to price assets accordingly and sell them efficiently.

Asset Management

Asset Management is a key component of real estate sales, because real estate cashflow is neither automatic nor derived solely from market factors. Income property rents and mortgage payments must be collected in order for investors realize cashflow from their real estate holdings. Furthermore, properties require maintenance and mortgages require regular compliance with various lending laws. Real estate securities are also subject to regular reporting requirements, as well. As such, there is no way for a real estate salesperson to escape asset management. Proper management of real estate assets by the salesperson will lead to seamless dispositions, whereas mismanagement of these types of assets can lead to a canceled or substantially delayed sale. Unlike other types of sales, asset management is as much a consideration to sale as timing and value. The competent real estate salesperson understands this requirement and ensures that assets are properly managed.

Lead generation, asset valuation and asset management are aspects of real estate sales that have unique concerns. Real estate sales professionals must master these aspects of sales in order to successfully bring about consistent dispositions. In our next post will deal with the remaining two aspects of real estate sales--marketing and customer relations.