Success in 2015: Build on What We Learned In 2014
Santayana famously said “[t]hose who do not learn history are doomed to repeat it.” With that admonition, let’s take a look at what we learned from real estate in 2014 and use it to build an even more successful 2015.
It’s All About The Team: Buyers spend months searching for the perfect apartment. They miss out on a few due to bidding wars, but then find the perfect match. Now it’s time to pick a lawyer. The client’s first question? “How much do you charge?” I get it, it’s a natural question to ask. But when selecting this important team member, think about the following scenario: Your doctor calls with test results. You have a rare disease that, if not properly treated, will lead to your early demise. She gives you the name of a few experts in the field, and you begin calling trying to find the right specialist. Is your first question in that case, also, “how much do you charge?” Might you ask instead, “what is your experience in this area?” “How many cases have you successfully treated?” “What are your credentials?” And, yes, eventually the fee will come up, but when selecting such an important member to your healthcare team, I would submit that it won’t be the determinative factor. It’s no different with a lawyer. In the grand scheme of a real estate transaction, the legal fee is among the least expensive parts of the deal. But choose an inexperienced practitioner, who gives you a “bargain basement” rate, and you might end up back to the home search when your “dream apartment” ends up being but a faded memory.
The Three Most Important Things In Real Estate?: Yes, the immediate response is “location, location, location.” And that’s surely the correct answer. But in 2014, and looking forward to 2015, add “financing, financing, financing” to that mix. Cash buyers are great, and it was fun when they were 40% of the buying market, but those days are gone. Now the borrower returns in full force and, combine this with the ever-increasing complexity of the mortgage regulatory market, makes for another minefield that must be conquered on the way to a successful closing. Gone are the days of calling the guy who opened your checking account and handled your car loan to also get you a jumbo mortgage. Today’s mortgage bankers – the good ones – are experts in their field, and know how to package a loan properly to increase the chances of underwriting approval. They manage client expectations, explain early to clients the volume of paper that will be required to complete the loan, and assess likelihood of approval realistically, without sugar-coating. Guaranteed financing no longer exists, and the 20 day closing is essentially folklore. Saavy real estate buyers will carefully choose the mortgage banker.
It’s No Longer About Information: I spend a good deal of my time teaching real estate professionals how to be better at their profession. I recount the following when working with new agents: I started in real estate when I was 16. I was hired as a receptionist after school in the headquarters of a large real estate brokerage in upstate New York. Among my duties was to put labels on the MLS books that were delivered every Friday. The PC was in its infancy and the internet was a decade away from being invented. So information about available listings, contracts signed and closed deals was provided in print, distributed to the membership physically each Friday in a thick book printed on newsprint bearing the label “CONFIDENTIAL” on the cover. In those days, what real estate brokers sold was information. More particularly, access to information. Looking for a 3 bedroom 1 ½ bath ranch? Your only option was to call a broker and request access to their confidential information. Fast forward to today, the game is inverted. Buyers no longer require access to information. They are inundated with it. So the value proposition of the real estate professional has changed. Deciphering and analyzing information is the currency of the successful broker. Providing expertise on valuation, closing costs, board approval processes; these are the services that today’s successful brokers provide. So, if you’re still just “showing apartments,” instead try helping clients acquire or market them.
Negotiating Is Not About Winning: Most people think that negotiating is akin to a battle. Like the Thunderdome made famous by Tina Turner. “Two men enter, one man leaves.” (Mad Max, Beyond Thunderdome). But nothing could be further from the truth. Successful negotiation is a journey, where the entrants seek to find common ground, an area where both parties will find satisfaction, not necessarily elation. A common mistake made in the negotiating arena is to seek victory on all points. Instead, before beginning the negotiation, ask yourself what is important here, and what is a distraction from the main focus. Sometimes a seller wants me to reach out to buyer counsel to see if the buyer wants to purchase certain furniture that the seller no longer wants. But until a contract is signed for the real estate, I actively discourage such distraction. “Are you selling a couch, or an apartment,” I caution my seller. There will be plenty of time to negotiate the terms of the couch later. And the result of that negotiation will not impact the success of the sale of the apartment. Whether the buyer buys the couch or not, is not really important in the larger context of the transaction. So why risk derailing oneself from the main point. Confine negotiations to the key terms of a deal, and you will find a quicker road to a contract.