Real Estate Fundamentals - Your Key to Success
It’s easy to understand why new-home sales agents
have lost their focus, with media coverage and conversation
trumpeting sales slumps, the “need” for incentives and issues like sub-prime lending that don’t truly affect most buyers. While this coverage undoubtedly makes buyers nervous, the reality is that this is a good time to buy a new home in the Chicago area.
I am very optimistic about 2008 and beyond. The key is to turn away from gimmicks and back to the fundamentals of what sells a new home.
The Chicago housing market traditionally has
avoided the super highs and super lows of other
regions, giving us remarkable stability. As I write,
statistics show all new construction condominium
inventory delivered between 1997 and 2005 has been
100 percent sold, 2006 deliveries were 98 percent
sold and even inventory scheduled for delivery in
2008 are at an impressive 80 percent sold to date.
From 1998 through 2006, the total contracts/reservations
for condominiums, townhouses, adaptive
reuse and conversions averaged 4,386 total units per
year, with a low of 3,258 in 1998 and a high of 8,162
in 2005, which was the peak of the investor-based
sales influence. And 2007 sales are currently projected
at over 4,000 units, based on the first six months
of sales recorded.
Another factor in our favor is that, unlike other
markets around the U.S., we don’t have an oversupply
of new, unsold homes in the downtown market.
About half of the available inventory of new homes
in Chicago’s downtown market is under construction,
and only an estimated 2 percent are actually
built and ready to occupy. Additionally, home speculators
have disappeared and lenders generally have
gotten smarter about realistic pre-sales conditions
and loan qualifications.
Despite these encouraging signs, we, as a profession,
need to reevaluate methods being used to sell
homes in Chicago. It seems to me that far too many
sales agents rely on incentives to make deals, rather
than performing the due diligence of convincing
potential customers that the home offered has the
value, reputation and quality desired.
Roughly two-thirds of new-home agents here have
experience only in a strong market in which even bad
deals succeeded — this is no longer true. Good deals
with good fundamentals still make good sense, but
today’s sales agents must demonstrate those fundamentals
to customers. For example, most customers
we see today don’t have a clear understanding of current
prices. While we at Garrison Partners don’t
typically participate in auction sales, it’s easy to see
why they are increasingly popular. Without taking
any risk, consumers can watch the bidding and verify
the market price for a given kind of home.
Sales agents also need to remember that home purchases
are emotional decisions. We see many buyers
today filled with anxiety, rather than anticipation,
because they don’t understand the home-buying process.
Agents can turn these emotions around and make
buyers confident and happy. Start with the obvious
and ask buyers if quality of the construction, reputation
of the developer and location are important
factors. If they are, then focus first on finding homes
that meet those criteria. After that point, discussions
can turn to persuasion and, if necessary, making the
purchase more affordable with incentives.
Agents who never have worked in a tough market
are uncertain how to shift focus. There are many
excellent new-home training venues around the U.S.,
and I strongly encourage agents to take advantage of
Making a return to these fundamental values will
be the your key to success.