Illinois REALTOR®: The Next 90 Days

The Next 90 Days

Use market data to motivate buyers and sellers

By Ann Londrigan, Senior Editor

• 7 Step Action Plan for the Tax Credit Extension and Expansion [1]

We all know a primary motivator for buyers in the months ahead. The federal homebuyer tax credit ends April 30, 2010 and no further ­extension is expected. Likely, this is it. That means you need to aggressively market the tax credit—and the ­deadline—with your buyer clients and prospects. For a seven-step action plan to maximize this opportunity for your business, see the story on page 17 from Steve ­Harney, a 20-year real estate veteran and speaker who drew a standing ovation at the Illinois Association of ­REALTORS® 2009 Convention for his strategic advice for working effectively under current market conditions.

Harney believes it’s very important for agents to know what is happening in the market, why it is happening and how to communicate the facts to the consumer.

“People don’t believe what you tell them,” says Harney, a former top producer and founder of KeepingCurrentMatters.com. “They always believe what they tell themselves. Present the facts, figures and charts that show the market clearly. Tell them the truth and trust their intelligence.”

And while media headlines should not alter your business plan, Harney says it can be particularly effective to use market reports from third-party (non-REALTOR®) sources to persuade a buyer or seller to act. This method can be particularly helpful to convince your seller it’s time to come to terms with lowering the price or to motivate a potential seller to list now rather than try to “wait out” the economic recovery.

So for buyers, the motivators are clear. The tax credit ends April 30. As inventories decrease—especially at the entry-level prices—there will be fewer choices. Mortgage interest rates have only one way to go and that’s up. In his KeepingCurrentMatters presentations, Harney uses sources such as The New York Times and the The Wall Street Journal to illustrate this point for buyers: “History tells us that once rates start to rise, they will do so quickly and dramatically.” Emphasize quickly and dramatically.

For sellers, it’s about price. Should I wait to sell? Won’t prices improve as time goes on and I’ll be able to get a better price for my home?

Harney does anticipate short sales and foreclosures will continue to put downward pressure on prices. A report released November 19 by the Mortgage Bankers Association (MBA) found a record 14 percent of borrowers were in trouble with their mortgages during the third quarter of 2009. MBA’s chief economist does not expect foreclosures to peak until 2011 with the increase primarily attributed to job losses and more homeowners with negative equity in the home.

This is important information for sellers related to setting the right price to sell. In this scenario Harney uses reports such as one from the CME Group that shows prices expected to hit bottom in May 2010 with a recovery to current levels a full two years away in November 2011. Last fall a Moody’s Economy analyst said prices won’t recover until 2020.

For REALTORS® planning for their business in 2010, ­Harney believes both the tax credit and short sales should be the focus in the first half of the year.

“I believe very strongly that foreclosures will dwindle,” says Harney. “Banks have decided they will do short sales and they are working to make the process easier. That has already started in larger lending institutions. Banks are sending a letter to a homeowner telling them the bank has decided to stop the foreclosure process and will agree to a short sale. The letter says ‘Here is a definition of a short sale and this is what we need from you, this is what we need from your ­REALTOR®, let’s get this process started.’”

He adds: “The largest increases in revenue for an agent or company will be short sales. Get the short sale designation, get educated on the short sale.”

Ultimately, how do you answer the question from buyers whether housing is still a good investment? To ­answer with an emphatic “YES!” Harney uses a chart with data from MSN Money.com and Case Shiller that shows since January 1, 2000 the return on investment in real ­estate was 44.2 percent while the Dow Jones Industrial Average, S&P 500 and Nasdaq Stock Market all were in negative territory.

“In the next 90 days, don’t try to do everything,” says Harney. “Concentrate on the tax credit and get going on short sales. The companies and agents who work hard for the next three months will dominate 2010. It is entirely up to you!”

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7 Step Action Plan for the Tax Credit Extension and Expansion

By Steve Harney

Step #1 – Contact anyone who might have given up. Originally, there was a lot of speculation that there would be no extension granted. That caused some buyers to stop looking (especially in regions where closings take longer). We must immediately reconnect with this group.

Step #2 – Contact anyone in the higher income levels that will now be eligible. Income levels will be raised to $125,000 for a single and $225,000 for married couples. This segment is new to the credit and therefore virgin territory. I would start with this group as it has not been touched by the original tax credit. Since there is higher income, they will qualify for a larger mortgage. This could be the answer for the second tier homes whose sales have remained stagnant.

Step #3 – Contact every move-up buyer. This group has stayed on the sideline. Now, they might have 6,500 reasons to make the move. One of the reasons they were on the sideline was the difficulty selling their home. But, if the $8,000 credit will now be available to buyers with higher income, more of the middle tier priced homes will sell. Many of the sales over the last 6 months were foreclosed properties which did not create move-up buyers. Now, more non-distressed properties will sell.

Step #4 – Let every buyer know that this is the best time in history to buy a home. The affordability of homes has gotten better for three reasons.

1. Interest rates are at historic lows. However, the Fed has announced it will pull back on the purchase of mortgage-backed-securities in March. Experts believe that will drive interest rates to over 6 percent.
2. Tax credits if you buy now. Whether it is $8,000 for new buyers or $6,500 for the move-up buyer, the tax credit will expire the first half of 2010. (The house must be in contract by April 30.)
3. Selection is fabulous. No matter what type of home you are looking for, your choices are almost unlimited. As more buyers take advantage of this opportunity the less choice there will be.

Step #5 – Contact all the CMAs you did over the last year and let them know – THE TIME HAS COME! If anyone wants to move (for whatever reason) now is the time. They will never have a better opportunity to move on with their lives and live the life they have always dreamt about.

Step #6 – Contact every listing that EXPIRED in the last 18 months. Again, if anyone wants to move (for whatever reason) now is the time. They will never have a better opportunity to move on with their lives and live the life they have always dreamt about.

Step #7 – Sit with your existing sellers. The opportunity to sell their home will dramatically increase from now until the spring. Then, interest rates will rise and the extension of the tax credit will expire. We must insist that they price it properly. If their house doesn’t sell now, then when?

Reprinted with permission from http://steveharneyblog.com [2]. Subscribe to “Keeping Current Matters” at www.steveharney.com [3].

• Download a free consumer marketing handout on the new tax credit from www.illinoisrealtor.org/taxcredit [4].

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