With interest rates soaring past 7 percent, inflation continuing to rise, and trillions of dollars of our wealth being wiped out by the stock market, real estate prices may be on the verge of an unprecedented free fall. How can you accurately price property in this environment and, more importantly, persuade sellers about the wisdom of lowering their prices now before prices fall even further?
In my article “Are You Up for a Down Market?” I outlined how to use the various Automated Valuation Models (Realtor®.com’s AVM plus their links to the Collateral Analytics, Core Logic, and Quantarium AVMs,) Redfin, and Zillow’s AVMs, to get the best estimate of the actual value of a house in today’s declining market. While showing sellers those 5-7 AVM values usually works, today’s market may require even more ammunition.
The tools you need for today’s rapidly shifting market
Since its inception, NAR’s REALTORS® Property Resource (RPR) has provided Real Estate Agent with access to the nation’s largest property database, allowing them to generate beautiful 15 to 25-page property reports.
RPR’s Reggie Nicolay and Genie Willett joined me recently to share their whole new suite of pricing tools that answer the question, “How’s the market?” with the most detailed and persuasive data ever. Best of all, NAR provides you with these tools at no charge.
AVMs don’t tell the whole story
Nicolay explained that only relying on AVM valuations and/or a CMA does not tell the entire story. RPR’s new tools, updated app, and website now allow you to address these issues in a radius as small as ½ mile from the property, provided there have been at least three recent sales in that local area.
The updated RPR app
The RPR app is one of the few tools in real estate that allows you to instantly convert leads no matter where you meet them. Simply ask the lead the address or area that they would like to know about. Once they respond, ask them for either their cell phone or email address so you can send them the information they want now. The result? Instant lead conversion with a few simple clicks.
The screengrab below shows you the five primary search screens on the updated version of the RPR app. You can search by street address, map, or within a specific radius of the property.
In most cases, sellers will give you a property address. This is the screen that will appear and includes data based on median sales conditions. You can also access this data using the maps screens above as well.
The next step in the process is to select the reports you want to include. For potential sellers, Nicolay suggests sending the Mini Property Report and the Market Activity Report. Since the Seller’s report can be 15 to 25 pages, he recommends using that report on your listing appointment.
Using the RPR app with buyers
For buyer showings, Nicolay recommends providing them with the Buyer Tour that allows your buyer to see the various properties you will be showing them in a side-by-side comparison. Once they identify the properties that they are most interested in, you can provide them with the Mini Property Report and a Market Activity Report.
If your buyers are writing an offer, give them the Seller’s Report and the Market Activity Report. If they have school-age children, include the School Report as well.
The new RPR website
To take full advantage of NPR’s most comprehensive data, you will need to visit their website, since much of this functionality is currently not available on their app. Here is a sampling of what’s available (there are over 30 different reports), as well as how to discuss these charts with your sellers to help them understand exactly what is happening in their local marketplace.
Moreover, since RPR updates these charts every 30 days, these numbers are the most recent and comprehensive snapshot of what is happening at the local market level.
In the example above, note the Market Type with the arrow. Track this monthly since you can show sellers which way the market is moving. For the property used in this example, Nicolay said the arrow has been moving from a strong seller’s market close to a balanced market. Keep in mind that in past market downturns, it has taken 8-18 months to make the transition from a seller’s market to a buyer’s market.
On a listing appointment, the key metrics you would want to discuss with the seller are the Months of Inventory, List to Sold Price (which is currently at 96.5 percent,) Median Days in RPR (42 days and this is up 75 percent in just one month indicating a slowing market,) plus the median sold price, which is down 3.88 percent month over month.
Translating these numbers into plain English for your sellers:
A List-to-Sold Price percentage of 96.5 percent indicates most properties are selling under asking price. To illustrate this point, a house listed today at $1,000,000 on average would sell for $965,000 after being on the market for 42 days (six weeks).
Here’s how to close the sellers on being realistic about their price point.
Last month median sold prices in this area declined by 3.88 percent. If this rate of decline continues, that means your property is decreasing at a median rate of $38,800 per month. If the market stays on the same trajectory, three months from now your value will have decreased by $116,400.
Consequently, it’s critical that you list your property at a price where it will sell in today’s market with today’s interest rates. Otherwise, you may be chasing the market down for months to come.
The Neighborhood Housing report provides a second quick snapshot of what is happening at the zip code, local city, county, state, and national level. The most important numbers to note are the “List Price 1-Month Change” that you can use to show your clients which way the market is trending at this moment in time.
Detailed tracking reports
Pulling the MLS data for the properties within a half-mile radius of your listing can be quite time-consuming. In contrast, RPR provides these reports with a single click.
Included are reports for New Listings, Active Listings, New Pending Listings, Pending Listings, Months’ Supply of Inventory, Sold Public Records, and Sold Home Stats. An especially helpful part of this chart is the trend line showing how the market has shifted since August 2017.
To identify which way the market is moving, compare the median price per square foot for the active listings, newly pending listings, and sold listings.
For the property referenced above:
The median price per square foot for active listings was $496.
The newest listings on the market were priced at $475 per foot.
The newly pending listings (chart not shown) were at $453 per foot.
The sold listings (chart now shown) were at $408 per square foot.
The difference in the median price per foot in the active vs. sold listings was $88 per foot (17.7 percent).
Assuming the property was 2,500 square feet, that would translate into a listing price of $1,240,000 and a selling price of $1,020,000, a swing of $220,000.
Consequently, what this data is telling you and your seller is that if your listing is typical for the area (at the median price, not totally redone or in a disaster zone) the seller should probably be listing at the pending price per foot of $453 at the most, with the expectation of selling at $408 per foot, provided the interest rates don’t go up again.
When it comes to answering the question, “How’s the market?” RPR’s new suite of tools is your go-to resource not only for converting potential leads but helping buyers and sellers get a clear understanding how your local market is trending.
Bernice Ross, president, and CEO of brokerage UP and RealEstateCoach.com, is a national speaker, author, and trainer with more than 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/new agent.