The Time May be Coming Again Soon


I don’t mean this headline in any ominous way. In recent years the national economy has given the opportunity for most in the real estate industry to reap huge financial rewards with little downside risk. The last few years we have seen the following:
- Huge amounts of cash were searching for real estate. Most attendees at our marketing sessions were trying to spend cash as their first priority.
- Low interest rates and easy credit were everywhere.
- Investors were willing to partner in development hoping for just a little more return.
- Brokers with limited knowledge could easily sell properties over the Internet. One just needed a listing of an attractive looking building in a reasonable location. Cap rates were nationalized.
- Many of the Society’s creative problem solving skills were mothballed while properties sold at very low cap rates and high per square footage costs. Some of us gray haired folks rolled our eyes and couldn’t believe it. We watched good multi-legged exchanges and creative deal structuring fall apart because cash buyers got there first, thus killing the final exchange contract before due diligence was completed.
- Our “Most Motivated” sessions struggled for qualified participants.
- Quality client counseling wasn’t a necessary ingredient for successful brokerage.
- Lots of our industry still was quite successful earning big commissions with lazy counseling skills or no experience in this area.
- Even 9/11, the Iraq War and the Katrina disaster couldn’t stop this profitable real estate boom
As I think about the Rochester Society Marketing Session just completed, a few observations come to mind.
- The amount of cash represented at this meeting was significantly less.
- The meeting was awash with horror stories of developers in some regions walking away from commitments. Housing markets in some cities are depressed and foreclosures are escalating in some communities.
- Clients and participants were privately talking of some real estate investments that aren’t working that are starting to cause some stress. Areas of the country differ dramatically in their local economies. Unlike the 1980’s where stress was everywhere, the national economy is strong but it appears local conditions make some areas very attractive and others exhibiting recessionary traits. This would seem to foster opportunity.
- Brokers seemed more willing to talk more in terms of “Client Needs” not just “My Client Wants.”
The Society of Exchange Counselors has always thrived in a market where transactions require creativity, problems need to be solved, alternatives need to be found, new ideas for solutions are critical and closings are NEEDED by our clients, not just wanted. The Society also understands that quality counseling is an absolutely necessary tool for success, not just a broker’s option.
So dust off the old exchange techniques, get the counseling juices flowing and be ready Society members; the true strengths and expertise of our membership may be challenged in the near future. This could be a satisfying and opportunistic time for our Society to thrive. I am looking forward to it aren’t you???