Brokerage Ideas for a Declining Market

For some of us old-timers it is déjà vu. The commercial real estate market is sliding or crashing, depending on your perspective. Many brokers have been through a few minor downturns but this could get really serious so what do we learn from those that experienced the 1980s?

Here is what I learned from the 1980s crash in real estate values:

1. Don’t ignore the market!

If sale prices are falling, recognize it and adjust to it. Be honest with yourself and your clients about what your market is doing. Don’t be in denial or you could waste a lot of time and money. You should know the recent comparable sales market and if your client will only take cash then list accordingly. If your client is open to equity marketing solutions, then you need at least an actionable value that doesn’t chase people away. In a falling market, each new listing probably needs to be priced lower than the sale price or your last listing.

2. Work with clients who have “Needs,” not “Wants.”

a. There is no reason to deal with clients that want to sell only at last year’s value. If they think you can find the unique buyer that hasn’t been watching the daily news or if selling for cash is their only goal, then maybe you should ask this client to find a different broker. It is costly to list something for a client with unrealistic expectations. Sometimes refusing a listing due to unreasonable expectations brings the client back to you later when they realize you were giving them sound advice. In the meantime, they are spending another broker’s time and marketing dollars.

b. Some clients really do “need” a transaction. They need the cash to offset other losses; they need the cash to infuse into their business; they have high debt and need to save as much equity as possible; they need to acquire a job. If your client prospect doesn’t pass the “need” test, then give him to the broker down the road.

c. Don’t be embarrassed by setting a new low in the market! Sometimes brokers refrain from even discussing a low offer since they don’t want to face their client with reality.

3. Learn new and old “Formulas” and “Equity Marketing” concepts.

Some of these ideas haven’t been that prevalent in our recent decade that’s been awash in cash. If you are unfamiliar with equity marketing and other creative ideas, then find the education to gain this knowledge and confidence.

4. Understand that you are looking for market “Takers,” not necessarily traditional “Buyers.”

a. You want to find people that would own your client’s property under some terms and conditions. No one can make any type of transaction without finding the “Takers.” Sometimes a couple of transactions are necessary to accomplish your client’s “needs.”

5. Maximize and encourage full cooperation with other brokers!

a. Your client may need to have more than one professional finding a solution. If you don’t fully cooperate with other brokers that can or will bring you a potential transaction proposal, then you aren’t putting your clients first.

6. Increase the contact, input and communication with your clients.

a. Most clients hold the tools to a successful transaction in what other things they can bring to the table beyond their ownership. Their attitude, skills, needs and resources may open doors, and you as an experienced transaction maker should provide the professional expertise to close. You and your client are a team and if you don’t operate this way, then your chances of a successful transaction are bleak.

7. Take time to think and plan!

a. Most creative solutions or transactions take some time to germinate, draft and then deliver to prospects and clients. You may have to develop a presentation on all the benefits this new idea might create for your client, but in order to close you must also convince a cooperating broker, business partner, lawyer, accountant or lender.

We, as experienced and educated professionals, will be tested in the next few months or years. We should capture the knowledge that is available to survive and serve our clients successfully in any market. Many Brokers who only know how to “list and sell for cash” are likely to struggle while brokers trained in equity marketing can flourish. It is never too late to enroll in courses and learn new tools to represent clients effectively.

One Comment »

  1. Stephen,

    Great article,there are many of us new to the real estate cylcles (10 years or less) and probably many who have not been through one quite like this. There is much consternation about what it is, what to do with it and where to go next and I am sure we can all use any insight we can get.

    I suspect when the dust settles and some form of real growth begins to emerge, the tools that will carry us through will be a smorgasbord of legacy and new approaches. The new approaches will likely be similiar to the ideas you present above dressed up in the fashion of the day.

    Thank you.