There's a "four alarm fire" happening in the real estate industry today:

What is it?

Interest rates.

Interest rates are rising extremely rapidly. Now we knew coming into 2022 rates were gonna rise. The anticipation was from Mortgage Bankers Association, NAR, Fannie Mae and Freddie Mac, etc. The consensus was 3.7% by the end of 2022.

But what has happened?

First week in January, rates went to 3.12%. Second week in January, rates went to 3.45%.

Wow — that's almost a vertical rise!

So what's the messaging here?

The messaging for our buyers and sellers is get off the fence and get into the market.

Now, why are rates rising so quickly?

Well, we know that the Fed had told us already that they were gonna raise rates three times in 2022 to fight inflation because inflation's at a 50-year high and 7% was the latest number.

So their #1 goal was to fight inflation.

They also announced they were gonna stop buying mortgage-backed securities as of March.

But now the word on ...

Hey guys, I wanna give you a quick strategy when you are listing a house for the first time and you're having a conversation with a seller.

I call it my "Many Buyer Eyes" Strategy. And here's how it works:

I say...

"Hey, you know what? One thing I do with all my sellers when I list their properties for sale is I treat you as a buyer. And what that means is that I'm gonna act like you're a buyer for your own property and your own price range. So I'm gonna set you up in the MLS as if you're a buyer looking in the 400-500k price range in your market area, in our MLS zone that we're in with similar attributes of your house. Here's why I'm doing this: I want you to see in real time the listings that are being presented to buyers that are searching for home like yours.

So you're gonna see all your competition, all the price reductions, all the pending transactions, they're gonna be coming to you. And I want you to look at them because we want to be responsive in real time. So...

Lawrence Yun was recently quoted as saying, "If you are under the age of 40, you have never seen inflation this high in this country."

The inflation rate in November hit a record 6.8%. That's the highest we've seen in decades.

So when we look at these numbers and everybody's talking about inflation, how does this relate to estate?

It's an interesting conversation. It's something that we should talk about with our clients.

Here's the good news when it comes to real estate:

Real estate is a tremendous asset and a hedge against inflation. That's why last year, we saw a record number of people investing in real estate. In fact, it was the the highest recorded ever. The percentage of homes purchased was 18.2% were sold to investors.

One reason is they're using it as a hedge against inflation.

So here's what's happened according to Lawrence Yun. He says that real estate has proven to be a good hedge against inflation. Some examples:

In the 1970s, during one of the highest i...

One thing that we should do this year is cut the dead wood.

What does that mean?

It means we don't wanna be walking up a mountain, our mountain being our figurative goal set that we've set for ourselves and have a backpack full of rocks on our back.

Now, what is that backpack full of rocks?

Those are clients that don't wanna sell, that don't wanna buy, that are wasting your time, that are frustrating, that are angry people that we do not need to be carrying around on our backs anymore.

We need to cut them loose and work with people that really wanna buy and sell.

So going into the new year, how can we approach our business a little bit differently?

One is to work with ready and willing clients which sounds crazy, but it is so simple that it's obvious, right?

We need to work with ready and willing clients.

Having a ready and willing conversation is important. So I'm gonna give you my "ready and willing" conversation script when I'm talking to a buyer.

So when I'm t...

What is Q2?

Well, Q2 is your most valuable asset. And you might not even know it.

Your most valuable asset is your database, your sphere of influence, we know that.

But what's Q2 mean?

Q2 represents the quality and the quantity of your database. So let's look at those two issues and how they can impact your bottom line coming into the new year.

Let's start with the quantity. What does that mean? Well, if we know that for every 10 people in our database, we'll average one closed sale, knowing that quantity makes a big difference. In fact, when I talk to agents on a regular basis, and I ask, how many transactions did you close last year? And they say 10, 12, I'll say, how big is your database? Let me guess. It's probably 80 to 120 am I right? Most people will say, yeah, you're right on the money.

Why?

Because your database is a reflection of your performance. Smaller database, smaller performance. Larger database, larger performance. That's just the nature of the beas...

This is an amazing number:

63% of home buyers that are out shopping today believe that the homes that they're looking at should look like the homes that they see on TV on HGTV and other shows like that.

That is interesting because that's something we've got to educate our sellers about. Because if that's the buyer's expectation, if we don't meet that expectation, we may not get top dollar.

So when we're sitting with sellers, how do we have those conversations? There's another study that might help with that conversation that will actually incentivize them to want to do this.

The new study shows that of 13,000 homes in the country that were studied in 2020 -- a very recent study -- 85% of those got between 6% and 23% more for their home because they were staged compared to the competitors in the neighborhood.

Those are powerful numbers to motivate your sellers. And then we have to define what staging actually means anyway.

So when I'm talking with a seller, for exampl...

I got a quick note on feedback. This came to me from one of my friends that works with me, Adam McGrew. He started doing this a couple of years ago and I thought it was brilliant.

We're always asked for feedback when we do showings. Number one, give the feedback because the shoe's going to be on the other foot. When you are selling a listing and they show your house and you're going to ask for feedback. And if they don't provide it, it's going to be frustrating. So always give feedback.

But now you want to go further than that. Meaning, when you're giving feedback, it actually can be a pre-negotiation tool.

This is how Adam uses it:

Instead of just saying, "Oh, it's a nice house, but they chose another one" or something super simple that's not meaningful, Adam gives a detailed text.

In the text, he gives an insightful analysis of the home, how it compared to other listings, what the buyer noticed as they're walking through the house — for example, they noticed the deck...

Are you doing a weekly call to all your sellers? If you haven't started doing this, this is something you need to be doing. And as you take new listings, you need to just create this expectation that you're going to call them every week.

My preference is on Monday. I want to get the week started off right. And having my Monday morning power hour, where I call sellers, is super important in my business plan.

So why do we make calls to our sellers every Monday?

Because we need to earn the right to be able to ask for price adjustments, condition improvements, or incentives if they're needed in order to get the property sold.

The market's changing and not every single listing you bring to the market is going to sell instantaneously anymore. Often we're going to have to make some adjustments in the condition, price, or incentives we're offering.

Here's how you handle that conversation with the seller:

I'm going to start by saying, "Hey, just want to give you a quick update...

As we begin to price property, it's important to understand the difference between comp-based pricing and competitive-based pricing.

Comp-based pricing is what REALTORS typically do when they do a CMA, they do a comp based pricing analysis. What they do is they look at properties that have sold three to six months ago, very similar to what an appraiser does. And normally in a typical market, that's very effective. But we're not in a typical market.

When you're doing that today, you could have an inherent flaw in your data. And here's what it is:

Back in April and May, all indications point to the fact that we probably hit our apex point of the market. Meaning that home sales were indicating at 23-26% appreciation rate compared to the year before. So that was the peak acceleration of our markets.

Since then, we've been moderating. And what that means is that people aren't getting 23-26% compared to a year ago. Now it's down to about 16.9%, still high, no doubt, but that ...

If you want a great marketing message that you can put out to your audiences today. I'm going to give you one right now.

And it's not from me. It actually comes from the NAR Economist Blog. If you haven't checked that out, check it out. I pull a lot of data out of there all the time.

But they had this great example of how much equity someone would have built up over a 30 year period.

And so they took an average home price and they went back 30 years ago and said, what was the average home price? What would be your guess?

The average home price 30 years ago was $103,333 — an odd number, but that's what it was.

Then they took somebody that put 10% down back then, had an average payment based on the interest rates at the time, and figured out how much equity they would have built up through equity appreciation and paying off their mortgage.

So what would they end up with net worth today just from their house?

The answer is $349,000.

But not all areas are created equal,...