After a long run with a strong real estate market in Colorado, we’ve started to see the market cool considerably over the past six to nine months. Between an increase in inventory and the high interest rates, the days when most homes experience a bidding war the week they enter the market seem to be gone. In its place, we’re seeing homes staying on the market for much longer, buyers feeling empowered to ask for more concessions, and more sellers being forced to accept an offer at or below asking price.
If you’re considering a career change and have been interested in getting your real estate license, it’s understandable that you may have some concerns about this decision as we enter into a down market. In fact, there’s a common perception that a down market isn’t a good time to start a career in real estate. The good news for aspiring real estate agents is that this perception is a fallacy.
Properties don’t disappear in a down market, nor does the need to buy or sell homes. There are always transactions occurring regardless of whether we’re in a hot market or a down market. While the fluctuation of home values that occurs when markets heat up or cool directly impact buyers and sellers, this fluctuation has much less impact on real estate agents. As an agent, you will collect your commission regardless of the home value. In fact, many savvy real estate agents find that it is easier to make money in a down market due to a reduction in competition.
That being said, a down market is typically associated with a variety of factors that can create more challenging conditions for real estate agents, including:
Often, real estate agents who flounder in a down market struggle because they’re applying the same strategies that were successful when the market was more robust. You can absolutely continue to earn a lucrative income during a down real estate market, but it’s important to understand that you need to change your approach to take advantage of these different market conditions. When you do this, you’ll be able to capture a share of the transaction volume necessary to achieve your income goals.
In order to be successful in a down real estate market, you must first understand the dynamics at play during these market conditions. When you understand what is hot in a down market, you can pivot your business strategies to focus on the factors that will help you maintain a higher volume of transactions.
But in a down market, the dynamic shifts and buyers become highly valued clients. These conditions put buyers in control of the process – properties are more plentiful, and prices are generally lower (making them more attractive for potential buyers). These factors make a down market the ideal time to represent buyers. For this reason, many smart real estate agents will emphasize finding seller clients in a hot market and buyer clients in a down market.
A down real estate market doesn’t mean that there are no people looking to buy homes. But these conditions impact the types of people most interested in buying real estate. In a down market, there are plenty of people with cash, patience and investment smarts looking for real estate agents who can help them invest their money. This is a great time to focus on attracting investor clients.
Savvy real estate investors love down markets because they can purchase investment properties at a more affordable price. Many of these investors sit out a hot market because prices and the associated perceived risks get too high to justify the investment. However, these people are typically very active during down markets when prices drop. This is particularly true of “fix and flip” investors since they’re likely to have a higher profit margin when they’re able to buy these properties at their absolute lowest.
Investors generally like to purchase properties in affordable price ranges because these are more resilient in down markets. Everyone needs a place to live, so more modestly priced properties will be much more competitive in a down market, whereas affluent buyers looking for high-end homes buy when they want to rather than when the market conditions are right for them. By researching the market for homes in affordable price ranges, you can more effectively cater to the needs of investors looking to buy in a down market.
These same principles apply to commercial properties. In fact, this may be even more important in commercial real estate due to the larger values of commercial properties. Many commercial real estate investors will be extremely patient and wait out a hot market in order to invest when conditions will be more favorable for them. It’s common to find commercial real estate investors who will spend large sums of money buying a portfolio of assorted commercial properties during a down market with the intent to hold onto them and until the market heats back up, when they can sell these properties for a large profit. If you’re able to represent these investors when they’re buying and retain them as repeat clients when they sell, you can potentially earn very lucrative commissions on both ends of these transactions.
Unfortunately, foreclosures will typically increase during challenging financial times. Lenders who take possession of these properties will typically look for real estate agents to help sell them. These “real estate owned (REO)” properties can be a tremendous source of business for real estate agents in a down market.
One of the best ways to recession proof your real estate business is to build a strong referral network. Agents who have built a referral-based business are typically able to earn a good living in any type of market conditions. This is because agents who get large numbers of referrals typically represent their clients well and become the first agent called when these clients need help with another transaction. They’re also readily recommended when former clients have friends in need of a real estate agent.
As we said earlier, there are always transactions occurring, even during a down real estate market. The agents who are top of mind for former clients who were extremely happy or who are recommended by these former clients will typically receive more calls in a down market than agents who haven’t built a strong referral network. In addition, it’s often easier to turn a prospect into a client when they are referred by a prior satisfied client. This is a powerful driver of business during a down market.
If you’re considering a career in real estate, Colorado Real Estate School can set you up for success in your new endeavor. Our online real estate classes are packed with all the critical information you need to get your license and build a thriving real estate career.
All our courses are developed and taught by licensed local real estate professionals who possess the expert knowledge necessary to educate you on the latest trends impacting the Colorado real estate market. In addition, the online format of our courses allows you to work through all materials at your own pace to maximize your learning and fit your studies into your busy schedule.
In addition, you’ll have access to our VideoConnect Success Learning System™ containing the largest library of instructor-led video content available. These highly engaging video lessons enhance your learning by providing an authentic classroom environment from the comfort of your home.
You’ll also benefit from our TruSupport Pass Guarantee™ which demonstrates our ongoing commitment to your success. If you don’t pass your real estate exam on the first try after taking our pre-licensure courses, we’ll give you extended access to all course materials while you study to retake the exam. One of our instructors will also analyze your test results to determine the areas where you struggled. Our instructor will work with you to develop a customized study plan that emphasizes the subjects and concepts that were most challenging to you so that you can focus your efforts on the information you need the most work mastering. This process will give you the best chances of success when you retake the exam.
Contact us today to learn more about our online real estate courses.
