Stay ahead of the burgeoning 2020 recession

The 2008 recession and ensuing recovery saw the loss of 94,000 active real estate agents in California. These former agents were unable or unwilling to survive in the harsher real estate market, an environment brought on by the recession and slow-moving recovery. Today’s agents will pull through the 2020 downturn if they plan their financial strategies now to survive the unfolding economic trifecta situation of a recession, pandemic and financial crash.

Forecast the real estate market, for yourself

The first step you can take toward making it through the 2020 recession is knowing when it will occur. Use these two resources to fathom the years ahead:

The yield spread

The yield spread indicates the likelihood of a recession or recovery one year forward. After over a decade of positive activity, the yield spread went negative in June 2019. June’s negative yield spread figure forecasted a recession to arrive within 12 months. Therefore, informed real estate professionals were prepared for the next recession to arrive in mid-2020. Read more…

Charting the market

Today’s market signals of a negative yield spread, significantly slowing real estate sales volume and imbalanced prices indicate today’s real estate investors have passed the end of the most recent sell phase. Investors who understand the principal of option value are in a hold phase. Sales volume will only decline in the coming months, home prices following in 2020-2021. If the Federal Reserve (the Fed) goes to negative rates, that stimulus will tend to give home prices support.  Read more…

Virtual transactions in the 3rd decade of the millennium

As the novel coronavirus (COVID-19) continues to keep Californians at home, the entire property market is rapidly feeling the adverse impacts of a shuttered client base. Brokerages with experience giving virtual tours and assisting remote clients are quickly showing the upper hand.

Virtual tours

While more difficult, homebuying and selling may still continue in 2020, despite COVID-19 isolation requirements. Real estate has been classified as an “essential business” – it shelters people and businesses which must take place. Thus, while home tours may still continue, most homebuyers and sellers will prefer to avoid in-person meetings and tours throughout as much of the process as possible. Read more…

Discuss virtual transactions

There is presently no legal requirement to use a coronavirus disclosure or questionnaire in your California real estate practice. However, agents do have a duty to address in verbal communications the concern of members of the public they have contact with in their real estate practice. To best represent their clients, agents ought to verbally discuss best practice for keeping individuals away from each other in transactions.

Contract extensions and cancellations

Even in normal times, closing dates are, at best, estimates. Thus, “time essence” provisions are antiquated, misunderstood and even costly provisions. During the era of COVID-19, many homebuyers and sellers are choosing to extend closing dates as they wait and see how the economic fallout from the pandemic impacts their plans.  Unlike a recession setting in as a defense to a buyer closing escrow, the pandemic presents the defense of “force majeure” to closings which may bar sellers from enforcing the price a buyer agreed to pay.

Extend the agreement

As a matter of policy, RPI Forms do not contain “time essence” provisions. When you need to extend closing scheduled under an existing purchase agreement, simply use RPI Form 250 as a general addenda to your current purchase or listing agreement. If not, then notices to perform providing a reasonable time period for the buyer to close are the seller’s best enforcement effort.

Expand your practice and your thinking

Create more ways to earn income by branching out into similar career paths that build on your experience as a real estate agent.

Become a notary public

Though notarization is a simple process, it requires some training and licensure — all within reach to those who want to gain new, marketable skills and top off their income. As a real estate agent, you’re in a prime position to take advantage of these business opportunities and expand your earning potential by becoming a notary public. Read more…

Get your MLO endorsement

Assist your homeowner clients to take advantage of low interest rates by becoming a mortgage loan originator (MLO). As an agent, you need to hire on with a broker who is an MLO-endorsed licensee with the California Department of Real Estate (DRE). To become a California-licensed MLO you need to meet minimum standards for MLOs, complete pre-licensing education and pass federal lending exams.  Read more…

Increase marketing of your brand

Layout in writing your strategy to increase and track your marketing efforts to stay on top of branding yourself and nurturing clients during these disruptive times.

FARM for new clients

The goal of FARMing for real estate clients is to build a database of contacts and be recognizable in your chosen neighborhood of influence. Expanding your FARM and distributing a greater volume of marketing materials is a smart way to increase your client base. Read more about FARMing here. Access 300+ free FARM letter templates here.

Develop and market your website

As homebuyers and sellers are stuck at home, having a personal website is more important in 2020 than ever. Help your clients find you and your listings online by creating an attractive, user-friendly website using search engine optimization (SEO). Read more here.

Become articulate with time-honored investment strategies

To maintain an acceptable level of clientele, a more innovative approach into diversification is needed during recessionary periods to develop additional sources of income. Consider spending time learning about popular investment strategies.

Real estate syndicates

Syndication is the act of bringing together in co-ownership a group of investors to fund the purchase, operations, and eventual resale of an income-producing property. A recession is the ideal time to be an agent or broker conducting business as a real estate syndicator purchasing income-producing investment property at the bottom of the market. Read more here.

§1031 exchanges

A §1031 transaction or exchange allows an owner to sell business-use or investment real estate and use the sales proceeds to purchase replacement business-use or investment real estate, called like-kind properties, without a tax on the profit. Learn the §1031 rules to become a more attractive option for investors purchasing at the bottom of the market. Read more here.

Prepare for distressed properties unemployment will produce

Study the California rules protecting homeowners during the foreclosure process, the tax impacts of completing a foreclosure or short sale and the tricky negotiations for discounts with mortgage lenders on negative equity properties. Then, market yourself as an expert to attract more clients during the downturn.

Foreclosures

Foreclosures inevitably rise during a recession, as many homeowners find themselves with reduced income and unable to make mortgage payments. However, the unique job losses created by COVID-19 social distancing have produced some temporary foreclosure protections. When you become a foreclosure expert, you can advertise your services to buyers seeking to purchase foreclosed properties and you can help current homeowner clients by directing them to the appropriate resources. Read more about foreclosures here and COVID-19 foreclosure protections here.

Short sales

A short sale is a homeowner alternative to a foreclosure sale when the mortgage amount owed is higher than the property value encumbering their home. Real estate agents advertising themselves as short sale experts can help short sellers navigate the more complicated short sale process. Read more here.