The real estate market is ever-changing, and 2023 is no exception. Analyst Ryan Lundquist recently reported an uptick in new home sales, signaling a shift in market dynamics. However, this comes at a time when the market for existing homes is experiencing a significant slowdown, with sales down by 30% or more. In this blog, we'll explore these trends and what they mean for real estate agents.
The Uptick in New Home Sales
According to Ryan Lundquist, new home sales are on the rise. This is an interesting development, especially considering the overall slowdown in the real estate market. Mortgage rates have reached a high of 7.19% as of September 21, 2023, contributing to the sluggish pace of existing home sales.
The Slowdown in Existing Home Sales
The current market is one of the slowest in decades for existing home sales. High mortgage rates and economic uncertainties have led to a 30% or more decrease in sales.
What Agents Should Do:
1. Early Client Registration: Show your clients new builds early and get a buyer compensation agreement signed to ensure you get paid a commission.
2. Check Insurance at Multiple Points: Advise clients to check insurance at the beginning, middle, and close of escrow to ensure coverage.
3. Maintain Relationships: Sometimes your clients walk into new builds without you, or you can't attend their first walkthrough. Good relationships with builder agents can sometimes save a commission that might otherwise be lost if you can't register them in advance.
4. Stay Informed: Keep up-to-date with new builds and market trends to provide the best service to your clients.
5. Client Registration Expiry: Be aware that your client registration has an expiration—some 3-6 months, others for up to a year. If your clients are shopping for long, be sure to register them again as needed.
6. Utilize CAR Form BRBC: To protect your commission, consider using the California Association of Realtors (CAR) Form BRBC, also known as the Buyer Representation Agreement. This legally binding contract ensures that you are compensated for your services. The best time to have this agreement signed is at the beginning of your relationship with a new client, ideally before showing any properties.
Room for Negotiation
Many builders are still paying commissions and leaving room for agents to negotiate significant discounts for their clients—sometimes tens of thousands in price reductions.
New Builders' Rate Buy-Downs
Lennar and other major home builders are changing the game. Lennar has recently stopped paying out any agent commissions, despite over half of their sales coming from agent referrals. They are also offering mortgage rates in the 5-6% range with massive buy-downs around $60-80k to incentivize buyers. Other builders are following suit but on a smaller scale, offering significant but smaller rate buy-downs to attract buyers.
The real estate market is in a state of flux. While new home sales are picking up, existing home sales are slowing down. Agents need to adapt to these changes to continue providing exceptional service.
For more insights and assistance in real estate transactions, contact us at AIDE.
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