I have an important concept for you as we're coming into this challenging market with interest rates.

So I want you to think about something I call parity pricing. Let's paint a picture:

Imagine you're a buyer now. You have a $400,000 budget to buy a house. And you found one and got it in contract. Your budget for your payment is $1,767 a month. That's for principal and interest — we won't worry about taxes and insurance for this kind of demonstration.

So how we came to that number is if we were buying a home in April and we were lucky enough to get a 5.25% interest rate back then, that's what that payment would equal. But fast forward to today, we were shooting this around September where interest rates have shot up to 7.25%. In order for that buyer who only has a budget of $1,767 a month, or for that buyer to buy a house based on today's interest rate, how much would the seller have to come down to get to a parity...

Hey guys, you're gonna be taking a listing in the next couple weeks. And when you take that listing, what if I give you a tool that can help you market it in a way that will set you apart from all the competition and help you sell for top dollar—despite the interest rate issues that we're having in the marketplace right now?

Here's your golden ticket:

When you're sitting with the seller, I need you to ask them this question:

"Can I ask you, what kind of loan do you have on this home?"

If they answer that they have an FHA or a VA loan or a USDA loan, guess what? Those loans are potentially assumable. And if they have a loan interest rate of less than 5%—even less than 6% today—that could be very valuable to a buyer in the marketplace.

Now, there are some conditions and qualifications. Obviously if they're doing a VA loan, the buyer has to be a veteran themselves. But most of these just require that the...

Hey guys, I've got another tool for you:

When you are going out to take a listing and the seller is asking you about getting top dollar for their home, one question you can ask which relates to them getting top dollar is, can I ask you how much do you owe on your current home?

This is gonna reveal how much equity they have and how much they have left to pay off.

Some—about 30% of the people you're talking to—will own their home outright. And the vast majority will have some kind of loan. But a lot of those people have paid down their loans dramatically and they have a very small balance. What if you said something like this to them?

"I got something to ask you guys based on what you just told me:

We're in a high interest rate environment. So it's making affordability a really big issue. And because of that, when people are paying more in interest, they can't afford to pay at a higher price. But if we were able to offer an...

Hey guys, have you ever heard of a blended interest rate?

A blended interest rate is gonna become really important to a lot of us selling real estate in the coming months and years as these high interest rates stick with us.

So here's what a blended interest rate is:

Imagine a buyer has a budget, and they're gonna go out and buy, let's say, a $700,000 house. They have $100,000 down, and now they have $600,000 they're gonna finance. But they can't quite swing the high interest rates that are out there today. It's just gonna put 'em in a place where they can't afford it.

But they're willing to be creative and if you have a seller that's going to be creative, you can still put this deal together.

So here's an example:

Let's say that they were able to go out and get a first mortgage for $400,000 at the current interest rate. Let's call that 7.5%, which is probably where it's headed pretty quick. And the seller was willing to carry a...

What is the meaning of measuring market intensity and why does it matter?

Market intensity is an interesting way to look at the market. I was given this idea by my friend, Lennox Scott. So when we look at market intensity, the way we measure it is by how fast listings are going pending the first 30 days they hit the market. So if we go back in time and look a year ago in a lot of markets across the country, when you look at how many listings were going pending in the first 30 days, it was like 80%, 85%, 90% of listings were going pending at that point.

Fast forward to today: What's that market intensity reading? I'll tell you what mine is. For the last two weeks, in my local market that number is 60%. 60% of listings are going pending in the first 30 days.

It's still a high number. It's a lot, but it's not 80%. It's not 85%.

So that market intensity comes down a few notches, and that's the conversation we need to be...

Why should a buyer buy a home in today's market?

If we don't know the answer to that, then it's gonna be a struggle to talk to buyers about why they should buy. Because everybody thinks they should wait:

"Shouldn't I wait for prices to come down? Shouldn't I wait for interest rates to come down? Shouldn't I wait for the recession to kind of come and go?"

There's gonna be a lot of those mindsets. And we have to be able to answer the question: "Why should I buy now?" 

And really we have to sell ourselves first before we sell anyone else. So I'm gonna give you four reasons here that someone should consider buying now as opposed to waiting or not buying at all.

1. Some sellers are panicking.

Why are they panicking? Because they put their home on the market yesterday and they expected just to get overrun with buyers. Then maybe two or 3, 4, 5 days goes by and they still don't have multiple offers. They don't even have very many...

There's a new survey that was done by the National Housing Survey, which was just done in June. So it's fresh data. And it shows a divergence that we haven't seen probably in the last 10 years or more.

It shows how many people think that the economy is on the wrong track:

81% of Americans believe the economy's on the wrong track.

So when you look at that number and we put it in perspective of people that are buying and selling real estate, how do we have that conversation? Where people think, oh my gosh, we're on the wrong track. I don't know that I should be buying.

We call that consumer sentiment. Or I don't know if I should be entering this real estate marketplace.

What can we say?

How can we address that concern where people think it's the wrong time to enter this market?

Well, a good lesson for us is to model successful people. People that are more successful than us, right?

One of the most successful people in our...

Date the rate. Marry the house.

Now, what does that mean? That means that if we went back in time to a year ago, the market was a completely different animal. Right?

A year ago, buyers that were in the marketplace were experiencing multiple offers on every listing. They were being asked to sign escalation clauses that would maybe sometimes mean they were paying 10, 20, 30, 40, 50, a hundred thousand dollars more than the list price. People are being asked to do appraisal waivers, inspection waivers, appraisal gap language, non-refundable earnest money.

It was an incredible time to be a buyer in what we might call a frenzy market.

Now, fast forward to today:

The market's undergoing a complete shift, right? And what that means is there's a lot more to choose from. There's a lot more listings on the market. List prices are coming down in a lot of price categories. We're seeing a lot fewer buyers in the market. So that means that the...

New study out from the Mortgage Bankers Association shows that ARM demand has reached a 14-year high.

And now what's an ARM?

An ARM is an adjustable rate mortgage.

A lot of you that have entered the business over the last 10 years may have never used an ARM.

They became almost invisible for many, many years. Why? Because we've had the lowest interest rates in history. No one would bother doing an ARM. But over the last quarter, just to here in 2022 ARMs have gone up to a 14-year high.

So an ARM is an adjustable rate mortgage. Generally, it's set interest rate for the first 3, 5, 7 years. And then it resets based on the current rates of that time. There's a cap on it. Every loan's a little bit different, but here's some examples of what that looks like:

Right now, as I'm talking to you today...

The current interest rates are about 5.5% while the ARM rate is about 4.5%. So people are getting about a 1% discount for going into an ARM...

How do you normalize a price reduction?

People don't wanna feel like they're the only ones reducing their price. And some sellers may not be in tune with the market like we are. They may be assuming that the market's like it was six months ago. And they're the only person that's not selling right now.

Of course, we know that's not true. We know the market's changing. We know there's more inventory hitting the market than we've seen in a long time. We know interest rates are impacting the marketplace.

So how do we normalize a price reduction?

The way you do it is to show others in your market that are also reducing their price at the same time. So here's how you do it.

When you're talking to a seller, you can say:

"Hey, Mr. And Mrs. Seller, you know, we haven't had a lot of showings and that's probably directly to related to our price. We're seeing more competition. Interest rates are definitely...