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...

A number that we should be concerned with right now in the market is 16.1%.

So what does 16.1% represent?

It represents the number of transactions that were canceled last month. The last time we saw a number that high was at the beginning of COVID when buyers really didn't know what was gonna happen. March, April, when COVID really went into full effect in our country in 2020. That's when you saw this same level of cancellations. And that's what we're seeing again right now.

So how do we tighten down offers so that sellers have some clarity that they know they're gonna get to closing?

I'm gonna give you several things to think about. You might have a few more. But one of the things is getting the disclosure statement signed as quickly as you can.

Most states require a disclosure statement. This is where we're the seller's gonna disclose everything they know about the house to a buyer. But not waiting around, not delaying getting that...

Here's something we should all be doing with a seller at the beginning of our relationship:

When we take that listing, we should be resetting expectations on the number of live showings that will occur.

Last year, when we took a listing, we'd have 20, 30, 40, 50 showings in the first week. Today, that number maybe two or three or four or five. It will not be the same as it was last year at the same time.

So how do we reset this expectation?

One thing we need to talk about with the seller is the way the average buyer looks at homes. So last year in 2021, the NAR measured this and they found that buyers, on average, that purchased a home, looked at homes for eight weeks. And during that eight week period of time, they viewed eight homes. But of the eight homes they looked at, they looked at three virtually. And in the buyer's mind, that was a showing.

So we need to educate our sellers about what people consider to be a...

Here's something that's come off the table over the last few years:

And that is the idea of an owner carrying their contract. We don't hear that term anymore because interest rates became so low, that no one would consider carrying a contract. Well with interest rates rising, this conversation would be something that we should be having with sellers now again.

And that conversation could be as simple as this:

"Hey, Mr. And Mrs. Seller, I just have a quick question. You guys have a pretty good equity position in your house. And just one thought came to mind. As interest rates are rising for typical mortgage rates, have you guys ever considered carrying a contract yourself? In other words, acting as the bank. This is where somebody would offer you a down payment, large enough to pay off your note that you have now and pay all the fees and everything else that's associated with the closing.

"But then after that, you'd have an income...

Now here's another question that a lot of us are getting:

Is the market turning into a buyer's market?

This is really a market-by-market conversation. But I will tell you that we could easily have a situation in a lot of markets where you actually have a couple different markets within the larger market.

Here's what that means:

Markets aren't just one thing. They are a whole list of price bands, right? So you have lower tier price bands, mid tier price bands, and higher price bands. And in your market, as the market is transitioning, it's not all one thing. So you could have a lower tier price band that's still a strong sellers market. Lots of demand because that's where first time home buyers go, right?

But then as you move up the ladder, you might see that at the higher tiers—the luxury housing, for instance—that it is a buyer's market.

So what's the defining factor here?

You gotta ask yourself, how do I...

Here's an interesting question that we often get:

If I buy a house and sell a house in the same market, am I gonna give up some equity? Am I gonna make a mistake by doing that?

Well, generally when you're buying and selling a house in the same market, you're not gonna have any equity loss because you're just moving money from one house to the other. And actually in our current market, we have something kind of unique happening in a lot of areas of the country. Really it's a tale of two markets or maybe three markets.

But when you look at your market, it's not just one big market, right? It's broken down by price bands. And there's some price categories that are much hotter. They're much more active. People are much more engaged and that would typically be the lower price categories, right?

The first time home buyer categories. But as you move up that ladder to the second per home purchase, so maybe the starter luxury and the real...

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...

What is an anchor point? And how can it benefit you when you're talking to sellers about getting their prices down?

Well, an anchor point is a way that we can help sellers recognize where they're at relative to the competition of the market. And what's gonna happen to them if they don't take action.

So let me give you an example:

If you have a seller in a neighborhood and you call them and you say:

"Hey, Mr. And Mrs. Johnson, I was hoping I'd have a conversation with you because I did a little research in the neighborhood, and I know we haven't had the activity that I've been hoping for. And so I'm concerned about getting the house sold. So I did some research. I know, you know, the property over on fourth street. It's been sitting in the market for a hundred days. I know you'd drive by it every day.

"And I did a little research on that one. It looks like they started at $600k and now they're down to $550k,...

One thing we should all be aware of right now is that a lot of home sellers are reevaluating their price.

And one thing you should be monitoring in your own market area is the number of price adjustments that are occurring every 24 hours. Maybe on your hot sheet, your MLS data sheet, it's gonna show that number. Keep it a close eye on that, and then think about it with your own sellers.

Here's something that's interesting:

In the last few weeks we've seen 3.5% of all the sellers in America reduced their price.

Now that doesn't sound like a lot. But remember, we're coming off one of the hottest real estate streaks we've ever seen in our market.

But the market's starting to cool when it comes to pricing and people are starting to adjust to get ahead of the market. Typically we don't see price adjustments begin to happen at this level until July or August.

So why are sellers starting to adjust prices much, much earlier than ever before?...