*Event driven market declines
One of KJF Partners’ Core Values is:
“We are driven by our personal commitment to create value for our investors, tenants, teammates and brokers.”
To serve our broker partners, we send occasional emails that focus on things that I have learned through my brokerage history or that I notice from my current role on the principal side of the business.
Brokerage is a very challenging business and when there are events, like the COVID 19 pandemic scare, it can be challenging to understand what to expect and to move deals forward to a successful conclusion.
Buyers React First
My experience as a broker during several rapid market downturns/stalls is that buyers generally react before sellers. During periods of turmoil, or the threat of turmoil, buyers tend to get conservative quickly. They will re-think their position in existing escrows, lower offer prices, or decide to sit on the sidelines and wait until things have moved in a positive direction before taking action on new deals or existing escrows. As a broker, anticipate your buyer getting “cold feet” during a transaction and re-sell your buyer during every presented opportunity. Be a good listener and watch your buyer’s actions carefully. Delays in scheduled action and communication often tell of your buyer’s underlying fear. Ask questions to fully understand their thoughts and be prepared to help them through the process. Remind your buyer about their long-term goals and help them focus on the reasons they decided to make their purchase decision. Always be armed with good news about the deal/property/area etc., and share that news liberally. If your buyer is on the edge of cancelling a deal, ask “what would it take for them to feel comfortable moving forward.” Frequently, if you can shift a conversation from cancellation to moving forward, you have a very good chance of making a deal that everyone will be satisfied with.
Sellers tend to accept reality of an adjusted market slowly
When an event creates a negative impact on the market, sellers tend to hang onto the promise of yesterday’s prices for too long. One can’t predict what tomorrow will look like but, seldom does a pricing decline, preceded by an event, recover as quickly as prices drop. Very frequently, the deal that the seller currently has on the table may be the best deal they will receive. You must prepare your sellers that in the event of a buyer request for a discount, or rent guarantee, it is frequently prudent (assuming the request is reasonable), to negotiate a solution and get the deal completed. Markets drop at the speed of an elevator ride, and frequently recover at the speed of walking all the way back up the staircase. With our current COVID 19 scare, there will be tenant failures, rent concessions granted and, vacancies that increase. In general, the capitalized value/price of those potential losses maybe far greater than a price concession that you can negotiate with your current buyer for your current escrow. You will be serving your client well by pushing hard and successfully closing your deal with an existing buyer rather than allowing a deal to die and watching your client chase prices down and incur greater losses.
Time will eventually kill all deals
As a very young broker, I learned that time was never my friend while in a deal; urgency to move forward on a timely basis is always important in real estate. COVID 19 is only an example of what could happen to complicate your deal. Lost days become weeks and, if enough time is lost, something will happen to strain your closing and cost your seller money or the potential to conclude a deal completely. Time is a valuable resource, not to be wasted and, if you take advantage of time, you will be rewarded with more deals and stronger relationships.
Like all of you, I’m hoping that the current crisis will pass quickly, and we’ll return to business as usual before long. But, I’m certain there will be losses incurred, tenants that fail, and deals that die. Bring good energy to your deals, to your clients, and keep your deals progressing so everyone can accomplish their goals. In the long run, the market will adjust and grow. It always has.
KJF Partners, Inc.
Cell Phone: 949-275-5038