Episode 20: When Markets Change – How the Buyer/Seller Relationship Changes

Scott Williams: Sweet Home Santa Barbara, where the skies are so blue. Sweet Home Santa Barbara, what’s worked for me can work for you.

Jonathan Robinson: Welcome back to Sweet Home Santa Barbara. I’m your co-host, Jonathan Robinson. I’m with my friend, realtor and co-host…

Scott Williams: Scott Williams.

Jonathan: Good to see you again, Scott. It’s been a little bit. Since the last time we did a podcast, all kinds of things are shifting in the real estate world. The topic we’re going to talk about today is how to think about market shifts in real estate when we are currently in one. I look forward to learning a little bit about this topic.

First of all, I’m wondering if you could give us a little overview of your view of market cycles and where we’re at now.

Scott: Well, the great majority of the time, Jonathan, the buyers and sellers and realtors are pretty much in agreement about what’s going on. Most recently, the seller has been in charge of the marketplace, and buyers have not had much choice except just to deal with the fact that the sellers had a lot of power. All three of us, the realtors, buyers, and sellers, were in agreement that this was what was going on, but that is in the process of shifting. That is no longer what’s going on right this minute.

Jonathan: What could you say about what’s going on now, if anything?

Scott: Well, a gap has opened up, Jonathan, between the way the buyers see the market and the sellers see the market. They’re the two important players here. The realtor’s job is just to facilitate this, but if the buyers and sellers see things differently, then the market begins to become different.

Jonathan: How often does that happen?

Scott: In this case, it’s been about two years. We had the COVID market, and that was a seller’s market. We’re just leaving a seller’s market. Four, five years before that was also a seller’s market, although not nearly as powerful as the COVID market. That’s really about seven years now that we’ve been in a seller’s market. They can be quite long.

Jonathan: Is there anyone in charge now or is it kind of a free-for-all?

Scott: Well, the very best real estate, the sellers are still in charge of, because the buyers who want to find something that’s just in a fabulous location and really good condition are competing with each other and probably overbidding in order to get that. Less of the super prime is becoming a little bit more balance between the buyers and sellers.

Jonathan: Right now, are realtors helpful in helping the buyers or do they not know what’s going on, either?

Scott: Well, that’s the hardest thing for a realtor to admit because we’re used to being the go-between the buyer and the seller, and kind of knowing what’s going on. Right now, and this is one of the two times, when the market takes off like a shot, it’s going up like a rocket, when that first begins or when the market begins to crest and we go into unknown, in those two moments, the realtors are the least smart person in the room. The buyers and sellers have more of a sense of what’s going on than the realtors because we’re just used the way it’s been.

Jonathan: Yeah. So you say both the buyers and sellers are, in a way, better position to know what’s going on. Let’s talk about the sellers now. What should they be knowing or doing, or what consideration should they be thinking about if they’re toying with the idea of selling their house now?

Scott: Well, they know that things have changed and it’s not as fast as it was. They’re all completely aware of that. They don’t know quite what it means, but they’re aware, it’s not the same it was. There are not so many multiple offers, not so many buyers on the… they’re going to be hitting them with lots of offers. That’s already happened. The sellers are trying to figure out, “How bad is it?”, or, “What do I need to know?” I can’t really help them with that. They are in that position of losing traction, and the same thing with the buyers. The buyers are realizing they have more traction, there’s fewer competitions, and this is just a natural phenomenon that the realtor can only watch and say, “I wonder what happens next. It’s a curiosity for me,” but the idea that I’m in charge of this, “No, I’m not in charge of this,” and none of the realtors are in charge of right now.

Jonathan: Still, you must have advice as to what, like, for example, sellers should be thinking about in a market like this or what buyers should be thinking about in a market like this.

Scott: Sellers should be open to the fact that maybe their house is going to sell for less than they thought. When the marketplace crests like this, oftentimes, there is a 10% above the market for the really fortunate few, or 10% below the market or what they thought the home was going to worth. It might happen to a seller. They should open up their flexibility for what they take and just say, “Well, that’s the best I can do.” The buyer, the same thing. They may still find themselves competing for a really wonderful home and they may have to compete a little harder, or maybe they’re the only show in town for a seller and they’ll get it for a little less. As we work it through, this is how it happens.

Jonathan: How does a person’s life stage, for example, fit into this? Like, should they be considering their own personal needs in this market? How would you advise people about that?

Scott: That’s the crux of the matter. When all parties, the buyer, seller, broker, all realize the sellers in charge, then you just make your plans accordingly and you fit your life into that situation. In a moment like this, you need to pay attention a little bit more to your own life. I don’t recommend you listen to a bunch of predictions. Talking to your family and friends about where the real estate market is going probably won’t do you very much good. It’s going to tell us all, when it’s done, how it’s going. Predicting right now is just isn’t going to work very well. Give it a little bit of time, but if your life says, “I’m planning to keep my job. I’m doing well financially,” then you should go ahead and move forward with your purchase. The average person in Santa Barbara area keeps their home for 20 years, so you should make your decision like, “I should go ahead and buy a house,” yeah, you’re going to have at home for a very long time in most cases.

Jonathan: So the consideration of, “Is this a good time for me to buy?”, or, “Is this a good time for me to sell?” becomes even more important when nobody knows, really, where the market is going to go next?

Scott: Yeah. You are the expert on your life. Try to turn off the media and the friends and whose guessing where the real estate market is going and focus on what’s best for you and your life. Should you be selling this home? Even if it’s for 10% less, should you be selling your home? You are the expert in answering that question. Should you buy? You’re the expert. You have to listen a little bit more to your own voice in a moment like this.

Jonathan: Now, you mentioned that realtors, sometimes, are the last to know what’s going on, and sometimes they even can back out of a deal. Say a little bit about that.

Scott: Well, the last time we had a big change in the marketplace was at the beginning of COVID. Buyers backed out of buying homes because they thought everything is going to fall apart. That turned out to be, in the last two years, that was absolutely the best possible moment to have bought a house when those people backed out of escrow. To somehow think that you, personally, can predict where the world is going and what’s best for everybody or for you, it may not turn out to be that way. If it feels like, “I like this house. I want to live here,” you should buy it. There is no better way to know than that.

Jonathan: Yeah. It’s interesting. The best stock market people in the world will say that, “We can’t predict the stock market. We base our buying on other principles other than that we can predict the market.” It seems to be the same right now in real estate.

Scott: Yeah. There’s that, sort of, herd Instinct of how human beings operate, and I think you should have your meter tuned to the fact that, “What is everybody doing?” Right now, your meter is probably not reading very well. That’s hard to admit as a realtor, that I don’t know, and I think that buyers and sellers, you don’t know, but pay attention to what’s best for you.

Jonathan: Any last words on market cycles and practical ideas that people might consider?

Scott: Well, this is a very interesting moment in the marketplace and doesn’t happen very often, but it’s a curiosity of, we’ll go back fairly soon. We’ll know what’s going and where things are going, so stay tuned.

Jonathan: How can people get ahold of you, Scott?

Scott: Email is best. Scott@ScottWilliams.com.

Jonathan: Well, thanks for listening, folks, and hope you join us for future episodes of Sweet Home Santa Barbara.

Scott Williams: Thank you for listening. Please subscribe to our podcast on your favorite app. If you know someone preparing to sell their home, please tell them about the podcast. Visit ScottWilliams.com to contact me, and download the two free E-booklets: “Is My House Saleable Now?” and “How Not to Buy a Money Pit”. Thank you for listening.