Fear of Loss is a Great Motivator
During the past several months, even though COVID cases are on the rise (both in the US and Canada), people are being driven to make decisions about homebuying due to a sense of urgency. 2020 will go down in the history books as the year of migration.
When we are faced with a problem, we have an urgent sense to do something. It is the illusion of control. We think “I can’t stop the virus, but I can certainly try to move my family out of harm’s way.” With so many people now working from home, it has allowed a migration out of densely populated cities into suburbs. We have seen a migration out of the suburbs into smaller towns where house prices are more affordable. With people spending so much more time at home, we have seen a migration to bigger houses that offer additional rooms for work and school. Since people are travelling less for vacations, we have seen a desire for bigger backyards so people can enjoy the outdoors without leaving the house. With COVID causing havoc in long-term care homes, we’ve seen a migration to multi-family homes because people want to bring their parents or grandparents home to live with them.
No doubt, people’s needs are changing, but the urgency around making a decision to move now (rather than waiting) has been driven by “not wanting to miss out”. People don’t want to lose out on the great interest rates, in case the government decides to raise rates. With house prices on the rise, people want to buy now before prices go up even more and they can’t afford the house they want. With such low inventory, people are being driven to make decisions quickly or they risk losing the house to the other buyers in the market.
This has created a feeding frenzy in the real estate market.
2020 will go down as the year of migration. Whenever there is migration it equals commission. The pandemic has created the DESIRE for movement, but people’s fear of losing out is causing the URGENCY to move now. If you want someone to buy something, you tell them why they should do it. If you want someone to buy something today, you need to create a sense of urgency. You will meet prospects every day who will tell you they are interested in possibly making a move, but it is your job to change their “interest” to a “commitment”. The fear of loss is a greater motivator than the opportunity to gain. People are more apt to make a decision to avoid pain than to gain pleasure.
What is the pain of not making a decision now?
- Potentially higher interest rates:
Once the economy recovers, the government will raise interest rates to avoid inflation. Although governments have signaled that interest rates will be kept artificially low for the next few years, this could change quickly if we get the virus under control and the economy rebounds. With good news this week about potential vaccines, the recovery could happen sooner than expected. My experience tells me that governments don’t typically give us a lot of notice when they decide to raise rates. Back in 1990, we went to bed one night and when we woke up the next day interest rates had risen by 1.25%. Perhaps there were rumblings that interest rates may rise, but agents certainly didn’t see the clues and we got caught on it. My advice to you is to advise your clients that interest rates won’t always be this low, so take advantage and buy now.
- Rising house prices:
If interest rates continue to stay low and demand continues to stay high, house prices will continue to rise. It is a simple case of supply and demand. If a move is in their future, waiting until mid-2021 could have a significant impact on the purchase price of the next property. If they are moving up to a more expensive house, this will have an even bigger impact. If they are selling a $500,000 house and prices go up by 10%, they will receive an additional $50,000 when they sell. However, if they are buying a $700,000 house and prices go up by 10%, they will have to pay an additional $70,000 to purchase that house. Essentially, they will lose $20,000 by waiting.
There are times in your career when opportunities are knocking. My question is, are you taking advantage of every opportunity? You should be talking to people every day about real estate. In those conversations you need to turn a “we’re thinking about it” to a “let do it”. Given the uncertain times we live in, it is normal for mature adults to suspend making major decisions. You must be good at bringing urgency into the conversation by elegantly explaining how they could lose out if they wait. Fear of loss is your best friend in today’s market to get people off the fence.
Leader’s Edge Training