Being a seasoned real estate agent is not easy right now. Some of my sharpest Realtor® friends tell me they’re facing three simultaneous challenges: (1) their business models are becoming obsolete because of technology, (2) scarce inventory, and (3) boomers want to move but are having trouble qualifying for a conventional loan.
The following video is a high-level overview. The post below that explains what is behind the 3 challenges and how agents can get around them.
After hundreds of hours of development, we've developed a 2-hour class to teach agents a strategy that will help them make money while making a difference for some of their clients who really need help.
Before we get into course details, if you'd like to determine how much your client can borrow with a reverse mortgage to buy a home, click the Reverse Mortgage Qualifier button below and I will generate a report from our proprietary, industry-leading reverse mortgage calculator, based on your unique situation.
Now, let’s look at why real estate agents are being pushed to transform their business model.
Technology Is Changing Everything
There are three types of people when it comes to technology; digital:
- Natives
- Immigrants
- Illiterates
Millennials are digital natives. They’ve spent their entire lives surrounded by and using computers, video games, video cameras, cell phones, etc. To them, a fax machine is as outdated as Morse code.
Digital immigrants are those of us who learned this technology language to adapt. Some of us learned better than others. Scientists, however, tell us that a language learned later in life goes into a different part of the brain. It’ll never be second nature to us.
Digital illiterates are those who chose not to learn the new language. Some can’t download a PDF, some don’t have smart phones, and some don’t even have a computer. Half are sad or frustrated about it, the other half say they don’t care.
Think about this for a minute. Whether we’re talking about the public school system, or a branch manager responsible for training new agents; we have digital-immigrant instructors trying to teach a population (of digital natives - Millennials) that speaks a different language.1
Demographics Is Destiny
Demographics are driving the change and challenge agents are facing. More and more it’s going to be about Millennials. Notice the image below, since 2015 Millennials are the largest cohort, or population group.
The bigger story concerns the workforce. Since 2015, there are more Millennials in the workforce than Gen X or Boomers. This trend will continue and get bigger.
Digital-native Millennials cannot be reached by the same strategies that worked on their parents or grandparents. Real estate agents relying on old-school methods like printed open house flyers will not connect with this generation. They expect video with exciting drone footage, like they see on all the fixer-upper TV shows.
While Boomers currently have the most wealth, future jobs and incomes tilt toward Millennials. Jobs and income are the key to qualifying for a home loan.
For seasoned agents (say those over 50), transitioning to this new reality is not trivial. When Tom Ferry gave the CAR Expo Keynote presentation two months ago he said:
- All marketing should be video-first
- Google claims 85% of the world’s content will be video by 2019
- Facebook is the Internet and soon all content will be video
I just talked to a Realtor friend who has her SRES® designation. She’s exasperated at how much the business is changing and she feels like she can’t catch up or keep up. While she’s proud of her digital immigrant skills, she says she’s not close when it comes to video marketing on Facebook. She’s paid for a couple of courses but doesn’t have anything to show for it.
She has resigned herself to not competing for Millennials. The good news is the strategy behind our new class is not aimed at social-media-savy Millennials; it is aimed at digital immigrants and illiterates (aka Baby Boomers). It’s perfect for my Realtor® friend. It doesn’t matter that she’s not cutting edge on all the social channels.
Low Housing Inventory
Another agent challenge is today’s tight inventory conditions. The National Association of Realtors (NAR) reports that: “Unsold inventory is at a 3.4-month supply at the current sales pace, which is down from 4.0 months a year ago.”
Low Boomer Mobility Makes the Housing Inventory Problem Worse
One of the reasons there is an inventory issue has to do with homeowners (Boomers) not being able to qualify for a home loan; therefore, they cannot move. Don’t be fooled by today’s low unemployment numbers. They fail to count those who’ve left the workforce – some not by choice. Many retired people are stuck in the wrong home.
Tell me if this sounds familiar. A couple or a woman lives in a home where they raised their kids. The house still has a mortgage balance because of previous cash-out refinances that covered a job loss, college expenses, or a wedding. The house no longer fits. Maybe it is too big, or the yard’s too big, or it’s in the wrong neighborhood, it has deferred maintenance, it’s not near the kids, or it’s just too expensive.
Because the owner cannot qualify for a conventional loan, they stay stuck in the wrong house, thinking their only choice will be to eventually sell and rent, which is something they really don’t want to do.
Bloomberg recently reported that "Baby Boomers who refuse to sell are dominating the housing market." Trulia reports that baby boomers currently own about 3.6 million unoccupied rooms.
And Diana Olick noted on CNBC that "if baby boomers don't downsize out of big suburban homes, younger buyers eager to upsize can't find a home to buy. As competition from young millennials heats up at the entry level, the logjam pushes prices ever higher and out of reach."
Eligibility
The third agent challenge is eligibility: people who'd like to buy a different house can't get qualified.
Today's low unemployment numbers do not reflect those who've left the workforce. The truth is, the last Recession was brutal on mid-level boomer executives. Many saw their 401-k's get wiped out. Then they sold at the bottom of the market and were too afraid to get back in.
Also, many displaced workers couldn't find a new job that paid as much as they previously earned. Many who could not afford to retire became consultants or started a small business. We applaud their resilience, but self-employed income can be difficult to document. One thing that is going to be quite helpful are the March 2018 changes to the jumbo reverse mortgage purchase loan program - designed specifically for people who want to buy a home with a reverse mortgage without having a monthly mortgage payment.*
Blue Ocean Strategy
What if you're an agent with a buyer who can't find a home? What if there was a way for you to help a baby boomer homeowner sell a home, buy a different one that fits better; without them having a mortgage payment. And what if that sale freed up some of their equity, which could be managed by their financial advisor providing a much-needed emergency fund. And then, what if you could help your original client buy the home you just helped the stuck boomer sell.
If you knew how to do this, a sale and two purchases, and your peers did not know how, would that help you differentiate yourself?
Authors Kim and Mauborgne wrote a book called Blue Ocean Strategy. Their premise is that the way to profit is to redefine the market and/or the basis of competition. Think Cirque du Soleil compared to a circus. The goal is to unlock new demand while making the competition irrelevant.
We have invested hundreds of hours building our reverse mortgage purchase class specifically to teach real estate agents how to do this. We teach you how to help retirees and seniors get out of the wrong home, and buy one that fits better; how to have a win/win outcome without stepping on your current business plan or strategic relationships.
Imagine if you could do that two or three times in the next year. Imagine if you were one of the few who knew how and/or who had the resources and relationships to do this in a predictable, profitable manner. That would be a Blue Ocean Strategy. And that is what our reverse purchase class is all about.
Make Money By Making a Difference
Think about honey bees. They don’t wake up thinking about pollinating 400 different agricultural types of plants. They head out each morning looking for nectar. The $19 billion worth of crops they help produce is a by-product of their efforts. That is a good analogy for what we’re talking about.
This strategy is about real estate agents positively impacting the supply-constrained housing market without having to re-tool their business. It's a virtuous circle. When an agent helps make a life-changing difference in a senior’s finances, helping them downsize, they inadvertantly bring new supply to the market.
Our Reverse Purchase Class also explores how real estate agents can partner with financial advisors to both slow portfolio withdrawal rates and increase assets under management. Those two topics are always top of mind with our CFP® and CLU® financial planner partners. For more information on using home equity as a component of an overall wealth management plan, click here.
If, as a real estate agent, you’d like to learn how to address three of your biggest challenges today (technology disruption, scarce inventory, and non-eligible borrowers), click the Learn More button below, go to www.reversepurchaseclass.com.
If you'd like to know how much a client can borrow on a reverse purchase, click here.
About the Author
Kent Kopen earned his Reverse Mortgage Specialist credential in March 2007. In 2016 Kent earned the CRMP®, Certified Reverse Mortgage Professional® designation. Mr. Kopen previously worked at Merrill Lynch and Morgan Stanley as a financial advisor and Chartered Retirement Planning Counselor. He provides education, tools, and strategies to professionals who offer financial and legal advice to others. "Our resources help financial advisors, CPAs, and estate planning attorneys help seniors optimize their home equity to provide greater security and peace of mind."
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