Do it yourself is over – brokers again “En Vogue”
The times of the real estate boom are over, at least for the time being. This also shakes up the era of “do-it-yourself” marketing of real estate as well as fixed-price models. The number of sales properties coming on the market is increasing, buyers are decreasing. As the real estate market changes, new challenges become apparent and the need for professional assistance in real estate sales is back.
New reality in the real estate market
The Swiss real estate market has changed significantly in 2023 and poses new challenges for real estate owners. After years of rising prices, the market is now experiencing a decline in real estate values. Media such as the NZZ report that the boom around real estate is now over: real estate prices are falling. Whether single-family homes, multi-family homes or condominiums, prices have fallen compared with the previous quarter. The combination of higher interest rates, an inflationary environment and rising construction prices is causing many households to postpone their dream of owning their own four walls or to give them up altogether.
For some, the turnaround in the market is a challenge. Rising interest rates lead to higher claims. Even though the trend reversal has been apparent for some time, many ignored the turbulence, assuming “in Switzerland, it will be a soft landing.” But today, even the last optimistic voices have fallen silent. The prospect of losses across the board clouds the mood.
Often the pressure to sell is particularly high in the new reality of the real estate market. Prices are falling and mortgage rates are also rising in this country. The signs are pointing to a storm and sellers are facing the challenge of successfully placing their properties in a highly competitive environment. However, the changes in the market demand an adjustment of the sales strategy and the use of new ways in real estate marketing.
The limits of do-it-yourself:
During the height of the real estate boom, do-it-yourself marketing strategies and fixed-price models were popular. Homeowners were trying to cut costs. However, the savings also involved compromises, such as foregoing the maximum achievable sales price, as the high valuations allowed for such losses. But this calculation no longer works. At a time when the market is volatile and value and demand are declining, these approaches are reaching their limits.
The advice and support of a professional real estate agent is thus once again “en vogue” and literally invaluable in times of uncertainty. Market complexity, budget planning, professional marketing needs, time and resource management, legal issues and negotiation skills make support a valuable resource – especially with experts who provide 360° service and simplify processes for all involved.
Make sure your broker has in-depth expertise to ensure your individual needs are best met. Commission fees of 2 to 3 percent of the sales price are common. Increasingly, however, contracts with a surplus revenue provision are being used: If the broker sells the property at a higher price than the agreed target price, he receives a bonus fee in addition to the commission. In the case of fixed-price brokers, many tasks and complex “paperwork” often have to be completed by the owners themselves. In other cases, brokers intentionally set the sale price too low in order to close the sale quickly and with little effort.
What does this mean for homeowners?
For homeowners looking to sell their current property, recent real estate price trends mean they risk selling their property at a lower price than before. However, this is by no means a guarantee; with the right advice from real estate experts, it is still quite possible to sell your home for the same price you paid a year ago. In addition, now that average home prices have dropped, some prospective buyers may see this as a prime opportunity to go house hunting, increasing interest in the property.
Return on investment possible despite loss of value?
Falling property values mean lower profits for sellers. This is a simple mathematical fact: If the property could currently be sold for CHF 900,000, but in a few months it will be worth “only” CHF 850,000, there is a risk of generating less income in a later sale. However, it is important to note that there is not necessarily a loss for owner:ins. Rather, this depends on the timing of the property acquisition.
For those who bought between 2008 or 2009, or before the price increase, a sale in 2023 will still be worthwhile because, among other things, the value has risen so much that even with a moderate drop in value, a return is still achievable today. However, those who bought at the peak of the price increase may have trouble if values fall more than a few percent.
Fixed price broker versus commission
When choosing the right real estate partner, it is important to compare carefully such as: fixed price broker vs. commission. Fixed price brokers charge a fixed fee, regardless of the sale price of the property. In a situation where the sale price is lower than expected, the costs of the fixed price broker could significantly reduce the profit. Also known are brokers with fixed contracts and fee-based additional services, e.g. for viewings, exposés or insertions on online portals. Negative surprises and disappointments are not uncommon with these models.
It is therefore important to choose a real estate agent who offers transparent and flexible commission structures and links his fee to the actual sales proceeds. This ensures that the interests of a seller are optimally represented and that owners do not suffer unnecessary financial losses.
Young and old rely on professional support
The growing challenges and uncertainties have led to an increased need for professional brokers. In Switzerland, as the Handelszeitung reports, only 12 percent of all real estate transactions are conducted directly between private individuals, while brokers are involved in 88 percent of cases.
Both the younger generation (Generation Z and Y) and the older generations (Generation X to Boomers) prefer the support of real estate service providers. Young people looking for their first home, as well as older people looking to sell or rent their properties, rely on the expertise and experience of real estate agents to successfully complete their real estate transactions.
Only a small percentage of the Baby Boomer generation tends to want to do the marketing themselves. Still, the vast majority, regardless of generation, agree that working with a real estate firm adds value and leads to smoother real estate transactions. Real estate companies in Switzerland that cultivate a cross-generational mindset are particularly in demand.
Time for a new strategy
As a property owner, now is the time to rethink and adjust your strategy. It is more important than ever to keep an eye on the latest developments in the market as well as trends for marketing in order to make informed decisions. Anyone thinking about selling or generally unsure about the current situation should team up with a real estate expert who can provide optimal support in all processes related to leasing, management or marketing – and do so transparently, flexibly and risk-free.
All data are without guarantee. The information on these Internet pages has been carefully researched. Nevertheless, no liability can be assumed for the accuracy of the information provided.
