Today we talk about what’s really happening in the Southern California Market.
“I felt that I had plenty of life experience, work experience management experience and build a business building experience to start my own team, but if I had to do do it all over again, I would have probably speeded up that process by joining a really good successful team with a really good mentor and leader in it so that I can learn as fast as I could, and then decide if I wanted to start my own team or not. Because we all need that foundation, it’s really super difficult to try to get that foundation when you are not working as part of part of a team that’s already functioning well already successful already.”
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Welcome back to the think bigger real estate Show. Today, I am thrilled to talk about the Southern California market. How a top agent in that area is dealing with low inventory high demand, you’re gonna get a lot from this episode. Thank you for joining us talk soon
All right, welcome back to the think of your re al estate show. Again, I’m your host, Justin Stoddard thrilled to be with you today. Today I have with me a friend, his name is Leo Chen. Before I give a full intro, Leo, thanks for coming on the show today, my friend.
Leo Chen 0:39
Thank you, Justin, super excited to talk to you. We’ve been seeing each other here and there for some time. And a lot of people connected together. So super excited to talk and share and offer anything that I can to the audience out
Justin Stoddart 0:52
there. I love it. I love it. So let’s, let’s get it a little bit of a bio about Leo, obviously, you come out of the tech world, in real estate now, how long have you been in real estate Leo?
Leo Chen 1:03
So I’ve been in real estate a little over seven years now. So we’re getting we’re getting up there and getting established pretty well in the area. So as you know, Justin, prior to that I worked in tech for over 15 years. Go
Justin Stoddart 1:17
what, what was what was the direct maybe one of the biggest reasons why you got out of tech and into real estate, what was the draw?
Leo Chen 1:25
Well, tech wasn’t wasn’t necessarily my first choice. And one of my long with many other career choices I’ve made. But having no one just, you know, the way my brain works Tech, I could always make a living at Tech. And so it wasn’t necessarily my first choice, but through that, through the boom of tech as to the 20 2000s I was able to take advantage of that and really, really had a great run of it. But honestly, just, uh, you know, tech is such a, such a moving industry, you know, there’s something new literally every single day. And, you know, I was tired of chasing that, to be honest with you, I wanted something that was more down to earth, more people oriented, and not so much of the hustle and bustle of, you know, testing out the latest greatest, you know, social media app or, or the next beta software that comes out and have gotten earned a lot of skills and knowledge and management through all that stuff and wanted to start my own business.
Justin Stoddart 2:32
There’s a lot of people, right, that leave kind of the corporate world and get into real estate. With this, this promise of more income, and more time freedom, right. And I think anybody who gets into the industry also realizes that it’s also very competitive. A lot of people want kind of a lifestyle that real estate can offer. Obviously, you’ve you’ve kind of dug deep roots, you’ve been mentored by some of the top people in the business, you’ve created a quite a name and a brand for yourself, what are a couple tips that Leo could offer? That would be beneficial, before we get into kind of the full topic isn’t worried just curiosities for me, would be a couple things that you would offer to an agent that’s maybe just getting started, that you wish you would have known seven years ago?
Leo Chen 3:13
Well, more than more than anything, really to find the passion in the industry, because that’s going to fuel fuel everything. So that’s, that’s number one, first and foremost, because I’m fortunate for me, I love real estate, and I love helping people I love being a community. I love building, you know, relationships, which was some of the things that were lacking in my, in my tech world previously. But if I had to offer anything else outside of that, is that, you know, a very smart person finally put it into words for me, that I could not put it into myself is that real estate is a team sport. It’s a team sport, meaning you cannot do it all on your own. And if you did, you’d be tired and resentful. And so that’s not that’s not a successful formula. And so, couldn’t have couldn’t have said those words better for me to really hit home is that if I had to start over, I would get into a group of people into a mentor into a coach into a team of some sort, where they can help me, you know, get my feet wet and experience everything possible to be able to learn from the best people that I can find. You know, and that’s that’s, that’s the main thing that I would would tell anyone getting into real estate or maybe you’ve been in a real estate for a while.
Justin Stoddart 4:32
Are you recommending Leo that people actually like if they’re getting started to join a real estate team, or to build their own kind of team, if you will, around those people that that are related to the real estate transaction?
Leo Chen 4:46
Well, I took the ladder out. I felt that I had plenty of life experience, work experience management experience and build a business building experience to start my own team, but if I had to do do it all over again, I would have probably speeded up that process by joining a really good successful team with a really good mentor and leader in it so that I can learn as fast as I could, and then decide if I wanted to start my own team or not. Because we all need that foundation, it’s really super difficult to try to get that foundation when you are not working as part of part of a team that’s already functioning well already successful already. Being able to give you all the opportunities that you couldn’t, maybe the first two, three years.
Justin Stoddart 5:32
Great insight. Great insight, Leo, let’s um, I want to circle back on some of the things that you’ve done when it comes to marketing innovation, right with your tech background. But before I go there, I’d like to really have a conversation with you at this point about what’s happening in the Southern California market. I know, I was a homebuilder through the intermountain west, and things were starting to happen in the California market just prior to the big recession. And we told ourselves that, hey, that’s happening in California, we can’t expect to have that happen up here. We’re a different market. Well, when when, when in actuality, the California market was just ahead of us. And had we been looking at it through, you know, through a different lens, or maybe even the correct lens would have seen that, that we had a year or so kind of heads up as to what was happening. So whether or not that be exactly true. Now, when it comes to real estate as opposed to homebuilding back then I do think that the California market tends to lead in a lot of different things. And I’d love to hear from you just what’s happening on the ground in Southern California, Orange County area, that may be an indicator as to what’s coming in the future for some of the markets. So please do share with us what’s going on?
Leo Chen 6:45
Yeah, you know, I really, I really love what you say, because it’s super, super interesting. In the past, I lived, I lived in Hawaii, for a couple of years, I lived on island of Hawaii, and super small town and stuff like that. But prices are super expensive. But having lived and own a home and running my business in Southern California also had my eyes on both markets. And incidentally, Hawaii market was a year behind the California market. So I could literally see it either going down or going up and know what’s happening in Hawaii market, I was so interested because I wanted to buy a second home in Hawaii, you know, and be able to live some of the time in Hawaii, and then the rest of my time building my business and everything in California. So I think it’s super great insight on your part to know that, you know, California is kind of a bellwether for most part of the country. And we probably can’t compare specifically to New York because New York is such a such a specific market with its own dynamics, but the rest of the rest of the country, I think it does apply, you know, and so, right now, you know, everybody knows the three eyes. And if you don’t know the three eyes, you should know the three eyes inventory. Alright, okay, it’s interest rates, and its inflation. If you didn’t know anything else about the market, if you knew at least something about those three things, you can know exactly what’s happening. Inventory is super low, right? We have historically low interest rates, because the government’s trying to make sure we don’t have any big fluctuations and impact the economy where they can really back in one way or the other. And then the last thing that we didn’t expect just a few years ago is all this inflation from seven plus trillion dollars that they put into the market, right. And so it’s impacting here in California, more than more than anything, because everything is just hyper magnetize here in California is lots of money. There’s lots of people, there’s lots of politics is lots of taxes, there’s lots of inflation, right? And so because of that, we’re all feeling everything all at the same time. And then the rest of the country kind of gets kind of gets rippled, you know, into the rest of the country. And so right now, what we’re seeing is that interest rates is creeping up a little bit. Just because we have so many people looking to buy homes, so much demand, it’s going to take a little bit, little more than just a 1% interest rate to really deter those people because we’re, I always told people and I’ll still tell them now is that anything below 5% interest rate like us, you don’t have to worry you should just get get into the mortgage, and then you can adjust later you can refinance, if it goes down. If it goes up, you’re safe, you’re you’re not going to go get crazy into the seven or eight, nine interest rates to some of us remember for all enough, so really, still historically, low interest rates, so that that’s still giving a lot of buyers a lot of confidence if they’re savvy enough and have a good real estate agent to advise them that hey, don’t be freaked out about an 8% You know, up or down on which way and really the the price here for the buyer is To find that right home, to settle their family to raise their kids in the right school districts to live the lifestyle by the beach, for example, which a lot of my clients do is is the goal there. So don’t take your eye off the ball, because we can definitely get you the home, if you follow the process that we help you with, you know, being prepared, know realistically what the home’s going to sell for and bid appropriately, what your value what your limit is not get caught up in all the rest, rest of everybody else what they’re going to get a bid on. But right now, we’re still getting 1020 25, you know, buyers to a home, right. So we are still we are still hitting our highs. But we may, depending on how the interest rates go, we may we may start to slow down. But this spring is our highest, most active season right now. So everybody’s looking to kind of see where it goes from here. But in the short term here, if you want to buy a home, right now, we should have more inventory than the rest of the year. You know, as things come on. And in case you don’t know, other than how many people to house. Normally, if we had 1000 homes in a market, we’re having 20 to 25% of that 1000 homes would be 200 250 homes. That is what we have right now. In your city, there’s normally 100 homes on the market, on a regular year, you’re seeing about 20 to 25. So inventory is super low. Okay, so it’s okay, you know, you just have to be smart and have to make right decisions with a good agent that’s going to make sure you don’t miss it. Make sure your pricing you know putting in offers at the right price with the right terms. And then you should be okay. I’ll tell you everybody right now, hopefully, this gives people a lot of encouragement is that everybody that works with me gets a home, whether it’s two weeks from now, two months from now, six weeks from now, we’re going to get you a home as long as you follow the process, and you understand what it takes to do that.
Justin Stoddart 12:07
I love it. You know this, it’s a great thing in one of the things that you know that I teach, and that people that follow me learn repeatedly, is that it’s not a good idea to try and be the cheapest agent in town just be the best agent. I think one of the ways you can do that, as always, by expanding the knowledge that you bring to your clients. It’s one thing to be able to be knowledgeable when it comes to, you know, other agents. But if you can take something interesting, like you just shared and simplify it and deliver it to agents, it’s not just what you know, but it’s your ability to communicate it to them so that they know, it doesn’t help that you don’t necessarily it really helps when you communicate that and what you just shared that with the three eyes I think was absolutely brilliant that everybody ought to be able to understand that. Obviously, when inventories down, that’s going to cause prices to go up, right simple supply and demand. When interest rates are up, that’s going to cause demand to go down. Right? Because people’s buying power and inflation what I hear you saying please correct me if I’m wrong. When inflation’s up, again, people’s buying power is down because things just cost more expensive without via the appropriate way to kind of if you could simply categorize inflation. Would that be the right, I guess corresponding consequence of increased inflation?
Leo Chen 13:23
Yeah, I think inflation is super interesting right now in the market, because we’ve had historic rise in interest rate that that most of us have ever seen in our entire lifetimes. You know, and I think this is a really interesting mix into our low inventory, low interest rate. environment is that, you know, what, if you normally would buy a $1 million home, it’s just make easy numbers. And over the last 12 months, I know in Southern California, here are our regular in our county, Orange County has gone up 23.5% Okay, in the last 12 months, so if you had a if you’re wanting to buy a million dollar house 12 months ago, today is a million million 25 Okay. 1.25 Okay. So, where, where in your life? Whether you own a business, or or you you have a job, a high paying job or something, where are you going to earn an extra $250,000 in anything that you do? Very, very few opportunities to do that. Right. So I’ve had clients that I’ve encouraged by 12 months ago, maybe they bit the bullet and, you know, when in six months ago, they still capitalize on some of the some of the rise in prices. But then I still have clients who are looking, you know, for three, four months, for one reason or another, they’re a little bit on the fence, but at the same time they they don’t want to miss out but they haven’t fully pulled the trigger yet. But in those few months, you know they may have, you know, last the time cost that they put themselves into? Could have been, you know, $100,000, it could be more, right. And so that’s the effect of inflation that’s happening in our market. So if you’re having a good understanding about that, as the buyer, you should know, like, hey, if I’ve decided to buy, okay, I should buy as quickly as I can, and get the best deal. I can, of course, okay. But I will not lose out to other offers for 1015 or even $20,000. Because I’m going to earn that back in less than three months. Right? In equity. Okay. And so I think that’s important, too, to understand. But I know what everybody’s thinking right now. It was thinking, Well, what if the market crash, then my value is going to go down, and I’m going to overpay for my home? I remember that was the case in 2009. You know, all that kind of stuff. totally valid, then you should decide, hey, maybe it’s not the right time for me to buy. Okay, maybe I need to hold off. Maybe I think some some sort of correction is going to happen. And I’m going to wait for that. Okay. But I will say that, okay, what would you do as a buyer, if six months one year from now, we don’t have a crash, and it continues to either rise a little bit more. Okay, or flatten out a little bit more, and we stay at similar price that we have now. Okay, except it might be a little more expensive. What is your thought process then? Because now it’s higher than it is today? Okay, what would you do one year’s time? If it was if it was down? Okay, great. You have the money you buy? If it’s up? How would you feel? If you feel like oh my god, I should have bought a year ago? Oh, my God, I can’t believe I missed out. Oh, my God, interest rates, four and a half 5%. Now it was 4%. Then, like, if you have any kind of regrets, I would say you should try to buy right now. You know, so that’s that’s my advice to buyers to how to think about how to form future forecasts themselves. And there’s no wrong or right answers is really just how you feel. Nobody has a crystal ball. Right? So I’m here to kind of show you the numbers, show you the facts, show you where things are going. But we don’t know exactly what’s going to happen. I’m sure most people are thinking that Russia invading Ukraine was very less likely about a month ago. But you know, things happen, right. And because of that, you know, the feds are helping our economy, make sure that we don’t have a big shift. And so they’re holding off a little bit on interest rate. So that’s, that’s good for us.
Justin Stoddart 17:34
I think one thing that really stands out to me is that when you work with a professional, and if everybody listening to this, you want to be poised as that person, right, you want to help your clients to see repeatedly that they’re working with a with a master with an expert with a professional, because when they do a professional, what do they help you to? Do they help you to avoid the opportunity costs of indecision, one way or the other. Right? And I think, you know, I’m in the coaching space, you know, consult real estate agents. And oftentimes, I’ll have them delay. And then they come back and they say, Boy, I really wish I would have done this three months ago. And for some of them that I’m really close, I can have the conversation to say, we should probably calculate, it’s very healthy for you to understand the decision making process, and what happened there and how much it actually cost you. Because when you don’t have certain systems in place, that are proven to generate a certain return, the delay, and I think I’ll try that on my own are not quite sure yet. There’s a cost to waiting, right, there’s a cost of delay. Same thing when working with professional real estate agent, when you have an expert that can really put the numbers in front of you, and empower you to make the right decision for yourself. It allows you to not work so much on hyperbole to not work so much on emotion, and really be able to get down to what’s the right decision for us is it to buy is it to delay is it to sell as it’s not I love that about about you and about other professionals out there is that they make themselves extremely valuable and make any talk of, well, someone else will do it for a lower fee. The only time that comes up and should ever come up is if there’s no value, right? Like the price comes, it becomes an issue when what when they can’t see that there’s any value there. And when you’re having these conversations, hopefully some of which you’re you’re pulling from Leo today is this ability to make yourself invaluable to make yourself irreplaceable to her this concept of well, so it was going to do it for less it becomes completely irrelevant because of not just the value that you add, but also the documented history and testimonials that you should be gathering now of people saying this was the result of having an expert by my side right this is this is how much I made. Like you said, Leo, I made $250,000 last year because I had a great real estate advisor that really guided me to make our own best decision. And I think that’s super important for professionals to know in this market where there are others that are simply playing the price game It’s a race to the bottom for them.
Leo Chen 20:02
Yeah, I think future casting for them what they would do, we’re not trying to say, hey, the markets gonna go up markets gonna go down. It’s more about what would you do if the market went up? How would you feel? What would you do if the market came down? How would you feel? Now knowing what you feel what would you choose today? To see where that’s gonna go? Right? So I think it’s not our job to tell them what’s going to happen. It’s our job to show them hey, here are the different ways that could happen. Justin, you’re you’re in the coaching space, I’m sure you talk to many agents, right? Hey, I want to make 500,000 Half a million dollars next year, I made 300 350,000. How would you feel if you made, you know, 750,000? How would you feel if you made you know, the same? 350,000? How would you feel? If you had a bad year and you made 200,000? Well, let’s, let’s see how you feel. Now that, you know, okay, How’d that feel in those scenarios? Like, we’re gonna do whatever we can to avoid, you know, those things, because now you know, what you feel if that happened, right, then that that allows the decision making process, you know, super easy, you know, we can see our goals, and we can see that, hey, we don’t want to once we start falling in the other direction, we can self correct and say, No, that’s not the feeling. That’s not the that’s not the direction we’re going. Because I know exactly what that looks like. And I want to go the other way. So it’s the same thing with the buying, buying or selling decision. Right? You know, I love what you said about commissions, because
we have, we have clients that say, Hey, you know, I want to pay leases possible. And, and I don’t want to get into a bidding war, like we hear that like all the time every day. But I will say I have some clients. And I’ll just point one out, as an example. Okay, they did everything that I asked them to do. And in two weeks, we got them three offers accepted, not just one, but three. Now, don’t get me wrong, a lot of people wanted all of those homes too. But because of our relationship building our we asked the right questions to the listing agent, we sought out all the audit information. And then we also analyze and calculate, make sure that we know what the what our projected home value for that is, and what my clients are willing to pay for it, and then give the best terms that we possibly can. So they they ended up with those, those offers, they picked one day went into escrow. But they thought, well, you know what we stretched just like you asked me to, we put in all the money that we could possibly afford on this home. And now we’re in a situation where we got the home. Okay, we can’t afford anything further, it turns out that that home was after doing the inspection, needed a new roof, and needed a major termite major termite repairs of eight or $9,000. So we’re looking closer to 18 or $19,000. To do those two repairs. The the sellers were willing to repair the termite, which they’re kind of required here in California. Okay, so we’re out of the woods there. But my clients are buying this home that it’s new to them, they’re looking at a you know, 12 to $14,000, new roof to pay for within the next year or two, and they just put in all the money they possibly had to earn, earn an acceptance of this offer. So we went in, negotiated and told told the sellers that, hey, we gave you the best price possible, because we really wanted to home, we’re very serious about this home. And but we did not expect to find this in our expection where we needed a new roof. We’re not asking you to pay for a whole new roof. But we’re asking you to maybe meet us halfway so that we can, you know, save up the rest and pay for on our own. So if you guys can help us with that and cooperate on both sides, okay, we’re happy to go forward, or they may have to decide whether they’re going to drop out or not. But because of that conversation, we’re able to get the cells to agree now they didn’t want to do it. And they were thinking about for a couple of days. But we really just made a case that hey, these are a young couple starting their new lives, they put it in their entire savings in into this home to get this home, they do not want to drop out of escrow escrow. But of course they made that made that offer not knowing that there’s a problem with the roof. And so because we made that clear, they were finally willing to do it. And literally at the end of the day, they saved that $89,000 for termite repair, and then another $89,000 for the half half of the cost of the roof. Okay, so that’s an example of what a good agent will do for you. Now, I’m not saying hey, you need to hire me, but at least hire someone good that will do that for you. Okay, because for them, okay. They may or may not have been able to be negotiated to get that money back from the sellers to make it easier for them to be able to do the proper repairs. later on. So I want to just encourage buyers out there, it’s not all about just the final price, it’s not all about the bidding. It has a lot to do with everything else surrounding it, and what you end up with in the end, and in this case, in the end, they got half of the roof paid for they got the termite, you know, cost, you know, paid for. And so they felt that that was that was good that they can handle that, and they got the house of their dreams.
Justin Stoddart 25:26
I love it. I would think if you are in Southern California, I think Leo’s a great person to hire. But that’s just my opinion. But I think you’re exactly right, Leo, is that the principle is correct, is it? You know, you and I both learned from the same mentor that conversion happens in conversation. And unfortunately, I think in our tech driven world today, which maybe is part of the reason why I hear that you left technology to come into real estate is because there’s more conversations, there’s more community. And I think when you can really because because to the sellers that like on on paper that may not have made sense for them to do that. But once you come to the cellar, so here’s the situation, you know, in good faith, they put their very best foot forward. And now we’re learning this, it tends to go from just an IQ thing until like an EQ thing, right? You probably know, my reference there as well, is it that people get are able to bring in some of the emotion of making a decision and not having it all be an intellectual thing. And people able to make decisions that not just, you know, are in the best interests of somebody else, but of themselves as well, right? We as humans aren’t just about numbers were also about doing the right thing and taking care of other people around us. And being a part of a community, I think when you have a trusted advisor agent, right? Somebody who really adds more value, you can trust that the person’s gonna be having those you know, those conversations. I time with you is flying my friend, I’m going to have to do this, because I looked up and saw what time it is. And we are about out of time. So I want to ask you one more question. But before I do that, I want to let people know about the wisdom club. Right? You’ve created a club in Southern California. Tell us quickly about that. And then I got one more question for you.
Leo Chen 27:04
Yeah, the wisdom club came out came out of just before the pandemic where I was sharing a lot of inspiration, ideas, quotes, things that I come across, that really inspired me to be better, in person be better in my community and better in my business. And so I decided to start a Facebook group, to be able to house all that stuff to funnel people who are interested in stuff into that group. And we’re, we’re a growing group. And a lot of people have really gotten a lot out of it, I’ve gratefully have have gotten messages, say said that I got them through a tough time and things like that. So I really wanted to be able to serve in that way. It costs nothing, we’re just a community to to be able to share and give you a quick pickup in the morning. Some of us people out there that know me and Justin, know that we’re both part of a 5am club. But we we get up and we learn a little something to kind of kick start off our day, where the Western cup does kind of the same thing for us. And during the pandemic I did 63 interviews. As a is a podcast live interview, just like we’re doing here. With business owners, we’re having tough, tough time with COVID, with small businesses around our community, and sharing their inspirations and sharing how they, how they’re passionate about their business, sharing what they’re passionate about their community in their life. So that’s what the wisdom club is about. I love for anyone out there who is watching this to join and get something out of it and participate.
Justin Stoddart 28:36
I love it, Leo, my final question is this is you know, you’re a big thinker. That’s why you’re here on the show today. What does Leo Chen do to continue to be a big thinker to continue to expand your own possibilities to where they’re always growing? What does that look like for you?
Leo Chen 28:50
Well, it never, it never ceases to amaze me that transformation that transformations in our lives does not happen in isolation. Some of you might have heard that before. And it just amazes me each and every day. How if we surround ourselves with people that will support you care about you, but also give you ideas of what what you’re going through and what some of the steps and journey that they might have gone through to be able to share with you is super, super important. Whether in your own personal life or in your business, whatever ways that you’re wanting to grow. I know I want to grow every single day. And and so we surround ourselves with a lot of people like Justin, who are putting out this podcast and showing other people what the what other people are doing what great things people are doing so that we can all uplevel ourselves and so that’s my big thing is hopefully you’re surrounding yourself with with great mentors, great fellow colleagues and and even people in the wisdom club to be able to kind of help you and support you.
Justin Stoddart 29:57
I love it, Leo, such a pleasure to have you on the show today. Again, as I mentioned, I’d love to have you back. And we’ll have to continue our conversation because I really appreciate having you shared about your market, how that pertains to being a great agent. And I know that we’ve all received a lot of value from you today. So thank you for that. And for everybody listening here today, my final request, you know what it is it is these three simple words and which are go think bigger. Leah, thanks for helping us do that today my friend. Thanks, Justin.