Relationship Management: First-Time HomeBuyers

3 Ways a First-Time Home Buyer Can Drive You Nuts!

Learn how to overcome three common challenges of working with first-time home buyers.
Working with first-time home buyers can present its own unique challenges. If their indecisiveness doesn’t drive you crazy, their meddling parents just might.

Some first-time home buyers can be your best clients—eager to learn more about the housing market and soak up every ounce of your wisdom. But others won’t let being novices at home buying get in their way, and they may send you on an endless search for that perfect house.

First-time home buyers are the largest group of buyers, making uWelcomep 32 percent of the home buying market. They can generate extra business for you for years to come, too, so they may be worth the trouble.

How can you overcome some of the biggest challenges to working with first-time home buyers? Experts weigh in.

Problem No. 1: Buyers who bring in their parents.

First-time home buyers are often young and they may want to bring in some reinforcements to help find the perfect house.  “There is no more dreaded phone communication from the first-time home buyer to his agent than the ‘I’d like my parents to stop by and take a look’ call or e-mail,” says Richard Courtney, a real estate broker with French, Christianson, Patterson and Associates in Nashville and author of Buyers are Liars & Sellers Are Too (Fireside, 2006). “At that point, regardless of any and all conditions, the deal is most likely dead. While the buyers have not heeded a word of advice from their parents since they were 11 years old, now they want the folks to share in the biggest decision of their lives.”

And you’re stuck in the middle.

When the parents enter the picture, they often play the game of “see who can find the most wrong” with a property. As Courtney notes, parents are great at spotting a “nail hole from 70 feet and through two sets of windows” or they can “hear a floor squeak at a noise level otherwise audible only to bats.” [You think he’s kidding! =SA]

What You Can Do:

  • Don’t argue. Resist the urge to blurt out: “Your father’s an idiot; you shouldn’t listen to him!” Nor do you want to argue with ma and pa. Instead, let the parents meddle and involve them in the process as much as your client wants them in, Courtney says. Thank the parents for their extra insights. And if the parents misstate something, correct them gently when they are wrong, but do it respectfully.
  • Educate the parents too. Share comparable sales, financial information, and inspection reports with the parents too — assuming your client approves. Share all your accumulated knowledge and data with the parents so that they feel involved in the process and aren’t advising their child when they’re uninformed about the realities. [Please note, the Parents may well have a different agenda than seeing that their child makes a good decision.  They may not want the child to yet purchase anything.  It will become clear by the second showing.  When this happens, kindly tell your client that you think they may want to take some time to determine what they wish to do and you will be available when they are ready.  Do not look for them to get back with you.  Move on. =SA]

Problem 2: The uninformed buyer who doesn’t realize it.

Some first-time home buyers know they’re novices with real estate and defer to you as their expert. But some will take on the know-it-all role, even though they don’t have a clue about the real estate market.

Maybe the buyer wants a move-in-ready beachside home, with every upgrade money can buy — and they want it all for a fraction of what it really costs. Or they may find a home they love and want to submit a ridiculously lowball offer.

Educating buyers about the market may take some extra time, but it’s worth it. After all, educated buyers tend to make better offers with fewer contingencies, agents say.

What you can do:

  • Talk about the home buying process. Counsel your client about the process of buying a home before anything else. “They need to understand how the home buying process works from beginning to end,” says Leroy Houser, a real estate coach and trainer who leads seminars and courses.Discuss home inspections, appraisals, and some of the terminology in the business (such as HUD, short sales, easements, surveys, and so on). Include up-front discussions about common stumbling blocks, like when does their lease expire if they’re renting, and will they be prepared to break their lease? Talk about market conditions: Are prices going up or down?
  • Make sure they get a financial reality check. Have the buyers get prequalified for a loan so they know what they can afford before they start falling in love with homes that aren’t in their budget. Use a mortgage calculator to determine monthly mortgage payments plus estimated utility costs, property taxes, and maintenance costs.
  • Let them make a mistake. With some stubborn buyers, you sometimes have to let them make a mistake before they get in the right psychological mind-frame, Courtney says. Against your advice, they may insist on doing too many counteroffers in a deal or submitting too low an offer. As a result, they may end up losing a house they really wanted. “Let them experience the loss of something they wanted,” Courtney says. Next time, they’ll listen more closely to your advice.

Problem 3: The indecisive buyer.

Some buyers just can’t seem to commit. The search for that perfect house is endless, and after about the 15th home you’ve shown them, you may lose hope that they’ll ever choose one!

First-time home buyers love to search for homes, and “they know how to find houses,” Houser says. “But their problem is they don’t know how to buy them. The more you look, the more confused you can get. They want to do more looking because they don’t have enough information to make an informed decision.”

What you can do:

  • Have them complete a questionnaire. Do this at the very beginning of the home search to learn what they’re looking for and to get them to more carefully consider their “must haves,” “nice to haves,” and “avoidables” too. Get a sense of the house styles they prefer, the number of bedrooms, home designs, neighborhoods, and so on. What are their main motivations for finding a home? Do they want to have a shorter commute, be in a certain school district, or have increased security?“The questionnaire is much like a doctor would do for a new patient,” Houser explains. “A doctor uses a questionnaire before you even meet. The doctor then looks it over to talk about what the issues are. In real estate, it should be the same thing.”
  • Use “preframing” to guide the search. Get the buyer to focus on part of the market rather than the entire market. For example, say something like, “There are two distinct groups of homes in the marketplace that fit your criteria. One group we call ‘opportunities,’ which include some new homes and resales we consider good values because they are priced to sell, in excellent condition, and move-in ready. They are close to perfect, and I have four of those to show you,” Houser explains at his Web site about using “preframing” with first-time home buyers. “In addition, we have three homes we call ‘Deal Homes’ because they are outstanding deals. They need some repair, so they are priced below the market.”  You narrow the market for them to seven homes and carefully frame and prepare them for what they’re going to view.
  • Create urgency. Mortgage rates and housing prices won’t stay this low forever. Your buyers may need more drive to buy now rather than wait until later. Show them what home prices have been doing in your area. Mortgage rates are at ultra-lows right now, but what can your clients afford if rates return to the 6 percent range, as they were a few years ago?
  • Be frank. You want to encourage buyers to be open and straightforward with you about what they want, and you also may need to heed your own advice. After the millionth house showing, you may need to confront your buyer point-blank on his or her indecisiveness. As Courtney says, you may need to say: “If you want to buy a house, I can help you do that. If not, we can’t look at houses forever.”First-time home buyers require plenty of patience, but if you’re able to help them successfully navigate the process, you may not have just produced one sale, but a bunch of future sales, such as:

    “The buyer may have been single when you sold him that first house. After marriage, he wants to move again,” Courtney says. “Then he and his wife have children, and they need to move. First-time home buyers could easily produce five sales in a short period. They’re a good market to work with and cultivate. But just remember, you’ll need to educate and nurture them through the process.”

Melissa Dittmann Tracey is a contributing editor for REALTOR® magazine.
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Why Use a Realtor?

All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR “®” logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethicsand are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reports that 84% of home buyers would use the same REALTOR® again.
Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $100,000. If you had a $100,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $100,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®.
But if you’re still not convinced of the value of a REALTOR®, here are a dozen more reasons to use one:
1. Your REALTOR® can help you determine your buying power — that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders — banks and mortgage companies — offer limited choices.
2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.
3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. schools, etc. There are two things you’ll want to know. First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell?
4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date.
6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders.
7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.
8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors in getting your property sold at the best price, quickly and with minimum hassle.
9. Your REALTOR® markets your property to other real estate agents and the public. Often, your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The REALTOR® Code of Ethics requires REALTORS® to utilize these cooperative relationships when they benefit their clients.
10. Your REALTOR® will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF REALTORS® studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your REALTOR®, you do not have to allow strangers into your home. Your REALTOR® will generally prescreen and accompany qualified prospects through your property.
11. Your REALTOR® can help you objectively evaluate every buyer’s proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing — a lot of possible pitfalls. Your REALTOR® can help you write a legally binding, win-win agreement that will be more likely to make it through the process.
12. Your REALTOR® can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).
Logo of the National Association of Realtors.

Related Articles:

Realty Times – Relying On An Agent.

I’m really home!

Do you have a trusted realtor; your partner in your

quest for the right home?  Someone who’s only goal

is for you to say,      “I’m really home!”?

Here’s what you need in a Trusted Advisor.

RELATIONSHIP:  To earn your trust, your realtor needs to have a relationship with you.  A real relationship requires the participants to care about each other.  Is your realtor a caring friend?  If not, seek a realtor who will invest “caring” (not just time) into the relationship.

http://hounddogs.files.wordpress.com/2011/12/friends-comment-023.gif   LIFETIME COMMITMENT:  There are some hard-working agents who work hard only for the sake of the transaction.  You need someone who considers this friendship a lifetime relationship.  Yes, that’s right; your realtor should be your friend for life.  Someone who is always there.  What better evidence is there for trust?

CREDIBILTY:  Oh sure, you do want to work with someone with a track record, who has successfully closed real estate deals.  There is credibility in that.  However, you want to see credibility through honesty and integrity in everyday experiences.  Does your friend exhibit ethical behavior in relationships with others?  You’ll only know this if you have a relationship.

RESPONSIBILITY:  If this realtor has closed deals and gotten people to closings, isn’t that showing responsibility?  Yes and you still want to see more than that.  Does he volunteer in the community, take leadership roles in organizations?  How about this:  When he finds himself in a pickle, is he quick to become angry and blame others?  Or does he admit that there could be a miscommunication and work to get it resolved?  That’s the person you want on your team.

You do expect a hard-working professional.  But without the other characteristics (traits of character), you’re not likely to get the results you need from your Realtor.  Take the time to interview at least a couple of individuals.  Get to know someone before you really need her.  It won’t take very long to learn if she:

  • Wants to invest in a RELATIONSHIP
  • Is with you for the LONG-TERM
  • Garners CREDIBILITY in life
  • Exhibits RESPONSIBILITY in all involvements, and
  • CARES about you.