here are five very important things to know when it comes to buying real estate in today’s market.
An ounce of prevention is worth a pound of cure, they say. What they don’t say is that prevention is also less painful, less costly and more efficient, especially when it comes to preventing the deal-destroying misconceptions and decision traps that plague hot market home buyers.
Often, the only ‘cures’ for these house hunt ailments involve letting the market educate your buyer client, as it does when they lose one or more “dream homes” before they are able to fully absorb and align their strategies to your advice. This cure not only costs them properties, it can cost them money if home values are increasing in your market. Plus, it certainly costs you hours and hours of your most precious business asset: your time.
So let’s circle back to prevention. There are five critical categories of preventive messages you can – and should – deliver to your buyer clients before you even kick off their house hunts. Here they are:
1. How to fill in the blank.
Buyers come to the house hunting process full of questions, wonder, and often even some level of disbelief in their ability to actually become home owners. The process itself seems overwhelming and full of uncertainty, even in the calmest of markets. And the more the market heats up, the more difficult it seems like buying a home can be, logistically speaking.
Buyers crave to understand just how all these pieces of the puzzle will fall into place, in terms of the basic logistics of going from house hunter to home owner. To that end, you should brief them on the basic flow of a transaction, from mortgage pre-approval to close, including things like contingencies, inspections, underwriting and the actual closing and funding ritual.
But they also have questions they might not be able to articulate in the realm of how they can make a smart decision and be successful in a competitive seller’s market. Buyers often come into the transaction with a great deal of unstated internal panic on issues like:
– How they’ll decide how much to offer for a home?
– How they’ll ever be able to compete without throwing too much money on the bargaining table?
– How will they know if a property is a lemon?
If you, as their agent, get out ahead of these questions and proactively provide them with a primer on the steps of the house hunt, today’s market dynamics, and all the tricks, insider secrets and experience-based systems you will offer to help them get to closing, you will save them (and yourself) a great deal of angst. You’ll also avoid having to constantly respond and react to the advice they’ve been given by some relative, friend or random newspaper article they read – and you’ll gain trust and credibility points, all in one fell swoop.
2. What to Expect.
You’ve done many a deal. And surely you’ve spotted patterns around the things that occur in a transaction that catch buyers by surprise, cause them shock or even dismay them to the point that the deal is threatened or derailed. These are the sorts of things you can and should take the time to address and deactivate before you put a buyer in the car.
One rule of thumb is, as you walk through your flowchart or briefing about the steps of the house hunt, to point out all the moments in time where the buyer will be required to (a) come up with cash (e.g., earnest money deposit, inspections, removal of contingencies, prior to funding and close) and/or (b) show up in person during the business day (e.g., inspections, closing, etc.). Mentioning these before the house hunt even starts up in earnest empowers your buyer to plan for these things, and be poised to transfer cash or take a half-day off work more easily when the actual day comes.
Prevention-minded agents also take care to address and manage buyers’ expectations around the market dynamics they will undoubtedly face. If multiple offers are common, let them know that up front. If most buyers have to make offers on 3, 5 or 10 homes before they are successful, telling your buyers that before they begin viewing homes reduces the sting of losing a home. It also builds your credibility and minimizes their resistance to your aggressive offer-price recommendations if and when they do lose a home after making what they thought was a good offer.
3. Mindset Management.
Buyers look to us to help them understand the various angles and smart ways they should be thinking about and approaching the multiple tough decisions they will have to make between the time we first meet them and close of escrow. We also hold a unique level of insight into the decision traps and flawed thinking we’ve seen other buyers apply to their real estate decision-making; sharing common pitfalls with incoming buyers in advance can help them avoid errors that often cost buyers properties, time and money.
4. Freak-out prevention.
A freak-out predicted is a freak-out avoided, in my experience. At least a small segment of your pre-house hunt briefing should be dedicated to helping your buyers understand that it is completely normal for a smart buyer to panic at various points of the transaction. In fact, it might even be slightly abnormal or concerning for a buyer not to have any trepidation, nervousness or anxiety as they move through such a major purchase!
People who are generally calm can sometimes misinterpret fear or anxiety as a sign that they shouldn’t proceed with the transaction or that something is gravely wrong with the deal. Letting buyers know up front that these emotions are completely normal and even a good signal that they understand the gravitas of the commitment they are making can deactivate the derailing power of the freak-out.
I go so far as to tell buyers the precise points in the transaction when they can expect to feel super-jitters, like the moment before they sign the offer, the night they get into contract, the moment they lock in their loan and the day they remove contingencies, to name a few. Then, I share with them any checks and balances I have built into the system to help them make sure their rights, wants and needs are covered before they make these increasing levels of investment and commitment. This solves for and eliminates many a freak-out before it ever rears its ugly head.
As a rule, we brokers and agents are very comfortable using data with sellers during a listing interview, and even with buyers who have found a house and need to understand the comps in the process of deciding how much to offer. I submit that it is just as essential, just as powerful, to back yourself up with data during your pre-house hunt briefings.
Don’t just tell buyers that homes are flying off the market, so that they must make an offer quickly on a home they love – tell them that, and then give them the average number of days homes in their target areas are actually on the market before they go pending. Don’t just tell them that most homes in your area are selling for over asking; given them a list price-to-sale price ratio to render this information more concrete and help them truly wrap their heads around it.
Then, make the data applicable by showing and telling them how you can help them use this data to power a successful house hunt. For example, if the list price-to-sale price ratio is running at 110% and your buyer is looking at homes in the $300,000 range, tell them: “that means that the average home listed at $300,000 is actually selling for $330,000. So, I suggest we actually start searching for homes listed as low as $250,000 so you can make a successful offer without going over your $300,000 limit.”
Your buyer might follow your advice – or they might keep asking to see homes listed at $300,000. But in either event, you deliver on the promise of having an experienced, professional real estate pro in the buyer’s corner when you serve up the market data that should matter to them, and help them understand how to use it to level-up their approach and minimize the common frictions of the house hunt.
Your Global Lifestyle Team