By Michele Lerner
The number one frustration for many REALTORS® in recent months has been buyer hesitation. In the face of weak consumer confidence it can be tough to create a sense of urgency among buyers.
Today’s sophisticated consumers know they are in a buyer’s market and national media reports about the real estate market have given many of them a sense of complacency that makes them slower to move forward on a home purchase.
Experienced REALTORS® suggest that the first step in getting buyers off the fence should be a counseling session to reveal the buyer’s expectations and demonstrate the agent’s strong knowledge of local market conditions.
Counsel Your Buyers
Mark Lesses, an associate broker and vice president with Coldwell Banker Residential Brokerage in Arlington, says the key is to understand the priorities of each buyer before deciding on an appropriate approach.
Buyers, who have contacted a REALTOR®, yet are still reluctant to make a move or who prefer to put off a decision until some future date, can be encouraged to move faster with local market information.
“There are three specific reasons I give buyers why now is a good time to buy,” says David Kres, an exclusive buyer’s agent and owner of Buyers Brokers Only, LLC in Haverhill. “First, interest rates are still low, but they are trending upward. Most buyers are concerned about the monthly payment, so they need to be educated about the impact of higher interest rates. Second, there is less demand and less competition for homes in the winter, so buyers have a better chance of having their offer accepted. Third, even in this market good properties are still selling, so if you delay making an offer by even just a week or two there’s a good chance that the home you want to buy will be under contract.”
Laurie Wilkey, office manager of Jack Conway Real Estate in Dartmouth, stresses the importance of pre-approving a buyer for a mortgage.
“Knowing they have money available to borrow helps them make a plan,” says Wilkey. “Most people know already that it is a buyer’s market, so the motivation to move now depends a lot on their situation. If their lease is up or they need to relocate that can help, but it also important to show them that the interest rate on their loan approval is only temporary. They need to understand how quickly they need to move in order to keep that loan approval at that interest rate.”
Demonstrate your Math Skills
Cheryl Deschenes, co-owner of Weichert REALTORS® – Hunter Properties in Plainville, says she explains to buyers that the local market is improving in sellers’ favor, with prices rising slightly and days on the market decreasing.
“Most importantly, I tell them how much they will lose in the long term if interest rates rise even a small amount,” says Deschenes. “I lay it out for them by telling them that a $200,000 home last October would cost $984 per month, but even with a relatively small increase in interest rates that same mortgage cost $1089 in December. That’s $105 more per month for the same house and $37,800 for the life of the loan.”
Kres creates a spreadsheet that shows the monthly payments for the same price with the same down payment at different interest rates to demonstrate the impact on their budget.
“Buyers need to realize that they are much worse off if interest rates rise by one-half percent than anything they could gain by taking off $25,000 on the home price,” says Kres. “Obviously the impact is even greater on more expensive properties.”
Richard Machado, an exclusive buyer’s agent and broker of Fidelis Smart Home Buying Team in New Bedford, also focuses on interest rates to show buyers the difference between what they can buy at different rates.
“Buyers are mostly concerned with their monthly payment, so I show them that a $1500 mortgage payment at 4.5% interest could buy them a home with a $300,000 loan; but at 6.5% interest that would only pay for a $235,000 mortgage,” says Machado.
Deschenes documents home values to demonstrate a stabilizing market, which helps buyers feel more secure that they will not lose value in their home.
“I show them that homes in our area have had a long-term equity gain of 24 percent over the past eight years and 40% over the past 15 years,” says Deschenes. “That’s a much better return than investors get with stocks, plus the owners have had the enjoyment of their home.”
Discuss the Rent-Versus-Own Impact on Their Finances
“Buyers are mostly concerned about their monthly payment, so it is important for REALTORS® to know the local rental rates as well as the for purchase market,” says Wilkey. “If potential buyers hear they can own for the same price as renting; that will make them move more quickly to buy. They will also need resources for a down payment, but their comfort with the monthly payment is what makes them decide to put the rest of the package together.”
Take a Realistic Approach
John Farrell, a sales associate with Coldwell Banker Residential Brokerage in Beverly, recently worked with buyers who were tempted to put off their decision until the spring in the hope that more homes or better homes would be on the market.
“We talked about the potential for an increase in interest rates and in prices by the spring, as well as the reports that our local market was active enough that they would lose the home that interested them,” says Farrell. “They made an offer immediately rather than wait for the unknown.”
Machado says buyers need to understand that they should not be searching for the “perfect home.”
“Buyers need to take a businesslike approach and search for the best house they can afford that is available now,” says Machado.
Provide a Specific Market Analysis
Georgia Taft Pye, an exclusive buyer’s agent and broker/owner or Buyer Brokers of The South Shore in Duxbury, says buyers’ biggest fear is overpaying for a home, so she finds herself showing more homes to customers so they will be confident they have paid a low enough price for a property.
“A big motivation for buyers is to see a price drop,” says Pye. “I do a title run-up on properties before the buyers make an offer to show them what the sellers paid and their outstanding mortgage so the buyers can see the context of the sellers’ point of view.”
Machado also researches properties and checks the current assessment, original asking price and any recent changes to the price or assessment.
“It’s important to understand how motivated the sellers are and check to see how much equity they have in the home before making an offer,” says Machado. “I can show the buyers that if the sellers recently dropped their price it may be time to offer them full price if they really want the house.”
Increase your Market Knowledge
REALTORS® suggest that a deep understanding of your local market can be a tool to help guide buyers into making a smart home buying decision. Most agree that a two-pronged approach to gathering information works best: using the data available from the MLS and other sources, and spending time touring homes and neighborhoods so that you have an intimate understanding of what is available, what sells and why.
“Every home is different and people react differently to each home, so if you see as many homes as possible you know what is out there and what buyers may want,” says Lesses. “It is essential to have good relationships with other agents, too, who can talk knowledgeably about their listings and about what they are seeing on the market.”
Kres says that every REALTOR® has the tools available to educate themselves about their market.
“REALTORS® should learn how to use the MLS data and the NAR REALTORS® Property Resource (RPR) [an exclusive online real estate database still in roll-out phases providing REALTORS® with data on every parcel of property in the United States],” says Kres. “But it is pretty tough to do a comparative market analysis if you have never seen the homes, so it is vital to look at properties, too.”
Deschenes recommends that agents keep up-to-date on local homebuyer programs, such as the 103% financing option that was recently available in some locations. Wilkey suggests that municipal databases can be a good resource for REALTORS® to find out about developments in their community that can impact the housing market as well as the sales history of a particular property.
“Anecdotes about a neighborhood, a home or the entire market can be helpful to give buyers a sense of where we are in the market, so newer agents should take the time to listen to experienced agents,” says Pye. “They should also spend as much time as they can looking at homes, since buyers truly appreciate it when an agent can tell them they have already seen a home they are interested in.”
As Deschenes says, REALTORS® should want to know everything they can about their community and their market, since this is their business. Sharing that knowledge with buyers can be one way to motivate them to make an offer, as well as to earn their lifelong loyalty.