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April 19, 2014

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

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Relationship Management: 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 for others, they won’t let being novices at home buying get in their way, or they may send you on an endless search for that perfect house.

First-time home buyers are the largest group of buyers, making up 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, agents say.

How can you overcome some of the biggest challenges when 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 in finding the perfect house. And, alas, here come the parents.

“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?

Well, 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.”

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.

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, which asks questions about you, what’s wrong, and your medical history. 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 way below the market and are a deal.” By using this technique, 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 so 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, like what they were just 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 ones too.

    “The buyer may have been single when you sold him that first house. Then he marries, and he wants to move again,” Courtney says. “Then he and his wife have children, and they need to move again. 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.”
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