PDF Helping Buyers Narrow in On Their Dream Home

HELPING BUYERS NARROW IN ON THEIR DREAM HOME

Course Overview

Sometimes buyers don't know what they want ? or they think they know what they want, but nothing is quite right -- or their list of wants exceeds their budget. This course will provide some techniques to help buyers prioritize the things they want in a home. This course is organized as follows: Chapter 1: Buyer Profiles. What Type of Buyer Hired You? Different types of buyers are best served with different search strategies. Once a licensee figures out which type of buyer he is likely working with, he can enhance the way he serves that buyer's needs. Chapter 2: The Buyers Who Know What They Want Think about this: buyers face their own set of challenges. The buyers know exactly what they want and either the homes they see are not quite right, or the home they want is simply out of their budget. There are strategies to find the best home to fit what these buyers want as well. Chapter 3: Choices, Choices, Choices. Helping Buyers Decide More choice is good for the buyer ? right? Many of us deal with buyer decision paralysis, or the endless quest for perfection. This isn't limited to firsttime home buyers. The challenge is to narrow in on the best homes so that buyer (and agent) don't spend months (or years) looking at homes that just don't work. We encourage our customers to visit the FAQs section found here for further information regarding your educational experience with McKissock. Complete with step-by-step tutorials, we've designed it with YOU in mind! Please note: Upon completion of the final exam, you will need to advance to the survey page and complete the survey. Once that is done, the course will be marked as "Complete" in our system and credit may be issued.

Course Learning Objectives

Upon completing this course, you will be able to: Explain the importance of having buyers be pre-approved for financing before starting a home search Identify buyer personality types in order to tailor buying strategies to the client Interview buyers beyond the basics to create a buyers' wish list Assess buyers' priorities to make their search more efficient Categorize homes to make selection easier Facilitate home buyers' decisions and thereby increase home buyers' satisfaction

Table of Contents

Chapter 1: Buyer Profiles: What Type of Buyer Hired You? Chapter 2: Buyer-Centered Searching Chapter 3: Choices, Choices, Choices. Helping Buyers Decide Chapter 4: Final Exam

Helping Buyers Narrow in on Their Dream Home

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CHAPTER 1: BUYER PROFILES: WHAT TYPE OF BUYER HIRED YOU?

Chapter 1 Overview

In this chapter, we start with the importance of having buyers preapproved for financing if they need it. Next, we group buyers into the general type of home they are looking for, then their personality types. Even the best real estate agent may need to adjust his or her standard buying strategies to suit the needs of different buyers.

Learning Objectives

Upon completing this chapter, you will be able to:

Explain the importance of having buyers be pre-approved for financing before starting a home search

Identify buyer personality types in order to tailor buying strategies to the client

Every home buyer is different. Every home buying experience is different. Savvy real estate agents know how to tailor their approaches and strategies to suit not only the market conditions, but the buyer's wishes as well.

Did You Know?

According to the Office of Housing and Urban Development, the average homebuyer looks at 15 homes before making a purchase offer. See for yourself (go to #18).

Many real estate licensees know not to expect the average. Some buyers may look at very few homes, while others seem to take forever to locate their homes! The number of homes viewed before an ultimate purchase is likely to be higher for first-time homebuyers, in markets with large inventories, or buyers who are new to the area.

It is a good idea for all buyers to be pre-approved for financing, if they need it, before they start viewing homes.

Review Pre-Approval Process and Help Buyer Client Determine Price Range

Does your buyer need financing? Most do. There is a definite difference between a buyer being pre-qualified and pre-approved for a mortgage. Pre-qualification can be done by the buyer, a real estate licensee, or a lender. It is simply evaluating the debt to income ratio and establishing a rough estimate of the buyer's ability to obtain financing. Debt to income ratio simply looks at monthly gross income (income before taxes), and monthly debt that the buyer will pay for at least the next 10 months. Many banks and lending institutions have "mortgage calculators" on their webpages. While this is a useful tool, buyers needing financing are generally better served if they are preapproved prior to their property search.

Pre-approval involves the buyer selecting a lender, completing paperwork, and usually providing documentation, such as a couple years of tax returns, a few months of paystubs and bank statements, as well as official records of any investments they may hold. Being preapproved for a mortgage provides many benefits to the buyer:

It tells them exactly how much financing they are eligible to receive, and thus their price limits for purchase. Many buyers may start with an unrealistic price range if not preapproved.

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It makes their purchase offer(s) much stronger. In fact, many sellers will ask for a "commitment letter" from a lender upon receiving a purchase offer. It shows a level of seriousness that buyers who are not pre-approved do not possess.

It saves precious time in the transaction if the lender has the necessary documentation and forms.

Getting pre-approved may introduce your buyer to special financing programs that they may otherwise not know about. This can change the criteria in their property search.

It may give you an opportunity to show your value in recommending a few lenders with good reputations.

Tip: If you are suggesting lenders, home inspectors, attorneys, or any other service provider, it is a good idea to recommend at least 3. It is a violation of most state and federal law to require contracts or combinations in real estate because it restricts the free-flow of trade. The buyer must be able to choose his or her own service provider, and by giving him or her choices, this is made clear. Offering choice also protects you, the licensee, because the buyer is selecting the service provider. If your favorite lender has an off day and does a terrible job, you may become liable if you recommended only that lender. Offering choice in service providers is good for everyone.

A good way to begin the conversation about financing is by asking, "Which lender has pre-approved you?" In asking this way, it sends a message that the buyer should be pre-approved before he or she begins to look at properties. If he or she is not pre-approved, it is the job of the licensee to explain how it is in the buyer's best interest to get pre-approved before searching for suitable properties in earnest.

Example

Buyer Bert wants a 5-bedroom home, with at least 3,500 square feet in a prime waterfront area. He is confident that he can find what he wants with his $50,000 a year income.

He calls you one Saturday morning, asking to see a $2,000,000 listing that afternoon. Bert knows that it is a buyer's market right now, so he expects you to negotiate hard and get him a deal.

Think about how to approach this buyer and his goals.

1. Start by going over different types of agency representation.

2. What are the required attributes in a property?

3. Does Bert need financing?

4. If so, has he been pre-approved?

5. What is a realistic price range for Bert?

6. When would Bert like to close?

7. Look at comparables and set realistic expectations

8. Go over the buying process

With this basic information, licensees can demonstrate the usefulness of their training, skills, and experience. Buyers will be better informed on what to expect, making for a smoother transaction. In this case, it may save the buyer and the real estate agent countless hours of wasted time!

Types of Home Buyers

You can't expect your current buyer client to be like those you have had in the past. Every buyer is different. Each will have their own set of likes and dislikes. Each will have their own set of motivations for purchasing a new home. On the next few pages, we will go over the different categories of buyers based upon their motivations for buying.

Tennessee Real Estate Commission Core 2015-2016

Some would categorize home buyers like this:

First-time home buyers

Buyers looking to trade up

Buyers looking to trade down

Buyers looking to stay the same, but in a new location

Second-home buyers

Types of Home Buyers - First-Time Home Buyers

First-time home buyers are usually younger, more inexperienced buyers. They may start out with unrealistic expectations, and end up going through a long search before they get a true sense of the market, what they can afford, and that the homes in their budget are not perfect. Once they decide on a home, family members may come in and dampen their excitement (or add more unrealistic expectations). The most difficult part in this case is convincing the buyers that they may not get into their dream home right away.

It is very common for these buyers to look at everything available on the market, just to realize that the first home they saw was the best. By that time, it may be too late, or they may make an unrealistic offer that offends the seller.

In this case, market education is a great way to start. First-time home buyers often need more coaching than most others.

Let the buyers know what has recently sold in their market area and price range

How did the final price compare to the list price? (Examples: homes in your price range sell for 97% of list price on average... homes in that neighborhood have sold for 3% above list price during the last 3 months...)

How long do homes stay on the market on average?

How many seller concessions are too many?

Describe how a seller may react to an extreme "low-ball" offer

Be prepared to have an unsuccessful first offer

Make sure buyers use common sense, rather than emotions

Try to keep the drama to a minimum and be the buffer between buyer and seller

Explain the importance of being pre-approved for a mortgage from the seller's perspective

Example - First-Time Home Buyer

Here is a common example that many of us are all too familiar with:

You are working for a newly married, young couple as their buyer agent. They are looking for their first home. Of course, they want their dream home, but after many, many, (many!) showings, they get a sense of the market and find a solid home that is priced fairly and suits their needs.

What happens next??? You guessed it!

Both sets of parents want to see the home. The parents notice many items that aren't brand new and want to get the best deal possible for their children.

They pressure the young couple to make an offer 25% below list price. They also want the sellers to pay a few thousand dollars in closing costs, replace the roof, install a new furnace, and repave the driveway. Are terms like this common for this market?

Helping Buyers Narrow in on Their Dream Home

What should you do?

Hopefully, you have already talked to your buyer clients about the market conditions. They know that the average home in their target area sells for 97% of list price (much higher than 75%). Be sensitive to the buyers' needs.

It may be tempting to go over the situation with the buyers' parents, but do be aware of your fiduciary duty of confidentiality! Even if the parents are providing some money toward the purchase of the property, you signed an agency agreement with the young couple. If the parents are not named in the agency agreement, then you must be careful not to breach your duty of confidentiality. Also be aware of your duty to obey your clients.

It is your job to make your buyers aware of market conditions. Make them aware that the seller may become offended with the offer and may not wish to negotiate any further. Equip your buyers with the facts, and advise them as best as you can.

Once you show the facts and give your advice, the ultimate decision is up to your buyers. "Agents advise, clients decide." Some clients will heed your advice; others may have to lose a home or two before they trust in your expertise (and who knows ? maybe the sellers are motivated enough to negotiate or accept the offer!)

Types of Home Buyers - Buyers Looking to Trade Up

These buyers often have growing families or growing incomes. They often expect higher quality and more space. These buyers may be more realistic in their expectations than the first-time home buyers, but they may also get stuck looking for their "dream" home... and unwilling to compromise.

These buyers most likely don't need as much education as first-time home buyers, but presenting market statistics is still very helpful (list price/closed price ratio, average days on market, etc.).

Fortunately, they know what it feels like to get an offer on a home, so they may be more sensible when making an offer.

If also trying to sell their own home, some of these clients may feel like their home is under-valued and the home they wish to buy is over-priced. It may be useful to show these clients not only the homes they wish to buy, but homes similar to the one they wish to sell in order to set both expectations according to the market.

These buyers may be anxious to make an offer on a new home before their current home is sold. This may result in paying a higher price in order to entice the seller of their prospective new home. Remind them that there could be more than one great home out there!

Talk about the advantages and disadvantages/risks of closing two transactions on the same day (the home they are selling and the one they are buying). Offer an option of renting in-between homes if that could be advantageous. If another agent and/or brokerage is handling your buyer's home sale, touch base with that agent to make sure closing times and conditions will work out. Keep in mind that many lenders have a cutoff time to have money "wired" from one transaction to another (it may be 2:00 PM, or 3:00 PM, for example).

If the clients wish to sell and buy their homes on the same day, be extra diligent on qualifying the buyers for their home. Check and double-check that the buyers are ready to close on time.

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Types of Home Buyers - Buyers Looking to Trade Down

Buyers in this category can be further divided into two groups: "empty nesters" who are downsizing because their children have grown up and moved out, or family transitioners who have gone through financial hardship and/or divorce. Here, it is important to know if the buyers are looking for a smaller home, or looking to lower costs.

In this case, it is useful for the buyers to write out a wish list. Once the list is together, ask them to pick the top 3 "must haves." It may be difficult to get everything they want into a smaller or less expensive home, so help the buyers identify which wish items they can do without.

As with the buyers trading up, extra caution should be taken if these buyers wish to close on the home they are selling on the same day as the home they are buying.

Types of Home Buyers - Buyers Looking to Relocate

Some buyers move because of job relocation, family desires, or just prefer a different neighborhood, town, or state. These buyers may want exactly what they had before, only in a different location. The challenge here is to help them understand the different markets. Remember the three most important qualities in real estate? Location, location, location.

These buyers often face the difficulty of purchasing a home in an area in which they are totally unfamiliar. Real estate licensees may need to spend a great deal of time helping these buyers find the best neighborhoods and understand that market prices differ from location to location.

Tip: Instead of telling the buyers which school systems are better, which areas have lower crime rates, etc., tell the buyers where to find the information themselves. This serves two purposes: 1) It takes liability off the real estate licensee, which is good because these issues fall outside our area of expertise and statistics can change over time, and 2) Showing the buyers where to find the information empowers them to know where to go if they want to check the information in the future.

For these buyers, and for others, it may be useful to design your own handout with websites, phone numbers, and/or contacts for the following items:

School systems: such as , or where to find results of standardized tests. Greatschools also has a free mobile app that's worth downloading.

Crime rates: the local police department, sex offender registries:

List of reputable local contractors (plumbers, electricians, radon system installers, etc.)

Put the interests of the buyer clients ahead of your own ? it is your fiduciary responsibility. If it is best for the buyers to rent housing until they get to know the area, suggest it.

Types of Home Buyers - Second-Home Buyers

Second-home buyers can be a lot of fun. They are likely buying a home purely for enjoyment and relaxation. As in the previous situations, it is a good idea to have the buyer pre-approved, if he or she needs financing, prior to beginning a search.

Other important questions to ask the buyer are:

How familiar are you with the area in which you are searching?

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How wide is your search area?

Are you working with multiple agents across a wide area?

When do you wish to purchase your second home?

Are you just looking?

The resources you offer can vary tremendously depending on these items. For instance, the buyers may have vacationed in the area for years and know exactly what they want, or they may be from another part of the country, totally unfamiliar with your market area, and concurrently looking in other locations or states.

Psychological Profiles

The category of home buyer can help determine what kind of home a buyer would like best; however, a deeper psychological profile is useful when figuring out how to treat the homebuyer the way he or she wishes to be treated.

Within each of these categories, there could be these Personality Types:

The Excited Buyer

The Negative Buyer

Just the Facts

The Open Buyer

Psychological Profiles - The Excited Buyer

Every house this buyer sees is great. He or she makes positive comments on everything, and rarely has anything negative to say. Each time this buyer sees a property, his or her agent is certain the buyer will make an offer. After numerous property showings, absolutely no offers are made.

This buyer may actually be excited, or he or she may be overcompensating because he or she is not going to buy anything. Think about previous excited buyers you may have worked for. Does that make sense? Perhaps their partner is not willing to buy, or he or she may not actually be serious about buying (yet). With all buyers, it is a good idea to make sure they are pre-qualified for financing if they need it.

As you recall from the earlier discussion, you, as their agent, can help in the pre-qualification process in the comfort of your office or their home. However, to test how serious they are, you could actually help them get pre-approved for financing which, as you will recall, is more extensive and requires the buyer to provide extensive documentation to a prospective lender you or they select, and obtaining preliminary approval from that lender. Taking that extra step may be an especially important step to take for this buyer, in order to see exactly how serious they are. This may save you and them valuable time!

Psychological Profiles - The Negative Buyer

This buyer finds fault everywhere. Nothing seems good enough or priced correctly. Sometimes the negative buyer is teamed up with an excited buyer. There may be more going on than you know. Could it be that the negative buyer is really investigating the home with a critical eye? He or she may be the most serious of buyers. On the other hand, if the negative buyer is paired with an excited buyer, it could be that one partner is not ready to purchase a home with the other. Look for social cues to see how to best serve this buyer.

Tennessee Real Estate Commission Core 2015-2016

Psychological Profiles - Just the Facts

This buyer seems irritated by the search process. He or she may take an annoyed deep breath every time a question results in a long drawnout answer. This buyer has likely done a tremendous amount of research on his or her own and does not wish to hear the details on information he or she already knows. While this buyer may seem irritated, if treated well, he or she is very likely to zero in on a home quickly. In this case, answer questions with brief responses.

Psychological Profiles - The Open Buyer

This buyer actually likes the long answers to questions. He or she is likely to buy, but will lean on his or her agent for research and advice. Do the research for this buyer. Offer detailed answers. This buyer will appreciate it.

Psychological Profiles - Example

You are working with a buyer who is clearly impatient with the search process. When she asks a question, you see her getting frustrated and taking heavy sighs when the answers run on. The buyer often goes through a house quickly and wants to move on.... Next! You wonder if the buyer is completely frustrated and disappointed with the housing market.

Which of the following do you think is true of this buyer?

1. She clearly does not want to buy a home.

2. It is likely that she has done so much research that she knows exactly what she wants and doesn't need drawn-out, detailed answers because she is familiar with the concepts. She just wants the quick facts.

3. She will likely look and look and look without buying anything.

4. She may actually be the most likely to buy a home quickly because she has done so much research.

5. She will likely fire you pretty soon because you obviously annoy her.

Psychological Profiles - Discussion

Our thoughts on this buyer:

1. She clearly does not want to buy a home.

2. It is likely that she has done so much research that she knows exactly what she wants and doesn't need drawnout, detailed answers because she is familiar with the concepts. She just wants the quick facts.

3. She will likely look and look and look without buying anything.

4. She may actually be the most likely to buy a home quickly because she has done so much research.

5. She will likely fire you pretty soon because you obviously annoy her.

It is very possible that this is a "Just the Facts" buyer. They are knowledgeable, motivated, and know what they want. This buyer may be likely to buy quickly. Treat them with respect and offer very brief, factual answers. See if that makes them happy.

Helping Buyers Narrow in on Their Dream Home

Chapter 1 Wrap-Up

In this chapter, we covered the importance of being pre-approved for financing to help a buyer narrow in on the home that best fits his or her needs. Next, the different general types of buyers were discussed, followed by some common personality profiles to watch for. The goal of this chapter is to get a general sense of the buyer so that the best buying strategy can be designed to help the search process go more smoothly.

Note: We went over some types of buyers and personalities that you may encounter when representing buyers, but it's important not to force someone into one of those categories. The important point to take away from this is that each buyer is different and is looking for something different from you as their agent. Use the categories in this chapter as a guide towards discovering the needs of your buyer client, but make sure to be flexible with those who don't seem to fit the mold.

CHAPTER 2: BUYERCENTERED SEARCHING

Chapter 2 Overview

Now that we have established that every buyer is different, we can drill down further to help buyers discover what they truly want in their home. It is human nature to want many amenities, features, and characteristics. Often times, the wish list exceeds the budget, or there simply isn't a home that has the exact combination of items the home buyers want. In order to help buyers conceptualize their ideal home, there are a few things we can do to help them.

Learning Objectives

Upon completing this chapter, you will be able to:

Interview buyers beyond the basics to create a buyers' wish list

Assess buyers' priorities to make their search more efficient

In Chapter 1, we discussed a starting point to help tailor a service plan for the buyers: how much information to provide, the level of detail they want, and so on.

Every buyer is different, and each one has his or her own priorities. It is important to discover the top priorities of the buyer so that the search process is as efficient as it can be. Top priorities may be the price, the condition of the home (fixer-upper or turn-key), specific amenities, location, time of closing, energy efficiency, etc.

Some items are standard, and we know to ask those questions (number of bedrooms, which towns, etc.). Other criteria may not be included in the standard list of questions, but can help a great deal in zeroing in on your buyer's dream home. The key here is to determine what is important to the buyer ? not to add to his or her list of concerns.

Allergies

According to the World Health Organization (2010-2012), up to 40% of the worldwide population has some sensitivity (in the form of IgE antibodies) to foreign proteins in the environment. In other words, 40% of the population is "allergic" to something.

In the U.S., the American College of Allergy, Asthma, and Immunology estimates that 10% of the U.S. population is allergic to pets. Similarly,

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