Unless you’re exclusively a listing agent, it has always been part of your job to educate home buyers. In today’s tight market it can mean the difference between empty pockets or a full wallet.
At a time when hopeful home buyers are competing for every listing, you can find yourself writing offer after offer, with nothing to show for it but an empty gas tank – and perhaps a headache.
To educate home buyers, begin at the beginning…
Taking first steps first is vital, so your home buyers need to know that becoming pre-approved is a pre-requisite to house hunting. You might not enjoy telling them that they need to see a lender before they see a house, but you must – for your sake if not for theirs.
Since people don’t like to simply follow instructions, tell them the reasons why:
- They’ll know what they can afford
- Any offer they make will be taken seriously
Some home sellers won’t even bother to read an offer unless it is accompanied by a pre-approval letter. I don’t blame them.
Even with a pre-approval, things can go wrong on the way to closing. One summer when I was an agent, I had two transactions fall apart a week before closing. In both cases the buyers decided they wanted a divorce instead of a house. One of my co-workers lost a transaction because the buyers bought a new car just days prior to their scheduled closing.
Why should sellers take a chance on a buyer who isn’t pre-approved? In today’s market, they shouldn’t.
Let those buyers know that if they fall in love with a house before they get an approval, the house will likely be sold before their offer could be presented.
Educate home buyers to the fact that the perfect home may not exist – at least not in today’s market.
In a market with few homes for sale, buyers who are determined to own a home may not be able to get everything they want this time around. However, you can still encourage them to write their list of features their new home must have. Perhaps more importantly, they should write a list of what it must NOT have – features that would be automatic deal breakers.
Some features may be important, so have your buyers create a checklist of the most important features. For instance, office space, abundant electrical outlets, availability of high-speed Internet, or a dog-friendly neighborhood.
If you know that your buyer will not buy a two-story house or a house on a busy highway, you can save yourself time and effort by eliminating both from the list of possibilities.
Since listings are scarce, if they find a house that’s not quite “it” but meets all the “must-haves” and none of the “must-not-haves,” it should stay in the running.
Before you waste time showing homes, educate home buyers about pricing and offers.
Books, articles, and late-night infomercials all lead potential home buyers to believe that they can make low offers and buy homes for pennies on the dollar. In years past there have been markets where perhaps they could – but not today. Unless you can educate them away from that notion, you’ll be wasting a lot of your time.
My suggestion is to give them a reality check with facts. Do a print-out of recent home sales in their price range – showing listing dates and prices compared to selling dates and prices. If you have access to the information, also show them the days on market between listing and being under contract.
That should help you with educating home buyers on the need to take swift action. “Sleeping on it” is a poor idea in a tight housing market.
Straight talk about buyer representation is also a good idea.
Educate home buyers to the fact that if they try working with 3 or 4 different agents, they won’t get much support. They’ll also be likely to see the same houses with every agent. This is a good time to outline your buyer services, so they’ll know what they’d be missing. If you use buyer representation forms, get one signed.
When it’s time to write an offer…
Every market is different, so I wouldn’t presume to say: “Do this,” but from what I’m reading, other agents are writing winning offers with ideas such as:
- Offering over list price
- Eliminating contingencies
- Skipping the inspection
- Adding an escalation clause
- Allowing the sellers to remain in the house past closing
- Writing a love letter to the sellers
All of these practices are risky, so the pros and cons need to be seriously discussed with your home buyers.
The first 5 are risky financially, but writing a love letter could also be legally risky. I’m reading reports of losing buyers yelling “discrimination” and bringing lawsuits. So be very careful with that one.
One bit of home buyer education needs to start on day one and be repeated regularly…
As I mentioned, I watched one transaction fall apart because the buyers bought a new car. I’ve heard of others evaporating because buyers quit their job, ran up a credit card balance, co-signed a loan for a family member, booked a vacation, failed to make a payment, etc.
You need to pound it into their heads that once they’ve been pre-approved they must not do anything to change their financial picture. Don’t just say it once. Repeat it regularly. Back it up with stories about failed transactions. One foolish move can make all your hard work be for nothing – and destroy their dreams at the same time.
What if buyers do have an inspection – and get spooked by the results?
Go over the report with them, then help them connect with an appropriate professional to let them know the seriousness of problems the inspector noted. As we all know, inspectors call out trivial issues as well as serious problems. Help your buyers learn the difference – and learn what it might cost to fix the problems.
Decide together whether to re-negotiate with the sellers.
What if your buyers don’t listen to any of your advice?
When that happens, it is time to weigh your options. If you’ve already spent a good deal of time with them, it might be difficult to let go. There’s a condition known as Sunk Cost Fallacy that can cause you to hang on when it’s time to let go.
So have a serious talk – this time with yourself. Is it realistic to think that those buyers will begin to take your advice? Or is it more realistic to think that you will a) show them 3 homes every Saturday for the next 6 months without ever writing an offer or b) continue writing low-ball offers that are quickly rejected.
This is the time to “trust your gut.” If it’s time to let go, do so joyously, knowing that you’ve now freed up time to spend with a buyer or seller who will actually get to closing.
If you want more home buyers, or want to hang on to your buyer inquiries…
Check out my selection of buyer prospecting letter sets by clicking here. Click on the links to learn more about each of these twelve buyer prospecting letter sets.
Lender and home buyer Image courtesy of Flare at FreeDigitalPhotos.net
Sold graphic courtesy of stuart miles @ freedigitalphotos.net
Car Image courtesy of Phil_Bird at FreeDigitalPhotos.net