You’re at an open house, hoping to find a buyer for your client. Two prospective clients stand before you: a lovely couple with the intent on building a life. Maybe they’re the ones?
They’re not. They tell you so. Your heart sinks for a variety of reasons that are all too familiar to you. Your seller will be disappointed, the couple is a little crestfallen (as they love the house), and you are discouraged because you don’t want to waste your time either. Nobody is happy, given the circumstances. But the prospect of one’s real estate journey should be an exciting moment in someone’s life. The power of emotions makes it so but expecting prospective buyers to just fall on your lap won’t help your business, your client, or the prospective buyer.
Be proactive and start to build a different kind of buying cycle for yourself and your business. One that begins with the lovely couple right in front of you.
Just because they are not the right fit for the listing you now have available doesn’t mean that they won’t be ideal for the next one. Regardless of the market, you know that pre-approved prospective home buyers are one step closer to becoming homebuyers. So sit them down and help them write a checklist of what they need to do to become a homeowner. Not only is this the right thing to do, getting people on track to their home purchasing dreams, but you will likely gain a future customer this way.
Commit to Following the Checklist
The first step to making buying a dream home a reality is the simplest: have a checklist. Then make sure your would-be home buyers follow it. Making lists often gives us quick and easy access to endorphins, the happiness hormone. Aside from the fact that we keep an eye on everything that we need to do to get a particular job done or issue resolved, we get closer to it with each completed task on the list. That in itself motivates us to complete each task. Sometimes, things can be as simple as that.
Clean up any Credit Issues
Many clients don’t realize what’s even on their credit report. They allow their financial reputation to be sullied through ignorance or simply by forgetting or overlooking minor things that can stack up and affect their creditworthiness. They might not also realize when they dispute erroneous findings; it is a reasonably easy way to get these debtors off their credit report, which raises their FICO score within a few short months. There is no better time to eliminate penalties and to ensure all old debts have been paid than during the pre-buying period. Recommend your potential buyers to also refrain from opening any new credit cards until they close on their new home.
Any prospective buyer should aim to pay off as much of their debt as possible. This will work to clear up their credit, improve their credit score, make it easier for them to get approved, or, why not, a pre-approved mortgage. Interest rates are directly affected by their credit report, and the better it is, the friendlier their interest rate will be. So advise them to pay their bills on time, reduce any balances on their credit cards, and to cancel any credit cards they no longer use to raise their credit score.
Resist A “House Poor” Existence
Your clients’ eyes may sparkle when they tour the refurbished farmhouse with the granite countertops and travertine tile. Still, it’s important to get them excited about homes they can actually afford. Homebuyers who somehow manage to finagle their way into homes out of their price range soon may find themselves curbside when the bank forecloses. Encourage your home buyers to calculate a total mortgage payment using a mortgage calculator. Then remind them to add in taxes, utilities, and insurance for the most accurate estimate of what they can expect to pay each month.
Focus their attention on their budget and income to determine their loan-to-value ratio before they actually settle on the lender, type of mortgage, or home. There is really no point for them to visit homes that are well above what they can afford. This will only backfire both on you, the potential real estate sale, and their state of mind. If they fall in love with a property that is out of their budget’s price range, it might be challenging to get their mind away from that unattainable dream. If possible, only show them properties that are within their price range and focus on renovations if the property requires it.
Remember Other Expenses
Homebuyers sometimes forget to calculate closing fees when they’re planning to purchase their new home. When they find themselves ready to sign the purchase agreement, suddenly they feel helpless as they kiss visions of their new home goodbye. They haven’t saved or planned for the closing day, so they have no choice but to cancel the whole thing. Help your buyers forecast how much they can expect to pay out of pocket for closing costs, for appliances they may need to have installed, and for any other expenses their lack of experience precludes them from realizing. First-time home buyers may also qualify for federal or state financial assistance and down payment assistance.
What prospective buyers need to understand from the get-go is that expenses don’t stop at mortgage fees. Having some money on hand that won’t cover the downpayment is essential. Even beyond closing costs and other unexpected expenditures that buyers can encounter from necessary purchases, property taxes, HOA fees, utility costs, and upkeep costs will come sooner than they might expect.
Making a habit of saving for big purchases is one of the best things you can urge your clients to do. Not only will you ease the stress of their upcoming expenses, but you may also have helped them to adhere to this habit for the rest of their lives. Homeowners average about 2.5 to 3% annually on their home’s upkeep. It is prudent to get them used to put money away to afford to pay for the maintenance of their investment. One of the most significant up-front expenses encountered by home buyers is the downpayment. While experts suggest that 20% is the best percentage for a property’s down payment, the 20% margin also saves home buyers from private mortgage insurance. If prospective clients don’t save as much for their downpayment, they will be stuck with another expense on their monthly budget.
Know Their Financial Position
Your buyers should be intimately aware of the amount of house they can afford, and they should be prepared to walk away if necessary. Regardless of whether it’s a certain number of bedrooms and bathrooms or a square-footage situation, being aware of what they can afford is crucial. Setting a budget will help them focus only on the properties they can afford and not get side-tracked by mansions and villas outside of their budget. This is where logic comes into play, and everyone sets their feet firmly back on the ground. The reason why this step is so relevant is the debt-to-income ratio. Lenders look at prospective buyers through some formulas. This is one of them, telling the lender whether a borrower can afford mortgage fees of a certain amount based on the money they have left after covering any other financial obligations.
Lastly, they need to have their paperwork in order so they can earn that pre-approval letter. With all the financial and paperwork details handled, they will be better able to find the house that is just right for them, one they will be able to enjoy for years to come.
When dealing with prospective clients, try approaching them as if you already signed them. The more open and helpful you are, the more likely they will be to continue working with you. Just because your available listings don’t match what they are searching for doesn’t mean you won’t succeed in finding a home for them in the following days or weeks. The next step would be to trade contact information and call them at a later date. We all know that real estate transitions don’t need to be completely formal, and creating a relationship with your clients is necessary for you to earn their trust. Do that from the beginning, and you’ll see your portfolio grow by the day.
Let us know in the comments below about your most significant issue with approaching prospective customers as an agent. We all have uncertainties, but maybe we can further help you out in the future. Like & Share this article with other real estate agents you collaborate with and help improve the experience for all clients, not just your own. As competitive as this industry is, the goal is to find the dream home for each family on the hunt for one.