Note: Though this article is targeted to Realtors®, many of these tips are directly related to buyer activities during a real estate transaction. Be a smart and well prepared buyer – and use this information to your advantage! Via Trulia Pro Blog.
If you’re a film fan, you might have noticed a theme that I just discovered recently in movies that star movie star extraordinaire Denzel Washington. He tends to play roles at one extreme of the villain-hero spectrum or the other. But when he’s on the hero end, he often uses his smarts and expertise to do things no other mere mortal could do, despite his personality flaws, addictions and lack of any superhuman powers:
- In Man on Fire, he rescues a little girl from from a Mexican cartel.
- In Unstoppable, he stops a runaway train carrying a load of toxic cargo.
- In his latest movie, Flight, he lands a passenger plane that no other pilot could, in part, by flying it upside down.
Sometimes, as I see it, brokers and agents are the Denzel Washingtons of our clients’ real estate transactions and life visions. There are some hazards of home buying that are totally unavoidable, but there are some that highly-skilled, highly-observant, highly-savvy agents help their clients avoid falling prey to dozens, even hundreds of times throughout their careers:
1. Freak-outs and buyer’s remorse.
I tend to joke with buyers and sellers alike that the on the day an offer or counter-offer is ratified, both parties spend the evening riddled with remorse: the buyers think the accepted offer means they could have gotten the place for less, and the sellers think it means they could have demanded more! Okay, so it’s not totally a joke.
All jokes aside, it is the case that some buyers rue the day they closed on a home for years and years to come. This often happens, in my experience, when the home itself doesn’t turn out to be highly functional for their lives, the place turns out to be a lemon or the buyers find themselves overextended financially and end up in mortage distress.
Clearly, the decision-making on all of these issues – house “fit,” house condition, and how much to spend – are ultimately the buyer’s decision, not yours. Condition surprises are only avoidable via scrutinizing disclosures and having inspections.
But I have found one exercise to be a powerful way agents can help eliminate later remorse – I call it, the Vision of Home exercise. Before you ask them to get into the nitty-gritty details of the sort of house they hope to buy, in terms of bedrooms, bathrooms and the like, ask your buyer clients to sit down and journal out their vision for their life after they move into the home. Tell them to go whole hog and cover what they see in their minds’ eye on topics including, but not limited to:
- who they envision living in the home over the next 5 or 10 years
- what sorts of things all those people will likely do, inside and outside of the home, for work, school, play and downtime (i.e., will they spend their Saturdays walking to the farmer’s market, hiking the regional parks or hammering away on home improvement projects)
- where everyone will go to school or work, and how they will get there, and
- how much they want to work, and any changes in their work lives that they would like to make in the next few years, like starting their own business, telecommuting or changing jobs or industries (this point goes both to how much they spend and some of the home amenities they will need).
From there, you can work with them to move to more granular details, like the beds, baths, square feet and location details of a home that should help them realize their vision of home. And here’s how you resolve a freak-out: if or when the buyer gets panicked post offer-acceptance, whip this original Vision of Home document right on out.
At that time, or just before you remove contingencies, you can walk through this document with them, and one of two things will likely happen: they will be delighted to find that, even after the inevitable house hunt compromises, the place still will help them fulfill most of the items on their life vision wish list or they will realize that they have wandered too far astray from their original vision and back out while they still have the opportunity to find the right home for them.
2. Intentional ignorance. (unread disclosures, inspections – order more, make recommendations, etc.)
Buyers who fail to read disclosures, inspections, loan documents and such are buyers who tend to end up really, really upset at a later stage of the deal – often at you, their agent. Sometimes these are buyers who are so unused to these sorts of transactions that the mere sight of all those papers and zeros makes their eyes glaze over, bodies fall to the ground in the fetal position, mouths foam – etc. and so forth. Other times, these are buyers who have done so many major transactions in their work or their lives that they’ve gotten too casual, too lacksadaisacal, with the details.
- Read them yourself – summarize, flag items you think are important and obtain a written receipt with a bold, all caps acknowledgement at the bottom.
- Set an appointment to review the items with them, rather than just having your transaction coordinator send them over email or through your digital document signature application.
- Encourage them to ask questions – and give them “permission,” even encouragement to simply keep asking until they feel they are completely comfortable and understand everything. Some Type-As who are used to immediately grasping everything they read are very hesitant to ask what they think are “dumb” questions.
- Ask the mortgage pro on the transaction to send loan documents to your buyer and yourself at least a day or so in advance. The prospect of trying to read and catch mistakes in that pile of docs sitting at the closing table, often with the keys to the property and their moving hands hanging on whether they all get signed that very moment is one of the most common reasons buyers cite for not reading and understanding their papers.
3. Jumping off a self-made mortgage cliff.
In a heating market like today’s, the auction atmosphere and uber-long timelines of many house hunts can cause buyers to forget some of the fundamental tenets of buying a home – particularly when it comes to maintaining their financials in the same state they were when they were preapproved for a home. Here’s what I’ve seen work well: tell your buyer clients at your very first meeting all the ways you’ve seen other buyers inadvertently kill or seriously complicate their own deals. Make sure you include:
- Increasing their credit card or other debt
- Paying off and closing credit accounts
- Buying a car (an oldie, but goodie)
- Changing jobs and industries
- Paying bills late/incurring new derogatory marks on their credit report.
Even if their house hunt takes a year or longer, even if they are relatively self-service in terms of viewing Open Houses on their own, make sure you stay in close contact with them throughout and make sure they know to check in with you or their mortgage broker before they make any major money or career moves.
4. Deal-killing delay.
Hesitation kills deals – and it often critically wounds those it doesn’t totally slay. Agents know this. Most of us have cringed as we anticipated and actually witnessed this take place, more than once – or more than once every year:
- The buyer that loves a place, but is afraid to commit, so takes an extra day to make an offer or respond to a counter and loses it to another, more aggressive buyer.
- The buyer whose anxiety snowballs into feet-dragging on getting their documents to the mortgage broker, forcing them to run behind on loan contingency removal, which the bank seller refuses to extend, or
- The buyer who waits so long to get serious about reviewing disclosures, reading inspection reports and obtaining repair bids that they panic and consider pulling out of the deal when the first inspection reveals even a few condition issues that would not otherwise be so worrisome.
Obviously, if you can brief your buyers before they get started hunting in earnest on the folly of hesitating, that will get through to a good number of them. Additionally, because much of the early-deal hesitation arises from the novelty of the idea of making such a major financial commitment, doing a very thorough job of running and reviewing the comparables as they decide how much to offer, briefing them on how many other offers they are up against and reminding buyers of all the contingencies you’ll be writing into their offer can help diminish the panic-based paralysis that so commonly stops them in their tracks.
Even the most Denzellian of real estate agents can only do so much. Beyond making your best effort and implementing some of these and similar exercises and strategies, there’s no education like a market education. By that I mean that some buyers simply have to disregard your advice and lose a house or a mortgage before they become receptive to your urgings in the future. I’ve found that buyers who go through this can turn out to be your best clients and biggest raving fans in the future – after all, the market has proven you right!