Many buyers ask their agents questions about what they think the market/seller/interest rates will do. It seems the prevailing attitude by many real estate agents is to laugh off such questions, or retort with a witty comment such as, "My crystal ball is on the fritz." Their response is more like that of the famous Magic 8-ball: "Reply hazy. Try again." And try again they do. Because they didn't hire a fortune teller to help them buy a home, they hired what they thought was a real estate professional.
Have we hit bottom? Should I wait to buy a home or buy now?
Buyers want to know about the market. Has it turned around? Is it still dropping? Well, I don't have a crystal ball, but I don't need one to give an honest response to their query.
Our market (Salt Lake City) is expected to continue in decline this year (2011). The rate of decline is slowing, but if they buy a home today, it will be worth less one year from now. We have not hit bottom. I tell all of my prospects this. Many still buy homes. Some wait. I don't have a problem with that. THIS is what they want to know. Not that I don't have a crystal ball.
For many people, waiting is a great idea! Unless the cost of renting is greater than the cost of buying, they can save a larger down payment and get a home in a year at a price below what they could buy a similar home for today.
Sure, interest rates could go up at any time, but the real estate agents and mortgage lenders have been using that line for the past 5 years. And buyers know this already. Every buyer needs to assess their long-term plans and determine if buying a home fits in with their plan. Responding to their question by telling them, "whether the market is in decline or on the rise is irrelevant if you plan on staying in the home for at least x years" is selling them, not educating them. Use a client's questions as an opportunity to educate them. My experience has been that educated buyers are easier to work with and make better decisions. They will buy when they are ready to buy and I'll be just as happy to help them buy in a year as I would be to help them buy today.
As a professional, you owe them a professional response. They may as well consult the Magic 8-ball if you are unwilling to give them a response based on facts and data. I'm a professional and when questions such as this are asked, it is my duty to respond professionally.
How much did the seller pay for the house?
If a client wants to know what the home last sold for and when, I'll tell them. Is it irrelevant? Perhaps. But I'm their agent, not a "salesperson". It takes only a short while for clients to realize what matters and what doesn't. Most people are not stupid. When I give them an answer or provide them with information they've requested, we can talk about whether it matters or not. I can ask them why they think it matters. Doing this gives me great insight in how to help them reach their goals.
How much equity does the seller have in the home?
There is nothing wrong with knowing how much equity a seller has in their house (positive or negative). I've seen upside down sellers bring tens of thousands of dollars to the closing table to sell and I've seen sellers with hundreds of thousands of dollars in equity in their properties not budge at all and NOT sell their home. No, what they owe does not change the market value, but getting an idea of the seller's apparent ablility to be flexible is helpful when developing a negotiations strategy, especially in this market.
Why are the sellers moving?
Why the sellers are moving is great information. It doesn't guarantee a level of motivation, but it can certainly be an indicator. If a client wants to know this, you should ask the listing agent. It's usually easier to get this information before entering negotiations, but a professional can usually get an answer to this question pretty easily, at any time. Is this irrelevant? Heck no! Why the seller is moving is highly relevant when determining a negotiations strategy. Ask the listing agent, ask the neighbors, google the sellers. Not only could this be relevant and very helpful, but it can be fun!
Should I lock my interest rate or not?
For me, this is the toughest of them all because when this question comes up, they are under contract on the home they want to own and there are many factors beyond any of our control that affect the interest rate. On this question, even I will state that I cannot see the future. But I owe it to the client to educate them as much as I can so they can make an educated decision. Based on my professional and personal experience, I'll tell them what I would consider when making this decision.
I try and put the current interest rate into context. How has the rate changed since they started looking at homes? If there is any current trend, I let them know. What difference does an eighth make in the payment? A quarter? Do they want to watch the market daily to try and get that extra 1/8th off the rate? Are they willing to, and can they afford to, take the risk that the rate goes up 1/8th or 1/4 percent? What economic indicators are on the horizon? How might those reports affect rates? What is the trend in the stock and bond markets? How far away is closing? If they are just a day or two away from being able to lock for a shorter lock period, that could offset some of the risk in waiting those few days. Rates tend to "drift" down and "shoot" up. This isn't meant to be an exhaustive list of considerations, but it is meant to show you how dumb saying you don't have a crystal ball and leaving it at that is. What help are you? You're no help at all and they wonder why they hired you.
Whatever information you can provide to your client on the subject they are asking you about, you should provide it. Your client wants to make as informed and as intelligent a decision as they can. Who are you to decide that floating the rate another 2 weeks is too risky? If they understand the risk and can afford to gamble, it should be their call. Who are you to decide that the fact that the seller has $100,000 in equity is irrelevant in determining a starting offer?
It is because none of us have "a crystal ball" that it's even more important to provide our clients with whatever we can that will best help them make informed and educated decisions.
- Do you have excellent credit?
- Are you looking to purchase a $300,000-$800,000 home within 90 days?
- Are you making a substantial down payment or are you paying cash for your next home?
- Do you want an agent who will actually ANSWER your questions and research them if necessary?
If so, don't buy a home without an agent on YOUR side of the transaction! Make sure you hire an Exclusive Buyer's Agent!
Make sure you hire an E.B.A.
Call us at (801) 969-8989 or contact us via the link on this page.
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