This article was last updated May 9, 2023.
The recent market shift has caused a decline in buyers’ sense of urgency, resulting in a more cautious approach to property buying after a busy couple of years. With higher interest rates and some banks collapsing and stock market volatility as a result — buyers’ sense of urgency has declined almost as rapidly as interest rates have increased. After a frenetic two plus years, they are taking their time and carefully evaluating options before making an offer on a property.
Once they make an offer, negotiate and reach agreement with a seller on price and terms, doubt may set in at various points of the transaction.
- Are they paying too much?
- What about the condition of the home and needed repairs or improvements?
- Can they comfortably afford the mortgage payment and the required expenses that go along with owning the property?
- What if they like something else that comes on the market better?
It is common for buyers to rethink whether or not they are making the right decision. Here are seven ways to keep buyers in the transaction:
Before making an offer, it is important to coach buyers through what to expect, not only about the offer and the transaction process, but also the “state of the inventory” for their price range and the area(s) they are searching. Buyers need to understand what they are likely to see.
Do homes need work or are they somewhat updated or more updated in their price range? Are there common issues that typically come up during inspections in these properties such as foundation, plumbing or electrical issues?
They also need to understand what the required expenses of ownership are. For example:
- Are there homeowners association dues?
- How much does homeowners insurance cost?
- Are there any special kinds of insurance that will be required, such as flood or fire?
This will lessen buyers being in “shock and awe” once they are in their investigation/inspection period and give them a chance to pivot to a different area or kind of property if they aren’t comfortable with the choices that are typically available.
The contract forms, addendums and required disclosures should be reviewed with a buyer before they embark on a serious home search, not when they are being sent for electronic signature. Adequate time needs to be devoted to reviewing the key provisions of these documents, so buyers understand what will be required of them as well as that of the seller.
If buyers know ahead of time what their contingencies are and what are and are not legitimate grounds for getting out of a contract, they are more likely to move forward with confidence. This is a critical part of the transaction so buyers aren’t suprised and stressed when they learn what the contract really says.
A buyer also needs to understand what kinds of repairs can be requested of a seller in the market you are in. While in theory everything is negotiable, buyers need guidance before they start making offers as to what items are considered fair game (health, safety, termites, etc.) and the difference between a repair and an improvement. For example, asking the seller to have gutters installed or new screens on all of the windows is considered an improvement.
When buyers aren’t properly educated when it comes to inspections and repairs, this can be a huge breaking point in the transaction. Buyers may think the sellers refusal to tackle things that really aren’t true repairs is a deal breaker.
Buyers with doubts often need to have things put in perspective for them, whether that is comparing/contrasting comparable sales to the home they are under contract with or providing an idea of future value based on tackling updates and repairs.
Providing an idea of value of comparable properties that sold that were more turnkey can also help. An agent can also provide a cost of waiting or rent vs. buy analysis to help them understand that waiting is simply buying uncertainty. Finding ways to relate to stories of other buyers that had concerns and how they worked through them also helps to feel that they are not alone.
In some cases, an agent may need to renegotiate terms, ask for a price reduction, request repairs or ask for a credit toward a buyer’s closing costs or an interest rate buydown. Helping to financially offset the costs of unforeseen issues that arise from inspections or should the property not appraise, may make the buyer feel more comfortable about what they are about to embark on.
If the buyer is getting a loan, it is critically important to proactively communicate with them about the transaction, how things are transpiring, as well as any challenges that you as well as they might be dealing with. The lender may be able to give you feedback and vice versa about the buyers which can be helpful to both of you in determining how to keep them in the transaction.
Brainstorming with the lender on possible solutions may be the very thing that is needed. Sometimes getting on a conference call with the buyers and lender together and talking through issues is much better instead of all the back and forth that often ensues with the buyer saying one thing and the lender saying another.
The buyers could delay providing required documentation to the lender for a reason, but attempt to camouflage things, like acting like they have concerns about the house and its condition when there aren’t any major issues. This will avoid the disconnect that can happen, as buyers often think of their agent and lender as two totally separate entities who don’t need to communicate with each other.
Whatever side of the transaction you represent, you can never communicate enough with all parties that you are dealing with. That especially goes for the buyer. Do not assume that little communication from them means that all is under control or “no news is good news.”
Everyone handles concerns, questions and doubt differently, and they may be feeling overwhelmed and disengage vs. blowing up your phone with 20 questions. Check in early and often. Ask how things are going, if they have any questions or concerns and if there is anything you can assist with.
When it comes to communication, sharing a timeline of important dates and deadlines will help the buyers stay on track of what needs to happen by what date so they can plan accordingly. It also makes it easier to remind them and follow up on important milestones as you move through the transaction.
There is nothing more stressful than deadlines sneaking up on a buyer. They may react with more of a “fight or flight” syndrome when a contingency deadline is looming that they weren’t aware of, attempt to blame the agent, the lender or both, and want to get out of the transaction due to sheer surprise and being unprepared.
Sometimes the best course of action is to get out the calculator to help put all in perspective. In our current market, although interest rates are higher, the buyer needs to understand they are not likely to go back to what they were during 2020 through the first half of 2022.
Right now, interest rates can be offset by more negotiability and flexibility when it comes to making offers on homes as well as considering homes that have had substantial price reductions from when they first came on the market. Concessions can be negotiated towards an interest rate buydown as well as towards closing costs and prepaids to help keep more cash in a buyer’s pocket.
Once buyers can see everything laid out, it may help to assuage fears. A good way to put this is, “You don’t live in an interest rate, you live in a home.”
The more the buyer is educated about the inventory, the process they are about to embark on from making an offer, moving through the transaction, as well as the mortgage process, the more comfortable they will be about potential bumps in the road. They need to be coached to expect challenges and problems along the way but also know that there are solutions to move through most anything that comes up.
Cara Ameer is a broker associate and global luxury agent with Coldwell Banker Vanguard Realty in Ponte Vedra Beach, Florida. You can follow her on Facebook or Twitter.