When searching for that dream home, most buyers want to find one they love and can see themselves living in happily for years to come. In my experience, most buyers prefer homes that are move-in ready with minimal upkeep. Most buyers start that search online; they know what they are looking for, and many times they know roughly the price range they can afford.
Oftentimes, however, those two things come into conflict as buyers get closer to finding the right home. I see this frequently where a buyer starts out working with 65 to 75 percent of their loan prequalification number in order to be prudent and financially responsible by not seeking the most expensive home they could possibly buy. Then, inevitably, when they can’t find what they want for the money they want to spend, they start edging up on the listing price to find those homes with the amenities and finishing touches that they are seeking.
At this point, I always encourage a buyer to ask the question for themselves: “Where will I have to compromise?” Will you have to let go of the pool to fit into your price range? Maybe less hardwood flooring and no granite in the kitchen — or are these a must? Will you land in a home that’s a bit smaller in order to be in a better school district? Can you pay a bit more to be closer to recreational resources, such as parks?
The National Association of Realtors posed these questions to homebuyers to find out where compromises had been made on home purchases over the past year. The results, which can be found in NAR’s 2014 Profile of Home Buyers and Sellers, showed that while a third of buyers said they did not compromise at all, most let go of something that had been on their wish list.
What was the biggest area of compromise? It was on the price of the home. Almost 1 in 4 respondents negotiated what they ended up spending on a property. Close behind on the list of compromises was the size of the home — 20 percent of buyers reported compromising on size. Other areas noted included lot size, the condition of the home, the commute to work and friends or family, and the quality or age of the neighborhood.
This past year, my wife and I had a chance to buy once again. We did the same things most of the buyers in this report did in terms of going through the process. We looked at the inventory of available homes and school districts, and ended up buying a smaller home in a newer subdivision located in the highest-rated school district in our market. My new neighbor told me, “We ended up paying more for this house on a slab foundation than if we had bought on the other end of the county, because we wanted these schools.”
Schools are about the only thing this subdivision is close to! It is a longer drive to work, church, dining out and shopping, but schools are driving the area and people are coming. For agents, I think it is key to know the area rankings on local schools, as this is probably the one area where most of my buyers will not negotiate when finding a home. Buyers will know schools by scores or rankings and reputation, so it is imperative that you can be the area expert and know them just as well! If there are school-age children in the home (or there will be in the next couple of years), school districts are vitally important to buyers.
You can start to help your clients adjust their expectations (or their price range) by reminding them that everyone goes through the same process. We start with what we want to invest into a home purchase, we make a wish list of criteria for that next home, and then we have to make adjustments to one or the other. Discover which areas are most negotiable, and you will be able to focus on how to help them achieve their goals more effectively.
Hank Bailey is an associate broker with Re/Max Legends and a Realtor for more than a decade who provides buyer’s agent representation and seller listing services related to residential real estate.