By Ross Wilson
For a neophyte, buying real estate is usually uncharted territory. Worse, realty virgins sometimes suffer from misinformation from unreliable sources. As their trusted representative, it’s your job to educate, to gently coach and coax them into appropriate home ownership with as little stress as possible. That means no unpleasant pressure. By winning your buyer’s trust, your task is typically easier. Plus, you’ll be rewarded – emotionally and ﬁnancially. And if your service is exemplary, you’ll earn referrals.
Seize the opportunity to learn more about your buyers. Find out what makes them tick by way of an extensive initial consultation. During this personal meeting with both spouses, ask pertinent questions about both of their respective wants and needs. I emphasize both because they each may have quite different ideas – sometimes contradictory – as to what constitutes the ideal home. It’s in your and their best interests to understand each of their individual as well as collective wants and needs.
If you fail to satisfy both parties with the right home, one may block the other from offering on anything. If this happens, you lose and so do they. Compromise means that neither party gets everything they want. But to remain within their budget, it may be unavoidable. And they’ll depend on you to mediate and miraculously produce a mutually agreed outcome.
During the ﬁrst consultation, I once asked a wife for her wants and needs. I recall her replying effusively with a long, detailed feature list, from kitchen cabinetry to floor covering and everything in between. She had obviously been envisioning her new home for some time. The husband, when asked, replied simply that he wanted a big master bedroom, a bathroom and an attached double garage… (pause)… and whatever she wants. Smart! He may have been the head of the house, but clearly she was the neck.
The list of questions you can ask is limited only by your imagination and their affordability factor. What basics do they absolutely need? What would they like to have? As you make suggestions. they’ll tend to say yes to everything. Thus, it’s a good idea to initially allow them to volunteer this info without your prompting. Often, the unprompted features are what excite them the most. Make notes throughout the meeting and categorize the list by “needs” and “wants”.
The needs become your primary search parameters and the wants are a close second, particularly those expressed at the outset. Satisfaction of the needs list will get them through the front door for a viewing. But it’s the exciting stuff from the wants list that will ignite their emotional excitement engine and get them to the offer table.
To ascertain a feasible target price range, it’s important to include basic ﬁnancial questions so you don’t waste their time or yours. How much cash do they have for the down payment? Is it from borrowed funds? What’s their approximate gross combined income and outstanding debt with minimum monthly payments? Estimate their gross debt and total debt service ratios to ensure their dream home is within their ﬁnancial grasp. You might be surprised to discover that they can comfortably afford a larger home. Their lender will repeat this procedure when they seek mortgage pre-approval, but at least you can do a pre-screen.
If they already own a home, to determine their net transferable equity, a property evaluation supported by a comparative market analysis is obviously a prerequisite, and as early in the process as possible. You should clarify any difference between how much they believe they can spend and what they can actually afford. Since homeowners often over-estimate the value of their homes, the ﬁgures could be quite different.
Your thorough and thoughtful inquiry will attest to your serious intentions to make their home transition a happy reality. Plus, the sharing of their personal financial information, along with their feelings, cracks open the door to their inner trust circle and begins to nurture the growth of a mutual bond.
For comfort and peace of mind, buyers often prefer to spend well under their lender – approved maximum purchase price. Do your best to accommodate their wishes, at least initially. But during my career, I found that they were often disappointed with the less expensive homes and end up increasing their limit a little, sometimes a lot. Perhaps you’re uncomfortable advocating buying to their highest technical affordability level because they may feel you’re just trying to increase your commission. Nevertheless, your prime motivation shouldn’t be self-serving. As a matter of fact, it should be the exact opposite.
You don’t want them to excessively compromise their wish list because the more space and features they sacriﬁce to remain within their emotionally preferred budget, the sooner they’ll need or want to upgrade to a larger, more expensive home. This will entail a move sooner than later with all the stress and associated expenses – real estate commission, legal fees, land transfer taxes and movers – all over again. At least increase their emotional maximum to include an estimate of these future expenses.
It’s arguably wiser to invest in a larger home now and stay longer, provided they don’t buy a home too big for their britches. They might not sleep well worrying about bigger debt. Health is our ﬁrst wealth.