An ounce of prevention is worth a pound of cure, they say. What they don’t say is that prevention is also less painful, less costly and more efficient, especially when it comes to preventing the deal-destroying misconceptions and decision traps that plague hot market home buyers.
Often, the only ‘cures’ for these house hunt ailments involve letting the market educate a buyer, as it does when a buyer loses one or more “dream homes” before that same buyer is able to fully absorb and align their strategies of the agents advice. This cure not only costs a buyer properties, it can cost them money too, if home values are increasing in their market. Plus, it certainly costs your real estate agent hours and hours of a precious business asset: Time.
So let’s circle back to prevention. There are five critical categories of preventive messages a new home buyer can—and should know before they even kick off their house hunts experience.
1. Understanding the process:
Buyers come to the house hunting process full of questions, wonder, and often even some level of disbelief in their ability to actually become home owners. The process seems overwhelming and full of uncertainty, even in the calmest of markets. And the more the market heats up, the more difficult home buying process seems to be.
Buyers crave to understand how all these pieces of the puzzle will fall into place, in terms of going from house hunter to home owner. To that end, the agents job is to brief the buyer on the basic flow of a transaction, from mortgage pre-approval to close, including things like contingencies, inspections, underwriting and the actual closing and funding ritual.
But buyers also have questions they might not be able to articulate in the realm of how they can make a smart decision and be successful in a competitive seller’s market. Buyers often come into the transaction with a great deal of unstated internal panic on issues like:
- How will we decide how much to offer for a home?
- How will we ever be able to compete without throwing too much money on the bargaining table?
- How will we know if a property is a lemon?
Your agent should get out ahead of these questions and proactively provide you with a primer on the steps of the house hunt, today’s market dynamics, and all the tricks, insider secrets and experience-based systems your agent can offer (If they are an experienced – buyer’s agent.) Doing so will save you a great deal of angst.
2. what to Expect:
Odds are, your agent has sold hundreds of homes in their career and quickly identify the problems that occur in a transaction that catch buyers by surprise, causing the buyer shock or even dismay to the point that the deal is threatened or derailed. These are the sorts of things your agent can handle and should take the time to address with you before you even begin looking at homes.
Your agent should help you understand the key points of a transaction:
- When is the buyer is required to come up with cash? (Earnest money deposit, inspection fees, removal of contingencies, prior to funding and at close.)
- When are buyers expected to show up? (Lender meetings, inspections, escrow & title – closing, etc.)
In some cases, buyers can review documents online and transfer cash through bank wires to avoid taking time off of work.
a prevention-minded agent also take care to address and manage the buyers’ expectations around the market dynamics they will undoubtedly face. If multiple offers are common, the agent should let the buyer know this up front. If most buyers have to make offers on 3, 5 or ten homes before they are successful, learning of a ‘multiple offer’ situation before the buyer views a home reduces the sting of losing a home. Knowing this information as a buyer, will help you better understand what challenges are ahead if you are considering writing an offer.
3. Mindset Management:
Buyers should look to their agent to help them understand the various angles and smart ways they should be thinking about and approaching the multiple tough decisions they will have to make between the time they first meet an agent and the close of escrow.
Agents also hold a unique level of insight into the decision traps and flawed thinking many buyers make. Remembering that emotions can sometimes get in the way of a smart purchase, your agent is there to help!
It is completely normal for a smart buyer to panic at various points of the transaction. In fact, it might even be slightly abnormal or concerning for a buyer not to have any trepidation, nervousness or anxiety as they move through such a major purchase!
4. Freak-out Prevention:
People who are generally calm can sometimes misinterpret fear or anxiety as a sign that they should not proceed with the transaction or that something is gravely wrong with the deal. Buyers need to know up front that these emotions are completely normal and even a good signal that they understand the gravitas of the commitment they are making can deactivate the derailing power of the freak-out.
I go so far as to tell buyers the precise points in the transaction when they can expect to feel super-jitters, like the moment before they sign the offer, the night they get into contract, the moment they lock in their loan and the day they remove contingencies, to name a few. Then, I share any checks and balances I have built into the system to help them make sure their rights, wants and needs are covered before they make these increasing levels of investment and commitment. This solves for and eliminates many a freak-out before it ever rears its ugly head.
As a rule, brokers and agents are very comfortable using data with sellers during a listing interview, and even with buyers who have found a house and need to understand the comparable sales in the process of deciding how much to offer. Your buyer’s agent should also take the time to share data on topics that are of most importance. Buyers need to understand the current market conditions, each price range has common trends and an experienced agent can share valuable information about this.
If your agent is simply telling you that the homes are flying off the market, just so you must make an offer quickly, ask to see ‘comparable sales’ and look at how many days a home is on the market. A quick glance will show the averages of D.O.M. (Days on the market before they go Pending.) This same examination of past sales can also show if properties are selling at or above the asking price.
Not all buyers value this advise in the beginning, so remember, in most cases this is the same information the appraisers review in helping determine a fair market value. Furthermore, avoid being a buyer who simply writes offers with no results. Write offers to secure a home.