Sometimes the amount of real estate agents looking for buyers can be daunting, making you feel like a small fish in an ever-expanding pond. However, finding home buyers in today’s market doesn’t have to be intimidating. All you need to know is who you’re looking for, what they want, where to find them, and how to approach them.
There are many different types of buyers, but we’ll be focusing on two general categories: first time home buyers and repeat buyers. Within the repeat buyers category we will discuss trade-up buyers, trade-down buyers, and investors.
When it comes to the where, you need to focus on finding home buyers in two places: online and offline. It’s important to know how to hunt for prospective buyers in both spheres using effective techniques.
Lastly, it’s crucial that you approach each buyer in a manner appropriate to his/her buyer type and interact in a way suitable to the medium by which you are communicating (whether online or offline).
First Time Home Buyers
First, let’s take a look at first time home buyers: who they are, what they’re looking for, where you can find them and how to approach them.
Who Are They?
If we had to summarize the general mental environment of the average first time home buyer, we’d pick one word: idealism.
Think lofty dreams, high hopes and endless aspirations. The first time home buyer is just starting out. S/he is excited to take the first big “adult” steps of his/her life and, more often than not, buying a home is one of them.
Therefore, be prepared to have to bring your client back down to earth. You don’t want to kill dreams, but you do want to be the level-headed expert. This is where your market and overall real estate expertise will come in handy.
According to a recent Doorsteps survey, first time home buyers make up almost 40 percent of the total buyer pool. Furthermore, their presence is a good sign: the more first time home buyers, the faster the housing market can recover. This is because they allow existing homeowners to move out of their “starter” homes and into new ones, keeping the real estate cycle lubed and moving.
First time home buyers aren’t as young as they used to be. While the average first time home buyer was in his/her mid to late twenties a few years ago, buyers are now waiting to purchase until they’re in their early to mid thirties. Why the change? It’s harder to get a mortgage when you have student debt.
In fact, according to Yahoo! Finance, “With tightened credit, many defaulting young borrowers are no longer able to qualify [for] loans—especially mortgages. In 2005, nearly nine percent of 25 to 30 year olds with student debt were granted a mortgage. But last year , that percentage dropped to slightly above four percent.”
With new mortgage rules having gone into effect on January 10, 2014, it will be even harder for anyone with student debt to qualify for a mortgage. According to the Consumer Financial Protection Bureau’s new set of standards, in order to qualify for a Qualified Residential Mortgage, borrowers must have a monthly debt to income (DTI) ratio of less than or equal to 43 percent. This stricter DTI ratio will make it incredibly hard for people with student debt to meet eligibility. With the amount of outstanding student debt at about $1 trillion, there is a huge pool of people who won’t qualify.
Therefore, today’s first time home buyer will probably be newly out of student debt, a bit more financially unburdened, and in his/her early to mid thirties.
What Are They Looking For?
First time home buyers are looking for that first piece of real estate to call their own. Although what type of home they are looking for is highly dependent on budget, location, and personal plans, first time home buyers are generally searching for moderately priced homes to get them out of their rental situations. They are looking for privacy, space, and a place to call their own. Their first home will probably serve them as their family grows and they become financially stable enough to trade up.
These buyers are also concerned about commuting. In fact, 62 percent of Gen-Y buyers said that a convenient commute was a top factor when choosing a neighborhood. Furthermore, 43 percent said commuting costs were the most important environmental factor in buying a home.
First time home buyers are also looking for an agent that understands how special purchasing a home is for the first time. They want you to explain and be appreciative of the process with them, and reassure them that their first home purchase will be a sound investment for the future.
Where Can You Find Them?
As you’ve probably heard, 90 percent of home buyers start their home searches online. With first time home buyers being at the younger end of the home buyers’ pool (and younger people tend to go to Google for everything), it’s more than likely that this is where they’ll start the process. Therefore, let’s first focus on where to find first time home buyers online.
First of all, search “first time home buyer course” online and you’ll find a slew of courses offered to those thinking about purchasing a home. How can you use this to your advantage? Many of these sites partner with real estate agents. Find a course or group you like, and see if they have partnership opportunities available in your area.
Scour the internet for first time home buyer forums, create a profile, and answer any questions potential home buyers have. This is a great way to showcase your expertise and find potential buyers.
Marketing your services online is a must to attract any home buyer. Make sure you have a clean, well designed website, are present on various social media sites, and are producing quality written content.
It’s rare that first time home buyers find their agents offline these days, unless it’s due to a referral from a friend or family member. Therefore, aside from leaving a paper trail through a primarily rental area, your best bet is to network with past clients to see if they know anyone looking to buy a home for the first time. This can be done through your usual drip campaign, but with a focus on serving first time home buyers. This can be especially effective if you send mailers to those past clients you helped find their first home. Invoking that sense of nostalgia, coupled with a request to send first time home buyers your way, can lead to great, quality referrals.
How Do You Approach Them?
Since your first interaction with first time home buyers will most likely be online, make sure to respond to any inquiries as soon as possible. This will ensure that the prospective buyer knows that there’s an actual human being behind the other computer screen. If you have the buyer’s phone number, call them right away, but if not, respond to them via whatever medium they used to contact you (your website, Facebook, Google+, etc.) and ask for their number so you can give them a call as soon as possible.
As many a realtor knows, it’s a race against time during the first stretch of the client acquisition game. Therefore, make sure you’re on top of your leads. Furthermore, when dealing with first time home buyers, emphasize your experience in working with such buyers during your first contact. Outline your expertise with helping people purchase their first homes and why you understand and enjoy these transactions the most. Lastly, underline that you are excellent at exercising patience, as this is an incredibly important quality that first time home buyers want to see in their real estate agent.
On to the repeat buyers: let’s take a look at who these clients are, what they’re looking for, where you can find them and how to approach them.
Who Are They?
These clients have already been through the home buying process at least once, so they (more or less) know the ropes. However, this means that they can come in one of two forms: the know-it-all, or the teacher’s pet.
The know-it-all, as you may suspect, thinks that s/he understands the process incredibly well, maybe even better than you do (because you don’t do this for a living or anything, right?). Know-it-all buyers are incredibly opinionated, and if they’ve worked with other realtors, they may spend the whole process pointing out how their other agent handled things differently. Make sure to listen to these clients’ wants and needs, but also ensure them that you’re an expert in the field and explain why you handle parts of the process the way you do.
You can also do business with the teacher’s pet. The ideal client, this buyer knows exactly what s/he wants and what is expected of him/her throughout the process. This client will listen to your advice and make sure that s/he is complying with your recommendations. Praise this client for being incredibly easy to work with, but make sure s/he doesn’t compromise too much in an effort to be agreeable.
What Are They Looking For?
In addition to the overarching characteristics of repeat buyers, let’s take a look at three specific buyer types (trade-up buyers, trade-down buyers, and investors) and what they’re looking for.
These buyers are ready, financially and physically, for more room! Trade-up buyers are looking for extra closet space, bonus rooms and formal dining and living rooms. Extra space is necessary, while prestige is a big plus. These buyers will be interested in homes in a great location that have excellent curb appeal and amenities. Price is important to these clients, but trade-up buyers will be more concerned with their monthly payments and how to budget accordingly. Furthermore, many trade-up buyers have children, making school district quality a top factor in their choice of neighborhood.
This group will primarily consist of the empty nesters, baby boomers, and retirees. There will also be those who need to downsize due to financial reasons or divorce. These buyers will be interested in properties that offer a similar quality of life as their previous home did, but with a smaller down and monthly payment. These buyers are interested in town homes and condos more than detached single family homes. Additionally, trade-down buyers care about the overall quality of a neighborhood as well as being in a location convenient to family and friends.
This will be the group of buyers that really knows the real estate game. Investors realize that investing in real estate is one of the soundest investments they can make. Therefore, these buyers will have more than likely done their fair share of research and know exactly what they’re looking to purchase. Investors may be more interested in foreclosures and short sales than other repeat buyers, and may be more willing to compromise on the condition of the home or property.
Where Can You Find Them?
Let’s take a look at where you can find these repeat buyers both on and offline.
When looking for trade-up buyers, using forums can be very useful. You can check out sites like Quora, Ask.com and eHow to search for phrases like “trading up” or “upgrading to a better home” and see what discussions are already taking place.
When prospecting for trade-down buyers, research townhouse and condo complexes in your area, and see if there are any discussion boards on the site. These will clue you into what trade-down buyers are looking for in a community. Furthermore, such resources will provide you with the questions and concerns such clients have regarding downsizing to a smaller property.
When it comes to investors, a great online resource is BiggerPockets.com. This is a “real estate investing social network, information hub and marketplace” with over 150,000 members, many of which are investors. By simply looking at the many forum threads and marketplace posts, you can see that many investors are out there and ready to jump on a great new real estate investment opportunity.
A great offline strategy for finding both trade-up and trade-down buyers is door knocking. For trade-up buyers, target neighborhoods with young families and go door-to-door. Introduce yourself and discuss the school districts and benefits of neighborhoods where families might find themselves “trading up.” For trade-down buyers, target neighborhoods with an older population. Door knock, introduce yourself, and tout the benefits of local townhouse and condo complexes.
Of course, with both of these types of buyers, it’s important to implement a paper marketing scheme as well; place an item of value, like a new listing or recently sold property in an area they’d be interested in, in front of the targeted buyers via snail mail.
To find investors offline, join a local real estate investment club or attend a club meeting. You can meet a lot of prospective buyers here looking for their next sound investment. For a mailer marketing technique, target affluent neighborhoods and send out information on “Real Estate Investment Opportunities” outlining a few listings you have available. Follow these up with door-to-door introductions, and you may find yourself a prospect!
How Do You Approach Them?
As we discussed with first time home buyers, it’s important to respond to online leads as soon as possible. It’s crucial to contact repeat buyers, who may have another agent in mind, as soon as you know they’re on the hunt. This way, you can let the buyer know that there are other, possibly more qualified agents out there who may be a better fit than the one s/he has in mind.
Make sure to find out if the repeat buyer is a trade-up or trade-down buyer or investor during the first phone call. This will ensure that you know exactly what the buyer is looking for and what you need to do in order to be fully prepared to handle the transaction.
Lastly, acknowledge the client’s experience with the buying process, and ensure him/her that you will be there to ensure the process runs smoothly and efficiently. You are an expert in handling trade-up buyers/trade-down buyers/investors and know how to cater to their needs.
The most important thing to remember when working with any buyer is to know your market. Know what properties fit the needs of each respective buyer and market them accordingly.
When it comes to marketing, make sure you have both an online and offline strategy in place. The home buying process may start online, but it always ends offline. A strong online presence is key because you will be able to reach and potentially attract a much larger audience than you ever could offline. Additionally, a solid offline strategy is essential because it allows you to provide a personal, human touch to your marketing.
Overall, make sure to respond to your leads—whether online or offline—promptly. Once you’ve secured a lead, exercise patience throughout the process (especially with first time home buyers) and highlight your real estate expertise every chance you get!