(This is Part 2 of a two-part series. Read Part 1, "Push home buyers off the fence now.")
If you’re struggling with reluctant buyers, you can get your buyers to buy now!
Last week’s article looked at four strategies for motivating buyers to buy now. Here are four additional strategies to help you persuade a reluctant buyer that today is the best time ever to purchase.
1. The smart investor conversation
It’s no secret that people like Warren Buffett and Donald Trump are actively involved in purchasing as much real estate as possible. Explain to your buyers, that like Buffett and Trump, the smartest people in the real estate business are contrarians. They sell when prices increase and buy when prices are going down. This may be a little difficult for some buyers to grasp since it is exactly opposite to how most consumers behave. When prices increase, buyers stampede to buy property to capitalize on the increases. Of course, when markets fall, those who bought at or near the peak are generally the ones who are stuck with properties that are not worth what they paid. As one economist put it, "I know it’s time to get out of the real estate market when my manicurist and the man who cuts my hair start advising me on how to make money by flipping real estate." If your buyers are feeling reluctant, encourage them to be smart like Trump and Buffett — buy now when the interest rates are at historic lows and there are plenty of bargains as well.
2. The Bargain Bus
A trend that has been popping up in several places in the country is the "bargain bus." Rather than taking individual buyers out to look at various foreclosure, REO (real estate-owned) or other well-priced properties, some agents have been taking out groups of buyers in a bus to tour these properties. It’s certainly more time-efficient for the agents. It’s also an excellent way to have reluctant buyers become more motivated to purchase. When the agent sets up the best properties available in a given category and uses print and Web advertising to attract investors or savvy home buyers, there are usually multiple purchases from a single tour. The tour creates urgency in much the same way that an auction does. The fact that there is a busload of buyers also creates the impression that "others are doing it — perhaps I should do it as well."
3. Provide financial incentives
Oftentimes, providing a financial incentive is a good way to attract buyers who will take action. Seller strategies include having the seller pay part of the closing costs; pre-paying the buyers’ homeowner association dues for one year; or providing a home warranty policy. Since 35 percent of the properties in the United States are owned free and clear, having the seller carry part or all of the financing can be another viable option. Properties with financial incentives are excellent choices if you’re conducting a "bargain bus tour."
One caveat: Avoid "wrapping" mortgages (i.e. expecting the existing lender to continue its loan after you sell to another buyer) unless you have negotiated a written approval from the senior lienholder(s) prior to closing.
4. Locate sellers who will provide an interest-rate buy-down for their buyer
Numerous lenders have buy-down programs, including the Federal Housing Administration. For example, on a $500,000 purchase price with a $450,000 loan at 6.5 percent, a permanent buy-down would cost the seller $18,000. For $18,000, the buyer’s loan is reduced by $289 per month. To reduce payments by this amount would require a $45,800 reduction. (Please note that permanent buy-downs for 30 years are available only at a limited number of lenders. The typical buy-down is two or three years.) This approach may be too sophisticated for some buyers and sellers. The best way to explain it is to show the buyers what their payment would be with and without the buy-down. Next, show them how much the monthly buy-down amount would amortize over a 30-year period. A permanent buy-down is a win for both the seller and the buyer.
5. Reverse contracts
"Reverse contracts" was one of the most innovative ideas from the book "Transforming the Market in 2008" by BestAgentBusiness.com. Many times buyers have challenges determining which property to purchase. The proactive listing agent can begin the negotiation by having their sellers write a "reverse contract." In other words, the seller drafts an offer, slightly under asking price, and the listing agent presents it to the buyer. This can be the gentle nudge required to persuade the buyer to purchase.
Buyers today have the best possible opportunity to make their dream purchase. Use your marketing and your creativity to get the word out that if you’re thinking about buying a home, now’s the absolute best time to do it!
Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of "Waging War on Real Estate’s Discounters" and "Who’s the Best Person to Sell My House?" Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.
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