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If you’ve turned on the news, read a blog, or tried to help someone buy a house lately, you’ve probably noticed one thing: it’s a seller’s market right now. With inventory so low, prices have continued to rise, making it increasingly difficult for some buyers to secure a home – particularly if those buyers are trying to find their first home.
The biggest challenges for first-time homebuyers in this situation can be twofold: they often struggle to finance their home purchase, and they aren’t sure the best way to make their offer stand out. Below are some different options to discuss with first-time buyers struggling in this superheated market.
1. Explore Creative Financing
In incredibly competitive markets like today’s, getting the money needed to make an offer – particularly one that is over asking price – can be a challenge. Luckily, there are some time-tested financing strategies that may be available to your clients regardless of unfavorable economic circumstances, whether general or personal.
Related content: 5 Things to Know About Mortgage Refinance
These creative financing tricks incorporate a set of strategies that can help clients buy a property with less of their own money used as a down payment and may even lower their monthly note. If your clients are struggling, they may be interested in exploring the following options:
House-hacking
With the rise in housing costs, sometimes a great way to afford a home is to split the cost – and house-hacking can help. In simplest terms, house-hacking is when someone purchases a piece of real estate – a single-family home or duplex – and leases out one of the bedrooms or units. This rental income can then be applied toward their mortgage. House-hacking may help clients afford a house that may otherwise be out of their price range, or make a mortgage in general more affordable.
Having a renter immediately lowers monthly costs and helps pay off a mortgage quickly. Moreover, it can reduce expenses, lower taxable income base, increase savings, and provide passive income. In summation, it gives buyers the usual financial benefits of home ownership – equity, tax deductions – but with the added bonus of having someone to help mitigate the costs.
Co-signers
Another option to explore is having a co-signer, such as a family member, friend, or benefactor who would be willing to help them buy their first home. In the modern economy, it’s common for parents or other interested parties to help people purchase their first home. From simply giving an initial lump sum for a down payment, investing cash to help finance a mortgage, to co-borrowing on the loan, there are a multitude of ways people can help others financially. However, it may be beneficial to take this approach either with someone they know well – like a parent – or codified in a contract.
2. Make Smart Offers
The problem may not be financing their dream home, but helping them stand out in a highly competitive market. If that’s the case, there are some topics to explore with clients to make sure they are staying competitive in a multiple-offers market.
Related content: Multiple-Offer Scenarios: The Secret Goes Beyond the Highest Price
Discuss payment methods
In the current market, making a cash offer on a home will leave most sellers with a harder time saying no. It is not a feasible option for everyone, but an all-cash offer is appealing to sellers because they don’t have to hassle with finding a mortgage, it’ll expedite the closing process, and it means instant cash in their pocket. For first-time homebuyers, finding a friend or family member to help finance the property could be a worthwhile feat. And, in some states, businesses such as KW agent Tim Heyl’s Homeward help provide the cash and allow clients to pay them in “rent” until they are able to find a mortgage.
Related content: 5 Strategies for Succeeding in a Low Inventory Market, Straight from the Heyl Group
A little extra time
Understanding sellers’ needs can help put an offer at the forefront of their mind. And sometimes, what they need is a little extra time in the house to get their affairs in order. This could look like working out a deal where the sellers stay for free in the house an additional 30 days. Or participating in a leaseback program, where they pay the buyer rent for staying on the property for a set period of time. As buyers are exploring these options and conversations, flexibility and open communication are key.
You’re the Expert
At the end of the day, remember you’re the expert. Whether you’re just starting your journey in real estate or you’re a cold-calling veteran, you have knowledge of the market that most first-time homebuyers don’t. If they are feeling frustrated with the market, use that expertise to reassure them and guide them through the process. In the end, the right house will happen when it’s meant to happen.
For Keller Williams agents, our First-Time Homebuyers Seminar is available to help you deliver valuable content to prospective clients.
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