This post was inspired by Colleen Kulikowski's blog post: http://activerain.com/blogsview/18266/Congratulations-Carol-Williams
Buyers often compare buying to renting as if the two were different sides of the same coin. But buying is a very different proposition than renting, and the benefits and drawbacks can not be contrasted with renting, as if one was making a decision over which of two luxury cars to purchase.
For Buyers on the fence, I have my own theory.... I don't think a client who wishes to own a home would postpone a purchase simply for market concerns. In fact, if the client is holding off, my thought is that they are viewing a home purchase as an investment and not simply for their desire to own a home. The idea of buying a house for investment purposes is a fairly new idea. Maybe only 50 years ago people viewed the land purchase as an investment but the house itself more as a personal need and/or indulgence. The benefits intrinsic to owning can not be taken away even if the market tanks for a bit.
What the recent several years boom in real estate has shown us is that people who did not feel the motivation to buy a property for intrinsic ownership reasons can be motivated to buy for investment reasons. These buyers are a different type of buyer than those who simply, in and of itself, wish to own a home.
For example, take the idea of an American Kennel Certified purebred dog. Some buyers will buy a champion's puppy simply because they like the lines of the dog, and they wish to enjoy the experience of having their own dog with such a fine temperment, etc. Then there are those (such as dog trainers/competitors) who simply buy AKC champion puppies for the purpose of raising, training, and competing with them, for the intention of turning around and breeding and selling its puppies. The second buyer purchases the pup for financial gains, whereas the first buyer could care less if the total "monetary worth" of their dog lowers in correlation to the dog's age.
In a down or holding market, "on the fence" buyers are not qualified buyers. There could be a variety of motivations that could bring them to adopting the latter view of valuing home ownership for its intrinsic value, such as marriage or a pregnancy, or achieving a certain level of security in their work (for example, for a professor, this would be tenure).
Importantly, don't feel like a lemon for not knowing how to persuade an investment-minded buyer to buy. The means for bringing them to that point are, more often than not, not in your control. I would touch base with such buyers off and on and keep them informed of market progress, without stressing too much or internalizing it to believe it is a reflection of my ability as an agent.
This is a fabulous post. I went to a seminar a few months back and learned more about qualifying my buyers, and finding out their true motivation for wanting to buy. I have found that in this market, the only people buying are those who really NEED to buy, or those who treat it as a home purchase and not a stock purchase. Once I learned how to better qualify buyers, my time out showing is spent with many more motivated buyers. Those that are on the fence for whatever reason, I can assist with information, follow up e-mails and they will raise their hand when they get to the top level of motivation.
I also like what you said about not taking blame for not being able to close the deal with an "on the fence person" I learned that with most of these people, there is nothing I could have done. They are just simply not ready yet, and nothing I say is really going to get them there. All I can do is be their first call when they ARE ready.
Sean, I love your thoughts on this! Said very well (I tend to ramble and could not have made it as succinct as you have) and very, very helpful for people to know. The truth is, I think as agents we really beat ourselves up about this. We imagine we should be "superheros" in the arena of real estate. But those who close large amounts of houses don't do it because they get on-the-fence buyers off the fence, but because they show properties only to qualified buyers, first and foremost of which the criteria requires that they wish to buy in the next 30-45 days. If somebody says they want to buy in one year, I round that down to 6-8 months at the earliest, but have learned (sadly!) from experience they will just not be buying then and there!
Investment-minded buyers are the same. If the market is on a down-turn, in most cases, they will just not buy. One of the only things you can say as an agent to an on-the-fence buyer to get them to buy is, "The market is just about to swing back and head on up, so now is the best time to move on a home and capitalize on the low prices!" And if you say it, it had better be true. ;)
:)
Hi Kaushik!
In my practice, I don't show clients properties unless they are planning on buying in the next 30-45 days. I don' show properties to clients interested in buying in six months because, first, all the properties I show them today will be off the market in six months. Prices will likely change, so anything I show them now will not be a good indicator to them of what a property is worth (which is often the reason clients say they'd like to look at properties for months before buying. Clients, meaning well, think that this is a way of "learning" the market, but that market will change, and objectively it ends up being a waste of their time as well).
Sometimes clients enjoy looking at properties because it is a form of entertainment for them. Even if they find their absolutely perfect dream home, they will not buy. (If you’ve ever experienced this, you know what I mean! I had a pleasant couple I worked with in my first year who said to me, after two full weekends of viewing, that’s 4 solid days by the way, “Wow! This would be the perfect house, if we were ready to buy….”) I know this is something that most agents have to learn through simple trial and error and life experience in the field, because it is hard to imagine that someone simply won't buy. I felt the same way when I first started. I was worried about not taking out clients who didn't want to buy months from now because I was scared of losing them and didn't trust my experience one way or the other enough to feel secure with not showing them homes.
I think of it from an ethical position. As an agent, I am the expert. It is my duty to be a good steward of the limited time I have so that I can help as many people as possible in providing them excellent service and helping them buy and sell property. I am basically an intermediary. I view my job as the grease that helps people's lives’ turn easily. However, I can't and don't do my work for free. If I care and take care of people's needs in home ownership, I also recognize that a worker should be paid fairly for their work. That means that people who want to look for fun even though they really can't or don't want to buy right now are not really people I can help right now. By their own choice, they don't wish for my help. I am not simply a chauffeur who drives them around to look at properties; I am an expert who negotiates and ensures the acquisition and sale of property.
It boils down to a respect issue. Some clients understand the idea of not soliciting someone you are not going to pay. If I show some one houses for six months, my wages become reduced to something like a dishwasher. I am not paid simply to show properties, but for the wealth of knowledge I've accumulated and for the excellent service I provide. In a home showing, the work involved is not limited to driving and getting into properties. I research every property I show. I know market stats for that area, I know the last time that property sold, I find out neighborhood information. I present that house like an expert and have studied so that I can answer questions in detail. This takes hours of prep before every showing, and I don't have that time for someone not buying.
When you use the services of a lawyer, you pay them somewhere starting at $250 upwards per hour. You can't just call a lawyer and chat. The tab starts the moment they get your call. And depending on what the conversation is, they continue to work for you after the call is over. They research and put things together, and then they charge you for all the time they've spent, with or without talking with you on the phone or in person.
I guard my time in the same manner. It is not because I am greedy or don't care about people. In fact, I care so much about people that I want to make sure that I can help as many people as I can. But I can't really help them if they're not buying. I can't use my expertise if we are never writing up an offer. The structure of pay for agents (through commission payable at closing) should not change the definition of what work is expected of them. If a client who wanted to buy in six months had to pay per hour (instead of through commission) for every property they looked at, they would be far less likely to spend days and weeks of an agent's time just “looking around”.
Hi Sara
It's not often I see two posts in one! Qualifying purchaser motivation is a fine art requiring many re-works. We have all met with people who said they were not in a position to buy for 6 months, who then went out and bought a property after visiting an open house the following weekend.
I agree, time management is crucial. If I don't don't make a buyer's hit parade of agents to work with, that's okay, I just need to know so I can move on. Those folks go on an automated email with new listing info in areas they profess interest. I check back periodically. If I get the "The number you are trying to reach...." message, I recognize it's time to call someone else. I know I can't get them all and, that's okay.
In a market that is adjusting, buyers ask when the prices will stop going down. It depends. In the same market area, every subdivision has a different story to tell. Buyers need to do their homework regardless of the market direction and make choices about what they consider their best option. If it were an exact science, we wouldn't be having this conversation.
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Hi Sara: Thanks for writing such a good post. But... thank you VERY much for the detailed comment back to Kaushik you made above. If I may have your permission to do so, I would love to use the information in your comment in one of my "team training classes." It is a classic.
I have never read one of your posts before. You just commented on my "Chaos and Love" post, and when I see a comment from someone I have not "met" before, I try and make an effort to go and visit them on their blog. Thus... I found this extremely worthwhile post and comment of yours. Ahhh... reciprocity is such a wonderful thing.
It was also very interesting, in view of the current ongoing sub-prime crisis and what is going on at present on Oct 15, 2007... I found it sort of like walking back in time... while reading a post and comment from almost one year ago. Thanks again... take care... Karen Anne
Hi Karen Anne!!
Thank you for your kind words. Absolutely feel free to use my blog... I feel honored that you would do so! It is such a pleasure to have made your acquaintance! Let me know how people respond...