Luring First-time Buyers
5 Tips to Beat the Competition
By Amy Hoak
RISMEDIA, June 19, 2009-(MCT)
A federal tax credit of up to $8,000 is nudging many Americans into buying a home for the first time, good news for those trying to sell one.
Still, selling a home isn’t easy in most markets today. To get the typical first-time buyer to bite and submit an offer, a house has to stand apart from the competition – and there’s a lot of it, including foreclosure homes that are selling at hefty discounts.
One big thing working in favor of the traditional seller: A lived-in, maintained home is easier for buyers to imagine themselves living in than a vacant foreclosure. That has great appeal for someone buying a home for the first time, for practical and financial reasons.
In fact, while nearly half of brokers polled for a survey last year found that affordability was the No. 1 concern for first-time buyers, 81% said move-in conditions were very important to these buyers. Only 7% said first-time buyers were looking to purchase fixer-upper homes that they could buy on the cheap and renovate.
Those feelings are likely just as strong today as lenders generally require larger down payments, unless the mortgage is backed by the Federal Housing Administration. Higher down payments means buyers have less cash left over for improvements.
While foreclosures that are in severe disrepair can be a huge turnoff for a first-time buyer, some banks will make improvements to their foreclosure stock, fixing them up so that they meet FHA standards and a buyer’s needs. These homes can be stiff competition for the rest of the for-sale inventory.
Never fear, there are still ways to outshine other homes on the market. Assuming the home is priced correctly, here are five ways to lure a first-time buyer:
1. Maintain and Stage. A home that has been taken care of throughout the years will offer a stark contrast to a vacant, empty foreclosure.
As with any home, a fresh coat of paint, decluttering and the removal of unpleasant odors can go a long way to making a good first impression. But be careful not to over-improve the home, because the investment might not be worth the cost.
2. Mention Up Front That You’ll Help Pay Closing Costs. Whether it’s in the marketing material or in the listing, this could be an extra motivator to reel a buyer in. Generally, there’s a good chance they’ll ask for closing cost help anyway, but it might pay off to be proactive and offer it at the beginning.
If rising mortgage rates have your buyer spooked, consider paying mortgage points to bring the rate down. But consider a buyer’s timeline for staying in the home before deciding if this is the most effective way to help; paying points generally makes sense for those staying in a home for more than a few years.
3. Offer a Home Warranty. First-time buyers are often coming from a rental, and they are used to calling a landlord when there’s a problem. To help them more easily transition into homeownership, provide them a warranty that covers major systems when problems arise.
4. Offer Mortgage Protection. In some cases, it might make sense to address buyers’ fears by purchasing insurance so they can keep up with their mortgage even if after losing a job.
5. Don’t Snub Low Offers. Buyers know prices have fallen, so they’re being aggressive in their offers-sometimes extremely aggressive. But even if they come in with a shocking lowball offer, don’t scoff at it. Understand where they’re coming from, and try to compromise.
©2009, MarketWatch.com Inc.
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