Viewpoints, Part I
RISMEDIA, April 18, 2009-What will it take to revitalize America’s residential real estate market? Many industry observers are predicting a slow recovery beginning this year, with first-time home buyers leading the way. With low interest rates as well as the $8,000 tax credit in place, first-time homebuyers are faced with a huge advantage in today’s real estate market. Here, Mike Vazeii, director of real estate marketing, American Home Shield discusses how real estate professionals can help first-time homebuyers take advantage of the market.
Director of Real Estate Marketing, American Home Shield
There is a variety of market factors that are enticing first-time buyers. Historically low interest rates are very appealing, as is the $8,000 tax credit in the stimulus bill for first-time buyers that earn less than $75,000 ($150,000 for couples). Home prices are also attractive. The average cost of an existing home in 2009 is about $20,000 less than a home listed during the same period in 2008. Couple all this with the fact that first timers are unencumbered with selling an existing home and you have an excellent climate for new buyers.
Of course, there are obstacles for first-time buyers as well. Credit remains tight, so mortgage applicants will need a good job history and FICO score to become qualified. It also may be difficult for high-earning first timers to obtain jumbo loans, typically defined as loans of more than $400,000. These loans are viewed as high risk because of the amount. It’s yet another reason agents will be focused on the small- to medium-sized properties that first-time buyers tend to want.
Selling successfully to first-time buyers requires an understanding of the unique perspectives they have. Typically, they are more anxious than experienced home buyers. Buying a home is likely the largest single purchase they have ever made, so they are naturally nervous about it.
A real estate professional’s ability to allay a first-time home buyer’s fears on most of those points is limited, but agents-both the listing agent and the agent representing the buyer-can do something about the fear of major unexpected expenses after the sale. Home warranties can do wonders for calming jittery first-time buyers who fear the unexpected.
Studies conducted by American Home Shield and a major national real estate company reveal that homes offered with warranty protection sold an average of 23 days faster than homes with no warranty coverage, and those same homes earned 4% more at closing than homes without coverage.
Given the anxieties of first-time buyers, a home warranty could likely make a difference when they are comparing properties. This is important for real estate companies that want to shake off the doldrums of 2008. First-time buyers will be an important demographic this year and the competition for their business will be fierce. Listings that come with a home warranty policy will likely have a distinct advantage with this group.
The real estate business in 2009 will continue to be extremely competitive. Successful agents and brokers will need to do everything possible to maximize their close ratio. First-time buyers may be the key to a successful year, so make sure to consider their needs when developing your marketing strategy.
Study conducted in conjunction with a large national real estate firm. Results verified by Cannon & Company, a third-party accounting firm. Data compiled from such firm’s residential real estate listings that closed between 1/1/07 and 03/31/08 (158,197 total listings).
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