Dominating headlines and stirring up fear, rising interest rates have put home-buying plans on pause for many. In a session titled “Interest Rate Reality: How to Educate Buyers,” moderator Rei Mesa, president and CEO of Berkshire Hathaway HomeServices Florida Realty, led panelists Angela Adams, a REALTOR® with Michael Saunders & Company; Jenna Harris-Hernandez, a REALTOR® with The Real Estate Agent Flex; and Keith Smith, co-owner of Yes Realty Partners, a Keller Williams Alliance partner.
Specific points included the following:
- Educate yourself. Learn about the current market conditions, interest rates and the home-buying process. Stay informed by reading, watching the news and seeking advice from experienced lenders and real estate professionals.
- Be a better listener. Listen to your clients and understand their needs and goals. Each client is different, so tailor your approach and communication style to effectively convey information and help them make informed decisions.
- Seek expert advice. Don’t be afraid to lean on experts such as trusted loan officers, who deal with interest rates and market trends on a daily basis. They can provide valuable insights and guidance to help you and your clients navigate the market.
- Tell stories. Use storytelling to communicate with your clients. Share real-life stories and experiences from past clients to help them understand current market conditions and the potential advantages of buying now.
- Understand the seller’s perspective. Help your buyers understand the mindset of sellers in the current market. Explain how low supply and high demand can impact negotiations and potentially lead to concessions or favorable terms for buyers.
- Assess your own situation. Encourage buyers to assess their own financial situation and goals. Consider factors such as affordability, potential for refinancing and the overall experience of buying a home in the current market.
- Guide and coach clients. As a real estate professional, act as a guide and coach for your clients. Take the time to get to know them, understand their unique needs and help them navigate the home-buying process.
- Consider the experience. Help buyers understand the potential differences in their experience depending on when they choose to buy. Discuss the advantages of buying now, such as potentially lower competition and more favorable terms, versus waiting for interest rates to drop but potentially facing a more competitive market.
Mesa asked whether now was the right time to buy a home regardless of where mortgage rates are. Adams emphasized that real estate is a long-term investment, and that if a property meets a buyer’s investment or lifestyle goals, it makes sense to buy now. Harris-Hernandez agreed, adding that the decision should be based on readiness and current market conditions, while Smith stated that it’s always the right time to buy, depending on personal circumstances.
“Real estate is, as we all know, a long-term investment opportunity,” said Adams. “It’s a way to build equity toward retirement or create generational wealth. So I always tell my buyers, if you find a property that achieves your investment and/or your lifestyle goals, I think it definitely makes sense to buy today and begin building equity.”
While Harris-Hernandez agreed, she noted that “for some people, their biggest fear is having to pay a little bit more per month. But on the positive side is the experience of looking for and buying a home right now and not being up against 30, 50 or 100 other people like in the past few years because of historically low rates.”
Mesa next turned the talk to buydowns. “We’re hearing and seeing builders utilizing rate buydowns effectively to sell real estate,” he said. “Are you seeing that in the resale market? Are you seeing sellers willing and able to do rate buydowns?”
Smith answered that he was not seeing buydowns because inventory was still limited.
“But there are a little bit of seller incentives creeping in,” he noted. “But micro markets matter, and knowing your niche market and how you can help guide buyers and sellers. I think we need to do what we’re best at, which is help guide and navigate our clients. Let’s face it, it’s a bit of a minefield these days.”
Next were opinions on the old saying, ‘Marry the house and date the rate.’ Is it still a truism, or have times changed to the point where it’s no longer valid?
“It’s a statement that I’ve heard a lot and I think depends on how the investment is working for you,” said Adams. “I always tell my buyers that they need to be able to afford the rate today. So buy the property at today’s rate, and if you have the opportunity to save in the future, you can take advantage of that bonus. But it comes down to the cost to refinance, and ultimately if it will offset the savings. That depends on how much the interest rates change and how long they plan on keeping the property.”
Smith scoffed at the saying.
“I really don’t like it,” he said. “The reality is it’s down to what the buyer can afford for that particular month. Keep guiding your client to make the best decision for where they are in their lives and where they are at in their income. Buy a home you can afford, start living in it, and then if rates drop a substantial amount and the math makes sense, then you refinance. But get in a home and start building your equity.”
Helping clients who are on the fence about whether or not to buy was next discussed. Harris-Hernandez explained that communication was vital, and for her in particular, it helped that she’s had experience in both residential and commercial real estate.
“Commercial is a totally different audience, but with residential clients, you have to have these conversations in ways where I love to tell stories,” she said. “You look at all the great orators who are great communicators. They use stories, not just facts. So we go over the facts. That is that there’s still low supply, and that’s going to be a problem for the foreseeable future. And demand right now is a little bit less because of rates. So I use the story comparing the experience they’re going to have during this type of market versus a lower-rate market.
“I also use stories from past clients,” she continued. “Not only were we able to get them an amazing property, we got thousands of dollars in concessions. So sharing real-life stories that you’re seeing out there in the market is critical. Ultimately, we’re the leaders and coaches of our clients. Coaching them through understanding the mind of the person on the other side and their situation has really helped buyers make the decision whether to stay on the fence or not.”
Adams related how she is helping buyer hopefuls go through the challenging environment.
“Education is definitely key; it is our job to educate buyers about the marketplace, about interest rates, about the purchase process,” she said. “We all have many stories about buyers who decided to wait, then saw prices go up and they missed that opportunity to build wealth over time. Talking to them about how if they’re renting they’re not building equity.”
Mesa asked the panelists how they handled the ticklish situation when clients ask them if they think mortgage rates will come down soon.
“Everyone wants to know where things are going to land, and I truly wish I could give them that insight because that would be fabulous,” said Adams. “But the buzz that I’ve heard, and the things I’ve read, basically state that interest rates should land somewhere in the sixes. I think they can see that in any resource they check that it’s actually lower than the historical average over the last 30 years, which is just under 8%. I remind them of that and tell them my first interest rate was 11%. So it’s not so bad at this point. Interest rates are based on a factor of inflation, cost of borrowing, and of course, political and global events. And with 2024 being an election year, it’s hard to determine if those factors will cause adjustments in the rates and/or if they’ll let them settle for a specific timeframe.”
“Whatever goes up comes down, and whatever goes down comes back up,” Smith pointed out. “This is the way our business is. Sit down with your trusted loan officer and ask what products they have available. How much does credit score matter? We’re not the loan officers, but we’re the trusted advisor to help guide clients through the process. Educate yourself. If you can educate yourself, then you can educate your client. Take your loan officer for a cup of coffee or lunch or whatever, and ask what they see coming down the pike. What product types do they have? We need to educate ourselves and then move to the next step and educate our clientele.”
