Romancing the First-Time Homebuyer

There’s an interesting scenario shaping up in the under-$250,000 price tier of the real estate market in Sarasota County.  Based on the current rate of closed sales of single family homes—as reported in the most recent TRENDGRAPHIX for May—the county has just a three to five month supply of similarly priced homes; its lowest level since the height of the boom in September, 2005.

Buyers, many of them first-time purchasers, are finally satisfied that the bottom of the market is here—or close enough—and are now more appropriately concerned about lowering their actual long-term carrying costs.  Taking advantage of the very real prospect of saving up to $8,000 by using the First Time Homebuyer Tax Credit—before it expires on December 1—is much more palatable than the uncertain prospect of saving a few more dollars on the purchase price a month or two from now.  It also avoids the very real possibility that interest rates could spike upwards again in the meantime.

That we have now a three to five month supply of homes doesn’t mean that the market will suddenly be bereft of properties for sale in this price range come October or November.  It simply means that at the accelerated rate in which homes in this price range are now coming on the market and being sold, buyers will once again find themselves operating in something of a sellers’ market; with heightened demand resulting in fewer choices and less room to negotiate.  Even now, it is not unusual for buyers to zero-in on a preferred property only to unexpectedly find themselves in the midst of a multiple offer situation.

Still, all is not a bed of roses for traditional sellers in this price range.  With foreclosures and short sales complicating the picture—and purchasing a home on the cheap often the stated goal of value-obsessed buyers—theirs is the task of having to differentiate their property from a comparable property down the street that is in foreclosure and likely being sold at a substantial discount.

Yet sellers of traditional properties have at least one major advantage over comparable distressed properties.  Almost as important as price is the fact that more than eight-out-of-ten, first-time home buyers—according to a recent industry survey—vastly prefer purchasing a home that has been lived in and properly maintained.  As well, when they preview such a property it’s much easier to envision living there than it is when they walk through a home that is completely vacant, frequently overgrown with weeds, minimally maintained and quite often in obvious disrepair.  As a mater of fact, less than one in ten first-time home buyers said they were interested in purchasing a home on the cheap and fixing it up.  The up-front costs of purchasing a home are challenging enough for many first-time homebuyers, especially now that larger down payments are the norm.  A distressed property may present an ugly surprise in the form of incalculable hidden costs somewhere down the road.

A well-priced, lived-in, cared-for home—albeit properly staged, nicely landscaped, freshly painted and absent all clutter—often stands head-and-shoulders above competitive foreclosures and short sales in the same neighborhood.   Even when competitive foreclosures have been properly maintained, with clean pools, cut grass, utilities turned on and all necessary repairs made—as properties belonging to Freddie Mac and Fannie Mae typically are—you still have several creative ways to position your home as the better alternative (in addition to its lived-in feeling).

According to Amy Hoak, writing for Rismedia, a leading real estate industry publication and Web site, there are other clear-cut ways to attract first-time homebuyers in addition to bottom-line pricing and the home’s cosmetic appeal.

For example, you can make it known right up front that you will help cover closing costs.  If the buyers are already feeling psychologically cash-strapped by the notion of a looming down payment and other anticipated expenses related to the upcoming purchase, such an incentive can favorably pre-dispose them toward purchasing your home.

You can offer a home warranty.  First-time buyers are often long-time renters accustomed to having household problems promptly addressed and paid-for by their landlord.  Cushion their transition to self-reliant ownership by stepping-in as something of a surrogate landlord and handyman.

Offer a mortgage protection policy.  One of the biggest sticking points holding many first-time buyers back is the very real fear of being laid-off from their jobs in today’s roller-coaster economy.  You can often mitigate this fear considerably by offering such a protective incentive.

Above all, don’t turn your nose up at a ridiculously low offer; an axiom that actually applies to sellers in virtually every price category.  Negotiations have to start somewhere and buyers are all too aware that prices have fallen dramatically over the past couple of years.  That first low-ball offer is often a trial balloon to test your motivation; and is in no way indicative of how much more they are willing or able to pay. If they appreciate your home enough to make an offer at all—and are pre-qualified to buy in your price range—chances are very good you can strike a compromise through patient and constructive negotiations.

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