What you need to do to gear up for the spring buying season

By Elyse Umlauf-Garneau

Many survivors of previous downturns embrace the phrase, “This too shall pass.” It’s what Ira Serkes, CRS, ABR, GRI, e-PRO®, SRES®, of Pacific Union Real Estate, Berkeley, did in 2008 when he went months without a sale and again after several gang-buster months. Good and bad times come and go.

This spring’s home-buying season is shaping up to be one of the most challenging in recent memory, but agents are responding by remaining philosophical, focusing on new deals, and keeping panic at bay. Here are things to keep in mind as we enter the spring home-buying season.

First-timers Are King

If buyers are in the driver’s seat—and they are when the median price in the state has dropped nearly 50 percent and rests at $254,350—then first-timers are king. Previously, the affordability crisis sidelined such prospects, but many have had time to stash away down payments and they can move quickly because they don’t have properties to sell. Moreover, you can make the argument that the monthly cost of some homes is equal to or lower than rent. Reach buyers by:

• Meeting prospects on their turf. Because many first-timers are twentysomethings, Alex Wang, CRS, e-PRO®, a practitioner with Rainmaker Properties, Palo Alto, emphasizes how important it is to meet prospects via social networking, such as blogging, Facebook, and Twitter. “During the first week back in the office this year, I got six new prospects who had found me online,” he comments. And one brief status update at his Facebook page netted 16 comments and a lunch meeting with a prospective client.

• Emphasizing fiscal responsibility. With new buyers, the first stop should be at the office of a trusted lender. You need to know what buyers can spend, and lenders can explain the financing process and financial responsibilities of homeownership to first-timers.

• Embracing patience. Buyers are taking their time to make decisions. Many of Wang’s crop of new January prospects, for instance, said they didn’t plan to buy until the summer. “You can’t be in a hurry and you have to be willing to take time with first-timers. They require more education about the market and the process,” comments Wang.

• Adapting to their style. Younger buyers aren’t interested in being dragged from property to property in the back seat of your car. Wang does show properties, but also suggests a handful of neighborhoods, provides information about them, and then suggests prospects investigate the areas on their own. He also encourages them to visit open houses solo. “They need to do that initial work first, and I’ve prepared them with information on comps, performance data, and information on specific markets and houses,” comments Wang. He offers hand-holding on demand. “There’s no need for a hard sell. If they like something, they’ll ask, ‘What’s the next step?’”

Combat Buyers’ Paralysis With Data

• Counter waves of bad national news with market-specific information, says Bob Curtis of Village Real Estate, Santa Barbara. Curtis sends buyers articles about positive changes specific to the market they’re contemplating. “For example, our lower end is doing very well and we’re seeing multiple offers again,” he comments.

• Ground buyers in reality. “First-timers assume short sales are quick and they can low-ball,” comments Christine Harlow, a mortgage and real estate broker with Professional Mortgage Services, Murrieta. She spends hours explaining how the process actually works. And Curtis works to eliminate the day-trader mentality. “I want to know that people are making long-term investments and aren’t still caught up in the fix-and-flip mentality,” he says.

• Buyers all fear a further market drop and want to wait for the bottom. Curtis reminds buyers that no one knows where the bottom is and that sellers, too, are listening. He warns, “Sellers hear the same news and will be much less flexible when the market shifts.” He also discusses how buyers may miss out on rock-bottom interest rates while awaiting a market tank.

Financing Misconceptions

A prevailing misconception is that mortgages aren’t available. “You can’t get one, if you don’t try,” comments Ginger Wilcox, a broker with Pacific Union GMAC Real Estate in Greenbrae.

According to Harlow, “It’s not impossible, but underwriters are documenting loans more carefully, guidelines are tighter, and approvals take longer.” Prepare buyers for heavy paperwork (providing W-2s, tax returns, job history). “I have buyers with very high scores who are annoyed by so much paperwork,” says Harlow. The days of no-doc loans are over, but perfect credit scores aren’t necessary. FHA loans, for example, require FICOs of about 600, according to Harlow. For buyers with lower scores, Harlow identifies credit dings that borrowers should dispute and what debts to pay off to boost scores.

Derailed Deals

Be prepared for lots of hand-holding during escrow periods to keep deals together. Harlow notes that fewer deals are falling apart because of financing, but buyers’ demands can derail deals. One of Wilcox’s sellers was asked to refinish all the hardwood floors—to the tune of $6,000—after a home inspection, for example.

“Reasonable requests—repairs of hidden defects uncovered during inspections—are OK. But don’t ask sellers to replace carpet, paint, and things that were readily visible during showings,” Curtis comments.

Fear is another obstacle. “Buyers hear negative news and get cold feet,” Curtis comments. Some worry they’ve made a bad decision, others find a better house and want to pull out. Counter such urges with information about losing earnest money and reemphasize the solid deal they’ve found. Keeping buyers aware of market performance and what’s selling goes a long way in reassuring buyers, finds Curtis.

Twitter and Tweet

Wilcox uses Twitter to drum up business. Though her tweets aren’t always real estate-related, people know she’s a broker and she’s tweeted about kids’ ear infections and local preschools. What do ear infections have to do with real estate? Well, nothing. But fellow Twitterers know Wilcox is in the business and the idea is that when those people think real estate, they’ll think of her. Wilcox also transforms virtual relationships to real-world ones—coffee, anyone?—with Twitterers. The strategy has yielded a deal and a new buyer. “Many believe that social networking is for dating, rock bands, and those in their 20s, but that’s not true. I Twitter with people who are ages 22 to 70,” she says.

Create a Buzz … Let ’em See You Build It

The Heyday Partnership, the Los Angeles developers of Rock Row, hopes its online efforts will deliver real-world prospects to a green townhouse development it’s building in the city’s Eagle Rock neighborhood. A blog (www.heyday-la.com/blog.html) with blow-by-blow descriptions of the construction aims to generate early interest in the project, educate prospects about LEED specifica-tions (Leadership in Energy and Environmental Design Green Building Rating System™), and connect neighbors to the project. Neighbors’ feedback already led the team to opt for solar panels rather than a green roof. Rock Row’s real estate agent, Christopher Furstenberg of Furstenberg Realty Inc., Glendale, points out that many well-priced older homes generate big maintenance costs because they’re less energy-efficient. The early promotions and the project’s uniqueness will likely go a long way in generating buyer excitement. “After this last year, people are more sensitive to the way they’re living. This project is pioneering and offers clean, efficient living,” he says. A grand opening bash featuring local artists and caterers will further anchor the project in the neighborhood and give Heyday and Furstenberg an opportunity to meet and educate prospects about green design far beyond what they could outline on an MLS sheet.

Penny-pinching

Rather than slashing expenses to the bone, consider shifting dollars to marketing that yields the most business. Pacific Union Real Estate’s Ira Serkes charges all expenses to a credit card and downloads the expenses to a financial planning program that lets him track costs closely. With the program’s comment feature, he notes the source (advertising, buyers, referrals, and so forth) of every dollar. He found that 60 percent of his income stems from buyers—a valuable bit of information that led him to direct marketing dollars where they yield the most business.

And isn’t that what everyone needs now?

And for the cash-strapped, Serkes suggests examining every financial option—perhaps tapping Social Security early or a whole-life insurance policy—that can generate cash. Before making any such decisions, however, sit down with a financial planner to review your options.


Tip #1: For insight on helping first-timers find loans, see "A REALTOR®'s Guide to Finance Programs for First-Time Home Buyers," found at www.car.org/3550/100782/204893/FINANCE_GUIDE.pdf .

Tip #2: Download the Nov./Dec. article/pdf titiled "Short In Name Only." This article reins in buyers' expectations for short sales.

Tip #3: Need market data? Subscribe to C.A.R.'s free e-letter Market Matters and receive weekly data and info that will position you as the market expert in your area. Visit www. car.org for more info. Other C.A.R. products that can help you synthesize real estate data for repackaging to consumers include Clarus™ REsource and Clarus™ MarketMetrics.

Tip #4: For Twittering basics, see the Wall Street Journal's "Birds of a Feather Twitter Together": http://online.wsj.com/article/SB122826572677574415.html .

Tomorrow’s Rebound

Everyone wants the economic rebound to happen as quickly as possible. One way to do that is by not panicking and understanding that fear leads to poor decision-making and prompts retreat. That’s according to a New York Times story written by neuroeconomist Gregory Berns. “Just when we need new ideas most, everyone is seized up in fear, trying to prevent losing what we have left,” according to Berns. He writes about Skinner Box-like tests (remember the conditioning experiments with rats?) on humans and how the brain reacts to fear. He acknowledges that fear is an adaptive evolutionary drive for self-preservation, but says, “… It makes it impossible to concentrate on anything but saving our skin by getting out of the box intact.”

But that’s not what will help us emerge from this economic slump. Instead, take risk (knowing you’ll have some failures), devise new ideas, and brainstorm ways to drum up new business.

And the plucky advice to focus on the positive seems trite, but Chicago Sun-Times columnist Terry Savage offers reasonable cause for optimism in “7 Steps to Surviving the Rough Economy.” She concedes all that’s amiss in the economy, but also points out that Americans have always plowed through difficult times. She writes, “In the early 1980s, we had double-digit inflation, double-digit interest rates, and double-digit unemployment in many parts of the country. At that time, few were predicting the incredible growth of technology that boosted our economy and stock market.” She suggests that again, there will likely be a catalyst for the next round of growth.

And, let’s hope, brighter financial times.

Elyse Umlauf-Garneau is a freelance real estate writer.