Educating a first time buyer is time-consuming, but they're worth it

By
Real Estate Agent with Alain Pinel BRE 01367196

A San Francisco agent referred a couple to me who are first time buyers looking to buy their first home in the east bay. Yesterday, I invited them to come into the office to discuss their wants and needs and their resources. I gave them a Home Buyer Guide that could be their "bible" as they traverse the way to home ownership.

 

Wish List: Naturally, they are looking for a 3 bedroom/2 bath home with a garage and a yard. And they'd like to buy in Alameda, east of San Francisco.

 

Financials:   They've saved $4,000. They are pre-approved for $310,000. They want to keep their mortgage payments to $1700 per month. And they're counting on getting $8,000 for the First Time Home Buyer Tax Credit.

And there's the first opportunity to educate: that the first time home buyer tax credit is 10% of purchase price, up to $8,000. And that this program expires Dec 1, 2009 so they need to close escrow by that time.

 Reality Check: We went through some scenarios if they use FHA or Conventional Loans.

Type of loan, down payment and interest rate

FHA Loan

3.5% down

5.5% interest

Conventional

5% down

5% interest

Sales Price

$235,000

$235,000

Down payment

$8,250

$11,750

Closing Costs

$8,490

$8,971

Cash needed for down payment and closing costs

$16,740

$20,721

P.I.T.I. (principal, interest, taxes and insurance

$1,724

$1,659

Upon seeing these comparisons, they are better informed about what they will need for a down payment and for closing costs. And so their first order of business is to get their finances in order.

Setting expectation: This was a good way to introduce them to other cities where we can find suitable homes within their budget range (Alameda isn't one of them).

We browsed through the MLS for properties in their budget range, and discussed several that appealed to them. They know now that their plan to buy a 3 BR/2 BA house with $4,000 down is, simply put, not realistic nor achievable. At least not where they want to live.

Readiness to buy: This morning, they informed me that after sleeping on it, they decided to "put the house hunting on hold until we can confirm our down payment."

 

Straight Talk: A bit of time spent educating the clients was a good way to get them focused on what they need to do. They may not be ready to buy now, but the straight talk left an impression. When they're ready to buy, they know whom to call.

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Topic:
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California Alameda County
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Tags:
first time home buyer tax credit
first time home buyer
down payment
closing costs
estimates
educating buyers

Comments 6 New Comment

Rainmaker
1,140,087
Wanda Kubat-Nerdin
Your Southern Utah Residential Real Estate Agent
Prado & Kramer Real Estate, St. George, UT 435.632.9374

Pacita, Great advice for 1st time home buyer agents out there! I will bookmark it for future reference myself. Thank you!

September 27, 2009 02:50 PM
Ambassador
1,156,125
Kathleen Daniels
San Jose Homes for Sale - Probate Specialist
KD Realty - 408.972.1822

Pacita:  This is exactly what buyers need to know.  So many of them are unrealistic ... they hear about the foreclosure opportunityes and the "deals" that are available ... but buyers still need a lot of money in the Northern Cal area .... especially with the types of homes they want to buy.  You are a powerful contribution to the industry ... the buyers are blessed to have the opportunity to sit down with you and be educated.  Thanks for your post. As always, enjoyed reading it!

September 27, 2009 04:36 PM
Rainmaker
657,393
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

Anthony --- educating them has to be tempered with a little understanding. After all, we don't want to dash their dreams, but to gently wake them up.

Wanda --- this is one of the ways I put Fidelity Agent to good use

Kathleen --- thanks for the validation. In today's market of distressed sales, starry-eyed buyers looking for the deals, our roles have changed from realtor to advisor, consultant, teacher, shoulder-to-cry-on, and more. Just thankful I have something to contribute.

 

September 27, 2009 07:02 PM
Rainmaker
598,584
Donne Knudsen
CalState Realty Services
Los Angeles & Ventura Counties in CA

Pacita - Way to go!  In this market, we need to constantly be educating the buyer, especially first timwers because quite often they are the ones that are the most misled.  Good work and I hope you sent them to a trusted mortgage professional to get them going.

September 28, 2009 03:45 PM
Rainmaker
657,393
Pacita Dimacali
Alameda/Contra Costa Counties CA
Alain Pinel

Donne --- we should always advise the prospective client to be preapproved first. But in the meantime, having a tool like Fidelity Agent to help me with the calculations is an opportunity to educate on the spot.

Thanks as always for the feedback.

September 28, 2009 03:49 PM
Rainmaker
657,393

Pacita Dimacali

Alameda/Contra Costa Counties CA
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