The pandemic brought a wave of new real estate agents to the industry. In 2021, the National Association of Realtors (NAR) saw record-high membership.
And in March 2022, real estate had some of its highest gains when the median existing-home price hit $375,300, up 15% over 2021, marking the longest streak of consecutive year-over-year increases, according to NAR.
Many of those new agents reaped the benefits. But since then, interest rates have soared, and agents are navigating a historic decline in the market. The good news? Even while the market is slowing, people still need to move.
The moving experience continues to be a daunting process, especially for first-time buyers who are learning how to grapple with competitive listings, unexpected costs, and complex timelines. Those buyers are looking for education and guidance from their agents.
Findings from Opendoor’s recent first-time homebuyer report reveal that nearly all (94%) first-time homebuyers still experienced surprises throughout their buying experience. These findings can help new agents better prepare their first-time buyers for the unique challenges in today’s market. Here are some key takeaways from the report to help guide your strategy:
1. First-time homebuyers are investing more time and energy in the process than they expected
Some 58% found the search “much more time-consuming than expected,” up from 52% last year.
This includes more than two in five (41%) saying they checked home listings on average several times a day, up dramatically from 25% in 2021.
This uptick in buyer searches may have contributed to a jump in the average number of (in-person or virtual) home tours, up from 15 in 2021 to 24 in 2022 and a 4% increase in the number of buyers who made 10 or more offers before purchasing their current home (27% to 31%).
One of the side effects of an uncertain market: nearly two in three (63%) first-time buyers said they bid on a home they didn’t really want — and 43% said they did this more than once.
How to guide your client:
- With the growth of online real estate sites, it’s inevitable that clients and agents are viewing some of the same listings. However, you can set up your clients for success by advising them to stick with browsing within their budget parameters. You can more efficiently schedule in-person tours by prioritizing showings for homes that aren’t vacant (there are fewer options to see those with the seller still living there) and be more flexible on the timing with vacant homes. But remember to take offer deadlines into consideration.
- If they love it, potential buyers shouldn’t be afraid to make an offer on a house. The buyers can always consider including contingencies in their offer that protect them, e.g. inspection period, appraisal contingencies, etc.
- Discuss the bidding process with your clients so that they are clear about their expectations and needs. No one wants to lose a bid, even if they didn’t really want the house in the first place.
2) A top surprise of first-time buyers was the cost
First-time homebuyers cited the cost and the budgeting process as a surprise, as well as unexpected expenses like closing costs or taxes (38%), and the impact on monthly budgeting (32%).
How to guide your client:
- Introduce your buyers to a trusted loan officer early in the process so they can settle on a comfortable monthly budget that includes mortgage payments, taxes, insurances and maintenance.
- Buyers should know not only their pre-qualified amount (the highest price a lender will potentially finance), but also their total monthly payment. This monthly budget can be used as a tool to understand how much buyers can comfortably afford.
- Ensure that your client is aware of additional closing costs beyond the down payment, from legal fees to title and transfer taxes, which are things a lender can help them prepare.
- Make sure your commission is clearly detailed, since your last encounter with your client may be settling the bill. You don’t want them to be surprised or resentful at the end.
3) Consider the emotional toll on first-time homebuyers
The top three are: the stress of waiting on an offer (41%), coming up with enough money for a down payment (36%) and being outbid by another buyer (34%).
How to guide your client:
- Set expectations by giving examples of how offer timelines can vary. Clients should understand that the process mostly doesn’t happen instantaneously. It can be beneficial to connect with the listing agent prior to submitting the offer. This outreach may help you get a more timely response!
- Budget, budget, budget. It’s like shopping for a wedding dress: don’t try it on and fall in love with it if it’s out of your price range! Also, many first-time buyers aren’t aware that sellers may be able to contribute to their closing costs through concessions. In today’s market, this may come in handy.
- While offering a competitive purchase price is always important, you should also do your part to help best position your buyer in the eyes of the listing agent and the seller. Before your clients write the offer, ask the listing agent for some ideal terms from the seller such as the date for close of escrow, title company, shortened inspection period, etc.
Despite today’s challenges, the majority of first-time homebuyers surveyed feel empowered coming out of their experience. In fact, nearly seven in 10 (69%) say they are confident they found the best available home to suit them. By preparing first-time buyers for the surprises they may encounter, new agents can help buyers feel even more confident in their experience.
Will Holmes is the General Manager of Agent Growth at Opendoor, where he oversees product strategy, growth and enablement to help agents build their brands and grow their business using Opendoor.
