One of the most exciting types of clients to work with is a first-time homebuyer. Why?
They’re interested in the process. They’re motivated to learn what constitutes a competitive offer. They’re anxious to own the perfect home.
In this article, we’ll discuss who a first-time homebuyer is, how to work with various personality types, and useful information you may want to bring up with this type of client.
Who Qualifies as a First-Time Homebuyer?
Several types of individuals fall under this category and some of them might surprise you. A few examples cited by the U.S. Department of Housing and Urban Development (HUD) include:
- A person who hasn’t owned a principal residence in the last three years
- A person whose home wasn’t up to code
- A single parent who has only owned a home with a former spouse
Become Self-Aware and Relate to Others
Working in real estate is about building relationships. After all, you’re asking people to trust you in a major financial decision! As you study your personality, you’ll become more aware of your thought processes and strengths. Your emotional intelligence will grow as you learn to empathize and relate to others with differing personalities. The best agents make their clients feel heard and valued.
Here are some interaction tips for various personalities (not a comprehensive list):
Introverted individuals are typically not the first to speak up in a conversation unless they’re comfortable with you.
- Ask questions about what they’re feeling or thinking.
- Take time to listen and try not to cut them off.
Extroverted individuals are outgoing and comfortable around people. They’re self-assured and can talk to just about anyone.
- Let them explain their decisions and emotions when searching for properties.
- Ask them to elaborate on their observations if they’re eager to talk about multiple aspects of a home.
Inquisitive individuals ask a lot of questions.
- Be patient and calm with clients who ask or repeat questions frequently.
- Study the properties you’ll be touring with them and come ready to answer their questions.
Cautious individuals may need multiple reassurances that their choices are “right”.
- You should be able to share the pros and cons of a home in terms they can understand.
- You should not pressure them into making a decision, but rather share with them as many details about the home in question as possible.
Create Clear Communication
When working with a first-time homebuyer, you’ll need to set communication expectations. Determine the best way for you and your client to interact and let them know when you’re available. While you should set reasonable boundaries, recognize that your client might want more communication or quick information about specific properties in their market.
Remember, too, that honesty will pay dividends over time with your client. If your client has a budget of x and expects feature y, you should be ready to temper that expectation by telling them to expect feature z instead, and why.
You’ll also need to prepare to hear bad news from time to time. Your clients might need to back out of a home search due to an unexpected life event, or maybe your client doesn’t want your help anymore. Stay positive and offer to reach out to them at a future date.
Respect the Fair Housing Act
Remember the Fair Housing Act? In case you need a refresher, the FHA protects seven different classes of people from housing discrimination. For example, if a client asks to send a “love letter” to a seller, it can potentially violate fair housing laws. It’s important to follow the rules and avoid liabilities among interested parties.
Understand First-Time Buyer Programs
Many buyers don’t realize that they have access to special financing options in the form of loans and grants from their state government and housing finance agencies. Depending on their income and veteran status, they may be able to put 0% to 3.5% down if they qualify for VA, USDA, or FHA loans. Buyers can also look into their lender’s closing costs and down payment assistance programs (grants) if available in their state.
Share Tax Incentives with Clients
Two tax incentives are worth mentioning to first-timers. When Uncle Sam comes for his slice of your clients’ metaphorical pie, one major advantage of being a homeowner is deducting mortgage interest from income taxes. In 2021, a qualifying homeowner can deduct interest from the first $750,000 of a primary or secondary mortgage.
Also, a first-time homebuyer can withdraw $10,000 from a traditional or Roth IRA for the purchase of a home without incurring a 10% early withdrawal penalty. Qualifying couples can withdraw $20,000. Keep in mind that traditional IRAs are subject to taxes and that both traditional and Roth IRA funds must be repaid within 120 days to avoid a penalty.
The Bottom Line
First-time homebuyers typically require more of your time than other clients. Some may have strong personalities and know exactly what they want, but more often than not, you’ll need to explain unfamiliar processes and paperwork with clients who don’t know much about real estate. Allow your first-timers to ask questions and gain confidence in the homebuying process. You might be able to keep the relationship over the long term and generate future referrals.