Able real estate agents know the first step with first-time (and really all) buyers is to get them pre-qualified — preferably with a lender who is accustomed to working with this group of buyers and who has the patience to explain (early and often) all the costs related to a property purchase.
Beyond that, however, agents need to set buyers’ expectations for the entire transaction as early as possible. Here are 10 of the most important items to go over with first-time buyers in advance.
1. Be prepared to clue in first-time buyers about local conditions, especially if they’re moving to the area or are relatively new
Where there have been recent natural disasters, new buyers will always have multiple questions — along with fears that may have been magnified by media coverage.
If there have been earthquakes, fires, floods and/or mudslides in your area — or in adjacent counties — anticipate answering very specific questions about those natural disasters and what areas were affected and to what degree.
Additionally, in many areas of Northern California, “urban growth boundaries” surround each of the towns in some counties. Buyers coming from areas where sprawl is common are often surprised by smaller home sizes and stingier lots than they’re accustomed to “back home.”
Some areas are “water deficient,” which may be new to people moving from areas where water is plentiful. So be aware of conditions that are unique to your area, and prepare to address issues related to any and all of them.
Finally, setting buyers up with an automated MLS feed can help first-timers (and newcomers to your area) better understand what their budget will buy in various areas.
2. Outline the purchase process for your buyers
Make sure they know how escrow works. And assure them that, once they have written an offer that a seller accepts, you will work closely with their lender — and their chosen title company — so both you and their lender will be able to know how much cash they will need on hand for their down payment, appraisal, inspection and closing costs.
Expect to explain this multiple times (and ensure the lender is explaining costs, as well). If private mortgage insurance comes into play, you can anticipate the need to explain that multiple times, as well.
3. Go over the purchase agreement with first-time buyers well before they make an offer
Explain all the terms that are new to them. Emphasize the built-in, time-sensitive elements of a contractual timeline. And make sure they know which aspects of any transaction you handle and which escrow and their lender takes responsibility for.
4. Explain the purpose and timing of inspection, appraisal and loan contingencies and the effect of releasing those contingencies on their earnest money deposit
Emphasize that the first-time buyers should make their offer contingent on a satisfactory home inspection, even if the contingency makes their offer less attractive to the seller. (You may have to explain the term “contingency,” as well.)
Make sure buyers understand that their lender orders the appraisal but they (or you) will order the inspections, and go over which types they may want to get. It’s wise to provide a list of prospective inspectors in advance, as well, so they can do any desired research prior to selecting inspectors for a specific property.
5. Talk about the ‘as-is’ provisions of the purchase agreement
Often first-time buyers believe sellers are obligated to repair every flaw inspectors find. Establish what they should expect to accept “as-is,” the point at which asking for repairs is appropriate, and the alternatives if sellers decline to make requested repairs. The forms used to request and respond to requests for repair may prove helpful during this discussion.
This is also a good time to briefly discuss what buyers’ options are if an appraisal comes in below a purchase offer.
6. Make sure buyers understand that visible flaws are commonly factored into a home’s list price
If repairs are obviously required to make a property livable, help the homebuyer estimate how much these costs will add to the property’s purchase price.
In a similar vein, you’ll do your buyers a service if you help them understand what on-going maintenance, utilities and other day-to-day ownership costs may be after they purchase their first home.
7. Brief them on typical ‘closing’ periods and the chain of events that takes place within a typical timeline of 30-45 days
Providing a sample written timeline in advance and a property-specific timeline once they’re in contract can be a useful way to tackle this subject.
Even though buyers will most likely not refer to it but will call you to ask when a deposit must be made or a contingency release or increased deposit is due, having a contractual timeline in hand will help you answer their questions promptly and precisely and may even forestall a few.
8. Note key moments during the contract period when their physical presence will be essential
Digital signing has made it possible for much of the paperwork of a transaction to be handled online from anywhere. But some tasks really require the buyers’ presence.
For example, it’s helpful for buyers to meet with inspectors for post-inspection briefings, even though they will receive written copies of all inspection reports.
If loan docs have to be signed, buyers must be available to sign those documents in person — even if they’re out-of-town and need to sign with a notary.
Ensuring buyers’ presence at critical junctures requires finding out if they have out-of-town trips planned or other predictable absences scheduled and working around those plans.
9. Alert them to the fact they must find and select homeowner’s insurance prior to closing, especially if a lender is involved
Suggesting several alternative insurers will let a first-time homebuyer know they have options when choosing an insurance carrier and that the costs can vary based on coverage and the insurer.
10. Provide them with a list of vendors they may need at move-in
It’s probably best to save this list until closing — although you may certainly want to provide the names of trusted movers early on. But let buyers know in advance that you will be providing a vendor list near closing so they don’t panic.
In fact, it’s an excellent addition to the envelope that contains the keys to their new home. Your list should contain phone numbers to get utilities (including telephone and internet service) established in the buyers’ names, trash/garbage service set up, rekeying services and other local resources for commonly sought services — such as where to find help for house cleaning and repair the property and handle landscaping services.
Add fun events in your community and favorite restaurants to the list, especially if they are new in town.
First-time buyers may require extra time and more information at every step, but they’re so thrilled and grateful when you’ve found their ideal home, the added effort is worth every minute. Plus, you’ll be top of their list when they outgrow their first home and are ready to sell and buy another.
Nicole Solari is owner and managing broker of The Solari Group in Solano and Napa Counties in Northern California. Nicole runs one of the highest producing brokerages in all of Northern California.
