So much of life in the real estate business is uncertain. So you spend a ton of your time feeding the top of your funnel with qualified buyers and sellers, and much of the rest executing your transactions with focus and smarts. Agents pride themselves on sticking the landing, because closings are the vehicle via which we ultimately get paid: paid in commissions, yes, but also in client love and referrals.
But thereâ€™s an age-old challenge, a potential glitch in this loop, which most buyer agents have faced. The glitch? You are not in control of 100% of the factors which dictate whether your buyer clients will close escrow. The lender must cooperate, and even the seller and the property must all align to bring your buyer-side transactions to a glorious close. And even more importantly, the buyer must play ball at dozens of moments throughout escrow, by showing up, bringing cash and signing and submitting documents.
On the surface, itâ€™s usually pretty clear what facts are the immediate cause of troubles closing an escrow. But many, many times, thereâ€™s a buyer emotional or mindset issue â€“ something less tangible and less remediable â€“ underlying the hard cold facts.
Here are a few such issues I often see at work in blown-up deals:
1.Â Great expectations.
(And even greater disappointments) Todayâ€™s buyers come into the process with visions of sugarplums HGTV dancing through their heads. Itâ€™s not at all bizarre to hear buyers with the most entry level of budgets express their dismay at not seeing quartz countertops, dual vanities and pristine hardwood floors as they view properties.
Itâ€™s understandable that, after scrimping, saving, dreaming and window shopping (online and in real-life Open Houses), buyers might have to right-size their expectations once they have a legitimate loan approval and the reality check it often bring. Even buyers who have been casually perusing properties listed in the correct price range are frequently flabbergasted when they realize theyâ€™ll need to conduct their â€œrealâ€ house hunt $100,000 lower in order to successfully compete for a home in your market.
The truth is, some buyers simply struggle to make this expectation correction in earnest. These are the folks who fail to close escrow not because of any glitch in the deal itself, but because they persist in believing that theyâ€™ll somehow be the exception: the one buyer who is able to get an impeccably staged home in the most popular neighborhood in town, below asking. These buyers sometimes also present in the form of the couple who refuses to negotiate a compromise between their own inconsistent home wish list items, so that you can never make them both happy.
Others valiantly battle the scourge of high expectations, managing them enough to compromise and get into a property, then finding fault with even the most minute property flaw as uncovered via inspections or demanding bizarre last-minute seller concessions, unconsciously voicing their disappointed expectations.
Expectation management is an essential skill for all brokers and agents, but especially for those representing buyers. But the next-level version of skill that I often see lacking is in helping buyers feel that you are providing them with options vs. always telling them they canâ€™t have what they want. Donâ€™t just say: â€œyou canâ€™t have (e.g. a home in that neighborhood, that many bedrooms, a home in pristine move-in condition, that big of a yard, etc.)â€. Â Instead, show them all the options, including those at a higher price point, and work with their mortgage broker to help them map homes to prices and the corresponding monthly and upfront financial obligations. Then, let them choose.
Home buying â€“ especially for the first time, in a new town or after a major life transition like a marriage, divorce or becoming a parent â€“ can be scary. You deal with such large sums and major decisions every single day, so the further into your career you get, the easier it is to forget just how momentous and frightening the home buying transaction is to someone who has never made such a large financial or life decision as this ever before.
Most buyers are responsive to â€“ many even welcome! â€“ your efforts to create calm and assure them that they will come out the other end of escrow in a better situation than they were when they started. But even the most well-managed buyer will have a freak-out moment (or ten) in the course of even the most well-managed transaction:
the night the contract is ratified
the day inspection reports come in
the day contingency removals are due
are all common milestones that trigger freak-out moments.
And if the buyer has a particularly nervous personality or the transaction has surprises at all, these things can cause even freak-out moments than normal.
In my experience, the best way to neutralize the deal-killing potential fear-based freak-outs is to normalize them. Â By that I just mean get out in front of them, from your very first meeting with your buyer client. Make sure they understand not just the events that make up the flow-chart of a typical transaction, but the emotions that commonly accompany the various milestones. Knowing that itâ€™s normal to feel that way and that those feelings will pass quickly helps a buyer simply sit through the freak-out, without the knee-jerk reactions that can both consciously and unconsciously kill escrows.
Also make sure you understand their front-of-mind fears, and that you address them in a very visible way throughout the transaction. My experience is that many agents do a vast amount of work to protect their buyerâ€™s best interests without the buyer being aware that this is taking place behind the scenes. If your buyerâ€™s biggest worry is that theyâ€™ll end up with a lemon of a house, make sure they are onsite during inspections, that you are with them when you go through the inspection report and that you work with them to get and review repair bids. If they are more concerned about the neighborhood, donâ€™t just chat up the neighbors when you see them, get their number or email address to share with your buyer client so they can ask their own questions.
3. High-low woes.
When the market first began its decline into what I call the Not-so-Great Recession, it became common for agents to point out that thereâ€™s really no such thing as a â€œbadâ€ real estate market for everyone. What seems like a â€œbadâ€ market for sellers is a â€œgoodâ€ market for buyers, and vice versa. Â But some buyers perceive the market as â€œbadâ€ for them no matter what is going on in the market. When prices decline, they fear they are buying a home that will simply depreciate from the day they close escrow. Â When prices increase, they worry that they are buying too late, missed their best opportunity and are perhaps even overpaying for the place.
With this type of buyer, it helps to get both philosophical and â€œmathy.â€ Help them to understand both sides of this mindset Catch-22 and explain that this sort of logic causes people to freeze up and wait, putting their lives, their family needs and even their financial advantages of home ownership on hold until that fantasy moment of the perfect time to buy, which will never come under this logic. Then, show them price histories for their target neighborhood(s) back over a long period of time, and help them understand that if they are buying for the long-term, the precise timing of their purchase wonâ€™t be nearly as critical to their homeâ€™s value as they might think.
And then remind them: their home is not just an investment. Itâ€™s the single greatest lifestyle level up they will ever make, with the potential to easily improve their financial status, their daily life, their family relationships and their childrenâ€™s education. Accordingly, itâ€™s best to make the decision whether and when to buy based on what makes sense vis-a-vis all these considerations. Then, walk them through how youâ€™ll help them factor in the time-sensitive market dynamics when it comes to the individual decisions theyâ€™ll need to make to execute their dream of buying, from offer price to neighborhoods, and beyond.