Are you a tire kicker or a home buyer?

Are you a tire kicker or a home buyer?

In the advent of a more transparent real estate market, where listings are found all over the internet, it is sometimes thought of by persons that browsing a few listings on their phone makes them a home buyer, without much consideration to their qualifications. You might call these people “tire kickers”. What I want to do in this article is distinguish between a tire kicker and a home buyer, and give advice on how you can be in the latter camp.

Tire kickers are often those people who might browse around and window shop without any intention to buy. Tire kickers exist in a retail environment where persons are encouraged to look around to decide to buy or not. Tire kicking may not be a bad thing. In fact, those who enter stores and don’t buy anything might return to buy at a future date, or by word of mouth, recommend the store to somebody else.

Let me know talk about online tire kickers. Online tire kickers might have the quality of browsing for goods online and even adding something to their shopping carts and never check out and pay for anything. They might flirt with the idea of owning something and add it to a cart or wish list, but never pay. Back end engineers often spend lots of time wondering how they can convert these tire kickers into real buyers. Ergo, much time is spent programming guest registration and check out instructions to make sure these people can seamlessly enter credit card information for a purchase.

So far, we have seen that tire kickers have some vague interest in owning something but may not follow through with it. At this point, we could venture into the philosophic question of rational choice theory, but we might bracket that conversation for a later time and just focus on the “what” instead of the “why”.

Let us know jump back to owning a home in real estate. Owning a home in real estate is a serious step in one’s life and, often, such a decision is not possible without evaluating one’s life circumstances. If the life circumstances are right and buying a home is part of that master plan, then that is often the first step in converting a person from a tire kicker to a home buyer.

The next step to converting a tire kicker to a home buyer is by loan/ bank qualification. Homebuyers need to speak to a loan agent or present their bank statement to their real estate agent to show they have the means to make a purchase.

There’s no nice way to say it, but if you have not researched the means to purchase a home, you are not a homebuyer! People sometimes forget that homes require money to purchase. This money will either come from your personal bank account, a gift from a family member or friend, or from a banking institution who will lend you the money, less the down payment and closing cost fees.

Once you have identified your home buying qualifications, which alludes to your purchasing power, then you can meet with your Realtor to find out just exactly how much “house” you qualify for. This is when returning to the phone and the desktop might be relevant to look for houses. Your pricing parameter is clearer and your home search is more concrete. Not only will you have more confidence in home buying, but you are more likely to succeed in purchasing a house than those who do not get qualified first.

I hope I have outlined the steps to convert yourself from a tire kicker to a home buyer, which in summary is to identify whether your life circumstances demand and tolerate a purchase for a home, and then produce a loan qualification letter that states an official banking institution has given you the OK to make the purchase. I think one reason I wrote this article is because I speak to hundreds of buyers daily on purchasing a house, and many of them are casually looking without much of a plan, and this is frustrating for them since they expect to buy a house just because they can look it up online, and frustrating for me because it is not a good use of time. What I can say is that tire kickers might also specify a time in the future where they might be thinking of buying, and that might be another talking point for the future. Buying a home depends heavily on the readiness of the buyer/consumer, and I am not one to rush anyone into a complex process, but homebuyers are not homebuyers until they are qualified!

The Most Important Thing to Do Before Looking for a House

The Most Important Thing to Do Before Looking for a House

Today, we live in a culture where information arrives instantly at our fingertips. Information about homes for sale is no different. Anybody can look at a house, whether they are old, or young, rich or poor; the information is available for anyone.

Now let’s think about only those people who are qualified to buy a house. Chances are they have large cash reserves or the minimally decent down payment needed to purchase. But even they might shop for a house without doing the most important thing they need to do.

So what is the one thing that is so important? The answer is simple: finding out your max price. Your max price should be known to you. If you are getting a loan, your max price is determined by your loan advisor and it may appear on your preapproval form. Your real estate agent will also have knowledge of your max price, even though you might think it is confidential information.

Why should your real estate agent have this information? She should have it because it places a cap on the searches she will do in finding your house.

Is your max price confidential information? Well, yes, it is, and it should not be shared outside of those trying to work in your best interest. That is why your loan advisor knows your max price, your real estate agent knows your max, your significant other knows your max price… and that’s about it. For everyone else, like the seller you are trying to buy from, you do not reveal your max price to them, for obvious reasons.

To be sure we are all on the same page here, the max price is your down payment plus your maximum possible loan amount you qualify for. If your preapproval letter shows your maximum loan amount, that is not your maximum purchase price. If you see that, add your down payment to determine your maximum purchase price. That is when the search truly begins.

Many of my clients ask me: “Let’s see property first and then I’ll get qualified.” Denying my clients of this suggestion might insult their reputation and pride, especially if they make it clear to me if they have the means to purchase property. So what do I do? For repeat clients, I usually oblige them and tell them that we can see property first and get qualified later. For newer clients, I have to stick to my guns and tell them that you must get qualified first.

Why do I stick to my guns? The answer is twofold: the first is that I am a professional. While the client calls all the shots for decision making regarding the purchase of the house, it is my responsibility to create the conditions that make success porrible.

The second answer has to do with time. I respect my clients’ time as well as my own. If we see properties without establishing the price range or qualification, period, then we are wasting time out on the field looking at properties the client does not qualify for. In fact, I have had many overqualified clients looking for property, only to learn that they have auto loan debt they forgot to pay down, student loans they did not touch for years, or other debts that may hinder their ability to get credit.

So when these issues are identified early, what can they do? They can fix them early when there is time to do. What happens if the issues are not addressed right away and the client insists on looking at property? The results can be disastrous, and let me explain why.

Imagine finding the house of your dreams but you are not yet qualified to purchase on a house. Because many sellers impose deadlines for offers, you are now against the clock in getting qualified for a loan. This puts pressure on the loan advisor and added stress on everybody. After getting qualified, now imagine that your max price is less than the listed price of the home you love, and let’s assume there are multiple offers out there on the house already.

From this case study of being underprepared to offer for a house, we see that the origin of the problem was not knowing what the max price is for a house before shopping.

So in summary, we learned that finding out your max price before house shopping is like putting the horse ahead of the cart—it is the smart way to go.