A recent Zillow survey found that 50% of Americans cried at least once when buying a home in the current competitive market.
And now, pretty much every buyer who didn’t lock in to a mortgage rate between 3-4% is crying too.
As a real estate professional, it’s your job to help clients through this emotional and stressful market. So, here are some ways to discuss how the rising interest rates impact today’s buyers.
We all know mortgage rates jumped up significantly this year, and it’s creating a lot of unease and uncertainty for buyers. The chart below gives a clear visual on just how much it impacts a buyer’s budget.
When your client is talking about their maximum budget, they are likely discussing a loan amount. ‘The highest we can go is $525,000.’
But it’s important to point out they should have a maximum monthly payment in mind – because a drastic change in interest rates creates a drastic change in monthly payments.
So, if your buyer wants to have a maximum monthly payment of $3,000, they can determine how much of a loan they can afford based on current rates. At 5.5% interest rate, they can take out a loan for over $528,000. When that the interest rate is at 6.5%, the loan amount drops to $474,000. This is crucial for buyers to understand.
Educate the Consumer
A consumer cannot make an informed decision without fully understanding what the numbers mean. Being an educator means you need to be the person who takes the time to explain what the current rates mean, as well as the options available to your client.
Here are two scripts you can use to converse with consumers in your market about changing mortgage rates.
Start with a simple question: “Has anyone taken the time to fully explain the buyer process with you?”
When the buyer thinks about their answer, they consider how much value agents are capable of bringing them. If you are bringing more value and more information than other agents as part of your buyer consult, you are sure to stand out from the crowd.
From there, show the client the numbers. Pull up the chart above on your iPad or computer and explain what it means for their specific budget. Make sure they understand the full cost of being a homeowner before you walk out the door.
The next script answers the question that everyone is asking right now: “Should I buy or continue to rent?”
Jared James delivers a perfect response:
It’s another response that starts with a question.
“Do you want to build your own equity or do you want to build some one else’s equity?”
Again, after asking the question, walk your client through the numbers so they fully understand what they are paying – and how it will affect their wealth both in the long term and the short term.