5 Ways to Help Your Clients Afford Their New Home

November 17, 2016

Jonathan Deesing

Homebuyers—especially first-time buyers—are usually in sticker shock when house hunting. Tack costs for home inspection, closing, and taxes onto the price of the home, and clients who have been counting pennies to buy the home of their dreams are now looking to their realtor wide-eyed and confused.

Realtors need to prepare their clients for those overlooked costs that often catch homebuyers off guard. Here are five ways you can help your clients gear up for the unexpected costs of home buying.

All homebuyers begin house hunting with a budget limit. What most don’t realize is homeowners need at least $9,000 extra a year for annual hidden costs, maintenance repairs, and general upkeep. Remind your client that they need to keep some money reserved in their savings account for unexpected maintenance costs that crop up, like a broken air conditioner or a backed-up sewer pipe.

As a real estate agent, you ideally want your clients to buy at the top of their budgets so you get a bigger commission. But here’s where you can retain clients for life and gain potential referrals: encourage them to buy the house that’s within their means. Pushing clients to live house poor, buying more house than they can afford, should never be an option. If your client buys a less-expensive house, they’ll be financially ready to handle sudden income losses, like a job loss or a new baby. Don’t push your clients to keep up with the Joneses—persuade them to be patient and responsible. Then, when they’re ready for an upgrade, they’ll call you again.

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Homebuyers may not realize that going from a one-bedroom apartment to a multi-bedroom home with a yard and a garage will affect their home insurance rates. While house hunting with your clients, point out things that will raise their home insurance. For example, an older home may cost less than a newer home, but it will cost more to insure. Be sure to point out how location also factors into home insurance costs as well—homes in high-crime or disaster-prone areas will have higher insurance rates. Urge your clients to compare home insurance companies and shop around for the best rate.

Does your client know that the homebuyer typically pays for closing costs? Do they realize this cost is additional thousands of dollars on top of the down payment they’ve likely spent years saving for? Tell them this at your first meeting to avoid unpleasantly surprising them later. Make sure to remind buyers of the potential impact of closing costs when establishing a price range.

Closing costs range from 2% to 5% of a home’s purchase price. For a $200,000 home, that can be between $4,000 and $10,000. Let them know closing costs will cover all lender fees, appraisal costs, and the government fees to transfer the title in your name. Bookmark a closing cost calculator that will give your clients a general idea of the thousands they need to set aside to cover these costs.

Right after their home offer gets accepted your clients will be faced with their first major expense: a home inspection. The price tag of the inspection causes homebuyers to waffle on this piece of the home buying process because the home isn’t theirs yet and it could still not work out. In the middle of making such a huge purchase, it’s important buyers view an inspection as not a cost of buying a home, but a cost of shopping for one. However, you can make this expenditure more palpable. Let your clients know the inspection will give them a close-up view to the details and structure of the home – they can back off their offer if they find out they’re getting a lemon, and even negotiate for a lower price if the inspection reveals that the home requires a lot of maintenance.

Home buying is expensive, and though the additional fees associated with it aren’t necessarily hidden, they are overlooked by most homebuyers. Prepare your clients for all the fees that add up in a home sale, and you’ll mitigate their sticker shock, building a trusting relationship.