Today’s first-time homebuyers have it tougher than buyers who entered the housing market 10, five or even two years ago. Interest rates are higher, inventory is sparser and misinformation online is more prevalent. It’s enough to persuade many rookie buyers to delay their home search.

Agents, though, can help address these hurdles to homeownership. They must problem-solve their way around challenges and provide buyers the information to make sound financial decisions. In this post-pandemic market, seasoned agents are turning complications into opportunities and helping first-time buyers recalibrate wish-lists and, ultimately, buy that starter home.

Agents as educators

Jonathan Lopez, an agent with Century 21 in Lincolnwood, meets with first-time buyers several times in person before taking them out to look at properties. He tells them what to expect during the transaction process and explains market conditions, financing options and grants.

Lopez finds first-time buyer grants simply by asking lenders what’s available. Some of the grants he has found to be very rewarding include a $5,000 Chase homebuyer grant; a $7,000-$10,000 IDHA grant through Neighborhood Loans; a $6,000 closing credit offering through Huntington bank; and up to $15,000 in down-payment assistance through Bank of America. Some of these grants are active as long as funds are available, so agents should check on availability before mentioning them to clients, he said.

The most crucial information he provides entry-level buyers is a list of what not to do while under contract: don’t buy a car, don’t quit your job and don’t deposit a large sum of cash into your account. All of those missteps will affect financing, Lopez said.

“When you buy a car, your debt increases, so your purchasing power decreases,” Lopez explained. “It affects your ability to get approved for financing.

“If you quit your job, it might jeopardize your ability to get approved for a loan. The lender will think, ‘This guy quit his job,’ and wonder, ‘Will he get a new one? Will he make the same amount of money? Is it full-time? How many hours will he work?’ It just becomes complicated.”

Reality check

Oftentimes, Lopez has to correct misinformation clients find online. “For example, I’ll have first-time homebuyers call me about a property and say, ‘Online it shows my mortgage will only be $900. Is it true?’ But when I calculate the numbers, it’s actually $1,500, because the website didn’t account for taxes and insurance. It’s been like this for the last couple of years.”

Mike Opyd, president of RE/MAX NEXT in Chicago, likens it to WebMD. “A lot of consumers are doing their own research,” he said. “From a professional standpoint, it’s up to us to explain how things really are.”
He noted that websites like Zillow and Redfin don’t account for how much debt a potential homebuyer has, how much money they saved, their income and the size of loan they qualify for — making clients feel disappointed when they hear the truth.

Math isn’t the only problem. “Pictures are deceiving,” said Ginny Zerang, a broker with Berkshire Hathaway HomeServices in Glenview. “They can either work to a home’s advantage or against it.”

She encourages first-time buyer clients to see homes they might disregard based on photos, because the more they see, the more they learn about the market and understand what’s out there.

In this low-inventory market, with little room to negotiate, younger buyers want move-in-ready homes, Zerang said. Her first-time buyers are typically 25 to 35 years old, and many are repeat clients she represented when they were renters. Rather than constantly compete against multiple buyers for one home that’s move-in ready, she has them review their “must-have” lists and decide which items they’re willing to compromise on. This strategy inspires them to find a home they can gradually update and, with little to no competition, gets them to the closing table faster.
If first-time buyers are not going to compromise on features, Opyd said, they will typically bend on location, but not to the extent that they end up in the exurbs. Still, with so many locations to choose from, the options can become overwhelming.

“A big mistake agents make is running around like crazy, trying to show buyers the many areas they might be interested in,” Opyd said. “They throw out areas without doing research. Maybe someone told them about it, or they went to a party there. Say they want a two-bedroom, two-bath property with parking in River North and their budget is $400,000 — it’s not realistic. They’re $100,000 too short.” It’s up to the agent to strategically narrow down the location and save everyone time, he said. While they cannot afford River North, he would tell them Old Town is close by and it’s an option.

Based on their needs and budget, Opyd actually narrows it down to four communities, and encourages clients to spend time in each area to experience the lifestyle. If they’re up for it, he’ll drive with them down the main street and point out all the hot spots. After that, if they’re serious about those locations, he’ll set up a property search. But he’ll only show them one house in each area at first. Otherwise, he said, it can become overwhelming. The fewer the choices, the easier the decision, he said.

Get to closing faster

As a buyer’s agent, Opyd said, maintain control of every aspect of the process. Have them use your attorney, lender and inspector. “The more we are in control of the situation, the easier it gets for the buyers and closings actually happen,” Opyd said. “A lot of agents make the mistake of letting clients choose whoever they want to use, and it becomes a huge mess.”

Tiffany Vondran, a broker with Fulton Grace in Chicago, uses the same approach to win bidding wars. “When I present my offer, I list bullet points of why they should accept it: ‘I’ve worked with these people, this lender and this attorney, and I never had a deal not close on time.’” She also contacts the seller’s agent to find out what’s important to them in an offer and tries to deliver it. When she does, even if her bid isn’t the highest, she tends to win.

Ignore rates

Opyd is seeing rate envy among buyers. “A lot of people know someone who got a really low rate and refinanced,” he said. “Unfortunately, that’s stuck in people’s minds. What they don’t realize is, had the pandemic never happened, rates would be where they are now.”

To put buyers at ease, he reminds them, “You marry the house and date the rate.” If they’re comfortable with the mortgage payment, they can ignore the rate and refinance later.

Attract first-time buyers

Lopez meets 50% of his first-time buyers at open houses and the other half from online ads. A majority of Zerang’s first-time buyers are friends of her two adult sons and/or renters who returned as buyers. Vondran attracts first-time buyers by co-hosting homebuyer seminars each month with a lender partner. Like Zerang, she has a lot of experience assisting renters, keeps in touch with them and when they’re ready, they return to her as buyers.

Build lasting relationships

Add value to the client experience by helping buyers understand what each location has to offer: distinguish between the taxes, school systems and what they get for the money, Lopez said. Buyers will appreciate it. “You’ll get a buyer who is thankful that ‘this agent is not just trying to sell me a home, he’s helping me understand the different markets and helping me find the perfect home,’” Lopez explained.

All of our experts agree that first-time buyers look to agents as educators, advocates and, by the time the transaction closes, in many cases, trusted friends. Once you have earned their trust, one successful transaction can springboard multiple deals. Those clients will likely send referrals your way and choose you to help them find a home for every stage of their lives.

Expert Sources

Jonathan Lopez
Century 21

Mike Opyd
RE/MAX NEXT

Tiffany Vondran
Fulton Grace

Ginny Zerang
Berkshire Hathaway HomeServices