Tuesday, December 6, 2022

Is it cheaper for me to rent or buy in today’s market?

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Give your first-time homebuyers the information they need to stay motivated to buy against rising prices, rents and rates. Homeownership is still key, according to trainer and author Bernice Ross.

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As the red-hot seller’s market becomes a distant memory and we move into what may arguably become a buyer’s market, one of the best sources for ongoing business is first-time homebuyers. To capture this business, however, you must be able to overcome their primary objection — “It’s cheaper for me to rent.

In a slowing market, the beauty of working with first-time buyers is they don’t have to sell anything before they purchase. Here’s the step-by-step process for attracting first-time buyers and then converting them from renters into homeowners.

When renting may be a better choice than buying

Renters who do not want to be tied to living in one place for an extended period, who don’t want the hassle and the expense of maintaining a property, or who are currently living in a rent-controlled unit where rent increases are tightly controlled, are often poor candidates for purchasing a home. Don’t waste your time.

Good candidates include those who want to stay in the same location, who want to put down roots in their local community and who have the financial resources to purchase and maintain a home. (For a more detailed discussion, visit, FirstRepublic.com.)

Five tried-and-true marketing campaigns to attract first-time buyers

You can use the following topics as the basis for marketing campaign in print, podcasts, on social media or video.

  • What’s the best hedge against inflation?
  • Real estate: The shelter you can live in!
  • Contact Sally Agent at 800-555-1234 to learn more.
  • Want to become a homeowner now?
  • You can buy today with as little as 3.5 percent down
  • Contact Sally Agent at 800-555-1234 to learn how.
  • Want to buy but need help with your down payment?
  • Down payment assistance is available NOW!
  • Contact Sally Agent at 800-555-1234 to learn more.
  • Tired of paying your landlord’s mortgage?
  • Become a homeowner now!
  • Contact Sally Agent at 800-555-1234 to learn how.
  • Another rent increase?
  • When you own a home with a fixed rate mortgage,
  • Your payments will be the same for the next 30 years.
  • Contact Sally Agent at 800-555-1234 to learn more.

When the buyer says, “It’s cheaper for me to rent”

You can share the following graphic from Keeping Current Matters which is based on statistics from the Federal Reserve. You can also use this as a marketing piece as illustrated below.

When the buyer has credit problems

Obviously, some first-time buyer leads may have credit problems. To clean up their credit, ConsumerAdvocate has ranked their top 10 rated resources for credit repair for 2022.

When they need help with their down payment

First, the bulk of the American public believes they must put 20 percent down to purchase. Use your digital, print, and social media marketing campaigns to inform your market area that buyers can purchase with as little as 3.5 percent down.

It’s equally important to market by pointing out that a large percentage of buyers qualify for down payment assistance. In the fact, the average amount of down payment assistance paid in 2021 through the resources available at DownPaymentResource.com (DPR) was $17,000!

To quickly determine whether down payment assistance is available for a specific listing, visit Zillow and click through the mortgage tabs to “down payment assistance.” Zillow has partnered with DPR to display all the down payment programs available for all listings posted on Zillow.

Is it better for me to rent or buy?

The best way to answer the question is it “Cheaper for me to rent or buy?” is to base it upon your client’s current rent as compared the cost of purchasing.

Based upon each buyer’s unique circumstances., NerdWallet has a rent vs. buy calculator that allows you to show your buyer exactly where the breakeven point is between renting and buying.

Case Study

Your buyer is purchasing a median priced home priced at $428,700 with 20 percent down and obtaining a 30-year fixed rate loan of $343,000 (80 percent) at 5.88 percent interest.

The buyer currently lives in a median-priced 2-bedroom, 2-bath apartment in Atlanta that rents for $2,431. (Search ApartmentList.com to see the cost-of-living numbers and median rents for your location.)

The two screen captures below display the results from the t NerdWallet rent vs. buy calculator. The first scenario shows the point where it is cheaper for the buyer to purchase as opposed to renting. That takes place at approximately three years as you can see in the chart below.

The second scenario shows that at 10 years, the buyer is saving $870 per month and $104,409 in total by owning rather than renting.

Below is a summary of the amounts saved at various points in this loan. It’s easy to see why the data from the Federal Reserve shows that homeowners have 40 times the net worth of renters.

The beauty of using the NerdWallet rent vs. buy calculator is that you can quickly access this information when you’re working with a buyer. Simply enter in the price the buyers want to pay, the location, the amount of the down payment, the loan details as indicated above, and the buyer’s current rent.

In slowing markets that may be shifting into a buyer’s market, first-time buyers may be one of your best sources for consistent business. While it may take a few minutes to fill out the data required to generate the charts above, there is not another approach that I’m aware of that is more powerful at overcoming the buyer’s objection, “It’s cheaper for me to rent.”

Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with more than 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.

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