Today's Buyer: A Composite

What Do Today's Home Buyers Look Like?

Contrary to popular opinion, home buyers are not an endangered (or extinct) species. Two of my clients just purchased homes, and three more are actively looking.

So what generalizations can you make about them?

They have many (if not all) of the following four attributes:

One. First-time Buyers.

Yes, it's a lot easier to buy if you don't need to sell first.

If you currently own a home and want to buy another, you must either: 1) qualify to own two homes at once, which means an interval of "doubled-up" mortgage payments, utility bills (even if one set is lower because you're not living there), etc.; or 2) make a contingent offer.

That means your offer is contingent on getting a signed Purchase Agreement on your current home, typically within 90 days.

While more Sellers are ok with that in today's market, others want the certainty of a done deal, even if it means accepting a lower price.

Of course, another reason buying is easier for first-timer's is all the incentives being thrown at them.

I'll leave a comprehensive list of programs and incentives for another post, but suffice to say, if you're a first-time buyer and can't find a carrot (or several) for buying right now . . . you're not looking very hard.

Two. Long-term orientation.

I think it's safe to say that the people not buying now are focused on the (downward) direction of home prices.

Which is perfectly understandable.

No one wants to catch a falling knife, and right now the velocity of that knife is record-setting, particularly in places like Las Vegas, Phoenix, and parts of California.

By contrast, many of today's Buyers don't really care what prices will be next year or even three years from now because they're not contemplating selling then.

Rather, they see themselves as locking in their long-term housing costs at today's historically low rates. No matter what housing prices or interest rates do from here, they know that their monthly living costs will be a fixed $1,200, or $2,000 (or whatever).

Three. Financially conservative (or related to someone who is).

It's certainly possible to buy today with as little as 3% or 4% down, particularly for Buyers going through FHA. However, putting more down gives you more options: you can "go conventional" (get a regular bank-issued mortgage); it may qualify you for a lower interest rate (surprise, surprise); and it will help you avoid the various add-on fees becoming popular with lenders.

Also unsurprisingly, Buyers coming in with a heftier downpayment are more popular with Sellers, who don't have to "sweat" the Buyer's financing contingency (the vast majority of Purchase Agreements give the Buyer a prescribed amount of time to secure their mortgage).

When credit was readily flowing, Sellers really didn't care where the Buyer's money was coming from; they knew it would be there at closing. So financially strong Buyers couldn't really get much of a discount.

Today, Sellers can't take anything for granted.

As a result, financially strong Buyers -- making low-risk offers with big downpayments -- can often command a discount from nervous Sellers.

Of course, putting more down means re-paying less.

That same financial conservatism carries over into Buyers' borrowing decisions.

Forget about exotic, adjustable rate loans; they just want plain vanilla, fixed, at the lowest rate they can get.

Four. Custom wants and needs.

I just sold a 4,000 square foot duplex with prehistoric wiring (amongst many other problems) to couple moving to the Twin Cities from Chicago.

Big obstacles, right? Perhaps for many Buyers.

However, one of the clients is a potter who wants to put in a kiln. As a result, they wanted a property where they could install a high-end, 200 amp-plus electric service. Buying a "blank slate" property -- with a discount to match -- suited their needs much better than retrofitting something closer to "move-in ready" condition.

Obviously, not every client needs an in-home kiln (for some odd reason, though, I've now had three clients who have!)

However, plenty of Buyers are looking for homes that they can put their own "stamp" on, whether it means creating a new Kitchen, opening up walls to create a more open floor plan, or simply updating to their taste.

For the first time in a long while, such homes are in plentiful supply, at prices that are likely to prove good, long-term values.