Interest rates fell to record lows. For-sale homes seemed to be snatched up within hours. And the walls seemed to be closing in for many apartment dwellers.
Millions of Americans rushed to buy homes last year after the COVID-19 pandemic struck, but not everyone found their dream home. With many homebuyers coming to regret their decision, mortgage originators should be ready to offer a sympathetic ear and to help find a new solution for these borrowers.
For originators, maintaining relationships with clients over the long term has been a mainstay business-development strategy for decades. First-time homebuyers often trade up or refinance after a few years, and they’re likely to lean on the expertise of the originator and real estate agent who helped them navigate the process the first time. This assumes, of course, that they had a positive experience and some effort has been made to maintain the relationship.
Of course, keeping up with past clients is Business Development 101 for mortgage originators. What’s interesting about the current environment is that this buy-and-sell cycle, in some geographic areas and with certain clients, appears to be accelerating.
The pandemic-induced race to escape apartments and condominiums in search of more space — coupled with a historic shortage of available homes — drove frenzied buying decisions that many people came to regret. It seems plausible, based on the upheaval of the past year, that the mortgage industry could see widespread homebuyer remorse.
Consider a study by Statista, which found that 30% of U.S. homeowners who bought during the pandemic now admit, due to financial reasons, that they should have waited to purchase a home. Another survey suggests the problem could be even more widespread. A LendEDU study indicated that 55% of new homeowners regret their decision to buy a house during the pandemic. Among this group, 30% said that finances — specifically, a lack of financial readiness for homeownership — is the cause of their regret.
Whether you take the low end or high end of these surveys, a sizable portion of pandemic-era homebuyers seem to be having second thoughts. Several anecdotal examples of this dynamic were described in a recent article that chronicled people so desperate to win bidding wars that they skipped the normal due-diligence process or ignored known problems. Some ended up selling their homes mere months after buying them.
The pandemic-induced race to escape apartments and condominiums in search of more space — coupled with a historic shortage of available homes — drove frenzied buying decisions that many people came to regret.
It’s possible that a gap exists between homebuyer sentiments of regret and those who are actually trying to unwind a recent purchase — especially in a market where single-family homes are scarce. If the Statista and LendEDU surveys are indeed leading indicators, mortgage originators should position themselves to win the business of the seller turned boomerang buyer.
The first step toward winning a recent client’s business a second time is to dispense with the assumption that they won’t be in the market for a mortgage for several years. Since clients from 2020 are already viable prospects, the goal should be to effectively market to them while being aware of potential sensitivities. Regretful homebuyers may not be ready to admit they made a poor decision, even if they do want to start exploring how to get out of their current situation.
The playbook for marketing to former clients doesn’t need to be rewritten, but it does need to be adapted for the current environment. Take into account the emotions at play with recent buyers who may have concluded that they made the wrong decision.
So, how do you reach out to these former clients and see if they may be reconsidering a purchase made only a matter of months ago? The best way is to create a business plan that understands and acknowledges their point of view.
First, identify buyers who might be “high risk” for a return trip to the housing market. You might have worked with a client who bought a home sight unseen or without conducting an inspection. Other clients may have been involved in bidding wars that potentially pushed them into hasty decisions. Are recent clients opening your marketing emails and could that indicate they’re having second thoughts?
Develop marketing messages inclusive of people who recently bought or sold and are ready to do it again. For example, unlike “typical” second-time homebuyers, a seller may not have moved on to a new life stage that requires a larger home. Maybe they simply realized that they prefer a different area of town or that they bought more home than they could afford.
Demonstrate empathy for people who may be kicking themselves for a bad decision. After all, no one had lived through a global pandemic before 2020 and most people, if pressed, would admit that the past year involved a lot of improvising. Messages like, “We understand that buying your first home sometimes ends in regret,” could resonate with certain people.
The playbook for marketing to former clients doesn’t need to be rewritten, but it does need to be adapted for the current environment.
Insights and incentives
Offer helpful strategies for people who might be vacillating between settling for their current home or selling. Are there ways to help minimize their financial loss?
It may be that the movement in interest rates since their previous purchase has made it more affordable to move on to their next home. In coordination with a real estate agent, you could recommend investing money in their home before putting it back on the market. You also may be able to provide some insight into whether they’re better off selling now or in six months.
Consider offering an incentive to recent clients. Help soften the financial downside of reselling a home by offering a discounted commission. With a little humor and empathy, a “homebuyer regret discount” for people who are selling a home they purchased within the past 12 months could be a creative way to lure them back into the market.
Look to partner with real estate agents to offer a comprehensive road map for selling a recently purchased home and buying another one in the current market. What kind of competition can people expect when looking for a new home? Should they sell first and then buy, or is it possible to win the bid on another home with a sales contingency attached? These are the types of questions that boomerang buyers are asking themselves.
Utilize a client-relations platform that can streamline the process of keeping up with past clients and targeting prospects. For companies that employ a team of originators, the right platform also can help to streamline content generation while providing critical controls to ensure that marketing materials are compliant with all relevant regulations.
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In today’s frenzied real estate market, the homebuying cycle is anything but typical. Identifying recent clients who might fall in the “regretful buyer” category is the first step toward reaching this segment, but the marketing message also needs to be appropriate. Empathizing with people who might be having second thoughts will go a long way toward positioning yourself for future deals. ●