Originally published on January 19, 2017 by ValueInsured.
In the housing business, we often hear about the challenges of “cold feet”. If you are a mortgage loan officer or a Realtor, this might be a familiar scenario: A prospective home-buying couple has been working with you on a loan application or a dream home-hunting mission for some time. The buyers devoted weeks and months into this process – as have you – and finally found a dream home that fits their budget and criteria. And then, they get the proverbial cold feet. The catalyst could be a negative economic news headline, rumor about a friend who recently sold at a loss, or other personal circumstances and external influences.
Both first-time homebuyers and upgrade buyers can be susceptible to cold feet. There are long-time renters who wish to convert to owners but are concerned about the financial risks even if they could afford to buy, and move-up buyers who have outgrown their current homes but are afraid to borrow more again when they have been paying off their smaller starter home. In many cases, cold feet are triggered by a perception of risks. If all eligible buyers could be confident they will never lose any money with their home purchase, no one will have cold feet. Obviously, few people are blessed with that level of unwavering confidence, especially with all the current news headlines of fluctuating markets, potential price correction in overheated markets, and the still-fresh memories of the last housing crisis. So a big part of our job as housing professionals is to nurture our buyers’ confidence.
ValueInsured’s recent Modern Homebuyer Survey indicates that most prospective first-time and upgrade homebuyers will buy sooner, if they could be given more confidence about the housing market, and about their odds of preserving their down payment savings. The survey interviewed 1,013 Americans who were interested in buying a home, and this is what they had to say:
- Among all move-up homebuyers, 79% said they would sell and upgrade sooner if they could have more confidence in the housing market. Among all Millennial move-up buyers, 93% said the same; this is substantial but not surprising, considering that most Millennial homeowners bought a starter home, and often are in need of an upgrade when their family expands.
- Among all move-up homebuyers, 81% said they would sell and upgrade sooner if they could be more confident they would not lose their down payment if they ever have to sell their upgrade home. Among all Millennial move-up buyers, 91% said the same.
- Among all existing renters who want to buy, 54% said they would buy sooner if they could have more confidence in the housing market. Among all Millennial renters who want to buy, 64% said the same; this is of particular significance to the housing market, as these Millennial renters who want to buy make up the bulk of first-time homebuyers who help propel and grow our industry.
- Among all existing renters who want to buy, 59% said they would buy sooner if they could be more confident they would not lose their down payment if they ever have to sell their home. Among all Millennial renters who want to buy, 65% said the same.
- Combining all renters and existing homeowners who want to buy or upgrade, 70% would commit to a buying transaction sooner if they could be more confident they would not lose their down payment. Among all Millennial renters and owners who want to buy or upgrade, 82% said the same.
As housing professionals, we know there are several factors that help accelerate or hinder a sales transaction, many of which are personal and beyond our control. However, as our customers’ trusted guide to help navigate this important decision, there are ways and latest innovations to help strengthen their confidence in the market, drastically increase their chance of safeguarding their hard-earned down payment investment, and help them get into their dream home faster. It is not inconceivable that with these industry innovations, including down payment protection, cold feet could soon be a thing of the past.