Home Sales: Why Buyers Have Cold Feet

Interest rates are at historic lows and home prices have been spiraling down in most markets for the last year. It has never been a better time to buy a home. But still we hear the same story from Realtors across the land: Even qualified buyers have cold feet. Buyers are sitting on the fence, waiting.

A high-profile plastic surgeon in Dallas had been hovering over a $4,999,999 home. Qualification and income were not a problem, as he had a large cash down payment from the sale of a previous home. I am told he put a bid on the manse, extended his option period twice, then backed out of the offer at 5:01 p.m. on a Friday night. I mean, if plastic surgeons with cash are backing out of contracts, isn't everyone?

There are several things sellers and their agents can do to warm up buyers into signing on the dotted. This is not a market for the lazy, uncreative or faint of heart. Serious sellers need to be able to respond to buyers' fears:

Buyer complaint: I will not be able to qualify for a mortgage.

Whether real or imagined, many buyers are not buying because of perceived "loan issues" or the "credit crunch" that we hear about almost daily. Yes, mortgage guidelines have gotten tighter, and it is more difficult to get a loan now. Homebuyers need to do more than fog a mirror. Buyers need good, but not perfect, credit and cash for the down payment and closing costs. Banks have tightened debt-to-income ratios, too. But too many buyers think that they are out of the home buying league, and that is just not true.

Think homebuyers need 20 percent down or nothing? Think again; many buyers can qualify
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for a 3.5 percent down, FHA loan -- even on a second home!

What You Can Do: Talk to your agent about having a mortgage broker colleague create various loan-option scenarios for your home price: Down payment, closing costs and monthly payment. Keep these handy for prospective buyers or tuck them into the graphic. (Also see: "How to Get a Low Mortgage Rate.")

Even better, boot up a laptop to a home mortgage site like USAA, where prospective homebuyers can type in their own options on the spot. If your buyer is struggling to qualify because of needed structural repairs on the house, offer to chip in to seal the deal. In Texas, most sellers pay for title insurance, which lifts a few more dollars from the buyer's financial burden. (Also see "How to Choose a Real Estate Agent.")

Buyer complaint: I am afraid to buy a foreclosure.

Just when we need to move the glut of foreclosures through the system to get the market healthy, there comes word that banks may not have followed foreclosure processing protocols and may have improperly foreclosed on homes in at least 23 states. Not only do buyers fear buying foreclosures for possible structural damage, now they worry that the sale could end up reversed because of the "robo-foreclosures."

What You Can Do: Scream it out loud: your home is NOT a foreclosure or short sale, especially if it is located in a sea of short sales. You may want to actually print 'Not an REO/Not a Short Sale' on a listing graphic and even on the sign in the front yard.

Buyer complaint: We are waiting to clear the shadow inventory.

Shadow inventory, or homes that are financially troubled short sales or foreclosures but are being held back by the banks, could number 7 million homes. We hear over and over that banks are holding onto this inventory and will release it "eventually" so as to not drown the market. So buyers fear that if they buy now, they won't be getting the best possible deal from the highest possible selection of homes.

What You Can Do: Tell buyers that your home will rise ahead of the competition at any time, in any market. Make sure your home is clean and in pristine shape. Stage and feng shui it. One Dallas agent swears that yellow paint on walls turns off buyers: Maybe you need to paint everything a fresh, neutral white. Make your home stand out among the competition and make it the best value in the 'hood by pricing it well. Sure, more homes may come along, but they will never be as wonderful as this once-in-a-lifetime treasure. (Also see: "Home Staging on a Dime.")

Buyer complaint: The market has not yet bottomed out.

Some buyers still think prices may get lower, and they may be correct. After all, who doesn't want the best possible deal?

What You Can Do: Experts say that even if home prices slide by 5 percent, take into account the whole picture. How much will buyers really save if they wait until home prices drop a point or two? Interest rates or other rates -- taxes, insurance -- could be higher. Create a spreadsheet to compare numbers. As one agent says: I cannot foresee the future, but I can tell you about today. (Also see: "Don't Be Surprised by Costs of Homeownership.")

Buyer (and Seller) Complaint: Everyone's unemployed.

Not everyone. The California unemployment rate is higher than the national average, a whopping 12.8 percent compared to our national rate of 9.6 percent, and it's even lower in other states. But people are afraid to buy homes for fear they could lose their jobs in the future.

What You Can Do: Make a list of the major employers in town, and market your home to and through their human resource gurus. Don't forget major universities who bring in professors -- it's not only the students who need housing. If there are any government agencies nearby, check with them: Government is one employer that seems to be doing all right these days. And never, ever forget Facebook and other social network media.

Buyer complaint: There is absolutely no guaranteethat you can resell my new home tomorrow without taking a hit.

True. And there are no guarantees anywhere in life. What this market has taught us: Whatever goes up up up will come down down down, sometimes with a thud. Americans are starting to learn that buying a home is a solid financial investment over a long period of time, often five to seven years. For people who wish to remain mobile, perhaps renting really is a better option.

However, there are some areas where buying is actually cheaper than renting, places like Las Vegas, Phoenix, El Paso and San Antonio.

For more on home prices and related topics see these AOL Real Estateguides:

More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.
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