More people are beginning the transition from renting to the world of homeownership—and a good agent can help
By Chasity Cooper
Like many sectors, the real estate industry has experienced its own challenges since the coronavirus pandemic began last March.
Social distancing and shelter-in-place orders nationwide brought Americans to the realization that they needed more space for their families, friends and pets to thrive. With low mortgage rates, more people became interested in purchasing homes for the first time—some leaving behind the hustle and bustle of big-city life for quieter and calmer pastures.
Future buyers
Even as the number of homeowners has increased, it hasn’t changed the fact that inventory is still extremely low—even for rental properties. Generally speaking, some real estate professionals choose not to work with renters simply because the financial compensation is lower than. But despite the extra steps that may be required, some REALTORS® believe that working with renters can help potential buyers gain the confidence to one day achieve their slice of the American dream.
In Tucson, Arizona, veteran real estate broker Michael Mulvena, CRS, has worked with a range of clients—from retirees who want a seasonal rental to escape the winter cold of their hometowns to young couples who are looking to build their family’s first home. His brokerage firm, Wildcat Country Real Estate, aims to help customers who are not only selling, buying and building, but also renting. “Right at the very beginning of the process, we always ask every prospective tenant, ‘Are you planning on buying?’” Mulvena says. “If so, we offer them an opportunity to do a deep dive into their finances so that they can get a better understanding of what is possible. We take a look at areas where they can save money and apply that savings to pay off some debt. It may take one to two years, but over time, most will eventually qualify to buy a home.”
According to Apartment List’s January 2021 National Rent Report, the national rent index increased by 0.1% month over month, which represented the first time that rents had seen a boost nationally since August 2020. While many big cities like San Francisco, Chicago and New York City have experienced dips in rent since the start of the pandemic, this rent growth in other areas shows the market is beginning to stabilize.
Brenda Stone, CRS, a real estate agent in Alexandria, Virginia, is used to seeing the real estate market in the Washington, D.C., metro area fluctuate due to the number of military and government employees that are always in and out of the city on assignment.
“In my experience, most tenants don’t know they can use a REALTOR® to help them find a rental home. I know a lot of REALTORS® dismiss working with tenants, but I think that is a mistake,” Stone says. “The whole point of our business is to build relationships. Whether these clients turn into future buyers or great referral sources, they need our expertise as much as anyone else. A lot of tenants don’t know they can negotiate on the terms of the lease or the rental price. Being an advocate for renters shows them your skills, compassion and professionalism, which will translate to future business.”
Staying proactive with communication
When it comes to working with renters, Stone maintains consistent communication, even after she has placed them in a rental property. “Once they move in, they go into my database so they can receive updates from me,” she says. “Then, I’ll check in with them about three months prior to their lease termination. This is when I have a conversation about potentially buying, extending their current lease or other plans they might have.”
Consistent communication may seem overzealous, but it ensures that your services for the client are always top of mind. “I’ve worked with tenants who have expressed a desire to buy a home, but who feel insecure about not having enough money for a down payment,” Mulvena says. “In that event, I’ll refer them to local resources and grants that can help with securing the funds.”
Seeing delays
In Montclair, New Jersey, real estate agent Michele Chiles-Hickman, CRS, says that since the start of the pandemic, rentals haven’t moved as quickly as they have in years past. “This could be due to the fact that people weren’t moving as much because of COVID-19 or the low interest rates on homes turning more renters into buyers, but we still have so many buyers and not enough inventory,” she says. Chiles-Hickman works with a lot of landlords regularly and through the process, learns more about renters’ habits and when it’s the right time to approach them about potentially buying.
“From my experience, the time frame for turning a renter into a buyer could take between two and four years,” she says. “But given the pandemic, we certainly shouldn’t be discouraged if every rental we placed in the last two or three years is not buying this year.”
Stone says that sometimes there isn’t a specific timeline, but it can depend on the client’s financial situation. “For a lot of people, they come to our area and rent because they want to make sure they are going to like their job and the city. After a one-year lease term, they are ready to buy,” she says. “Other clients come to the area thinking it will be a short stay and after a few years, they realize that renting doesn’t make financial sense as their job or family is going to keep them here long term. That is why keeping in touch with them through their lease term is crucial.”
Overall, REALTORS® who work with renters are not only creating a pathway to homeownership for more clients, but they are helping people improve their lives.
“I would just encourage agents to be open to working with renters and to have a system when working with them,” Chiles-Hickman says. “It can take almost as much paperwork as the sale of a house, but we should look at the whole picture and view renters as part of the pipeline of potential homebuyers.”
Turning Renters into Homebuyers
Let them know that it is possible
“I find that many people don’t know that they are close to being in a position to buy,” says Michele Chiles-Hickman, CRS, Montclair, New Jersey. “They’ve heard reports that you must put 20% down, which isn’t always true.” From showing homes in potential neighborhoods to offering resources to assist with a down payment, allowing renters to see the possibility will bring them closer to a dream come true.
Encourage them to budget and save to prepare for the buying process
“When speaking with renters who wish to buy in the future, I have them speak to my lender,” says Brenda Stone, CRS, Alexandria, Virginia. “My lender provides guidance to help put them in the best position for purchasing when they’re ready.” From checking their credit to helping them find any errors on their credit report, a lender should always be the first step in purchasing a home.
Always remain in constant contact with rental clients
There are several ways to remain in touch with clients, even after they have moved into their new homes. “Maintaining good relationships is the key to success in this business,” says Michael Mulvena, CRS, Tucson, Arizona. “Even if your client isn’t ready to purchase a home, they may refer you to someone else who may be ready to take that step.”
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Photo: iStock.com/Cecilie_Arcurs/Gebbi Mur
