Mortgage Brokers Focus on Second Home Buyers, Baby Boomers
Disposable income and significant assets, including access to lots of cash, characterize high-end and second-home buyers, who are generally unfazed by the ups and downs of mortgage interest rates or real estate prices.
In 2005, second home purchases accounted for 40% of all sales, according to the National Association of Realtors, a number that was expected to dip last year as investors/flippers backed off. However, as Baby Boomers continue their inexorable march towards retirement, there remains enough wealth to keep the high-end, second home industry perking rather than peaking.
Strategies for reaching these asset-rich buyers vary widely, from heavy use of the Internet - with sophisticated websites providing virtual tours of luxury properties - to word-of-mouth referrals arising from home mortgage brokers‘ personal spheres of influence.
Location is also a key factor in how properties are marketed, and to whom. Resort and vacation areas tend to attract second home buyers who don’t need to be near jobs and schools, key concerns for younger homeowners. Those buying second or soon-to-be retirement homes like to be within driving range of children and grandchildren, but not too close to them.
“The bottom line is that the high-end, second-home buyer is looking for a gathering place for the extended family and a central location, because all the kids are grown up and scattered around,” says Debra Savage, who relies largely on referrals to sell homes at Deep Creek Lake in the Maryland housing market, a four-season mountain lake resort area within a three-hour drive of 23 million people.
When these Baby Boomers reach retirement, they sometimes sell their house in the suburbs and move up to a larger condo in town. Typically, these buyers are doctors, lawyers and financial company executives - and they use the Internet to find what they want.
Michael Saunders & Company, based in the Sarasota housing market places a high premium on Internet marketing. In an average week, according to Alexa.com, traffic to the high-end firm’s website was 15 times higher than to Coldwell Banker’s Florida site, 65 times higher than Prudential Palms, 142 times higher than Premier Properties and 900 times higher than RE/MAX Properties Sarasota.
“It’s our biggest focus,” says Tom Heatherman, a company spokesman. “As your income goes up, the likelihood you’ll use the Internet also goes up. When you go to our website and you are a high-end buyer, you can click on videos we’ve purchased and take a virtual tour of some of our priciest listings.”
Many of Saunders’ buyers are looking not just for second but for third homes. “You’ve probably heard about the bubble bursting in Florida, but it’s the high-end, $3 million and above, that’s really held up,” says Heatherman.
While special mortgage financing programs may attract first-time home buyers - and brokers marketing to them may promote their firm’s subsidiary financial services - obtaining a mortgage at a good home loan rate is often not an issue for high-end and second-home buyers.
There are, however, other services that high-end buyers have come to expect. Sellers of such properties “get specific higher-end expanded advertising,” says Lynn Kosner, who manages Baird & Warner’s North Suburban office. “The property gets on two or three extra websites,” such as luxuryportfolio.com and Baird & Warner’s special luxury home site, which also links to properties in other “luxury destinations.”
The method of payment also distinguishes the high-end market. “They are what we mostly consider cash buyers,” Kosner says. “They very rarely add a mortgage contingency to their offers. They usually don’t need to qualify for a mortgage.”
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