Buyer Education: Counseling Homebuyers to Succeed

Real estate pros who introduce their customers to homebuyer counseling benefit financially--and personally.

April 1, 2002

By directing just one low- or moderate-income household each month to a homebuyer education program, Steven Maples adds about $30,000 to his yearly income. That’s because those people usually buy a home through Maples once they complete their education program.

A sales associate with Windermere Real Estate in Bellevue, Wash., Maples says that in a market where a modest home sells for $339,000, such programs are invaluable.

In fact, many of the people with whom Maples works couldn’t achieve their dream of homeownership without the doors that counseling programs open for them.

“Housing costs here are so high that these programs are extremely beneficial for the moderate income family,” says Maples. “The programs help them get over the hump and into a home--either one that they couldn’t otherwise qualify for or one that better suits their needs.”

Maples is one of a growing number of real estate professionals whose business is expanding along with the ranks of first-time buyers. And these practitioners are increasingly relying on counseling programs to help make homeownership possible for low- and moderate-income buyers.

A lack of knowledge about counseling programs in your area can result in lost business for you, and a dashed dream for some customers. Some of Maples customers went to other practitioners first. But those practitioners couldn’t help them because they didn’t have knowledge of and access to different programs, Maples recalls.

“In addition to knowing about counseling programs, it’s important for you to shepherd buyers through the process--especially as the country’s homebuyers become more diverse,” says Maples. “I can usually help buyers find a home and get their financing and downpayment assistance lined up.”

The Counseling Curriculum

“In recent years, I’ve seen more consumers pursue homeownership, and at an earlier age,” says Jude Brennan, owner of Mary Carpenter Brennan Inc., in Somers, Conn., and past chair of the NATIONAL ASSOCIATION OF REALTORS®’ Housing Needs Committee. “This has led to a need not only for homebuyer education, but also for overall financial counseling. Buying a first home is an awesome experience, but it’s really only the beginning of an extended financial commitment.”

For that reason, homebuyer education programs go beyond just showing consumers how to get a mortgage. The programs, which take anywhere from a few hours to several months to complete, also teach prospective buyers how much house they need, how much they can afford, and whether they’re ready to buy.

Qualified instructors educate consumers about the people involved in the homebuying process, including the salesperson, lender, mortgage insurer, and appraiser, and what their respective roles are. The programs also teach buyers how to shop for a house, make an offer, as well as introduce them to the financial obligations that are at the foundation of successful homeownership.

Counseling in the Real World

For 23 years, Ruben M. Peña, sales manager with Wakefield, REALTORS®, in San Antonio, Texas, has worked to get low- to very-low-income families into homes. In fact, his average home sale price is usually under $50,000. The closing process for his buyers is slower than the typical home sale--Pena calls it his “layaway plan”--lasting six months or more. Pena is a member of the NAR Conventional Finance and Lending Committee.

“I don’t write a deal until my customers have finished the counseling, raised enough money, and are comfortable with the process,” says Peña. “By the time they get their program certificate and we look at homes, I have a qualified buyer. Once we find the right home everything else falls into place within 30 days.”

Peña directs most of his buyer customers to a local Consumer Credit Counseling agency, which offers its program in English and Spanish--a plus for the salesperson who works primarily with Spanish-speaking clients.

Recently, Peña helped a single, Hispanic mother earning little more than minimum wage purchase her first home. Initially in the United States on a work visa, she became a citizen and was referred to Peña by her manager at work. Lacking any credit history, she attended a homebuyer seminar, qualified for downpayment assistance with a local agency, and learned about financial management and budgeting from a counseling center. The process, which included several group sessions, took about six months and resulted in a sale for Peña and a new home for his client.

Carole Holcberg, president of Holcberg Ltd. Real Estate in Buffalo, N.Y., cites a similar experience using a homebuyer education program. When she prequalified a client through the bank, the person’s credit problems surfaced. So Holcberg recommended the person attend a local Homebuyer’s Club. Six months later the credit problems were corrected and the client, having taken advantage of the time, had saved $2,500. Local nonprofit homebuyer program participants matched that amount, enabling her to close the deal.

“We wound up finding her a nice HUD house in a nice neighborhood for $19,000,” says Holcberg. Her chances of getting the home without the program? “Probably nil,” she says.

Making that First Call

A quick search of the Internet or a call to your local board of REALTORS® will help you identify a number of homebuyer education and counseling programs in your region. Typically run by private nonprofit or for-profit entities, these programs usually target the low- to middle-income first-time homebuyer who’s dealing with credit problems, lack of savings, or inexperience with the homebuying process. The programs are usually free, though some charge a fee to cover workbooks and administrative costs.

One group that has helped more than 50,000 homebuyers in central California over the last decade is Home Loan Counseling Center of Sacramento. With the first-time homebuyer in mind, the group’s mission is to help buyers understand the mound of information such as loan applications and credit checks that they will be forced to wade through when buying a home.

“Our goal is to help homebuyers feel comfortable dealing with the various professionals they’ll work with in the process,” says Jayna Bower, the group’s executive director, adding that the group, which also helps homeowners find downpayment assistance, works primarily with underserved communities and those with a high concentration of ethnic residents.

HLCC’s process involves three group sessions that cover the buying process, credit and money management, and responsible homeownership. The three courses take about eight hours total to complete. The courses are free, but there are nominal charges to cover workbooks. Homebuyers receive a certificate of completion after each course.

Industry-wide Standards

Are all counseling programs the same? No. But the counseling industry has become more professional and the curriculum that providers teach has become more uniform since the American Homeowner Education and Counseling Training Institute launched a half dozen years ago. The Washington, D.C.-based organization was launched by real estate groups about half a dozen years ago to train the trainers using a program developed by a wide range of players in the homeownership industry. The organization also conducts consumer outreach to promote the use of counseling agencies with professionally trained educators.

“The majority of home education providers don’t have the resources to develop their own complete curriculum,” says Karen Hill, the training institute’s former chief executive. “We’ve created a four-day training program for educators that uses a core curriculum, an exam, and a certification program that identifies the participant as a housing counselor.”

Such nationwide standards--often transparent to the real estate practitioner and homebuyer--are important, says Hill, because consumers are bombarded daily by media messages that make decisions like car and homebuying seem simple. “We let consumers know there’s a place to go for high-quality information,” she says, “before they sign on the dotted line.”

A Different Approach

Carlos Garcia, a broker-associate with The Keyes Co., in Miami, prefers not to send buyers to education programs. Instead, he attends classes on lending, for instance, and translates the knowledge into “plain Spanish” for his customers.

Garcia walks his clients through the entire process--from selecting the property to finding the right lender to obtaining letters of credit from their banks back home. “By providing the information and effectively guiding the homebuyer through the process,” he says, “I maintain control of the transaction from start to finish.”

And that control takes on new significance in an increasingly diverse marketplace. So make sure that the next homebuyer who walks through your door gets counseled, not frustrated.

Take that First Step

Interested in locating local homebuyer education resources? Start with the Web site hosted by the American Homeowner Education and Counseling Training Institute, where you’ll find information on the group’s 1,000 accredited counseling entities.

The U.S. Department of Housing and Urban Development also has a list of approved counseling entities, about 1,700-strong. At the site’s home page, click on “Talk to a housing counselor.”

Another good resource is your board of REALTORS®. See what the Rhode Island Association of REALTORS®, in Warwick, has done. Its Community Awareness in Real Estate homebuyer program enables its members to complete 27 hours of classroom education on diversity, fair housing, finance, and using Spanish in real estate transactions. To see a sample class, visit Rhode Island Living, click on “Real Estate Classes,” then scroll down to “Finance CARE.”

Other Resources

Neighborhood Reinvestment Corporation
The organization offers homebuyer counselor training as part of its Training Institute. For more information, contact NRC at 1325 G Street NW, Suite 800, Washington, D.C. 20005-3100, 800/438-5547.

State Housing Finance Agencies
These agencies are the principal way states make below-market home mortgage financing available to low- and moderate-income households. Many also provide downpayment assistance. The agencies typically require borrowers to participate in homeownership counseling as a condition of receiving assistance. To find the agency in your state, contact the National Council of State Housing Agencies, 444 N. Capitol St. NW, Suite 438, Washington, D.C. 20001, 202/624-7710, or visit the National Council of State Housing Agencies.

The Housing Assistance Counsel
A non-profit corporation, HAC offers training and technical assistance to organizations that serve rural America. For more information, contact HAC at 1025 Vermont Ave., NW, Suite 606, Washington, D.C. 20005, 202/842-8600.

The National Foundation for Credit Counseling
This network of 1,300 local nonprofit organizations is the nation's oldest and largest non-profit organization dedicated to budget and credit education and counseling. NFCC-affiliated counseling offices offer free or low-cost services throughout the United States. To locate the closest NFCC member office, call 800/ 388-2227.

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