October 16th, 2014 7:24 PM by Eileen Denhard
Generation Y, also called the millennials, includes more than 80 million Americans born roughly between the early 1980s and the early 2000s. It’s a resilient group, having toughed it out through Sept. 11, two U.S. wars, the housing boom, the Great Recession and spiraling college costs that left them in history-making debt.
Despite an adolescence beleaguered with political, social and economic challenges, this demographic, which is larger than any other current generation, remains optimistic about America’s future. A Pew Research survey reports that 49 percent of Generation Y say the country’s best years lie ahead. And these 14- to 34-year-olds are certainly flexing their muscles to improve America’s economic recovery. Cam Marston, president of Generational Insights and author of Generational Selling Tactics, estimates their annual spending at nearly $1.5 trillion. According to the U.S. Bureau of Labor Statistics, Gen Y’s buying power is only going to increase, with millennials expected to represent more than 40 percent of the U.S. workforce by 2020 — which includes well-paid C-level positions.
Real estate agents looking to build profitable relationships with this dynamic generation should start by understanding what makes Gen Y tick and which sales approaches are most likely to generate a positive response.
Many from Gen Y typically transitioned from adolescence to adulthood at older ages than previous generations, which means they wait longer to achieve adulthood markers, such as careers, home-buying, starting a family and financial independence. The reasons, Marston explains, center around America’s struggling economy and unstable employment. “By the time they decide to buy a home, they lack the financial literacy that baby boomers and Generation X had at the same age,” Marston stresses. “So Gen Y needs their real estate agent to fill in the gaps and be their trusted guide.”
Gen Y goes by multiple names.
To build this trust, agents have to put away their awards and focus on what they can do for the Gen Y buyer. “What we know is that millennials are interested in how you can positively impact their future. They don’t care about how many homes you’ve sold or awards you’ve won. That’s history,” Marston says.
Alex Milshteyn, CRS, with Howard Hanna Real Estate Services in Ann Arbor, Michigan, agrees. His first meeting with every Gen Y client begins with him explaining that he doesn’t sell houses; he’s a real estate consultant. “I promise to educate the client, keep them in the process, encourage questions and help them invest their money wisely.”
Milshteyn’s education process begins by having the client preapproved, which sets the housing budget. Next he pulls that budget into the real world by studying the client’s debt-to-income ratio. “Many from Gen Y are saddled with college debt, so I ask them up front if they have the resources to maintain a home. If the furnace breaks two months after ownership, which could cost around $3,000 to replace, will they be able to afford that? When the answer is no, we talk to the lender about putting less down and keeping more in the bank. Or I might say this is not the best time to buy.”
If timing isn’t right, Milshteyn helps the client create a financial plan. “We figure out how long it will take to save a cushion for home maintenance — say $5,000 — and I put that date in my calendar. That’s when I call the client, and we pick up where we left off.”
It’s no secret that Generation Y is connected 24/7, so agents who wait an hour to get back to these folks won’t earn their business. Rule number one, says Brian Copeland, CRS, with Village Real Estate Services in Nashville, Tennessee, is to respond quickly and briefly. “Gen Y hates voice messages. In fact, about 25 percent of my Gen Y clients haven’t set up their voice mail. So if you must leave a message, keep it short. Better yet, text.”
The same holds true for meetings. Keep these confabs brief and on topic.
It’s not that Gen Yer’s are in a hurry, says Cam Marston, president of Generational Insights and author of Generational Selling Tactics. “It’s more that they believe every transaction should be as quick and painless as buying something from Amazon or iTunes.”
As for digital presence, you need a current, informative and accessible website along with active social media status. However, Copeland says, “There’s no need to be obsessed about Facebook or Twitter.” Gen Yers rely on social media sites for feedback from their peers but not necessarily their REALTOR®. Although, Copeland adds, hopping on to a client’s Facebook page may offer insight into which neighborhoods are favored and thus which locations your client will want to investigate next.
As her client’s real estate adviser, Maura Neill, CRS, with RE/MAX Around Atlanta in Atlanta, believes that a big part of her job is teaching potential buyers how to use home evaluation sites. “This generation grew up with the Internet, and they have their hands on all of this online information,” Neill says. “During our first consultation I point out that many housing sites are great tools, but they are also filled with inaccurate information. These sites will never be as valuable as the market analyses I prepare.”
For example, Neill explains, sites like Zillow base home values on computer-generated algorithms, which come with high error margins. “When I assess a home’s value, I do it as an appraiser would,” Neill says. “So, Zillow might value a home’s worth at $260,000, but my appraisal, based on current numbers, puts its value at $290,000. If a home is listed at $300,000, my assessment makes the property much more obtainable from a negotiation standpoint.”
It’s these sorts of insights that put Emily and Anthony Ianiro, 28 and 27 respectively, at ease as the couple worked with Neill to find their first home. “We always felt that Maura had our best interest at heart,” Anthony recalls. “If we asked to see a home that was outside the area we wanted, she’d tell us straight out, ‘Don’t make too many sacrifices and buy just to buy.’ We appreciated that honesty.”
The Ianiros also felt safe during final negotiations, with Neill on their team instead of a real estate agent just hanging around for the commission. “It was a great feeling to know that we came first on Maura’s priority list.”
Once the Gen Y buyer begins scoping out potential homes, Brian Copeland, CRS, with Village Real Estate Services in Nashville, Tennessee, says the education process remains paramount. “By the time we enter a home, the Gen Yer has done the online research. So I can’t sell them closet space; I have to dig deeper. For example, I might know through experience that a neighborhood has a history of wet basements. Or when a buyer sees a second upstairs A/C system as a plus, I make sure they understand that it can only cool that level based on a maximum 20 percent differential; so if it’s 106 degrees outside, it will be 86 degrees upstairs. This data won’t show up on online real estate sites.”
Brian O’Connor, 28, and his partner, Brian Long, 34, teamed up with Copeland to find their current home in Hermitage, Tennessee, and the couple found their agent’s access to information not only to the point, but also expeditious. “In my world, it’s all about social media and apps. But at the end of the day, Brian’s experience took us to another level,” O’Connor says. “It took Brian minutes to give us feedback on different properties — the same information that would have taken me days to find on an app or through social media.”
And that feedback, O’Connor stresses, always keyed into the couple’s specified needs. “It’s much easier to tell someone what you think they need, rather than really listen to what a buyer says. Brian gets that,” O’Connor says. “When he advised us, it was always in sync with what we needed, which made working with Brian very personable.”
By listening closely to what clients tell him, Copeland also learned that millennials tend to be more environmentally conscious, a fact supported by a Pew Research survey that found Gen Yers more in favor of stricter environmental laws, more likely to attribute global warming to human activity and more likely to favor environmentally friendly policies such as green energy development and tax incentives for hybrid vehicles. So to reinforce his status as an expert who caters to Gen Y’s concerns, Copeland’s agency offers potential buyers a home energy audit for a small fee. “I would have never done that 10 years ago,” Copeland says.
“Generation Y is what I call a pack animal, in that they find great comfort being in a bigger group,” Marston points out. “So real estate agents who want to successfully engage Gen Y buyers might suggest inviting a few friends along to look at properties. The group becomes a sales tool for the agent. And don’t be surprised if the group shows up.”
Philip Becker, CRS, with Becker Properties in San Antonio, has seen firsthand an increase in Gen Y’s friends participating in the home buying process — both in person and online. “For these folks, looking at properties is a social process, and that includes social media posts,” Becker says. “Unlike older generations, millennials are particularly interested in knowing what friends think about a location.”
Location, Becker says, is less about neighborhood status and more about being close to the client’s preferred restaurants, dry cleaner and, of course, the “group’s” favorite hangouts. “Walkability is a big deal. How close am I to the services I use on a daily basis? Another Gen Y difference is that these services or entertainment venues aren’t malls or grocery chains. They want to be near the farmers market, urban gardens and locally sourced restaurants. It’s a different mentality, and addressing these priorities is important when selling to Gen Y.”
In addition, the most desirable locations are often in neighborhoods where homes have ample backyards. “Going back to the fact that Generation Y is very social, they look forward to entertaining,” says Becker. “So before talking about the kitchen or bedrooms, I go straight to the back of the house, with its deck and great space for barbecues.”
Location is also about resale value, since many of today’s Gen Y homebuyers are purchasing their “starter home” and need to feel comfortable about future plans. When Nathan and Crystall Ryder, 27 and 30 respectively, started working with Becker, combing the San Antonio area for their first home, this point stayed front and center. “Philip’s knowledge about different locations was unbelievable,” Nathan says. “He would take us to see a property and he knew about the home’s original builder, the builder’s reputation and if there were any neighborhood issues — even rumors of issues. These things were important to us because of resale potential. We love our home, but we may move someday — who knows.”
Keeping one eye on today and one eye on the future, Becker helped the Ryders find a “great home in a great location with great resale potential,” Nathan says. “Everyone told us that signing the final papers would be so nerve wracking, but for us, we felt very comfortable — no anxiety at all.”
Between Generation Y’s belief that America’s best years are around the corner and the nation’s slow but steady economic recovery, Becker sees millennials increasingly interested in buying homes. “When we look back to 2008, this generation was afraid to spend money. If Gen Yers were looking to buy, they worried about down-payment requirements and wanted to roll in closing costs. Now they’re not only making the down-payment requirements but also willing to pay closing costs. In some instances, they’re paying more to get the property they want in the location they desire. They’re feeling more secure, probably in anticipation of their careers growing and the higher salaries that come with those promotions.”
Or, maybe these traditionally late bloomers are transitioning from adolescence to adulthood and stepping confidently into the future, which wouldn’t be out of character. After all, a striking Gen Y trait is that they believe there’s no limit to what they can achieve.