Training Tip #6: Working Buyers 101
In a buyer's Market, nothing is more valuable than a ready, willing and able (you guessed it) buyer. Buyers can bring you more income in a very short amount of time. But if you get involved with the "wrong" type of buyer, or if you do a poor job of managing a great buyer, you can end up with a huge amount of time invested ... and no sale.
So what should you (ideally) be looking for from a buyer?
Here's a simple 4 item Buyer Checklist to see if you have a bona-fide buyer, or just someone who likes to drive around and look at houses.
1- You want a buyer that is actually able to buy.
2- You want someone who is motivated to buy.
3- You want a buyer that is loyal to you.
4- You want a buyer who is ready to buy.
Now some people would say that ready, willing and able are absolute requirements, and that you shouldn't spend 10 seconds with someone who doesn't meet all those requirements. Of course, like just about everything else in life there can be mitigating circumstances. Sometimes, you can spend some time helping someone who is not quite able to buy right now who might be worth your while. For example, you might want to work with a College Student that will be receiving their first real job when they graduate in 90 days. They can't buy today, but they might be worth your time if they're loyal AND motivated.
What about someone who has a house for sale up north or down in South Florida and can't buy right now? Again, if they are motivated to move here, it might be worthwhile to take them on. Who knows, if they find a house that REALLY knocks them out, they might be able to FIND a good down payment that will let them buy now and sell their other house afterwards. You'll never know until you find the perfect house, will you?
Another possibility we've seen is where we're able to find a house that the buyer really likes for less than they expected to spend, and then they go back home and lower their existing home price and get a buyer quickly. Sometimes these folks are pricing their existing home based on the price differential that they're expecting to pay. Again, you'd never know this if you didn't find the perfect house that makes them re-evaluate.
What about the buyer who is able to buy whatever they want, and tells you they're ready to be right NOW... if they get the right deal. We see a lot of these folks in a buyer's market.
Got the money. Check. Ready to buy. Check. Motivated to buy? Not so much. Loyal to you? Hmmm, good question.
If you are falling short in one or more of the 4 buyer requirements above, you need to start asking questions of your buyer. For example, with Mr. Investor above, it would be good to sit him down and have a little chat. Give him a presentation. Sell yourself.
After selling yourself, it would be a good time to go through the Buyer Checklist.
#1- ABILITY TO BUY- Mr. Buyer, how are you going to pay for this property when we find the great deal you're looking for? If he says he's financing, ask him if he has a recent pre-qualification letter. Tell him about your go to guy lender and ask him if he'd be willing to "go over current programs" with the lender on the phone. Dial up the lender and put him on the phone right now and excuse yourself. If he says he's paying cash you need to ask him "what kind" of cash are we talking about? Cash in a savings account, cash in a CD that he needs to wait to withdraw, or are we talking about cash from a lawsuit settlement or estate that he thinks he's going to get soon, or are we talking about "cash" that isn't cash at all? We've had people put in "cash contracts" that were turned down for financing! They thought it was OK to say they were paying cash because it was "cash to the seller!" If it is "cash" you have to ask questions, and let Mr. Investor know that the seller will want "proof of funds", as in proof that you have the cash in hand, or proof that you will be able to do so. A faxed letter from XYZ Funding Group that says "Mr. Investor is a member in good standing with the XYZ Group and is capable of buying property up to a value of $xxx,000" is not proof of funds.
If Mr. Investor doesn't have a pre-approval, and won't talk to your lender or just says trust me on the cash you seriously have to consider your options.
#2- MOTIVATION TO BUY- If your buyer is looking for a great deal that's good, you really wouldn't want to sell an overpriced property to someone would you? But- it is important for you to ask them to define the kind of deal that they consider to be worth buying. If homes of the type that your buyer is looking for are selling for $250,000 to $275,000 and he is only willing to spend $200,000 (again) you have to consider your options. Do the math. We've found that using the County Appraiser's Valuations is a great way to get a quick, easily understood handle on what constitutes a good deal. If your guy wants to look at pool homes with 4 bedrooms in Viera and they seem to be going for $250,000 to $275,000 print out all the comps that have closed in the last 6 months or the last 10-12 of them. Print out the Full Display with Tax record and compare the Sale (not asking) price to the county Valuation number. You will typically see a pretty clear pattern or range of sale price/valuation. If the most any of the comps sold for was 110% of the county Value and the least is 80% of the county Number and your buyer only wants to pay 60% of the county number you need to confront him with this reality.
He either needs to raise his sights a little to something that is at least plausible, or you need to figure out what is thinking is. We've had buyer prospects that were convinced that the market will drop another 30% in value and wanted to buy NOW with the seller's discounting the property to about 50% of current value to cover their worldview. Sorry, folks that's not a realistic expectation, and it's not a "buyer" you should be spending your time with unless you can change their mind real quick.
#3- LOYALTY- Loyalty is easy to explain, easy to understand and critical to any buyer/agent relationship. You should always ask any prospect right up front, "are you working with a Realtor yet?" Their answer will tell you a lot. If they say "No" formulate a game plan to make them loyal top you. This involves you proving that you will make it easier for them to find the deal they're looking for. You have to prove that you bring value to the proposition; otherwise they feel you're just following them around. If you have come across a buyer prospect that refuses to be loyal to you, you have to seriously consider saying goodbye. It's just not worth it, if they refuse to even consider being loyal to you that means that they do not value your ability to add value to the process, which means they don't respect you which means...
#4- READY TO BUY- A buyer who is ready to buy is someone who is willing to write a reasonable offer when they find the right house. A buyer who is unready, unwilling or unable to write a contract today is not a buyer.
Now- what does this all mean? It means you need to evaluate the viability of every prospect that you want to consider a buyer. In other words you have to find out if they are ready, willing, and able and will consider being loyal if you prove yourself to them. That doesn't mean they have to score 100% on all counts. Those buyers are too rare to rely upon. Rate them on the 4 Checklist Items and make a decision. Should you only consider the 4 Items? No.
You have to consider some other intangible too. Are they nice? Polite? Do they need your help? Will they appreciate it? Will they perhaps refer other clients? What’s the price range? How far away is their area of interest?
If someone is nice, and they want to look at a house that's 2 minutes from the office the other 3 Items aren't that big a deal are they?
Weigh your options, rank your buyers and guard your time.