Three Questions to Ask
One of the last hurdles for would-be Sellers and their agents to surmount before signing a listing contract often is how to handle prospects who’ve already expressed interest in the home.
Sometimes, what appears to be very serious interest.
The conversation usually goes something like this:
Homeowner: “My neighbor’s daughter/son-in-law’s best friend/accountant’s brother told me they want to buy my house. Will you reduce your commission if they do?”
Realtor: “Terrific! I’d be happy to negotiate a discount if that happens. But . . . tell me a little more first.”
Qualifying Prospective Buyers
Invariably, the “Tell me a little more” comes down to asking these three questions:
One. Has the prospective Buyer seen the home yet?
As I like to tell Sellers whose homes are already on the market, empirically, the odds of any one showing leading to a consummated sale are less than 10%.
That’s because the prospective Buyer doesn’t like the floor plan, wants a bigger Kitchen, smaller (or bigger) yard, more/fewer Bathrooms, or a thousand other reasons.
Or no reason.
Buyer Showing Feedback: Home “Just Not a Good Fit”
Sometimes — OK, lots of times — Buyers pass on a home “just because.”
And that ≤ 10% success rate is when the prospective Buyer has already seen photos of the home on MLS; is working with an agent who’s presumably put them in touch with a lender who’s financially qualified them (see below); and already knows the market.
Minus those things, the odds of someone buying a home sight unseen are . . . significantly less.
Two. Have the Buyer and Seller agreed on a price?
Often times, the issue of price hasn’t even come up yet.
Or, if it has, only a loose (and very broad) range has been discussed.
If instead the Buyer and Seller do have a concrete, agreed-upon price, the $64,000 question then becomes . . .
Three. Can the Buyer afford that price? (and, it goes without saying, in the reasonably near future, and without having to do something first — like sell their current home).
Unless the Buyer intends to pay cash (unlikely), they’ll need a mortgage.
Which means a lender will need to vet the Buyer’s finances, credit history, available funds for downpayment and closing costs, etc.
Step #2: for someone representing the Seller’s interests to vet the Buyer’s lender.
Unlike refinancing, a purchase money mortgage is extremely time-sensitive; if the lender (online and/or out-of-state) botches the closing, the deal is in serious jeopardy (to say the least).
Ditto for the lender being able to order a local appraisal, and complete underwriting in a timely fashion.
Other Stumbling Blocks
Even when the answer to all three of the above questions is an unqualified “yes,” there are still other steps between an initial expression of Buyer interest and a closed deal.
Things like the state-required Seller disclosure; the municipal point-of-sale inspection (if applicable); the Buyer’s inspection and navigating any issues that arise from it; getting from an essentially meaningless lender Pre-approval Letter to a firm underwriting commitment (including getting past the appraisal); and arranging for title work, walk-through inspection, and closing (smooth, one hopes).
For all those reasons, the attrition rate between “I know someone who wants to buy my house” and a completed deal is surprisingly high.
