When potential buyers ask you for help finding a home, you need to make sure they’re qualified to make the purchase before you start working with them. But prequalifying real estate prospects, which is simply making sure they can get financing if they need it and are serious about buying a home, can usually be done in minutes. This is an essential step when working with a new client.
Prequalifying real estate leads starts with a conversation
According to Stephen Antoni, associate broker of Mott & Chace Sotheby’s International Realty (Charlestown, Rhode Island), the prequalification process usually begins with a casual conversation. The first minute or two of talking to a potential client will usually give you a clear idea of their motivation and the value of your time. A few more minutes will usually give you the client’s financial picture.
“If it’s a couple you’re talking to, you’ll see pretty quickly which one of them takes the lead,” he says. “Ask this person what their timeline is: when they hope to move and how long they have been looking for a new home. Often the kiss of death is if they say they’ve been looking for two or three years. That tells me there’s not a lot of motivation or time pressure.
“You first have to find out what their motivation is. Do they have a timeline? What are they looking for? What can they afford?
Dig deeper to get more information
Obtaining the financial qualification of the client, says Antoni, can be a little more difficult. He notes that the agent will sometimes have to ask personal and intrusive questions. He warns that while some prospects will show up with a pre-approval letter from a lender, as well as tax returns and proof of income in hand, others will simply say, “We should have no trouble getting a loan ; we both have good jobs. That answer, he says, should trigger some apprehension. Many sales agents, he notes, will require a pre-approval letter before letting a potential buyer into the home.
“So one of my first questions will be, ‘Do you have a mortgage or will it be cash? If it’s a mortgage and the prospect hasn’t spoken to a lender yet, that’s our next step: go to a bank and see what products they offer. Your goal, of course, is to get the cheapest money possible with the fewest strings attached, and sometimes you have to walk the customer through that process.
A client’s income will be a big factor in qualifying for a loan, Antoni says, but credit rating is usually more important. If a customer has bad credit, an agent should be able to put them in touch with a credit counselor to get it fixed.
“In that case,” he says, “you might have to tell the client, ‘You’ll have to wait six to 12 months before we can talk about buying a house.’ If the client is starting a new job, the lender may want to wait three to six months. »
Make sure you know all the financing options
A top realtor will make it a point to know the lenders, know the credit counselors, and know all the options, says Antoni. For example, he notes, some lenders specialize in giving mortgages to specific professionals, such as doctors, who may not have great credit but whose income is assured. Officers should make it a point to be aware of these resources.
Agents should also be prepared to offer alternatives if the customer is found to be unable to make a purchase immediately. A potential client may have recently had to short sell a house to get out of an underwater mortgage; in some cases, they may have gone through a foreclosure. Usually, says Antoni, if a family has gone a year without a credit default from a short sale, they’ll be able to get a mortgage, but if they’ve had a foreclosure, it can take three years before they not be considered solvent.
“In that case, he says, you can sometimes find private funding, which will cost a lot more, but you do what you have to do. I might advise a prospect to look into lease-to-own options, which would give them time to get back to normal and establish a new line of credit.
“The best agent has a good working knowledge of the mortgage programs available and how to find them.”
Use a standard questionnaire to pre-screen potential buyers
Many real estate agencies have a standard questionnaire that their agents can use to pre-qualify potential clients. You can also check out this list of questions for prequalified buyers from the National Association of REALTORS®.
First and foremost, make sure the questions you ask a prospect during the prequalification process are legal and don’t violate fair housing laws. A crucial guideline is Section 10 of the National Association of Realtors® Code of Ethics and Standards of Practice, which states: “Realtors® shall not withhold equal professional services from any person for reasons race, color, religion, sex, disability, marital status, national origin, sexual orientation or gender identity REALTORS® shall not be a party to any plan or agreement to discriminate against any person or persons on the basis of race, color, religion, sex, disability, marital status, national origin, sexual orientation or gender identity.” (In practice , this not only means you can’t decline service for the reasons above, it also means you can’t direct a buyer to or away from a certain neighborhood or type of property.)
As Antoni advises, an agent will want to know during the prequalification process if the prospect is financially responsible, if they really want to buy a home, and if they will behave reasonably. As they gain experience, agents will encounter clients here and there who will become part of their “clients from hell” repertoire – but asking the right questions will weed out most of them.
“There is no substitute for experience,” says Ruth Kennedy Sudduth, executive vice president and director of the residential brokerage division of Boston-based LandVest Christie’s International Real Estate. “Because we focus on special properties across New England and the Adirondacks, most of the people we work with are ‘known’, fairly easy to find on your search engine. If they appear to be trustworthy, that’s no guarantee of their sincerity or their sanity, but it’s a start. Our culture as a company is such that a member of our team is likely to know, or know, most buyers. »
The importance of having good credit
As for creditworthiness, Sudduth says, that’s rarely an issue at the high end, where purchases are often made in cash. But if a question arises about a prospect’s creditworthiness, “Usually we’re pretty straightforward and ask for a letter from a reputable third party stating that the person has access to sufficient resources to close.” In any case, adds Sudduth, sellers always have the right to choose not to accept an offer based on insufficient financial capacity.
Blair Myers, associate broker and team leader at Blair Myers (Warner Robins, GA), who often represents sellers, notes that agents differ in the requirements they set for the buyers they work with. It doesn’t need a pre-approval letter from a lender before a prospect can view any of its listings.
“I consider it my duty to show my sellers’ homes to anyone who might be interested,” he says. “However, if you are in a more expensive market and/or represent an exclusive clientele such as celebrities, I can see the need for a more extensive screening process.
“I work with a variety of lenders, so I can connect buyers with lenders who offer exceptional financing opportunities for qualified individuals, as well as other options for those who have nicks on their credit or who don’t don’t have substantial financial means. Sometimes I suggest that they take the time to work on their financial situation or think about what they want in a new home before they start their search.
Find out what is behind your customer’s desire to buy
Myers suggests that the first question to ask a potential buyer is, “What motivates you to buy now?” Once an agent knows what is driving the decision, it is easier to develop a customer-specific service model.
“When it comes to how much they can afford,” advises Myers, “I tell people to focus on the monthly payment, more than the amount financed. Sometimes people are too concerned about the total amount they can afford. ‘they finance or by the sale price, but it’s more important to ask yourself if you can live with the monthly payment.
“Is it two or three times what you pay in rent?” Even if you can afford it on paper, think about how the monthly payment will affect your lifestyle, such as dining out, fashion, shoes, travel. If your lifestyle involves big expenses in these areas, you may find it difficult to cut back on your expenses to buy a house.
Myers also agrees with Antoni that one of the key pieces of information to learn early on, if you’re working with a couple, is who the ultimate decision maker is. This, he says, requires strong people-reading skills.
“The decision maker usually comes out pretty quickly, and it’s not always the one you can assume,” he warns. “Even if a person isn’t as vocal, they can be the key to closing the sale.”
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