Selling Soulfully with Jennifer Allan

Jennnifer I agree with you.  I don't usually require the pre-approval letter, but I do get a sense of where the client is credit and income wise; I also suggest that they begin conversations with a couple of lenders so that when we find the right home there won't be a delay in getting the deal done.

Jennifer, I do work under a BBA and I do make sure buyers are qualified BUT both of these things have to be presented at the proper time. And that time is after we have built a level of trust. Meeting with a buyer and showing them a few properties should be adequate time to build trust and to establish whether working with these folks is something that you want and they want.

Trying to get a BBA signed prior to building trust is like walking into a listing presentation and just whipping out an agreement and asking for a signature BEFORE you'll do your presentation. It's foolishness.

Trust, timing, presentation. It's not difficult.

Jennifer I happen to know I have the best buyers in Washtenaw county Michigan, so I feel pretty good about my business and my clients.  I always wonder about agents who make those comments.  My clients become buyers with me because of my attitude, I think.

Hi Jennifer,  we don't require a 'pre approval'...but we do have a few listing clients that will not confirm a showing appointment until THEY see a qualification letter.

Desire to buy is great Jennifer.  But taking a client all over creation and learning along the way financial constraints and limitations really wastes everyone's time.  When a seller says "How did they like it?" You utter "They loved it  but can not afford it and it does not fit the program they now know they qualify for."  Just wanting a home and "we'll find a way to buy it" unless mom and dad step in, or the 200 credit score improves overnight  is not enough.  Pre-qualfying if in everyone's interest because unless they are paying cash, they are ending up at a bank or mortgage firm unless owner financing is an option with custom made payments/down payment arrangements.  I find the folks that resist qualifying and don't appreciate or see the need, are the ones uset later when the banker points out they are not qualified to buy this price range of home.  A broker starts with a few good questions. Most buyers are glad you take the time to help them figure out the financing because they are going to end up at a bank before it is all said and done.  They want to buy real estate...not just look at it right?

Hey Jen,

I am with you 100%, to pre-qualify someone by their desire to sign a contract or get the financing in perfect order is turning people away.

A home purchase is an emotional event, to show someone some homes sometimes is the catalyst to get them emotional about the purchase and get them on to the next steps.

In a market where 20 hours a day is not enough to service your pre-qualified clients then one must institute procedures to maximize their effectiveness to the bottom line, but in today's market I would rather be talking to someone than not.

Take care!

RJH

Jennifer,

Thanks for the post. In my 26 years of experience, I have found it to be prudent to ensure that the buyer understands and is prepared for the process. Most have no clue as to what they are qualified to buy. They lack insight into the mortgage lending process and what is required and expected of them. Budgeting is a very basic principle when it comes to purchasing anything. I want my customers to be pre-approved. I then know that they have had a dialog with a lender and that they have a sense of what is needed from them in both comprehension and documentation. Most disgruntled buyers complain about not being informed and not being directed properly, both of which leads to stressful encounters and unpleasant situations. I have not been accused of failing on either front. I have been known to tell people that they aren't prepared. Unfortunately some of those same people where thrown in a car by an agent who heard their cry to own real estate, shown property, turned over to slick Jim for financing and now they have a foreclosure on the credit. Was it worth, I bet they would tell you no, that they were not prepared, educated or informed.

My customers and clients, knwo that I am their Realtor for life, not just the immediate tranasaction and that I work in their best interest.

I have never had a customer foreclosed upon until this year and in both cases, it was do to drastic changes in the household income, after owning the homes for more than six years in each case.

Do you customers a favor and ensure that they have what they need to make for a successful transaction and experience, start out with a pre-qualification, better yet a pre-approval.

Andrew - I guess I've just been lucky thru the years because I literally cannot think of one time this scenario has played out in my world. Oh, sure, when the mortgage market crashes overnight or interest rates jump up 1/2%, my buyer may reduce his price range or have to wait, but in general, I find that buyers are pretty upfront and even knowledgeable about what they'll qualify for. If a buyer REFUSES to speak with a lender - well, that's a whole different animal, but again, it's never happened to me. Law of Attraction in Action?

Kara - is that typical in your market? If my seller requested this of me, I'd gently steer them away from this requirement. There are precious few buyers in today's market - I'm not going to do ANYTHING that might put a roadblock in front of anyone who wants to see a house, even at the risk of showing it to someone who can't qualify.

Karen - ME TOO! DITTO - big time!

Bryant - Yep, exactly. I just don't see what's so difficult about the concept???

Dana - I do, too, but at the right time, which is NOT within the first ten minutes of meeting someone.

I agree with Brian. It is all in the timing. The laws in my area state that I have to present, on first face to face contact, information on agency. I do just that but I do not have them sign anything. I discuss it and let them take the paperwork with them and we proceed to take a look at a few houses and build rapport between us. Heck it is a two way street here as I may find they do not fit my buyer profile so I sure do not want a buyer agency with someone who is not right. Once the rapport is built and we know we 'like' and trust each other all the rest (pre-approval and BBA) is easy.

I would do this as a case by case basis, a client looking for their third or fourth home is much more aware of the prosess than a first time buyer. I do not have a problem with first time buyers, it's just so tough for them to acquire loans nowadays. Personally, I would not ask until at least some sort of repoire is in place. Good Luck!

My approach is similar to Bryant's and Martha's. But I tell them up front that I only work with a buyer's agency and pre-approved buyers up front...it works well for me. They know that I am serious and I offer more than any other agent they have met. It is very evident that one cannot offer that level of service to everyone, and my clients realize they are in a better class of buyer and deserve better treatment. I email the documents before we meet, and they bring them to the table to discuss. If they are happy with the answers to their questions, we sign a BA which can be canceled at any time by either party. Their first earnest money check is non-refundable - it either goes toward a house or compensates me for time and effort if they change their mind. Sometimes I take a retainer, but it always goes toward earnest money.

Perhaps this cannot work for everyone. But I don't and can't work for everyone. I would much rather work for a handful of clients who realize the value I offer and appreciate me. Especially with all the difficulties in the market...my clients this week took ME out to dinner three times and did all the driving to locations one hour each way. They take my advice on what needs done to the home we are selling. I am doing a ton of work on their behalf, and developing friends for life, not clients for life.

I hope this becomes the new paradigm for quality agents. Respect yourself, and others will respect you.

I wished everyone walking thru the door was ready to buy, educated on lending but your average 21 year old first time buyer needs help, guidance and in 28 years of being in this game, now finding more of an entitlement attitude.  Less knowledge of personal finances and more I want it, I am intitled to it and make them take half the price is needed to make it happen.  Qualifying now more than ever needed as they spend so much of their dollar on other recreation items and in places 5 dollar coffees a few times a day slurped down! People with lower wages, less income are more cautious spenders in Maine!

Jennifer, I think that you would enjoy reading Buyers are Liars and Sellers are too! by Richard Courtney...under Business and Economics in the book store...

I usually bring the subject up early on with my buyers. There are a few basic questions that should be asked without stepping on any toes in the early stages of house hunting. I do not refuse to work with anyone if they are  not prequalified, nor do I put the on the phone is a mortgage broker on our first meeting.

Jennifer,

Great points.  I don't require pre-approval letters before showing buyers property either.  I have found many don't know the process when they come to me, so it is my responsibility to guide them through that.  After I establish rapport and show them several houses, I do encourage them to go to their lender.  Mainly though so they know what price of homes they will be comfortable with, but it will also help when the negotiations begin.  I have had buyers with pre-approval letters still not qualify for the loan for various reasons and many are not the fault of the buyer.

I don't ask for the letter up front. I do ask for it if they are getting serious. You have to go on a client by client basis as they are not all the same. Good luck!

Betina

We all walk a tight rope on this one.  I don't want to chase away people who may at some time buy but at the same time, there are those people out there who use real estate agents as their entertainment center on a slow weekend.  So, where's the line.  Usually, with a few questions, you can tell which person is playing the entertainment card and which one really wants to buy something but can't really do anything yet.  I let my schedule be my guide -- if I have the extra wiggle room, I am more than happy to spend the extra time to hand hold someone who isn't ready but needs the guidance -- after all, I was once a first time home buyer and even though it has been a lot of years, I still remember the confusion and feeling overwhelmed -- I am happy to try to help someone through that.  If my schedule is booked with others for the day, then I try to give that person information, things to look over, food for thought that will allow him/her to begin thinking like someone who can buy a home -- and I try to schedule some time with this prospective buyer when we can chat. 

Now, if I've got someone looking for entertainment, then I know a couple of agents in other offices that I HIGHLY recommend to those folks. LOL :)

Jennifer--I agree with you. I just posted my comments on the other post you're referring to. I do ask a lot of questions before, on the phone. How long have you been looking? Have you talked to a lender? Are you looking for a particular school district or town? Get the ball rolling...get them talking. If you ask a bunch of questions before setting the appointment, you build a rapport and can gauge whether they're for real or not.

Someone who demands you drop everything and run over right now (whether a property is vacant or not) has little respect for us and those buyers I will schedule an appointment for in a day or two, but never drop everything just because someone expects to snap their fingers and an agent appears.

After a few questions, then I set up the appointment. But if we're going out for a 2nd or third showing, we're building a good relationship, then I quiz further on the prequal and finances. In this market, you need to take a chance on a buyer. Otherwise you just might P--- off a perfectly good future client.

I turned a buyer loose a few weeks ago. He stated he is working with other agents. I've gone out of my way for buyers too many times only to find out it was a waste of time. There are buyers out there that aren't interested in purchasing any time soon. Why on earth would I spend time driving them around?

If my buyers decide to work with me, I have them sign a BA and then we need to figure out what their realistic price range is. This is usually done by getting them pre-approved. In my market, nothing works without a pre-approval letter. It's mostly short sales.

Jennifer -- When I was brand new to real estate I loved looking at different houses and was so hungry I'd work with anyone who could fog a mirror.  Money was cheap and easy. Even though I didn't enjoy shoehonring a client into a sub prime loan based on their credit score, income and motivation to provide documentation I was willing to hold their hand and push, push, push to get them into the house they wanted to buy.

Now, money is not so cheap and easy and even the most motivated buyers need to make sure they can get a mortgage unless, of course, they're in the upper tier price ranges.  I'm not so enamoured of people's homes anymore with the dishes piled high in the sink, the roof in need of repair and bathrooms with pastel blue and Crest green tile and fixtures.

I do agree that trying to get a buyer broker agreement is a bit of a waste although my current company insists on one if I expect them to pay my commission.  My philosophy is that the client will like me and trust me and work with me...or they won't.  I know my Broker would never go after a buyer for the commission because of a buyer broker agreement.  Too much bad press. So the "protecting my commission" part is a sham.  There are some fiduciary responsibilities that are embedded in the BBA but I'm a good boy and do  my job well anyway,

Great post, Jennifer!

I received a call a week ago from a 'buyer' from last year. She and her husband couldn't buy then...and it turns out, unfortunately, they can't buy now either. Credit issues are just not going away quickly enough for them. But my point is, SHE called ME...and I know she will call me next year, or the year after...whenever they're financially able to buy their first house. 

In the meantime, maybe I can find them a lease/option situation. Either way, I've built a relationship with this young couple, and they surely have lots of friends and co-workers...right??

And I got to see a lot of neat houses...learning my market and my craft along the way. How is that a waste of time? Sheesh.

Jennifer, as usual a GREAT post.  Fine tuning - I would accompany anyone to be pre approved, because I don't want to get their hopes up, then crush them.  I also think we should keep working with them thru any financial problems to get their dream home.  That is the kind of service that allows us to really EARN a commission!!

Hi Jennifer!  I agree... but only to a point.

I think that your buyers should be qualified, NOT APPROVED.... 98% of the time a full blown pre approval up front is nothing but a waste of time resources and money.  A lender has to put time and money into a full approval, and it will slow down the "real" deals in the pipe line... That is a bad thing for your typical shopper.... If it is a difficult deal then a full approval is probably a good idea, but that is a very small fraction of buyers.

If the right LO asks the right questions the pre qual should be as good as any approval, (at least mine are)  And should not take more than a phone conversation and a few minutes. I have seen too many agents take buyers out only to find out they were 50-100k off in qualifying. You will never have a happy buyer when you show them a $350,000 house, only to find out they qualify for a $250k house... They will never Like any 250 houses once the prettier carrot is dangled.

As far as the buyer agency... You are spot on.. How can you get some one to sign that before there is a relationship?  You need to at least build trust first... You may not like them, They may not like you.... and I am sure the Buyer Agency agreement scares away far more buyers than it saves. It is a tool you can use if you feel that you are being dragged through the mud to see how serious a buyer is, but I think it should stay in your tool box until you truly need it.  But a qualification from a TRUSTED lending partner is a MUST.  I would NEVER EVER take a loan application with out knowing I can close it... My reputation is too important. I also have to make the relationship with the buyer and could try to lock them in with money up front for a pre approval, but I do not.

That's my 2 cents!

I hope you are having a great weekend!

Rob

Great post with important points;  I am always amazed at the folks who will insist on a prequalification and/or a BBA because they don't want to "waste their time" but then turn around and spend the day on the phone dialing for dollars or knocking on doors.  Uh, you JUST had a warm body on the telephone who is interested in buying a home.  Let's turn them away and move on to bothering perfect strangers, trying to get business.

No, not every phone call or email is from someone who is perfectly qualified, but they may be in a few weeks, months or yes, even years.  In the meantime, if you DO treat them with respect and do hook them up with a soulful loan officer who will invest the time in them to help them get qualified, how many people (not all of whom will be credit challenged!) over the course of time do you think they will tell about how wonderful you are?

Susan - I know, I know... How is it you put it so eloquently (aside from the above)? "We work so hard to bring people to our doors and then do everything we can to put up road blocks once they get there."

Rob- interesting perspective - seriously!! Would you mind explaining (maybe in your blog) the REAL difference between a pre-approval and a pre-qual in TODAY's market? I mean, every deal I've done lately has been an underwriting nightmare and I have GREAT buyers. How on earth CAN a LO get someone truly "approved"? Or am I missing something? Are we just talking desk-top underwriting here?

Greg - Well, thank you! And I know your clients love you. I can tell.

Sue - Sheesh is right.

Ken - same here. I don't even do BBAs anymore - I just use a Transaction Broker agreement when I have to cause I'm not gonna chase anyone down anyway.

Jennifer, you go!   I believe many Realtors have rushed to confuse "preapproved" or "prequalified" with appropriate qualification that is PART of the process, not the START of the process for many excellent, financially capable home buyers.  

I would submit many folks don't know now to properly coach, communicate with and mutually qualify customers. 

Instead they have taken a cheap (but self-defeating) path of requiring the buyer to have already done much of qualification work before hand.  Not sure I can think of any other industry where the sales folks require written proof of money just to talk about potential purchases. 

Great Post!!

Glenn - Excellent points, as always. You're one smart guy.

I agree with you. I show homes to any one who wants to look. It takes a few homes and may be a feew weeks of earning the buyers trust before I would even cnsider asking them to sign a buyers agency contrct with me. I have to prove to them that I can do the job and find them a house. As for pre approval letters, with just afew leading questions as you are showing homes you can pretty much tell if the buyers are going to qualify for a loan or not. All this paper work up front just to show homes are for INSECURE AGENTS who don't have the confidence that they can gwet the job done.

I agree 100% with your comments Jennifer.  This is one of thost topics that really get me going.  Several months back, I got involved to some degree in another post trying to explain the benefits of much of what you said.  To my surprise, nobody agreed with me.

It goes to show there is much too learn if you want to stay on top...or get to the top.

Oops..guess I wasn't logged in when I made that comment....

Curt- I looked at that post and WOW - some of this stuff leaves me speechless. To each his own, but I'll take any opportunity that comes along to get my smiling (and welcoming!) face in front of a warm body who has an interest in real estate. I guess I'm just not busy enough!

Exactly the same thing I thought!  In the world we are in today...and hopefully forever, it's all about trust and building that bond.  I hope I never get so busy or confused that I turn people away so easily.

In this market, it is the people that are the least willing (initially) to get pre-qualified that are the BEST Qualified buyers!  They already know they can buy, they are just looking for the right person that WILL help them.

I believe that there is a way to get the buyers pre-qualified before running out and looking at whatever they want to see, without offending them. There is no way I'm going to spend time and gas money, driving someone around, based on what they "think" is their price point.

However, I do remember an agent who totally turned me off, many years ago, by pushing too hard about my financial information. That was when I was a buyer, and did not yet have my license. I believe, from that experience, I've learned how to get enough information about the buyer's finances, to know if I need to get the pre-approved before I waste my time or theirs, or if after a nice conversation with them, I'm comfortable enough to start working with them without a pre-approval letter.

Now I need to go read the post of which you're referencing!

My wife read your blog today while at the pool with the boys.  Yes she is addicted to her Blackberry and this blog right now.  She told me I just had to read this post.  Well, I can say that there is mixed reveiws on this one.  I have done it both ways.  I think in the beginning I was so hungrey for clients I just didn't ask anything until I had a chance to meet them.  I remember my very first client I showed houses too, I made them sign the Buyers agency before I would show them the house.  They were very taken back by that.  I just said you don't sign I can't show you houses this afternoon.  They signed, and of course the very next day the called and said they were not going to buy right now and wanted out of the agreement.  Yikes, I learned from that one.  Now I am not such a stickler on the Buyers Agency.  I have been burned even when I have one.  Many of those trying to get out of it to buy a FSBO without an agent as the seller won't pay commission.   Whatever, you win some you lose some.  The Pre-qualified question is the first thing I ask a buyer when I contact them.  If they are not pre-qualified I send them a list of mortgage people to chose from and request they get pre-qualified.  I usually just tell them up front that it doesn't make sense to go out looking for houses when you don't even know the price range you can buy.  You don't want to get attached to something just to find out you don't qualify for that much or you might qualify for more.  I have never had any problems saying that.  Most of the time if they are not qualified it just ends up bad.

OMG - honestly it took me a while to focus on the words in your blog as I was laughing so hard at the picture - nice 'tramp stamp!'

Wait... that's not your tattoo, is it??? LOL!!!!!

I've been ranting for 2 days now on this agent's unfortunately featured blog... done with that. I'm off to focus on more positive things. Have a great week!

Hi Jennifer - Having been burned in the past, I strive for buyer agency agreements with all buyers that I work with. If presented correctly, it's a benefit to the buyer and helps set the expectations of both parties up front.

I completely agree with you on pre-approvals -- they're not necessary. You can usually tell by a buyer's conduct whether or not they need to speak to a lender. By tuning in to their questions and actions, we can generally guide them in the right direction.

If the buyer can't buy today and you are rude or don't spend anytime with them, when the day comes that they can buy-guess who they ain't calling! Some buyers may freak out if you start asking them to sign something before they ever look at 1 property. Be yourself, be helpful & informative, and develop a relationship. Who cares if you spend time with someone that can't buy right now, they have friends,relatives and coworkers that can. And someday they may be able to buy.

Funny... you speak about it not being a good idea to ask for a buyer/broker agreement, and then in the next breath you say.... "I have used the services of many real estate agents in my lifetime".

I'm guessing many of them ended up working for free, or you own 20 houses in 20 different counties.  Which is it?

There is nothing disrespectful about presenting a client a buyer/broker agreement.... In case you hadn't noticed... there are benefits to the buyer in having one of these agreements.

Cameron

Jennifer, I subscribe to your blog.  I bought your books.  I really appreciate what you write about.  Although I am willing to see your point, I strongly feel that for the amount of work that needs to be done in assisting a buyer, a contractual agreement should be in place.  A major benefit of said agreement would be the commitment on the part of the agent to provide a solution to the buyers' needs.

I don't feel that all of my clients need to sign one.  The ones that I don't get one on are those that I feel are not ready for my 100% commitment.  I will not take time from those that I am willing to give 100% to in order to give time to those that aren't completely sold out.

You are special in the way you handle your clients and I can see your point clearly.  With all of the legislative and lending guideline changes that are happening, it seems to be very important for professionals, those that attract the "A" clients to avoid wasting time with those that aren't willing to be professional enough to meet our own personal business standards.

Respectfully,

Mark

Jennifer,

I used to have the same opinion.  I used to say, "they need to get to know me first, then we can worry about the other stuff."

Notice, past tense.

You can ask about someone's financial situation without it being "rude."  I try to educate my potential clients.  That way, it saves us both time,  but at the end of the day they were "served" by learning what they may need to do to get into position to actually purchase.

As for a buyer's brokerage - it's just professional.  It doesn't have anything to do with rudeness. 

It's all in your approach.

I usually don't demand that they have the letter and when I get to know them - and build the relationship and that does not take very long - I get it and it is not a problem.

I agree Jennifer, and that is why I love to refer all my non-qualified prospects to a number of loan officers I trust and have good relationships with, so everyone benefits.  The potential buyers are qualified by a reliable source, the loan officer is now willing to send business my way as well, and I will usually know very quickly whether the potential buyer is capable or not without really wasting a lot of my personal time. Good advice...

Interesting point of view on this. I will show non pre qualafied clients. Not just too much at a time. The BA I ask for even if its a daily BA.

I was leaning towards only working with pre-approved buyers, but you are right. I think I am chasing them away, but there are so many with bad credit today.

Which comes first, the chicken or the egg? I never ask for an EBA... and I can't remember the last time a buyer "cheated" on me. It simply doesn't happen. For those who feel they need to protect themselves against their buyers, I can only offer that I don't feel a piece of paper protects you nearly as much as building a mutual trust, respect and yes, a friendship. I trust my buyers, I work hard for my buyers and I show them that I truly appreciate their business. In return, they buy a house from me, IF they buy a house at all. If they change their minds about buying a house, an EBA won't change that.

With regard to qualification, when a buyer contacts me to talk about buying a house, we have buckets of things to talk about, which includes their financial qualifications. We'll get to it, but it's not the first thing I bring up. No, I talk about what the buyer wants to talk about; specifically, his wants & needs, his preferred neighborhoods, how the process works, etc. Of course I ask about price range and if the buyer seems to have a good handle on how much he wants to spend, I'll rely on his given price range for a period of time. If he has no idea, then naturally, I'll send him to a lender. However, my approach to the whole lender conversation is as a benefit to HIM, not to ME. I think that's an important distinction.

Cameron -  Yes, I have owned dozens of houses in my lifetime. I have never "cheated" on a real estate agent I've worked with, although there certainly have been times when I didn't purchase anything, and felt bad about wasting my agent's time. However, again, an EBA doesn't obligate me to purchase a house. None of the agents I've ever worked with have required any sort of commitment from me, but they got it because they satisfied me with their service. So, no, I don't really see how an EBA benefits anyone - at least not the EBA's we have here in Colorado, unless you intend to go after a commission you feel you're owed. Which I'll not be doing... and have never had to.

Mark B - BINGO. This is what so many agents seem to miss. But you GET it!

Hi Jennifer - I'm a newer agent but what you say intuitively feels right to me.  For me to ask for a Buyers Agency before showing them a home feels like asking to get engaged before you go on your first date.  I do ask questions to get a sense of their seriousness. 

I was a buyer before a sales agent and I always balked at the BA agreement presented at the first meeting.  Totally turned me off.  Why would I want to tie myself to someone for the next six months that I am JUST meeting, when I don't even know if I like them or their abilities yet?

I'm also cognizant of using other agents/sellers time so we can start with the empty houses on lockbox in their range.  And then it is time to discuss a prequal, etc. and review a BA.

But so many agents feel so strongly on this issue.  I think it's partly your setting - if you are in a town or city, etc. that influences how you do business.  But at the end of the day, it has to be a way that makes sense and feels right to you.  The hard sell isn't going to work for me.  And I don't think it works in my town either.  I completely agree about respect. 

Dennis - Just don't forget that all those buyers with bad credit have friends with good credit. Sometimes the more difficult clients become your most rabid fans. That's worth the effort in my book.

Jennifer- there have been some great comments shared on this post.  Every buyer, and every deal is different- what followed the major real estate melt down here in many parts of Florida was a stream of "buyers" who could not get loans no matter what due to poor credit.  Interestingly enough many of their "friends" are no better off.   I think you have to weigh the merits of each buyer as an individual and not jump to judgment. 

A serious buyer has done some homework and has been to a lender or are at least willing to talk to one.  Either way- cultivating customers does take time,patience and good guidance.

Good luck and Sell Well!

I agree Jennifer that you don't have to have a signed EBA agreement to offer someone some service.  Part of being a Real Estate agent is actually being a salesman (OK -person for your benefit!). You have to be very adept at reading people and personalities to make the sale, and you have to know when to ask for the order. I always think of the poor department/Furniture store saleperson who while at least getting a small hourly wage probably hears more "NO THANKS, I'M JUST LOOKING" than anyone. People don't want to be sold, they want to be in control. It takes a real pro to move past that barrier and earn their trust. By pushing an EBA on someone too early you may end up losing a very qualified buyer. Invest a little time with that buyer and you'll get more sales and be busier than you can imagine.

I do get an EBA signed before we start having substantive talks about pricing or terms and will invest a weekend getting to know a buyer before signing anything.  Because I have to know who I'm working with also, and maybe, just maybe, I won't want to work with them. I've had buyer interviews over lunch-kind of like a date, then said "goodbye, I don't think we're a good match". I don't have any sleepless nights like you might with the buyer that's flat wearing you out!

What can be more irritating than "financially curious" is having someone fall in love with a house that they LATER LEARN they cannot afford....give me the pre-approvals every time.

Jennifer, I'm probably in the minority here as I only skimmed the comments. We make sure our buyers are pre-approved if not approved. If they are serious buyers it is no big deal. We don't take people out who are lookers, only those ready to buy. If they are ready to buy they have no problem calling a lender and having the letter in hand.

We go over Agency Disclosure, by MI law the first time we meet with them. They sign that they know the differnet ways they can be represented.

After that  first time out, they have either connected with us or not. If so we have them them sign a EBA Contract. Too many times when this is not done, it has been to our detriment.

You asked if agents really have that many buyers in their pipeline. The answer is yes at least for us.

Hi.. I've often worked with prospective buyers that have not been pre-approved at the time of our first meeting.  I will spend time with them and go through homes with them initially.  I will have a discussion with them about the need to begin talking with a lender and get pre-approved.  We can not write an offer unless we have a pre-approval letter... and having pre-approval information will better define the price range we need to focus on.  Each of my buyers did contact a lender and got pre-approved.  To date, I have never had a problem doing it this way.  Sure, I would love to have a copy of their pre-approval letter before we start.. but I don't mind investing some time until we can get to that point.

Missy - LOL - most disagree with me, which I expected. That's okay... my way has worked beautifully for me through the years, but I respect that others have different experiences. Because my business is almost all SOI, perhaps the relationships I have with my clients start off on a stronger note, thus eliminating the need to "protect" myself. Do all my buyers buy? Of course not. But most do, eventually.

But I must ask the question (of all, not specifically Missy), if you've been burned over and over by buyers, might there be reasons for that aside from not having an EBA or pre-qual/approval? When something goes wrong in my life, it's easy for me to look outside myself for someone or something to blame. But most of the time, it IS something I've done which is a wonderful thing! I can fix it!!!

I just don't believe that signed pieces of paper are the answer to building a loyal following. In fact, I believe with all my heart that the EBA, particularly, is a hindrance to that goal.

Thanks for the Gold Star, AR!

Jon - That's exactly how I handle it, too. I suspect that in your market, requiring pre-qual's or pre-approvals upfront wouldn't quite sit right with most of your clientele... am I right?

In my six years of real estate I have never had a BBA signed and I can say most buyers I work with haven't met with a mortgage person prior to looking. And since I started I have never lost a client due to lack of qualifying. I have had to extend the time I work with a client while they navigated loan qualification. (My latest closing came from first time home buyers I worked with last year who came back to me when they were ready.) I am open and honest with my clients and I educate them on the process. I suggest they talk with a mortgage person somewhere during our first meeting and I offer some names to get them started but this doesn't happen in the first ten minutes. If an agent were to shove papers under my nose to sign or demand I get pre-approved before even considering working with me and finding out what I am about, then they don't deserve my time.

JoEllen - CLAP CLAP CLAP CLAP!!! And it works perfectly well, doesn't it? I LOVE your final comment - "then THEY don't deserve MY time." Respect is a two-way street, people!!!

Jennifer, do agents in Colorado typically insist on contracts for buyers now? I left in 2002, and it simply wasn't done.

The thought of handcuffing a buyer to my services has never sat well with me- like you, the loyalty is, for the most part, an assumption. On Long Island, where many brokers don't PAY buyer agents (just sub agents, dual agents, broker agents- we still have fiduciary here) the contract is very dangerous to buyers- paying once in the listing price via the seller compensation (the buyer "half" goes to the listing company) and then, out of pocket to the buyers agent.

Even without that complication, forcing a contract seems, to me, to demonstrate insecurity on the part of the real estate agent- if I'm going to locate the house and do my job, why do I have to handcuff the buyer? If someone else performs the service for them to their liking, that's my problem, not theirs. So far, so good- while our buyers are facing their own challenge of getting their home sold in other areas so that we can represent them, they're hanging tight with us.

Jennifer, there's no easier way to scare a buyer away, you're right on.

Oh, and that's a great tattoo.

Jennifer

I agree - we all want to be treated with dignity and respect. Ultimately, as individuals, we all have our own styles ~ what works ~ what doesn't. It's OK for me that others are different.

I will spend hours on the phone with prospective buyers (and sellers) take them to lunch, for coffee, whatever, getting to know them and understanding what they want and need (building the relationship).

Because loan approval is the first step to buying a home it makes little sense (to me) to be taking people into other people's homes if they simply cannot qualify to purchase it. I will help people get pre-approved with no obligation to work with me on a purchase. However, once I have taken the time and helped them (as you suggest) they know I will do whatever it takes to serve them.

Pre-approval is the "E" ticket for the best rides. I must see the ticket before I will ride around with a buyer looking at homes. I don't need to see the ticket when I am building a relationship. For me, building the relationship is the best part of what I do everyday.

Jennifer,

I had a client just 2 weeks ago come to me after another lender said that they were a waste of his time because their credit was not perfect. 

I was respectful to the client upfront, helped them with a game plan to start fixing their credit and what they need to do to put themselves into a home in the next 12 months.  True they cannot buy today, but if they do fix their credit they will be able to buy in a year.  People remember who was respectful to them.  I am not worried that this client will go anywhere else when they are ready to buy. 

Laurie - Frankly, I don't know what Colorado agents typically do about buyer broker agreements - I never paid much attention to what others around me did, but I suspect it's not done as much as our brokers would like it to be. In fact, in a class I recently took with Oliver Frascona, he said in no uncertain terms that there is very little difference in Colorado between Buyer Agency and Transaction Brokerage, with regard to the service provided to buyers. So,now I feel perfectly comfy just fullfilling my agency disclosure requirements and working with my buyers as a transaction broker.

Very interesting observation about the appearance of insecurity! I've never thought of that, but yeah, it's dead-on!!!

Interesting post and interesting responses.  I feel like many who answered your post that RESPECT is a two way street.  A buyer that walks in wants you to drop everything and then may or may not be qualified to buy is usually a waste of time and money (at least gas money).  I have been "LISTING BUYERS" since 1992 and we don't even practice designated agency in my State.  By spending a little time working with buyers on the process it helps to eliminate much stress for them as well as gives us an opportunity to get to know each other so they don't feel that I am rushing them around as fast as possible to shove them into a house just to make a commission. More often than not they are impressed with this level of customer service beyond what you might believe. I believe that is a true sign of buyer RESPECT. If anyone out there in AR land is interested in seeing a non-manulipulative method that works each and every time please join me at the NAR Conference in Orlando on Sunday November 9th from 11:00 to 12:30 I will be giving a 90 minute introduction on HOW TO LIST BUYERS...P.S. Many of you called your customers clients I find that interesting since Attorney's say that they are in fact not clients until they sign a contract. 

Jennifer, I wholeheartedly agree!  Many of my leads are high-end buyers who would frankly be offended if I hit them with a pre-approval letter before establishing a relationship.  My pipeline is full too....and I am delighted about that.  When the time comes for them to seriously start looking then I will make sure to have discussed their financials.  It's worked for me for 17 years.

Everyone has valid points.  But the idea here is SERVING the client.

Obviously there is a conversation you have before you start looking for a home.  This is where you get to know each other and build trust. 

During that conversation I would simply ask my client if they knew what price range home they were able to look at.  If they were pre-qualified they said so.  If they were not I would offer to help with that... and ask if it made sense to them to know in advance what they could qualify for so that they did not get disappointed by looking at homes they fell in love with... but ultimately could not purchase. And doesn't it make sense not to waste time looking in the "wrong" price range?  Who is going to answer those questions the wrong way?

I also would ask them what their philosophy on risk was.  

This would initiate a conversation about what they could afford... versus what they felt truly comfortable with.  We would discuss how some people want to get as much house as they could afford but how it is more comfortable to get a home that you know you can handle even if life throws you a financial curve ball.  What if kids came along faster than expected and the wife wanted to take off from work for a while?  What if one of them was injured and could not work?

I would explain that a more conservative approach would be to get less home, but to use the extra income to pay down the mortgage as quickly as possible and build equity in the property ... saving thousands in interest.  With the right approach that first home could be paid off in less than 10 years, maybe as little as 6 or 7.

Then, if things go well, when they were ready... they can sell that home OR rent that home out (provided there is positive cash flow) and use the equity (through a HELOC) as a down payment on a larger home.  This process can be repeated until they are in their last home, and, if they like the idea of investing, have accumulated a portfolio of decent, income producing properties along the way.  

With the right approach a homeowner can, at the end of 30 years, have 3-5 homes "free and clear" utilizing the same cash flow as if they had just bought one "maxed out" home and paid off the mortgage the normal way.

Getting as "large as house" as one can afford makes more money for the Realtors and the mortgage companies, but it can result in risk and stress for the homeowners if their circumstances change, and it always means more interest to the bank for that mortgage.  Every dollar in interest the homeowner avoids paying for the mortgage is a dollar more than can be invested in the future to build real wealth.

Of course, as a Realtor, you will make a little less commission on that first home, but you will end up with a client for life and one that has an "investment" mindset.  This will bring you way more business, through referrals, etc., than the tad extra you get from the short term view.

The more well rounded a Realtor is... by way of asking the right questions, posing different scenarios, and finding out what the clients long term goals are, the better the Realtor comes off as a true expert and professional.  This means having a working knowledge of mortgages, HELOCS, mortgage acceleration programs, tax consequences and knowledge of the real estate investment industry (both flipping and buy & hold).

Jennifer,

   I sure like your attitude.

If I ever have  buyers for Denver I will refer them to you.

I work in Palm Beach County, Florida and work predominantly with buyers.

I have been a marketing consultant for 30 years and help my clients in 5 languages.

If you are interested in mutual coorperation, just e-mail me back. 

Peter W. Just

Peterjust@kw.com

Jennifer - I agree with your post about showing respect to buyers - and I agree they will eventually buy a home. Not everyone is ready and it is important to build trust and rapport - and find out what they want because if their perfect home becomes available, we will be the first to notify them.

Jennifer,

Some of what you say makes sense, and some does not. I don't require my buyers to sign a buyers agreement until we actually sit down to write a contract. However, in the two states I'm licensed in it is state law that I disclose agency PRIOR to any substantive discussions about specific property. Unfortunately most agents do not do this and are doing a disservice to their customers.

Disclosing agency usually opens the door to discussing the buyers agreement and some sign, some don't, but it's always their choice. It's our job as agents to make sure they are making an informed decision, and not our job to assume they don't want to be bothered with those pesky details like agency law. I've never had a potential client get upset with me (or not use my services) because I took the time to discuss their home purchase with them prior to showing them property. However, I have lost potential business when waiting to qualify buyers until after they fell in love with a home they could not afford.

You're right. There is no way to know if a potential buyer will ever buy a home, but that's not the point. You must invest a little time educating potential buyers because, like you said, relationships take time.

You seem to look at educating potential buyers as being disrespectful, and I think it's the exact opposite. I do think forcing buyers to sign an agreement prior to showing is indeed disrespectful, but so is not allowing them to make an informed decision. You'll rush out and spend $20 in gas showing them homes, but you won't invest that same amount of time talking with them, finding out their wants and needs, and helping them to find and secure financing?

I have never turned anyone away because they refused to sign a buyers agreement (except for investors), but I've never asked anyone to sign one that was not fully informed. I have more than a few people in my pipeline that have credit issues (that would not have been discovered until they found a home if we waited) that are working to resolve them and will buy once they are taken care of. Fortunately they did not fall in love with a home prior to discovering these issues.

I do see your point, and understand why you feel the way you do, but I must respectfully disagree that taking the time to educate your buyers is somehow disrespectful. As I said before, forcing them to do so before you'll work with them is.

I spend some time with the clients before obtaining the BBE or pre-approval though I will not go on indefinitely, especially not without a pre approval.

Diane - good for you! I guess things have started hopping for you in your new market. Congratulations!

Guys - please don't take this argument to extremes and assume I'm advising agents to avoid the topic of compensation and qualification indefinitely. OF COURSE we talk about how I get paid and how the loan process works. It's a big part of my job to educate my clients on all aspects of their home purchase. I'm not an idiot and I, too, am a busy woman. Please re-read the original post. I just don't REQUIRE that they be pre-qualified or sign an EBA for me to enthusiastically work with them.

Will I insist that they talk to a lender at some point? Well, actually, I never have to - real buyers talk to lenders because THEY want to, not because I force the issue. And maybe I'm just darn lucky that the buyers who cross my path all seem to be real buyers. And they're gonna buy from me whether or not I've "signed 'em up!"

Jennifer I couldn't agree more - having a converstaion with them regarding thier situation is a way to find out what I need to know most of the time.  My feeling with a buyers agency agreement is that unless I have relationship and have invested a little time in them I would not feel comfortable having one signed.  It wouldn't feel right and I listen to those gut feelings.  I do coach my clients and give them my cards to bring with them if they are going to an open house.  I explain why I don't think it is in thier best interst to purchase the house using the agent selling the property (I don't double end deals - again it doesn't feel right.  If I get the buyer I refer them to an agent that I feel can do a great job for them.). 

Build the relationship - the worst that will happen is you will have wasted a few hours the flip side is that you will have a great sale and food on the table.

I've taken alot of flak over the years for having the same attitude you do.

Relationship first, qualifying 2nd.

I always ask if they are working with another agent.  If the answer is no, then it's time to build the relationship.

Qualifying them comes 2nd.

I like your viewpoint. I think that spending time to find out what they want, getting to know what is important for them, you can breach the "prequalifying" without having to make it a huge point. Connect with them and you can find out a lot of the information you need before you take them all over hell and creation (sorry!). If you really connect with them, I think you'll already know their financial status, prequalification, etc.

My two cents on the issue.

Rich

My comment is a comparison.  Do you get a loyalty agreement with a seller?  It is called a listing contract.  Why would you not get one for a buyer?  I do not always get an agreement, but I do as often as possible.

Good Morning Jennifer.

• Pre approval: Should be a fully underwritten file subject to a house... (using hypothetical house info)
• Pre Qualification: Talking to some one like me, maybe looking at pay stubs or tax returns. (I usually have people read numbers off of stubs, returns and W2's to be sure the numbers are accurate, you would be surprised how often the initial response is off, on both directions) And of course full credit report. A good LO will give as good a prequal as Pre approval.

Some people get the two confused... or just dont ask the right questions for either of the above... Same as in any business, "Garbage in = Garbage out" There was NO learning curve in the past 5 or 6 years... just take the deal... I started in the business when we HAD to know how to read tax returns, Had to know FHA and VA.  this decade it was not so until the past year.... A lot of balls are being dropped due to lack of knowledge.

Deals should NEVER fall apart if buyers were screened properly.... However there is one other important piece in this environment:

• RE-Qualification... Guidelines have been changing frequently in the past year, some one that could qualify last month may not qualify today.

I will see about expanding upon the thought a little and posting a blog.

Amen, Sister!! It will only turn them off and scare them away, especially first time buyers who are scared and nervous anyway.

IMHO, you're doing your real estate customer a great disservice by not pre-qualifying them.  A professional has no trouble efficiently explaining exactly how purchasing real estate works, and certainly financing is a major component.  Naturally, if your customer pulls up in an S-class you're not going to have them fish out a prequal letter, so the situation has to be read immediately.

First time home buyers will appreciate your efforts in helping them in the finance area, and will also appreciate the fact that you are firmly representing them with a brokerage agreement. (In many states it's the law as well).

Will all this said, unless you a pure buyer's agent, your activities should be primarily listing real estate, meaning each buyer you choose to work with should be carefully screened.  And "Love all, serve all" is great, but "working without a net" or buyer's agreement is folly.   Let one of your buyers who you showed 6 houses to last weekend buy a $450K home next week without you, and you'll get my drift.

I disagree! Can we agree to disagree?  I know from past experience that if people are qualified they have no problem with any question.  I never ask any specifics at all - like what's your credit score before you enter the car?  If they don't answer the question right - there is a problem 99.9% of the time with their qualifications. They THINK they should be able to buy a home - they WANT to buy a home that they can't pay for.  Why is that my problem for their ridiculous elevated expectations?  Go get a better job princess & take his highness too!   Go work on your credit score that's in the 5's but you always have an excuse!  I'll be glad to help them out wholeheartedly and without reservation!

Absolutely we can agree to disagree! But allow me to throw in something from my personal experience...

I often shop for homes outside of Denver, for various reasons. Frankly, I do not get pre-qualified before starting the process. Why? Because I know I'm credit-worthy and that I will be able to get a loan. But because I'm self-employed (not a simple W-2), I simply don't want to go thru the hassle of the pre-qual process until I've seen the inventory and have decided I want to move forward.

Is this presumptuous on my part to expect an agent to spend time with me while I explore my options? Maybe some would think so, but that's no problem because I wouldn't be working with them. No, I'll be working with someone who sees the potential in working with me, even at the risk of "wasting her time." Someone who respects that when I say I will qualify for a loan I know what I'm talking about.

Would I ask this agent to write an offer for me if I hadn't yet talked with a lender? Not a chance. But to show me houses? Yes. So, therefore, because I would expect an agent to show me around sans pre-qual, I obviously offer my buyer clients the same respect.

Hi Jennifer... You asked for it... You got it! (one of the secrets to life, you just need to ask!) I posted a long winded blog on the pre-qual vs pre approval or if that link does not work http://activerain.com/blogsview/624348/What-is-the-Difference

thanks for the motivation to type away! 

You must prequalify.  Do doctors prequalify?  Don't they or someone take your vitals etc, ask you all about your simptoms etc?  They don't just walk in and perscribe you something.

Same with Accountants, Same with Attorneys, and all other professionals.

Realtors on the other hand, --You are looking to buy,? ok Hop in lets go.  NOT.  If you do this you for one are not being very professional, and 2, are taking the risk of wasting allot of time.  That time could be used to find a qualified better prospect etc.  I believe, in your book, you talk about wasting allot of time with one of these buyers, and give advice not to do this.  If your buyers think that you take anyone out with a heartbeat, how much value are you to them.  If they feel that you only work with certain types of buyers then they are more apt to look to you as having value and not just like everyone else out there.

Just my .02 cents

Justin

Good afternoon Jennifer, I'm new to real estate so I am gratful that you posted such an important question . . . one with obviously many points of view. Myself, I do not like high pressure tactics regardless of what it is I'm interested in purchasing, so I like your philosophy! I too have purchased real estate around the country, and never once was I asked if I qualified. had I been, I would have looked elsewhere.

All that being said, I have learned from this experience and I've appreciated the comments of others with an opposing view.

Thanks, Gene 

Jennifer, I agree with you 100%.  You have to build a raport and trust with your buyers before you start probing them on their entire financial statement.  This will come.  I have been burned a few times doing it this way, but more often than not, the buyer works out and some of the ones who do not, the give referrals, and often come back once they are ready to purchase because you showed them some respect.   Happy Selling, Brian Wray

Jennifer, you are correct.  Rudeness never works.  And as long as the buyer trully wants your help there is no reason to help out before preapproval and without a BBA.

Jennifer, does everyone realize that in many places a pre-approval letter is of only token value at best?  It is not a loan approval at that point, so it is only a likely outcome.  It may help define a range of affordability (which a good Realtor should be able to help a buyer figure out anyway). 

But "pre-approval" does not necessarily mean already approved.  It means, if I understand the process correctly, "before approval."  Now, granted, the letter may help show they have done some homework and started the process. 

Think about this, if the prospective buyer goesto a lender first without an agent in mind, don't you think they will ask the lender, "Can you suggest a real estate agent?" and that may not be you!  Be careful what you ask for!  You may pre-qualify yourself right out of the picture, at least part of the time!

Glenn - Robert Rauf just wrote a blog on this... (see a few posts up) in response to this blog!

Gene - I've run my business for 12 years following the Golden Rule... If I wouldn't want it done to me, I don't do it to others... Very Simple!

Well said, potential clients need to be respected and a relationship needs to begin somewhere,,,,, pulling out a buyers agreement before showing any homes surely won't win you any freinds

I understand and agree with many of Jennifer's comments in her blog - everyone does deserve to be treated with respect.   However, you can be respectful and professional without being a doormat.    What other business can you walk into and expect someone to give you a substantial amount of their time and attention, much less drive you around in their car, with no "olive branch" on your part to give them comfort that you are serious and ready to do business?   I don't know of any.   You can't even test drive a car until they run your credit or license.

I've done it both ways in my career and close to 100% of the ones that I worked with on a "leap of faith" from the get go never closed because they couldn't make it happen financially.    I think most serious buyers are open to at least answering some "prequal" questions.  If not, I agree with one of the other comments, I can better use my time trying to attract business that will close.   I'm doing this for a living and I think we can conduct our business professionally without disrespecting prospective buyers.

Im in a quandary here.  So many of the posts here seem to say "so what if the buyer doesn't buy from me, at least I didn't offend them". 

Further, a lot of the posts are from KW'ers - and I can tell you firsthand as a former Team Leader with them, the numero uno success principle they teach is "You're in your own business".

So certainly since you're in your own business, you can manage it anyway you like, but I for one find it very hard to stay in business without revenue.  According to Dirk Zeller in his magnificent book "The Champion Real Estate Team", you must be laser focused on DIPA, or "direct income producing activities".  So unless you charge consulting fees, or otherwise can wrangle revenue from real estate  besides earning commissions from sales, I would caution anyone - particularly those newer to the biz that might feel "uncomfortable" asking customer/clients to sign on with them - that you are in business now, and if you don't protect your business by executing the required brokerage agreements of your board and state, that you are selling your business short.

In Connecticut, there has been more than one case where at closing, the seller's attorney has refused to release the buyer broker commission when the buyer's brokerage was unable to produce a binding buyer's brokerage agreement.

Beyond the legalities, the act of signing a real estate contract implies commitment.  You, as a professional realtor are giving your 100% commitment every day, and will earn and deserve your client's 100% commitment to you.  This "feel good" stuff is interesting from a reader's point of view, but falls far below the threshold of professional standards contained in our Realtors Code of Ethics.

Like I said, good reading - but  not good business. 

Jennifer,

I totally agree with you!

Sure, there might be some prospects out there with unrealistic expectations who want to see properties they can't affort or who are just curious and want someone to take them on a "home tour"... I have actually heard some agents complaining that they had to take people all over the island (I practice on Oahu, Hawaii), as if they were tourist guides!!! I have done that myself, but even if these prospects don't end up buying, I look at it as an opportunity to find out about neighborhoods I don't know. I believe it is part of my job to try to educate myself at every opportunity, so that I know the inventory of the properties out there.  

Dan, I couldn't have said it better myself.  

Dan - did you hear anyone say they aren't making money using this strategy? You certainly didn't hear that from me... But since I disagree with almost everything Dirk Zeller has ever written, I'll guess you and I are worlds apart on our philosophies and that's dandy!

"Feel Good" works for me and keeps me loving my job... and bringing money in my door. I'll stick with it.

Actually I did read in several of the posts that not having an agreement worked against the agent. 

I don't disagree with any of your philosophies, (and I'm not trying to rile you up here) But this is the real estate business, not the real estate center for holistic counseling.  Smile.

My concern is that newer agents that read threads like this, think it's ok to be out showing property without any typeof agency agreement.  It is not.  Even if they have the customer sign an "unrepresented persons" agreement, it's better than not having anything at all in place.  You've caught me at a bad time, I  completed my required quadrennial code of ethics training recently, and I can tell you, that not fully explaining agency is a clear violation of the Code of Ethics.   And on the state level there are also requirements, and in Connecticut it's crystal clear what our obligations are in this area.

When you approach 30 or 40 listings with half that many in buyers on top of that, and leads pouring in from the net -  without agreements in place, how could you even know who your clients are?   This isn't personal at all, Im enjoying your posts and I thiink you're branding of the Sell with Soul is awesome.   And for what it's worth, I love my work too.  I have the best clients in the world and I call every one of them at least once a week to tell them just that. 

I get my clients pre-approved as soon as possible. All that being said, some I need done sooner rather than later. It's not the fact that I'm worried that they are "flaky" but some of them do have credit issues and it is important that we know what we are up against right from the get-go. I'm with you about the buyer's agreement. I do not require it signed even though now I discuss it with them upfront about an exclusivity. Things are different for me these days and I'm not afraid if I know I am doing a good job for my clients, and it would be a disservice to them, if I didnt mention about the pre-approval or buyer's agreement.

Interesting approach.  Thanks for the post.  It has expanded my view on the subject.

Show me an agent who must have a pre-approval letter and BAAgreement before showing a home and I'll show you an agent with an empty car. 

I want to take a buyer on a tour to determine compatibility, ability to buy, interest in making commitment, etc.  Then get the BA Agreement next so I can do my job as a fiduciary. 

Having a desire to buy is great.  However, the buyers need to have the financial ability to make a purchase.  I try to set them up with lenders if they have not talk to them. I do take them out w/o a pre-approval to get to know them and their needs. I would ask them if they have talk to a lender prior to a second appt.  If they have not, I have to question why they have not.  I need to know if they are ready and able buyers; if I can truly help them out or not.

I have mixed emotions on the subject and honestly it depends on the buyer.  I have worked with buyers without the buyer's agency agreement before and it has worked out OK.  But overall I like to have the agency agreement and pre-approval.  I explain to them that we need to know what price range to look in and most agree to get preapproved.

Most experienced agents can get a really good feel for a buyer's qualification to buy a home by spending a short amount of time looking at one or two homes.  I always send a pre-approval letter with all offers because I assume the agent on the other end will be asking for it.  I explain ahead of time to the buyer that the preapproval letter just makes their offer look that much stronger.

Your post is exactly how I've felt for years.  You are right on target.  Very well said.  The few time wasters are more than made up for by the ones that turn into buyers.  I never can really tell for sure so I just go on the assumption that they are all good people.  I only assume that the opposing seller can not be trusted to do everything that they say they will.

You are so on target with your post....as usual Jennifer.  I would love to get the BAA to help them realize we have teamed up.  Still, there is no guarantee.

In my HO I think not to "qualify" your prospect is just a waste of time.  Here in FL we have SO many people that come down to visit and  THINK they want to live here.  They then waste your time, money & gas so you can be a tour guide.  Sorry, I'm already behind the eight ball financially and not willing to drive around aimlessly to entertain company!  Pre-qualifying someone saves me time, money and aggravation.  I'm not a tour guide, if I were I could charge by the hour.  Good luck, Kat

Yeah, I've scared away a few by acting too hard on them about pre-approval....but then again....with the cost of gas, and the number of homes they want to look at.......who exactly is disrespecting who?

"Mike, Cindy...have you and your lender determined what kind of loan you're getting? Rates, costs, that kind of thing?"

There is so much discussion about respecting and/or disrespecting buyers here that I'm having a tough time understanding something. Ask the above question on your way out to your car (under the guise that you may actually show them property) <---facetious (sorta) and you'll have the basis for RESPECTFULLY having them speak to a lender beforehand.

Sheesh.

Of COURSE it's absurd to ask a client "So...can you afford a house if I show you one?" But is anyone here foolish enough to believe THAT'S what we're talking about?? Oh..I know it's been implied over and over again (ad nauseum). But I don't think any of us is presuming we're talking about "Car Lot' tactics, are we??

The reality is there are many ways of determining a buyer's prospective qualifying prior to (or at the very least early into) showing them property. Some work very well and some don't.

If you think a person who drives up in an "S-Class" is consummately qualified to buy your $800,000 listing, I have a bit of disappointing news for you. Actually, I'll let any number of mortgage specialists here drop THAT bomb. Is it a good idea to take a self-employed buyer out with her self-assurance that she's creditworthy? I guess that depends on the house.

A $150,000 home. Yeah...sure...why not? Almost ANYONE can qualify to buy THAT house. But $2,400,000??? Hmm...dunno.

Of these questions I am sure however.

Is it disrespectful to professionally inquire about a buyer's ability to purchase? No. Never. Ever. Forever.

Is it disrespectful to be...well...disrespectful? Yes, always.


Just sorta thinking out loud here.


Dave

Wonderful post, I think that treating people with respect and presenting the BBA at the proper time are critical to making it all work.  While I understand the not wanting to "waste" your time concept, at some point we have to put ourselves in their shoes and ask ourselves how we would feel if treated the same way.

Business is earned.

Jenn,

     I am with you for the most part.  I have worked with a buyer or two that were looky-lou's, but eventually I believe they will come back to me.  It is always amazing to me how far RESPECT can go with a potential client.  They just want to be listened to and they want us to do what we say we are going to do. 

Greetings Jennifer!

I have a feeling NY law is different with respect to “agency” than in most states.  BY LAW, I must have an agency agreement signed before I show anything.  PERIOD.
Now, I can choose to act as a seller’s or buyer’s agent – without getting an EBA.  I do not attempt to get an EBA on the first set of showings.  But agency disclosure must be signed prior to showing any properties.

In general, I will do two sets of showings before asking for an EBA.  If they don’t want to work with me by then – that’s fine – they can use someone else. I have found that  buyer’s who won’t sign after a certain period generally can not be trusted to work with me and often will try to do end-runs around me by going directly to the listing agent and squeezing him/her for money back for a double-ended deal.  These are games I don’t have time for and refuse to play. This type of behavior may be more of a big-city New York type of thing. It is regrettable, but all too common around here for me to spend time and gasoline on a customer that I have less than a 10% chance of closing.  Multiply that gas and time X 10 to get to one closing and you realize how impractical this is. I’ve worked both ways and have found that those who won’t, after two – three showings, sign up have another agenda that doesn’t include me being at the closing table.  I’ve had customers rack up hundreds of miles on my car before disappearing. Not to mention 30-40 emails. Scores of cost-of-living spreadsheets – you name it, they’ve done it. I had to smarten up and learn to respect myself and my time too.

As for pre-approval…unless there are unusual circumstances…they don’t get in the car without one.  The reason for this is simple.  I’m finding that most people’s eyes are waaaaaaay bigger than their budgets.  They don’t understand the process and the financial implications of carrying a $300,000 mortgage.  They think they can do this on about $1500 a month – including maintenance and taxes!  We live in an area where a 1 BR cooperative (not even a condo) can be as high as $250k and anything under $200k is really tiny or a real “fixer.”  Most people who come to me don’t qualify for anything close to what they want to buy.  These aren’t issues that a “little credit repair” will fix.  These are issues of basic affordability. They are one to two purchases away from what they think/want to afford. Whetting their appetites for things that are so far out of reach isn’t respectful in the least – if anything it’s cruel! For these buyers, there is no “sizzle” no “spark” that says “buy me!”  They have some bitter medicine to swallow in order to build up enough equity to do what they want. They can get there, but they have to “suck it up” and buy things that most people won’t even look at – then fix them up.

Ruthmarie, very well written.   In metro Atlanta we face similar challenges and it's getting worse, not better.   It astounds me how anyone today could be so naive as to believe they can afford a $300,000 home on income of less than $100,000 a year, a recent bankruptcy, collections, a 500 credit score and a judgment.   It's not practical and you would think that with all of the mortgage calculators and financial information available, free of charge, on the web and elsewhere that people would make themselves better informed.  

I and agents I work with frequently encounter a real "attitude" many times, and let's call it what it is "entitlement" - many people see their friends and co-workers in nice homes and believe that bad credit scores and history aside, if they pursue it long enough someone will make the dream happen for them - oh, wait, actually, that worked for several years didn't it!  It's going to take a while for the public to realize that the days of EVERYONE owning a home without working hard to achieve the dream is not realistic, and we cannot function or maintain a stable economy trying to make that happen. 

I have not yet come across anyone who can't buy a home, with the exception of a few who contacted me and were very up-front, saying they knew they couldn't get a mortgage due to past problems and would I help them find a lease-purchase opportunity.

What I've found to be an issue with the "buyers are liars" phrase is not that they're "LIARS" but that they don't really know what they want!  LOL.  (which is why you end up selling them something totally different than what they originally told you they wanted.) 

What has happened though is not that the buyers don't qualify for the mortgage -but the mortgage doesn't get approved becuase the house doesn't appraise! Or, after looking at two dozen houses, they decide to take out a home equity loan instead and put an addition on their house.

Yes, my time IS precious.  So is theirs.  And I'd also like to be the agent who took the time to listen to them and was interested in their needs.  They will remember that, especially if I keep in touch with them...eventually they will buy, or maybe they will refer someone.   

Karen - I HATE the term, Buyers are Liars just because they change their minds in the middle of their search. Who doesn't do that? I think we actually contribute to this phenomenon when we push buyers to give us  very detailed description of what they want and then try to find THAT house. However, the buyer would be happy with other types of homes, with more or less or different amenities, so by asking for so much detail, we force them to make decisions about things they may not care about. For example, if you ask someone if they want a garage or not, who is going to say "No, thank, I don't want a garage." But maybe the buyer doesn't care all that much.

I guess it depends on how you want to run your business, and what is expected by consumers and agents in your local market.

In my experience, it makes no sense to show homes to people who do not know what they can truly afford. Even more in today's market, they are best served by picking a loan BEFORE picking a house. That way they are not pressured into getting some exotic loan that they will later regret.

Consumers often think of us as working "for free" and that agents should not highly regard their own time. To run a good business, though, it is imperative to not be a marionette at the end of a string, jumping at every call to show property, for instance. If you run out and show homes to total strangers, not only do you risk wasting everyone's time (including your own), you also risk your safety. 

When buyers are pre-approved (or at least have begun the conversation with a good lender), not only do they have better tools for decision making, but there's an added benefit of "more safety" for you before putting that person or couple into your car.

I am not willing to put total strangers in my car, nor to meet them at homes. Working with a lender is smart on so many levels as a prerequisite to doing that. But of course there are lots of ways to run one's business. I wish you success and above all safety....

Hi Karen,

You are very fortunate.  Might be where you live - I have no idea. But I was warned from day one - DON'T WORK WITHOUT PREAPPROVALS!  It should be added that most brokerages around here actually advertise that they will only allow qualified buyers to view someone's home!  I have to say I have no notion as to how to enforce that one. But its all over everyone's literature!

However, every experienced agent who works my area INSISTS on that pre-approval being in place before taking anyone anywhere.   I don't know one veteran agent in my area who doesn't do this and my guess is that our location is the reason.  It's VERY expensive here.  Unless its a studio, you are usually at roughly $200k for almost anything else desirable - and that's generally a 1 BR unit without any frills or much room. Starter house?  A Nice starter house  - if you want more than just one bathroom  - over $600k.  So many, many people don't qualify and many more "imagine" that they qualify for far, far more than they do. When I get buyers to qualifiy themselves, they generally find they can afford $50-100k LESS than they thought.  Most think backwards.  "I have a nice income, therefore this small house SHOULD be affordable."  So the pricing situation creates a situation where most start out OVER-estimating what they can get - by wide margins. Unfortunately, this is Westchester and being 20-40 minutes from midtown Manhattan comes with a huge sticker price. I have found that once I start taking them to the places they WANT (not what they can afford) that all I have done is whet their appetites for more house/luxury then they can possibly handle financially.  This turns them off to the whole buying process and I lose the sale.   Not getting them qualified up-front is a lose-lose - for them and me.  It sets the buyers up for a major disappointment and me for losing a sale. I've never closed a deal with someone who hasn't walked through the door with a pre-approval - or gotten one at my request.   Something always goes wrong with people who can't/won't do it.

I would say that 80%  have eyes much bigger then their wallets.  I need realistic buyers not crazy people with pipe dreams.  This same type of person will often not "accept" the market that they are in and run around with new agents who don't know any better trying to lowball things so that they can "qualify" for more.  New agents around here are truly desperate.  99% won't see a closing for over a year - but they didn't know that when they signed up - so they go along with it thinking they can "create" a buyer.  They think this person will get "realistic" after a while and finally buy something they can afford. It's insane because most of these people will not become buyers.  People have a minimal set of "standards" before they will buy.  If what they see not to that minimal standard, they will rush back and hug their rental.  It is not a wise financial move, but that's the behavior and there is no changing it.  The behavior here is that because houses are so expensive, people feel that if the look under enough rocks they can "steal" something - after all this IS supposed to be a housing slump.   This mentality can cause agents to waste outrageous amounts of time and gasoline and completely undermine their ability to get started in more constructive ways.

BRAVO! This totally reminded me of the time my husband and i went house shopping. We were wanting to purchase a 4 bedroom home closer to his job. We packed a cooler and snacks for the kids and took off in search of a nice neighborhood in the area. We must have looked for a couple of hours and then finally found the ONE...It was a beautiful 2 story house in a very nice neighborhood. We found the INFO Tube and phoned the selling agent. Even though it was terribly late on a Saturday, she still insisted on showing us the house. It turned out that it was not going to suit family's needs. So this agent take out a pad and jots down exactly what our family was looking for in a new home...the kids even told her what THEY were looking for...She then sets up an appointment the following Monday to dedicate the morning to showing us all the houses that she thought would meet our needs. This agent took the time to KNOW what we wanted, took the time to show us homes all over the area we wanted to live in. She was extremely professional, funny, and never once made us feel like we were taking her away from something "important". It's not always about "hurry up and make them sign on the dotted line"...however...each agent is different. And i will recommend AGENT to anyone looking in this particular area! Best of luck with YOUR approach as it seems you too deserve a tremendous amount of respect from your potential buyers as our agent did from US!

I don't remember the statistics, but I remember reading that a very low percentage of buyers actually bought the home they originally inquired about.

When I saw all the comments I thought the picture would have generated a lot of them. I remember a while back when Mary McKnight posted a similar picture, and it was a huge hit. Every comment mentioned the picture. Hey, but this is great. It's all about what you wrote, and very little about the pic. That's cause you a such an awesome blogger. But I really love the pic too!!!

As a newer agent, I am refining my approach to buyers, and I seem to have gotten some practice in the last few months. My first buyer  seemed to be perfect. She was pre-approved and "ready to find a home."  After weeks of driving her around, she has decided to move back in with boyfriend. 

On the other hand, I am working with other buyers who are going through  the buying process for the first time. I showed them 4 houses on the first day that I took them out-one of those homes being an open house that I was doing that day. I already had a relationship with them from church, so educating them and showing them homes has been a pleasure. Since we have a relationship, they are very concerned about my time and the amount of work that I am doing for them.

My manager says that working with clients is like a courtship. You don't ask someone to marry you on the first date (unless you want to scare them). At the same time, however, he cautions us not to use all of our time and resources on people who are not going to buy. He says to put them on a "slow drip" of following up until they are ready.

First itme home buyers are the toughest ones these day i would say...Hey just send them my way and I will take care of them! ;)

Jennifer,

I agree - there is a grey area in there where I think a lot of realtors leave a lot of business on the table.  You cannot force buyers to agree to things they most often do not understand.  I think the respect goes both ways... if an agent listens to a buyer and respects their needs and goals and feels hey this agent is looking out for my best agent, then that buyer will in turn show respect to that realotr.  Whola !  A relationship builds... we never slam buyer agency down someone's throat when we first meet a new buyer, but instead look to build relationships.  I like the way you think and write !

Philadelphia Real Estate

Jennifer- very well put.  The only time I aks for a customer to obtain thier proof of funds or pre-approval before we begin a search for homes are when we will be focusing on foreclosures or short sales.  I have my customers get all of their ducks in a row before showing distressed sales because you need to be able to act fast in those situations and the banks will require that all offers be accompanied by those pre-approval documentations.

We agree totally!  Great attitude and article!  Even the ones that can't qualify now know people or have friends that can. With the right lender the can'ts can become cans over time, often with a little guidance.

nice post! Word of mouth advertising is amazingly helpful...it's always best to keep it POSITIVE. The last thing you need folks saying about you is "wow, that was a rude agent! Did she seem like she was in a rush to get rid of us?" for example.

I could not have said it better myself...  Just have to be thorough, diliegent and honest.  Now matter which way you play it, its always a roll of the dice.  I have learned to trust my gut and press forward.  Thanks for the insights!

When my previous home was for sale, the listing office called for a last minute showing, which then showed up late, and for whatever reason I did not leave the house while the other agent from the office brought the potential buyer through.  The agent took the buyer as far as the kitchen and then spent a good 15  minutes in there trying to convince the buyer to sign a buyer's agent agreement with her.   How is that for being agressive?  I would have been so turned off and I bet this buyer was too.

Jennifer,

Respect can be shown even if an agent inquires about the buyer's ability to purchase the kind of home they wish to have.  I think it's a disservice to the customer or client to lead them blindly into thinking they can obtain a loan for a certain amount when in actuality they cannot.  The outcome could be worse than an agent spending time and money...the buyer could lose money as well in the process.  A home inspection, termite inspection, both cost the buyer.  It's not wrong or disrespectful to advise a customer or client to find out what they can qualify for.  In fact I think it is an important part of the process and of value to the buyer.  They may decide that now is not the time to buy.  Their hopes and designs for a certain home may be something for a year or two down the road.  Better to know now than for them to be disappointed when the loan gets denied.

Brian

I agree with you....I do get the pre approval pretty quickly though and want the process started but I don't want my buyers to feel pressured.

Wow Jennifer. You've really struck a nerve with this topic.  ;-)

Jennifer, I agree completely. Has anyone ever had a deal with a perfectly qualified buyer fall apart at the end due to financing? My guess is most of us have had that happen at least once. With todays lending environment, a buyer may not be determined to be fully approved until days before the actual closing-and with the new financial regulation reform, we are going to see it get even tougher. We'll see lenders pulling credit reports and asking for documentaion the day before closing.

A good agent or REALTOR has incredible instincts and we know when we're being played and avoid those situations. I'll work with any buyer whether PRE approved or not. As part of my counseling process the procedures from looking at homes to contract are explained. As a listing agent, I really could care less if a buyer is pre qualified at the time they write an offer, and could care less if a buyers agent produces some useless pre qualification letter. Our contract languages stipulates timelines for lending approval and I'll expect them to adhere to the contract, just as I do as a buyers agent.

We all walk through department stores and eventually buy. We browse the internet and use someones resources and eventually buy. Can you imagine if the vendors put restrictions on our shopping until we committed to buying from them?

Jim - I'm so glad you commented on this - you make some great points... Thank you!