Determining Factors of a Qualified Prospect
1. Strong motivation
Motivation is simply the desire to do something. The stronger the desires on the part of the Buyer, the easier it will be for you to satisfy or even exceed their expectations. The stronger the motivation, the lower the expectations they will have for a property or your service. A low motivation prospect is willing to look for extended periods of time until they find the perfect home. In essence, they are looking for something that doesn’t exist in many cases. Do they want it? Do they have to have it? Those are the key questions to review in your head while talking with the prospect. If they are hoping for or would like something to happen, the likelihood of it happening diminishes.
2. Financial capacity
We can find people who have a desire or high motivation to live in a much nicer home. That certainly needs to be balanced with financial capacity: the availability of a down payment, credit score, steady employment, and sufficient income. Most people want more than they can afford. A Champion Agent finds out before they invest time on a prospect what their true financial capacity is. If you show property before you know clearly their financial capacity, you run the risk of disappointing your client. The Buyer ends up seeing homes they want but can’t afford, causing them to become frustrated with the properties, themselves, and you. This is a sure way to lose the client.
3. Authority to take action
Do they have the authority to make the purchase? Are they the only decision maker, or is someone else involved or influential in this decision? Far too frequently, low producing agents find out late in the game that parents, friends, aunts, or uncles will have an influence on the decision. This can easily cause a blockage to the sale. The other party, which is usually a parent, will come in after the home is selected and talk the Buyers out of the home they want. Knowing who will have influence on the decision is critical.
4. Realistic expectations, willingness to compromise
Qualifying and the Buyer Interview have so much value in determining this area. We are in a compromise business. The Buyer has to be willing to have realistic expectations of their desires and budget. They have to be able to forgo things that might be luxury items in their budget. They might not be able to afford that 3rd garage space based on their budget. They might have to forgo it because the area they really want to live is older, and very few of the homes have 3 car garages. Agents are better at determining the desire level of a client than the expectation level. We have to guide the client to identify their desires for their next home, then to prioritize these items. What are have-to-have items, and what are really like-to-have items? What is a non-starter item that knocks out the home and what is it that they can live without? Let’s go back to our garage example. If the house didn’t have a 3 car garage but had room to add on that garage and was in the right location and had all of the other features you were looking for, would that be okay? In the end, none of us will ever own the perfect home. We have to be willing to compromise. If we have a client without realistic expectations or with a lack of compromise ability, we will end up with either a large amount of time invested to generate a commission check or no commission check at all.
5. Willingness to understand the marketplace and market competition
This has been a difficult area in the past. Buyers have not liked the bidding war in real estate. They have felt taken advantage of by the Sellers. In some cases, they lost a few houses or had to pay 5%, 10%, or over 20% above asking to acquire a home. For a prospect to become a client, they must understand the marketplace, whatever it currently is. In the end, the market is the market! All real estate agents and Buyers can do is respond to the market. One thing an agent should always know is the percentage of list price to sales price for the homes in the price range their client is trying to purchase. This knowledge needs to be shared with the client, so they understand what it is going to take, at a minimum, to secure a property based on the facts of today. We need to clearly explain to the client that, if they are trying to be the exception, there will potentially be a high level of frustration for them.
6. Commitment to work with you exclusively
My position on exclusive commitment is that they sign a Buyer Agency Agreement. The Buyer Agency Agreement is becoming more commonplace in our industry. There was even an article on the increase in frequency and acceptance of Buyer Agency Contracts in the December 2, 2004 edition of the Wall Street Journal. I would suggest you secure a copy of the actual article to use in your commitment discussion.Why take the risk? I think that if someone is intent or even tempted to take advantage of you, it will come out during this stage when you are qualifying them for an exclusive commitment. You could even use a short list of services that you provide and ask for a trade of commitment, based on that short list of services.
And thank you for making me Your Orange County Real Estate Connection.
Michael Caruso, Broker ABR ABRM CLHMS CRB CRS GREEN GRI
Past President, Orange County Association of Realtors (949) 753-7900