Ask an Agent: How Do You Properly Qualify a Buyer?
Out of 55,000 agents on the Toronto Real Estate Board, Matthew Regan’s The Regan Team ranks 9th. And, out of 18,000 Royal LePage real estate agents across Canada, the team ranks 6th.
What this means for the Mississauga-based real estate broker and CEO is that, along with his team, he has had a lot of practice qualifying buyers, so Regan believes his advice is tried, tested and true — which makes him the perfect agent to answer this week’s question.
How Do You Properly Qualify Potential Buyers for a Home?
Qualifying a buyer is a very important step in the real estate transaction. There are always two sides to a transaction: the buyer side and the seller side. So, how you actually go about qualifying a buyer can be a bit of a touchy subject as you don’t want to insult anybody. If I was meeting you for the first time, maybe we’re at an open house or we’re going out to look at some houses, what am I going to do? “Hey you, can you afford this house?” People will probably take that approach the wrong way.
Instead, the tried, tested and true way to qualify a buyer is to ask pertinent questions. You need to ask questions and you need to ask more questions. Judging by the buyer’s answers, you’re going to be able to read between the lines:
“Oh, you know, we just started our look.” Oh great, okay, well, what does that mean? Are you just starting and you’re ready to buy tomorrow or are you just starting and you’ll be ready to buy in ten years?
Price point is always an interesting one. If an agent has a pretty expensive listing and they’re meeting a buyer for the first time, how do you know the buyer can actually afford the house? That’s where the internet is a great tool: Facebook, LinkedIn, etc. You can even go a bit further. Instagram will give you insight into lifestyle habits and you’ll begin to formulate a picture of who this person is. Really do your homework. Ask lots of questions. And do a bit of detective work. At the end of the day, as an agent, you don’t want to be working with somebody that’s going to waste your time. Your questions as an agent should start out broad and then get more specific as people volunteer more information. It’s really about having a conversation.
My next point is a bit loaded depending on the price range. But, if you have an ultra high net-worth person and you’re working in downtown Toronto in lucrative neighbourhoods, that person might show up in ripped jeans and a t-shirt, yet they could be worth $10 million. This type of person generally keeps their cards pretty close to their chest. In qualifying a buyer, your string of questions will be very different, but more often than not you can find out who the people with money are by just doing your homework and your detective work.
If it’s somebody in a more average or modest price point, it’s people talking to people and coming back to those pre-qualifying questions around timing and where they want to be. Judging by their answers, you’re going to be able to put that puzzle together pretty quickly. At least, you should be able to.
How Can You Reassure a Seller that You’re a Qualified Buyer?
With the number of houses being sold in the GTA right now with multiple offers – meaning, more than one buyer – it’s more important than ever for the seller to be assured that the buyer is qualified. So, how can you do that as a buyer-agent or as a buyer?
You can get an official letter from the bank on letterhead. You can also get one from a mortgage broker on company letterhead that state’s something along the lines of, ‘This buyer has been prequalified up to this amount’. You may not even have to be that specific, but certainly some sort of a letter from a lending institution will go a long way. The better prepared you are as a buyer, the greater chance you’ll be able to get the home you want.
There’s a bit of an art and a science behind pre-qualifying. However, at the end of the day it’s just people talking to people.
Have a free-flowing conversation, ask good non-threatening questions to try and formulate who this person is and you should be able to pre-qualify someone well. That being said, if I’m not getting the answers I want or what the potential buyer is telling me doesn’t match up with what I researched about them on the Internet, I might just go in with a really direct question. Often, that question is: “Is the buyer willing to sign a contract with me to allow me to represent them to buy a house in a given neighbourhood?”
If they say no, I’m moving on. If you’re a buyer, the number one thing you need to do is get pre-qualified from a bank or a mortgage broker.
This interview has been edited for both length and clarity.