Determining Factors of a Qualified Prospect

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.

Paul F. Stillwaggon NJ Estates Real Estate Group

November 2010 LINKING THE LATEST TECHNOLOGY TO OLD FASHIONED SERVICE

Copyright © 2010 Realty Times All Rights Reserved.

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.

Few journalists provide a fair and balanced picture of our services. I want to highlight such an article, which was published in the Wall Street Journal by Kelly Spors, that raises awareness and dialogue on Buyer Agency Agreements.

In the article, Ms. Spors shared with consumers that Buyer Agency is increasing in use nationally. She cited a survey by NAR that 64% of Buyers using agents used Buyer's representation in 2004. That was a 17% increase from 2001 when it was 47%. That means that almost two-thirds of people using a Realtor® to purchase a home are using an exclusive Buyer Agent relationship.

This article would have some value to have in your portfolio of tools. It could be shown to a Buyer to prove that the norm in the industry is Buyer Agency and exclusive right to represent. That 64% clearly backs up your desire to get an exclusive right to represent agreement signed.

There are questions it raises, as well, that we will need to prepare for:

 

1. What happens if the Buyer is unhappy with your service?

    

2. Are Buyer Agency terms always negotiable?

    

3. Do you think you might want to buy a For Sale By Owner?

    

4. What are the terms of the contract?

As a professional, by reading this article, you will be more knowledgeable as to the concerns of the Buyer. It will enable you to prepare for the questions and apprehension that most Buyers are experiencing when we ask them for a Buyer commitment.

I have always believed that the best approach with a Buyer is the straightforward one. Explain to a Buyer that this is the way you earn a living to feed your family. Then bring it to their level by saying:

"You would not go to work for a week or two and work real hard with just a hope of getting paid in the end would you? Since my income is not guaranteed, I owe it to my family to ensure I get paid for the work I do, just like you do. This is the only way I have to get paid. You can understand that can't you?"

Each of us needs multiple arrows prepared for us. This article could be another arrow to use in the right situation. The real value is that it comes from the Wall Street Journal, an independent third party that's highly respected.

The exclusive relationship, at its core, is about a trade of commitments. We are committing to provide a certain level of service, skill, expertise, and time to ensure the client achieves their goals. The client, in turn, must trade exclusivity and assurance of compensation for the services rendered. Anything short of full trade of commitments is damaging to either party.

I know of many agents who have a strong enough presentation and presence about them that they can get away with not getting a Buyer Agency Contract signed, but I don't recommend that. They will get burned every once in a while because of not getting a contract.

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.


Written by Dirk Zeller
November 26, 2010 

 

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