Are you working with a “Bona Fide” Buyer?

By
Real Estate Sales Representative with for real estate results in the Tri-Cities.

Are you working with a “Bona Fide” Buyer?

Many Buyers don’t have the financial resources and cannot qualify for a mortgage. It is therefore imperative that all Buyers be pre-approved before they start tying up the assets of a Seller with bogus offers.

Asking the Buyer a few pre-screening questions is a good idea:

What amount are you pre-approved for?

How much do you have put aside for closing and moving costs?

How much do you have put aside for a down payment?

Can you provide a letter from the lender confirming your bona fides?

How much deposit (non-fundable consideration) will accompany the contract?

Unless these are satisfied to the Sellers liking then don’t accept the offer.

The responsibility for determining the bona fides of the Buyer is with their representative, and this isn't limited to just the financial ability of the Buyer.

“The condition precedent clause begins with the words “this agreement is conditional upon…” and there is no deal, until the final condition is fulfilled, satisfied or waived”.  - Brian Madigan, LL.B.

This is what the Contract of Purchase and Sale used in British Columbia, says:

Section 21. ACCEPTANCE IRREVOCABLE (Buyer and Seller):  The Seller and the Buyer specifically confirm that this Contract of Purchase and Sale is executed under seal. It is agreed and understood that the Seller’s acceptance is irrevocable, including without limitation, during the period prior to the date specified for the Buyer to either:

A.    fulfill or waive the terms and conditions herein contained; and/or

B.    exercise any option(s) herein contained.

For instance, if a Buyer doesn’t remove conditions because of a failure to sell their own home, selling their home had better be a condition of the Contract of Purchase and Sale. 

So are you working with a “Bona Fide” Buyer?

A contract where the Buyer has not acted in the general principle of bona fides (good faith and fair dealing) is only void at the pleasure of the innocent party (the Seller).

There is a binding contract between the parties when the final condition is dealt with and confirmed with the appropriate documentation and within the relevant time period.

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Topic:
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British Columbia
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The Lower Mainland, BC, A fantastic place to live and work!
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Tags:
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Rainmaker
1,025,715
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

No buyer leaves the office and gets into my car until they are preapproved.

Aug 23, 2010 06:43 PM #1
Rainmaker
1,561,783
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

John,

 

There are many potential buyers, but when it comes to actually doing a deal they don't have any money.

 

Brian

Aug 24, 2010 04:53 AM #2
Rainmaker
179,718
John Grasty
for real estate results in the Tri-Cities. - Port Moody, BC
Your Tri-cities REALTOR, neighbour and volunteer.

Tim: that's a good policy for all buyers.

Brian: I started this post earlier in the year after having had an offer collapse because a Buyer didn't qualify. The representative had told me in discussions he had been showing the Buyer properties for 2 months.

Aug 24, 2010 05:02 AM #3
Rainmaker
1,561,783
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

John,

Some people start looking before they actually have the money in hand. They are still legit, but the money for some reason is not quite ready.

Brian

Aug 24, 2010 06:06 AM #4
Rainmaker
3,756,692
Richard Weeks
Dallas, TX
REALTOR®, Broker

John,

Well said.  If a buyer refuses to sign a buyers rep agreement and get pre approved it can be a big waste of your time.

Aug 24, 2010 07:03 AM #5
Rainmaker
179,718
John Grasty
for real estate results in the Tri-Cities. - Port Moody, BC
Your Tri-cities REALTOR, neighbour and volunteer.

Brian: do you hear of many incidents where it is not finances causing an offer to collapse?

Richard: thanks for the reminder of the buyer agreement; hopefully this will catch on and become an industry norm.

Aug 24, 2010 08:09 AM #6
Rainer
478,183
Not a real person
San Diego, CA

I love it when a real estate agent asks "How much are you pre-approved for?" and the response is, "Oh, I'm just looking right now." Well, we have to know how much you are pre-approved for before we know what to look at! Duh.

Aug 24, 2010 05:49 PM #7
Rainmaker
179,718
John Grasty
for real estate results in the Tri-Cities. - Port Moody, BC
Your Tri-cities REALTOR, neighbour and volunteer.

Russel: Bang on; classic text book, "Overcoming Objections 101".

It's difficult to comprehend that there are those who still let a buyer get away with that response and take them out anyway. Thanks.

Aug 24, 2010 06:13 PM #8
Ambassador
560,552
Peter Pfann @ eXp Realty Pfanntastic Properties in Victoria, Since 1986.
eXp Realty, Victoria BC www.pfanntastic.com - Victoria, BC
Talk To or Text Peter 250-213-9490

Hi John,

great post and I wish we coould get all buyer and more importantly all Realtors, to ask the questions you have used in this post, it would simplify our business 100 times.

I still do not get why, as an industry, sellers have to sign a bunch of papers to get their homes listed, but buyers can and are encouraged to shop for homes without any obligation, commitment and qualifications. In the process, this method wastes a bunch of time sometimes for more than one realtor.

Aug 25, 2010 03:10 PM #9
Rainmaker
179,718
John Grasty
for real estate results in the Tri-Cities. - Port Moody, BC
Your Tri-cities REALTOR, neighbour and volunteer.

This is a Phanntastic point you make about the time expended by a Buyer's Realtor. (plugs are free)

Research reported by Richard Robbins International says that on average a Buyer's Realtor spends 5 times longer than a Seller's Realtor on a transaction. Perhaps this should be reversed? :-J

That also answers why everyone wants to work with a Seller, especially when you and the Seller deterine how much the Buyer's Realtor should be paid.

I appreciate your contribution to the discussion Peter and Linda; thanks.

 

Aug 25, 2010 03:29 PM #10
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Rainmaker
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John Grasty

Your Tri-cities REALTOR, neighbour and volunteer.
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