Are You a Serious Home Buyer?

Home Buyers are not equal.

Perhaps that is a provocative statement, but let me take a moment to explain.

Home Buyers buy homes. That might be self-evident, but some people think that because they might look at homes either on the Internet, through whatever open houses happen to be open on a particular afternoon, or they get a Realtor to open up some homes so they can see them that they are 'Home Buyers'.

While some of these people might eventually become home buyers, these activities in themselves don't make people home buyers. These activities are among those that home buyers will take, but there are two other essential steps that must be taken before one is a serious home buyer.

1) Pre-approval with a reputable lender. This is not a pre-qualification, which means next to nothing these days with some lenders' requirements so loose that their qualification guidelines basically involve not much more than fogging a mirror. Pre-approval means that the lender is committed and will give you the money to purchase a home up to a maximum, subject only to the appraisal coming in at or above purchase price and delivery of clear title and termite report. Verification of income, debt and credit? Already done. All we have to do is find a suitable house. Serious bonafide home buyers do this.

2) Signed Buyer Broker Agreement. Serious home buyers employ a Realtor directly, and while this is relatively new in California real estate practice, it gives a level of seriousness to the home search that is essential for the home buyer to be assured that every possible home meeting (or exceeding!) the buyers' needs are considered, and that the home is purchased at the best price possible. While all of the usual Multiple Listing Service homes are included in the home search, there are other 'under-market' homes that can also be brought to the attention of the home buyer. Non-MLS homes such as For Sale By Owner homes, various distress sales such as NODs and REOs, agent and office exclusives, and various classes of pocket listings can be ferreted out and brought to the attention of the serious home buyer. Some of the best deals are made this way.

Some of you are wondering why these so-called 'under-market' homes aren't within the home search criteria of every agent from the get go. There are three reasons: 1) these homes take a lot more effort to find to begin with, 2) they are usually not 'clean' deals, in that there are usually problems associated either with the properties, title, or seller, and 3) because the agent commission is not determined up front in most cases, the risk of doing a lot of work for nothing is substantial.

The first two situations go with the territory, in my opinion. It's why it is called 'work'. The third condition is critical to my doing my best work on your behalf. This is almost self-evident if you think about it, but most people are pretty oblivious to how Realtors get paid. This business isn't conducted as a public service out of the goodness of our hearts by independently wealthy knuckleheads. Like you, Realtors have bills that have to be paid.

One of the terms of the Buyer Broker Agreement is the matter of commission. If the seller does not offer a commission (unlike all MLS listings), the buyer agrees to pay the agent's commission at a pre-agreed upon rate at close of escrow. That way, your agent (me) knows that there will be a paycheck after all the work is done and you the buyer know that absolutely every stone was turned over in a comprehensive home search. Commission is not paid up front, it gets included in the other costs of sale and are paid at close of escrow.

The very best deals are made by home buyers and their Realtors when a Buyer Broker Agreement (BBA) is entered into up front. There are of course other details advantageous to the home buyer in a BBA that we will cover in detail. One of the big ones is that if the seller offers a selling commission upfront as in all the MLS listings, there can be a substantial credit to you the buyer for closing costs. All the way around you, the buyer, win with a Buyer Broker Agreement. Serious home buyers take the time and effort to understand this and often embrace this tool.

However, there will be some home buyers who balk at it, even though there are substantial benefits to them by using a BBA. That is still workable with me when I am representing you on a home purchase. Penciled out and bottom line a BBA is to your benefit, but as the old saw says, 'You can lead a horse to water...'

It just is not an effective use of time to pre-negotiate a sales commission with every single FSBO or REO or other owner of property that otherwise meets your purchase criteria but does not offer sales commission up front. After all, this happens before you have even seen the property and after sometimes lengthy negotiations and all the paperwork, we might drive up to the curb and you may well just turn up your nose and say 'Next!' for one reason or other.

In summary, home buyers who get pre-approved and have a signed BBA are the most serious home buyers, get the majority of the Realtor's time and attention, and get the best deals. Together we will get you the best house and the best deal possible, without question.

So what are the other types of buyers? Casual buyers, or 'if the right house and the right deal happens to appear' types of buyers might be how some buyers can be described. Most of them terrific people of course, but they just don't have that serious intent and motivation of a serious home buyer. To start off, many of these people won't talk with a reputable lender and get pre-approved for a purchase loan before they go shopping for a home. This shows a definite lack of seriousness. Some actually say they don't need a loan and are an all cash buyer. While people with 'all cash' do exist, at this market's current price level they are fairly rare. When people tell me that they will buy a home for all cash but are unwilling to provide any verification, warning bells start ringing. Unless I have a personal level of knowledge about their abilities, I start thinking 'drug dealer' or 'pathological liar'.

Most people who buy a home or investment property need a loan for the purchase, and many who have described themselves as an 'all cash buyer' have ended up getting a loan for a purchase. More of these alleged all-cash buyer types just disappear after a while and end up as a waste of time. And they do not buy homes, so can they really be regarded as 'home buyers'? No. Then there is the very unfortunate situation of clients falling in love with a home that they just cannot afford to buy. Be smart, get pre-approved as the first step in a home purchase, not the last.

Of course, there are those who refuse to talk with a reputable lender, or have an unknown lender who will tell them anything but end up in basically as bait and switch artists, or simply can't actually fund the loan at close of escrow. As you can imagine, that situation causes problems for everybody. If the home buyer has their lender put a pre-approval letter in writing, subject only to appraisal, etc., that is what we want. If there is a question or concern I may urge the home buyer to make a back-up application with someone I know will actually fund the loan. If the lender is questionable, most listing agents require a prospective home buyer make a back-up loan application with a reputable local lender as well. It doesn't cost anything and it is good insurance in case the original lender will not perform. People who fool around with deals and interest rates just too good to be true are often burned by what often turn out to be disreputable mortgage brokers.

So how about the people that I come across who describe themselves as 'buyers', from sources such as open houses, my website (www.SCVhometeam.com), sign calls, ads, referrals, or just people I know? There are lots of people that I know who will buy a house that if it is priced so low that if they could buy and then sell tomorrow for a guaranteed no-risk big profit, might do so. Of course some of these folks are Big Story tellers, and even if given the best deal in the world served up to them on a platter would in the end not write an offer to purchase. But some would. While the stories of quick riches in real estate are the stock in trade of late night infomercials, and $200 seminars, let's get real.

You've got to walk the walk if you want me to take the talk seriously. If your primary criteria for purchase is a screaming great deal, then a Buyer Broker Agreement is essential. That puts you at the very front of the line. Call me today and let's get together if you want to get serious. If you just want me to send you information by email, fine. But I can't regard you as a serious home buyer.

Finally, there is a huge number of people who indicate by their actions that they are simply not home buyers. There folks give incomplete or wrong information on open house cards or on the website forms, or who don't respond to emails or phone calls or letters or generally have a reduced or even non-existent level of contact. Somehow, they will never manage to get together face-to-face with me... there's always some excuse. I am pretty sure they have the same kind of non-relationship with one, two, or a half dozen other Realtors. Fine. It takes all kinds. But they cannot in any way be described as 'serious home buyers.'

While I understand that not everyone is ready to buy a home today, unless someone who has self-described themselves as a 'home buyer' has some level of communication, if only to say 'not now, maybe next year', is certainly not going to get a lot of attention from me, but may get a periodic email or letter so that they know they can contact me when the time is right for them. Honestly, until the level of communication goes up a few notches and we get together face-to-face I won't be spending a lot of time finding the best deal on the market for these non-serious people. I concentrate my time and resources on the serious one. Again, this is not a public service. This is what I do for a living.

So for those who won't get pre-approved and/or won't enter into a Buyer Broker Agreement, maybe they are home buyers, and maybe not. The lack of commitment to taking the steps that will actually result in a home purchase is an indicator of a certain lack of seriousness or even of loyalty and/or respect for my time and efforts. While some will eventually buy a home, I can't commit unlimited time and efforts to those who won't take some basic steps that indicate they are serious home buyers. There are people who will and those wonderful folks get undivided attention. The rest get what is left.

That is just how it really works in the real estate business. While other Realtors probably won't give it to you straight, I will, and just have. People in the real estate business don't have unlimited time, and Realtors only get paid on commission at the successful close of escrow. There is no wage or salary involved, we are paid only after escrows close. A lot of time is spent trying to identify serious home buyers, and frankly, any time spent on those who don't buy homes is time wasted.

So, if you are serious about buying a home, call me. Let's get together and let's get you into a wonderful home and a great investment. For those who are honest and loyal, there will be some terrific rewards in a great deal of a home purchase and service second to none. Period.

I look forward to meeting with you!