Sellers are always asking me how I go about qualifying buyers: both prior to showings and again prior to accepting an offer. Yesterday’s Nor’easter was the best "qualifier" of real buyers that one could hope for as masses (as many as 50-60 people) of dripping wet buyers crowded open houses despite weather conditions. The common characteristic that all of these buyers shared; they were REAL! There were no lookers out yesterday. Now if only I could figure out a way to control Mother Nature.
Yesterday reminded me of an April a few years back when we had quite a snow storm on a Sunday on which I had multiple open houses planned. The sellers were insisting that I cancel the open houses but there was no time to effectively do so. We went ahead with 2 open houses in The Armory at 529 West 42ND and only had two prospective purchasers show up. They each bought one of the apartments. Again, the weather rarely keeps real buyers away.
So the next time you or your real estate agent think of canceling an open house due to weather, think again. Know that anyone who trudges through bad weather to view a property is most likely a very serious prospect. Aside from the weather, it’s this agent’s humble opinion (I said OPINION) that it is very difficult to "qualify "someone prior to them viewing a property. Doing so, an agent not only risks violating Fair Housing Laws, but could subjectively exclude someone who may indeed be a perfect fit for the property. Once prospective purchasers have viewed the property and indicated their willingness to proceed to the offer stage, qualifying them becomes absolutely necessary and exponentially more easy.
Additional tips for qualifying buyers unless you’re fortunate enough to have a Nor’easter:
- Have buyers complete a Financial Statement and consider insisting on it being notarized.
- Be sure to insist that buyer’s provide specific financing information including how much they will finance (% of purchase price) as well as what type of mortgage they will be obtaining, and monthly costs associated with mortgage.
- Ask for a Pre-approval letter from a mortgage broker or bank. Don’t confuse this with a pre-qualification letter which is based solely on a verbal verification of assets/income. Check out the difference at Thinkglink.com: Pre-Approval Versus Pre-Qualification
- Determine whether or not the offer is contingent on financing. For those who don’t know what this means, here goes:
- Financing Contingency (Check out this detailed explanation from guest writer/attorney Craig Blackmon at Rain City Guide). Basically the financing contingency gives the buyer a finite period of time (usually 15-30 days in NYC) to obtain their mortgage commitment. If the commitment is not received in that time, the buyer may be able to retrieve their 10% contract deposit from the seller.
- No Financing Contingency (Best explanation from my friend and colleague Noah Rosenblatt at UrbanDigs.com)
Once you have compiled all of this information (ideally from more than one buyer as was the case after our super soaked open houses this weekend), you can select the prospective purchaser with the best overall financial picture. Again, if this is too difficult, just hope for that Nor’easter. It brings out the best buyers every time.