How To Filter Out Non-Qualified Buyers In A Real Estate Transaction
A common concern of For Sale By Owners (FSBO’s) is how do you filter out the serious buyers from non-qualified people who are going to waste your time. Here are a few tips that will help you protect your time so you only show your home to qualified buyers.
Require Pre-Approval
When you list your home and begin getting calls from potential buyers, one of the first things you should ask them is if they have been pre-approved. If they say “yes”, require that they bring identification and the pre-approval letter from their lender. If they have not been pre-approved, tell them you require the pre-approval letter from a lender prior to viewing your home. Have a list of 2–3 local lenders that you can refer them to and welcome them back when they get the pre-approval letter.
If they are a cash buyer, ask them to send you proof of funds in the form of a bank statement or letter from their local bank.
Require an Earnest Money Deposit with Any Offer
When evaluating the offers, do not accept any offer that does not include an earnest money deposit. An earnest money deposit is a way for a potential buyer to prove they are serious about purchasing the property. Generally, it is anywhere from 1–2% of the purchase price, but can be anything of value offered as consideration.
The earnest money deposit can be conditional upon Buyers Due Diligence, Financing and Appraisal Qualifications, and Inspections. An offer without an earnest money deposit usually means that the Buyer is not serious about purchasing the home or has other financial concerns that may delay or cancel the contract down the road anyways.
Hire A Real Estate Attorney
If you are not going to use a Realtor, consider hiring a Real Estate Attorney to help you review contracts. A good attorney will be able to explain the contract and terms that you’ll need to pay attention to throughout the transaction.
An attorney will NOT help you with negotiations, coordinating inspections and timelines or other aspects of the transaction so be aware that you’ll have to handle that on your own.
Be Willing To Pay the Buyers Agent Commission
In a typical real estate transaction in Utah, the Seller of the property pays BOTH the Sellers and the Buyers side of the commission. FSBO’s try and sell on their own to avoid some of those commissions, but you may want to consider paying at least the Buyers side.
Because buyers do not pay the commission, it makes sense for them to use a Realtor to find a home. By not offering the Buyers commission, you seriously limit the amount of potential Buyers that will see your home. This is important because many buyers already have an agent when they find out your home is for sale. You want the most number of buyers as possible, so offer to pay that commission.
By successfully qualifying potential Buyers you will be able save yourself time and headache dealing with un-qualified time-wasters.
