Sunday, February 10, 2008

Buyers - our first meeting won't be at the property you found on the internet

I may have lost a potential buyer this week. Although this might not be correct. The customer who contacted me was interested in starting the buying process, but I am not convinced he could have actually followed through.

A customer - Mr. B. - e-mailed me introducing himself as a renter who lives in one of my past client's buildings. He's been a great tenant for Mr. P. for a couple of years and is now ready to try to find a property of his own.

This is a great introduction! But a bit farther in his e-mail, he stated that he'd like to start by looking at a certain property - and sent me a link to a property he found on the internet.

I gave him a call and we chatted for a moment. I tried to make an appointment to get together with Mr. B. suggesting a few dates and times he could come to my office. During the conversation, Mr. B. didn't have his schedule with him and told me a little bit more about what he was looking for. We agreed that he would email me with his availability.

A day later, Mr. B. e-mailed me again to tell me that he was available after 5 pm most days this week, busy this weekend, available after 5 pm all next week and had some free time the following weekend. He included some more information about his qualifications, how much he wanted to spend and how he planned to obtain financing - through a V.A. loan. Again, he asked if I would show him the property he saw on the internet.

I wrote back and cheerily offered a couple of evening appointments but suggested again that we would meet at my office to start with.

In a third e-mail, Mr. B. let me know that he didn't think that I was paying close enough attention. He had a particular way he wanted to conduct business and I was clearly not listening to his request as this was the third time he had to ask to see the potential property. I wrote back to clarify why we had to see each other first in an office setting before viewing properties, but rather than helping set Mr. B's mind at ease that our first meeting would probably lay the groundwork for us to be far more productive on subsequent property searching trips, Mr. B. wrote me back to tell me off.

There are a variety of reasons why I would not meet Mr. B. at the first property, and I thought it would make a great Blog entry to talk about why. Plus I get to let off some steam.

First, there are is a difference between being a "Customer" and a "Client." Everyone out shopping for real estate should learn the nature of their relationship with the agent that they are standing in a house, condo, or 2-flat with.

Mr. B.'s first e-mail indicated to me that he was interested in becoming my "Client." He desired an advocate on his side who could show him properties and represent him in the transaction. In order to form this kind of relationship, some stuff needs to happen. I need to tell you some legal stuff about representing you and what my duties are. I need to tell you about how I intend to get paid. Then I need to learn more about you and your needs and your qualifications in order to find the best property for you, for the best price for you, and for the best terms for you.

In addition, following these steps assures that in case someone accuses me of negligence, or of a Fair Housing violation, I can defend myself by demonstrating that I followed a certain procedure in forming our relationship, and that I repeat this same process exactly the same way for EVERYONE that becomes my client.

I also meet lots of "Customers" during the course of business. Right now I am posting this article during a break between "Customers" while sitting at an open house. While I am here at open house, I am representing my "Client" who is the seller of the property. Folks who happen to come to the open house because they are interested in this property are not represented by me. They are "Customers." I have an obligation to treat them fairly and honestly, hand out forms if asked, and answer questions about the property. But I am not an advocate for the best interests of that "Customer."

But there were a couple indicators that Mr. B. really would not be a good match for the property he was interested in viewing, and I am not in the habit of taking people to see properties that they can not buy.

The property Mr. B. was asking about was a two flat in Wicker Park. It had been foreclosed on by a bank and was sitting vacant. It did not have any renters in it, and was in nearly an abandoned condition. There was no electricity, or heat, or other utilities. No one was maintaining the property or shoveling the snow or making sure the sidewalks had all the ice removed. It was on the market for very close to the value of the land. Now I'm all for the concept of "Buy a lot - get a free house!" but this presented challenges that I don't think Mr. B. was aware of.

First of all, Mr. B. had indicated during his first conversation with me that he wanted something a little nicer than the building he currently lived in as a renter. I sold that building to Mr. P. seven years ago for $365,000 and it was recently appraised for close to $700,000. I know I could sell it for well over $600,000. It is located in a neighborhood not all that different from where the building Mr. B. was interested in. So from my perspective, Mr. B was asking to view a property that would not meet his expectations.

Then, let's say for the sake of argument that I could choose to meet Mr. B. at the first property to view it AND cover the questions and answers, the disclosures, and the other topics I would ordinarily cover in our first meeting. This is possible and I have seen agents do this before. But the property in question was a vacant foreclosed property in nearly abandoned condition. And Mr. B. wanted to meet in the evening. A dark Chicago evening. In the winter. With no lights or heat. Or furniture. You can imagine that this is not an atmosphere appropriate to conduct business. I am not exploring a dark, cold, treacherous property unless I have a real solid idea that this is a property that is interesting to my prospect. In fact, for my investor clients, I usually instruct them to drive by an investment property like this before I take them inside just so they are sure that from the outside of the building and the surrounding area that this is the kind of thing they are looking for.

Lastly, remember Mr. B.'s statement about his V.A. financing? Veteran's Administration financing requires that the PROPERTY also qualify for this loan program - not just the buyer. Though Mr. B. was diligent about beginning his mortgage qualification process, his V.A. loan officer did not tell him about the obstacles set out on the property and its seller. Property subject to V.A. financing must pass a stringent inspection that the property is suitable to be a home for the buyer. V.A. inspectors have been known to demand that gutters be in perfect working order, that peeling paint be re-painted, that the roof be in good condition, that the heating and air conditioning be in good working order and that the kitchens and baths be perfectly suitable for move-in. And these demands are usually placed upon the seller.

The property that Mr. B. identified was a distressed and foreclosed two flat. It was not even clear whether all the appliances were still in the building or had been stolen by previous tenants or the old owner. Certainly the heating systems, the kitchens and baths, and the exterior components of the building were in a state of disrepair. The current owner of the property is a bank and the property is listed "AS-IS." This property would not pass an inspection by a V.A. inspector for certification for ownership by a V.A. loan candidate.

Visiting this property could not only be a waste of time, but could also be perilous considering the weather and un-maintained state of the property.

Buyers, refer back to my previous post on “cred” to refresh your memory on establishing a relationship with an agent. Once you’ve got that established relationship going, then you can ask for the world – and your agent – myself included – will try his (my) best to accommodate just about any request. But without it, exploring in the cold and dark is more than you can expect.


Ric said...

Great post, Bob. Full of insight. As a buyer, I'm wondering if you require buyers to engage you as their exclusive buyer's agent. That would give me hesitation.

Bob said...

Indeed. Time is money. So is gas. After our initial buyer presentation, I do ask my clients to work with me exclusively. It's part of the "Faithful and Loyal" speach.