It’s important to prequalify any real estate prospect you receive. Without going through the prequalifying process, you could end up wasting time working with a prospect that isn’t qualified to buy a home.
One of the most important steps in the process is the mortgage preapproval. When a prospect has a preapproval letter, this can help give you confidence that they can actually get to the closing table.
When you’re working on prequalifying real estate prospects, there are some important things you want to do and some things you to avoid doing. Let’s look at both.
The Dos of Prequalifying Real Estate Prospects
1. Start with a Simple Conversation
The process of prequalifying any new prospect should always start with a simple conversation. Usually, if you start with a conversation, your prospect will give you a good idea of where they are at in the process. It doesn’t take very long to get a good view of a potential client’s financial picture if you keep the conversation casual.
2. Get More Information
Of course, prospects don’t always give you a clear picture just through conversation. It’s best to get more information when prequalifying real estate clients. You want to have a process you use for this part, as it can be difficult to ask the personal questions you need to ask.
Some prospects will have no issue showing up with proof of income and a preapproval letter from a mortgage company. Others think they will easily get approved simply because they have decent jobs. Also keep in mind the difference between a mortgage pre-qualification letter and a preapproval letter. A pre-qualification letter can be easily obtained online without the more in-depth determination and proof required by a lender.
Helping your new clients understand that most sellers will require a preapproval letter can move you in the decent right direction. Starting with a simple question, such as will you be getting a mortgage or paying cash can help. If your prospect states they will use a mortgage and they have not spoken to a lender yet, it’s a good time to recommend a lender.
3. A Standard Questionnaire is Helpful
Using a standard questionnaire as a part of the process can be very helpful. This can give you most, if not all the information you need to ensure you can make the right decision when working with new clients. Of course, you want to make sure you follow the Code of Ethics and Standards of Practice from the National Association of REALTORS.
4. Discover the Motivation
Buyers should have a good motivation for buying a home. Maybe they want to move out of renting, downsize, invest in real estate, or they are relocating to the area. There are many good reasons to buy a house.
When you find out the motivation of a buyer, it can help you prequalify them. Some potential buyers will just waste your time, as they are not really looking to buy. You want motivated buyers that have a good reason to buy a home.
5. Identify the Decision Maker
When working with couples, you want to figure out who the decision-maker is early on. This can help you with prequalifying clients and will likely happen pretty quickly. Identifying the person making the decision in the couple will help you when it comes to closing the sale.
The Don’ts of Prequalifying Real Estate Prospects
1. Make Assumptions
It’s easy to make assumptions or judge a potential buyer, even if they are saying everything you want to hear. Maybe the potential buyer reminds you of a client you had that was hard to work with or wasted your time. This doesn’t mean they will do the same thing.
Keep your assumptions to a minimum when prequalifying real estate prospects. As long as the prospect is motivated to buy and has the financial ability to buy, they might just be the best client you’ve had in a while.
2. Over Screen Your Prospects
There are times when a deeper dive into a potential buyer’s finances is necessary. However, if you take the screening process too far, you could lose good prospects. Make sure you ask the right questions and gather the necessary information, but don’t go overboard.
A good rule of thumb, if the buyer will have to provide the information to the seller, you can ask for the same information to prequalify them. This may be a bit different from the average housing market to the luxury market. It can also vary with cash transactions vs. mortgages.
3. Discount a Prospect that isn’t Qualified Right Now
It’s common for real estate agents to move on from a client that doesn’t qualify right now to buy a house. However, this prospect could go through credit counseling and do the work to become a well-qualified buyer in 3 to 12 months.
If you can help them get there, they will likely trust you when they do buy a home. Recommending the right credit counselors, lenders, and other helpful options can go a very long way.
There are many things you want to do when prequalifying real estate prospects and things to avoid. Make sure you have a good screening process to help you avoid the time-wasters.