Real Estate Talk: Qualifying A Buyer

How to determine if the buyer has the funds to buy a property

By Joseph Marovitch

Previously published August 31, 2016

Listing brokers (brokers contracted to sell a property) state they will qualify buyers before an offer is presented. To qualify a buyer is to determine if the buyer has the funds to purchase the property.

Sometimes the client mistakenly thinks “qualifying a buyer” means determining if the buyer can purchase the property and has serious intent to buy, even before a first visit.

Brokers are not allowed to deter other brokers from bringing clients and the assumption is if the buyer is visiting then they have intent to purchase if they like the property.

When we qualify a buyer, what we do is request that the buyer has a pre-approval from a recognized financial institution or a letter of proof from the financial institution stating the buyer has the funds in the event they are paying cash and no mortgage.

Before a visit, a listing broker can ask the selling broker (broker representing the buyer) if the buyer has a pre-approval or proof of cash. However, if the selling broker says no, the buyer is still allowed to visit.

Sometimes the client mistakenly thinks “qualifying a buyer” means determining if the buyer can purchase the property and has serious intent to buy, even before a first visit.

When the selling broker brings an offer, the listing broker can request proof of cash or pre-approval to accompany the offer. If there is no pre-approval or proof of cash, the listing broker can shorten the time period for the buyer to provide proof of financing, thereby saving time and aggravation.

What the listing broker and seller do not want is to go through the trial of due diligence including visit, inspection and providing documents only to find out just before or at signing that the buyer does not have the funds.

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Feature image: P. Widling

Other articles by Joseph Marovitch