The real estate industry has lost sight of a critical fiduciary duty -- to protect the seller from non-serious homebuyers. As homebuyers become more entitled to peek at seller's homes online and in person, the seller's right to be protected from lookie-loos, low-ballers, criminals, and FSBO-seller competitors has been shoved aside.

It's time the industry remembers, and takes steps to change.

Realtor Jack writes:

"I have read countless articles of yours over the years which I have found very interesting, informative and even entertaining. I read one this evening that I thought was very wise and thought provoking. It was your article entitled, "An Argument for Prequalifying Buyers Financially."

"You make some excellent points and recommendations that I really agree with, but feel that actual implementation could be difficult. I would love to hear what you would say to someone calling on an ad, or sign that wants you to meet them at your listing. Let's assume that your office is not near the listing and you know that the prospective buyers, or let's say lookers, have not been preapproved for financing, but they are insisting you show them the house soon."

"I look forward to your response and also reading your upcoming articles."

Jack

Realty Times responds:

Hi, Jack!

You've just hit the vein. This question is central to the future of real estate services which is in jeopardy.

The DOJ is suing the National Association of Realtors for its Internet Listings Display (ILD) that allows brokers to share listings for public consumption (an edited version of the MLS core broker-shared data). ILD also allows brokers a blanket opt-out. If they don't want the listings published by competitors on their websites they can say no, but they can't publish others' listings either. Further, a seller can instruct their agent to put their listing on ILD.

The DOJ would like to see all homes made accessible to buyers virtually by forcing all members of MLSs to share their listings with competitors on their websites.

This is significant because offline, the industry is not set up to show any home to any buyer who wants to see it. In person, some reasonable qualifying is always done, if only for time management's sake. You and your buyer narrow the price range, neighborhood or type of home before you get into the car.

Some online brokers have encouraged consumers to feel entitled to see all homes available for sale whether they are serious buyers for those homes or not, and the DOJ agrees. With the DOJ's intent to bring parity to online brokers, you may one day be required to show any listed home to any person who asks, no matter how unqualified the buyer and how much time you and your sellers waste.

The DOJ believes it is protecting buyers, but did they ask sellers what they want? Do sellers want unqualified people coming into their home -- in person or virtually?

That's the law of unintended consequences and it's time the industry establish reasonable showing policies right now.

Sellers hire Realtors to bring buyers, not traffic. If sellers wanted traffic, they could put out their own ads and throw the doors wide open. They hire Realtors in part to qualify buyers.

So, your first duty is to your client -- the seller who is already under contract with you. Part of your job is creating interest in the home, but it's also to protect sellers and their property from nosy neighbors, lookie-loos, FSBO-sellers, remodeling idea-gatherers, burglers, stalkers and other non-buyers.

Your dilemma is that you want to show the seller that you are generating traffic by having a "showing" on file. Plus, if the buyer doesn't want that house, there's a chance you could show them something else. Third, you don't want to say no to the buyers, because there's another agent down the street who has no qualms about escorting unqualified buyers through people's homes.

Will any of those concerns benefit the seller?

No, so your compass is clearly pointing in the direction you should go, but how?

You have the long-range consequences of letting unqualified buyers into sellers' homes to deal with. Buyers are feeling entitled and the DOJ is suing you.

It's time to turn this colossal tactical industry blunder around. The only way to do that is to go back to your fiduciary duty to the seller.

Be the first one in your MLS to ask sellers' to require buyer prequalification. Use it as a listing tool that will distinguish you from your peers. Your seller can insist on financial prequalifications from buyers, because there is no other rule that prevents unqualified buyers from gaining entry into sellers' homes.

You'll have to warn the seller that taking this stance could mean fewer showings, but they won't be cleaning the house up for lookie-loos. Let them know that if you bring them a buyer, it's a serious buyer.

With the seller making it part of the listing agreement, you can put the seller's requirement into the MLS.

Some agents won't comply, but they will only be hurting their own reputations.

Tell the buyer that the seller insists that anyone coming into their home must be financially prequalified with a letter from a lender containing the lender's name and contact information. You can call the lender and ask one question, "Is this buyer qualified to buy a home listed at X price?" Yes, or no. That way the buyer's privacy is preserved as well.

To get the buyer on board, tell them that prequalification is to their advantage. Not only will they know what range to shop in, but it reassures the seller. Buyers may be reluctant that they have to use the lender who qualifies them, but you can assure them that they don't. It opens the door for them to select a home, but if they want to make an offer, having a lender can move the deal quickly, especially if the seller is relocating or has another offer on the table. Being prequalified is also a good way for buyers to look at their whole financial picture. It helps them clarify their goals and outlook. If they buy this house, how soon can they start a family, buy a car, change jobs?

Point out to the buyer that while most state laws allow you to assist both sides, you owe different duties to both parties. Explain what those duties are, according to your state's laws. If they were the seller -- would they want just anyone walking through their home, or would they want a Realtor who works with only qualified buyers? Someday, they'll be selling their home, too, and they'll remember your ethics.

Most people respond to reason and will appreciate the qualify of service you're trying to give. Legitimate buyers won't be turned off, but if your buyer acts offended, it's a sure bet that they either need more education about the buying process or have another agenda.

So there's your answer. If they accept your explanation, you'll have a customer. If they don't, well, that's who you were hired to protect your seller against.