Assessing exactly how much a buyer can afford

One of the challenges that every estate agent has to face, said Anton du Plessis, CEO of Vineyard Estates, is to decide whether the potential buyer can in fact pay more than he said he is able to or, alternatively, whether he is, in fact overstating what he can pay.

“It can take years of experience to learn to recognise the three types of buyers – those who may go higher than their declared upper limit, those who will have to go lower and, of course, those who have made up their minds to spend a certain amount and no more – despite the fact that they can afford to,” said du Plessis.

One of the golden rules in these matters, he said, is not to ask the buyer what he can afford when he is within earshot of other people: for example, at a show house.

“I have had a case where the potential buyer was accompanied by a girlfriend whom he was keen to impress. Despite stating that he would offer a R1 million deposit, the buyer was actually dependent on a 100% bond in order to purchase, and had difficulty providing R200 000 for his deposit. Such buyers also waste agency time looking at houses that are way out of their bracket.”

Often, said du Plessis, buyers arrive at a show house without knowing the list price. When they discover that the price is way over their limit, they are embarrassed to disclose this and pretend that they are looking in that price bracket.

In these cases, said du Plessis, the diplomatic agent will sum up the situation and show the buyer good value homes in the right bracket, stressing that these are good buys.

With the other type of buyer – the one who understates what he can afford – it may take a day or two to realise this, said du Plessis.

“Some people dislike discussing their financial position and may actually choose to present a humble appearance to the world, for example, by dressing inexpensively and driving an old car. The more one can find out about buyers in casual conversation, the better one is able to gauge their means and assess their position. Then, if a good buy crops up above the supposed limit they will often take it.”

“In a recent sale, a buyer who had indicated he wished to spend no more than R3 million ended up buying for over R3,7 million.

The ability to get the buyer to raise his price when he can afford to do so and when a higher price is justified, said du Plessis, depends to a large extent on the level of trust established between the agent and his client. This, in turn, depends mainly on the agent’s knowledge of his area. If he is au fait with the latest prices achieved on a variety of properties in the area and if he can identify sales trends clearly, the client, quite rightly, will trust him.

“The weakness of many agents is that they simply do not do their homework thoroughly and simply extol the virtues of the home. In the worst cases, even when presented with the statistics, they are not really capable of interpreting them,” said du Plessis.

Although it is the agent’s duty to get as high a price as possible for a client, when it is clear that the buyer cannot go above a certain limit, it is pointless to push him to do so, said du Plessis.

“Here, again, a certain sensitivity is essential,” said du Plessis. “One has to be able to differentiate between the straight talker who tells you exactly what his position is from the conservative who likes to leave a gap above his “upper” price for negotiation if something good becomes available.”

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