|Leo dicaprio isn't looking to buy in San Antonio...Yet|
Wednesday, June 1, 2016
Mental Illness in Luxury Real Estate: The Curious Case of Fake Buyers
Fake buyers. "Is that even a thing?" Yes, unfortunately as a listing agent of luxury homes, I deal with them on a weekly basis. Large luxury homes attract fake buyers like a moth to a flame.
I find this topic fascinating because it's an unusual part of the human psyche. I also want other real estate pros to know how common it is so it's shut down quickly.
Let me define what a fake buyer is. I'll make up these definitions with some Latin words so it seems legit. I have no doubt there were fake buyers as far back as back as Pompeii.
Luxuria Fraudus Emptor: a buyer that can't afford a luxury home but acts as if they can in order to feel important or to deceive someone.
In contrast is the Luxuria Lookyloo Emptor: a buyer that can afford a luxury home but doesn't intend to buy one. This type of buyer is not really a problem. In fact, though this buyer doesn't intend to buy the home, once they see something they love, they may change their mind and buy the house.
An example is the buyer that wants to build a luxury custom home. They aren't in the market for a resale home but they go look at them to explore neighborhoods, look at a builder's previous projects and get ideas for their new home. So, they schedule appointments to see resale homes. Again, they have no intention of buying one of these homes.
However, if they see something they like, an idea is planted in Luxuria Lookyloo's mind and it starts to grow. That's right, it's luxury home "Inception."
This buyer interviews builders and learns that the home they want may cost a lot more and take much longer than expected. Once the costs and time factor of an architect, pool builder and landscape company become real, the buyer may become receptive to a home that is already built.
Each year, I sell several properties where the buyer looked at the home and seems to like it but disappears. Sometimes they come back and buy the house months later. Inception happened but it took time to take hold. So, even though these buyers may seem like a time waster, they are not. And, of course, it's nearly impossible to spot the Luxuria Lookyloo upfront because they or their real estate agent don't tell you that they just want to get ideas for their custom home. Because they wouldn't get access to see as many homes. The key is they have money. And, that money buys impulsivity and the right to change their mind.
So, let's talk about the true time waster, the Luxuria Fraudus Emptor. This buyer cannot afford a luxury home but they will try to schedule appointments to see them. They aren't looking to steal ideas for a smaller home they want to build and they don't just enjoy looking at houses. The reality is that many of these people are mentally ill with narcissistic personality disorder.
From the Mayo Clinic's website:
If you have narcissistic personality disorder, you may come across as conceited, boastful or pretentious. You often monopolize conversations. You may belittle or look down on people you perceive as inferior. You may feel a sense of entitlement — and when you don't receive special treatment, you may become impatient or angry. You may insist on having "the best" of everything — for instance, the best car, house, athletic club or medical care.
People with narcissistic personality disorder keep the facade up by touring luxury homes and demanding "big shot" treatment. If the Luxuria Fraudus Emptor is questioned about the source of funds for the purchase, they sense they aren't getting special treatment. As in the definition above they get angry. They deflect. They yell. They ask "Don't you know who I am?"
They do everything except produce evidence that they have the money to buy the house. Because they haven't been involved in this type of transaction before they don't know that qualifying the buyer is a standard part of the process.
The real buyer produces evidence of the capability to purchase quickly and respectfully understands the process. The fake buyer gets upset.
A big part of my job as a listing agent is to only allow qualified buyers to see the house. Overwhelmingly, sellers tell me that they only want qualified buyers to see their house. Often though, they don't understand how common fake buyers are.
Here are the main reasons why sellers only want qualified buyers to tour their homes:
1) It normally takes hours to prepare a large home for a showing;
2) Safety and theft issues
How do fake buyers even have the opportunity to see a home they can't afford?
Many agents don't have the experience to understand why a buyer would waste time so they don't know the right questions to ask. Also, the process of qualification can seem awkward and confrontational. So, when a buyer says they are paying cash or they will get a lender pre-approval letter later, the agent may buy it. Some agents are more than happy to follow a potential luxury buyer anywhere, without proof they are qualified, in hopes they will stumble into a big commission.
When I ask the agent for her client's qualifications before I schedule a showing, I'm just as likely to get anger or deflection in return as if I was asking a fake buyer directly. That's because the agent feels threatened - either that she is violating her client's confidentiality or that I'm causing her dream of a huge payday to shatter because I need her to dig deeper to make sure her client is real.
I get the confidentiality part. If that's the reason for blowback, at least it's coming from the right place. But, the skillful buyer's agent knows how to present her client's qualifications without violating their confidentiality. She knows how to obtain full access for her client. Sometimes this is a matter of getting written permission from the buyer.
"Jennifer, 123 Acorn Avenue requires proof of qualification before a showing is scheduled. I know you want to see the home but you're hesitant to provide copies of a bank account today. May I tell the list agent you have been hired as a partner at Radiologists, Inc and send a Google link to the announcement of your hiring?"
Jennifer: "Yes, that's fine."
Agent: "Great, I'll have you put that authorization in writing and I'll contact the list agent."
In the above scenario, when that proof is brought to me and I show the seller, it would result in a showing 100% of the time. The buyer didn't provide a lender letter (she may be paying cash) or copies of her bank accounts. But, we have a name, a reason the buyer is coming, a reasonable certainty that she can afford the house and a stamp of approval of a local institution that presumably vetted her as a real person. That's about as good as it gets and frankly better than a lender letter (that many lenders will crank out without much scrutiny).
It's great to have documents but it's more important to provide evidence of why the buyer will be in the one-third of one percent of buyers that purchase a luxury home (over $1 million) in the San Antonio area.
That's right, only one-third of one percent of home sales are above $1 million in the San Antonio area.
With that number in mind, agents need to think critically to discover why the buyer is that rare unicorn. I'd love to see the fake buyer deterred from looking at luxury homes they can't afford.