The Bogus Buyer

Once upon a time, a broker showed a prime property to a buyer.

The broker first met the buyer through an online inquiry. The property was being sold for hundreds of millions of pesos. She knew that buyers who could afford such properties were easily offended, so she didn't probe into the buyer's identity.

After seeing the property thrice (once to do measurements), the buyer finally made an offer. To ensure the sincerity of the buyer, the broker asked him to sign a written offer electronically. The amount offered was significantly lower than the asking amount, so negotiations ensued. After a week, the seller and the buyer finally agreed to a price. The seller signed the revised offer letter that contained the final agreed price.

The broker was ecstatic about becoming a decamillionaire thanks to a single deal. Prior to the transaction, she had maxed out her credit card, merely paying the minimum amount each month. She thought that her luck was just about to change and all her dreams were about to come true. This deal was the first of many.

The next step was to secure the earnest money, which was 10% of the transaction amount. The buyer said he was abroad and would issue the earnest money check as soon as he got back two weeks later.

Two weeks passed, and the broker followed up. The buyer said he already had a Manager's Check prepared.

Another week passed, and still, no payment was made. The buyer made another excuse–he was waiting for funds to be remitted from abroad but was having trouble due to anti-money laundering regulations. The broker, of course, never gave up hope in closing the deal.

After roughly a month, the seller finally decided to pull out of the transaction. The broker was surprised to find out that the owner had her banned from entering the village.

As it turned out, the seller declined another offer (which the other buyer took offensively) and lost the chance to sell the property.

End of story.

Lessons:

1. Contrary to what most clients think, brokers can only do so much to filter prospective buyers. There's a thin line between figuring out if the buyer could afford such a property and offending them. Imagine going inside a car showroom and hearing the sales staff ask what your line of business is. That's precisely how buyers feel when we ask such probing questions.

2. Require buyers to submit competent proof of identity when submitting written offers. This tests their level of sincerity.

3. Inform/remind sellers that unless some sort of sizeable earnest money is paid, written offers (even with the ID) bear no weight. While these written offers are legally binding, no one wants to go through costly legal proceedings. Money talks, bullshit walks.

4. Rule number 1 for brokers is "bawal ma-excite."

When brokers chase after deals, excited about the money they're going to make, it often leads them to say things they aren't supposed to or to rush the transaction. Based on the story, I could imagine the broker reassuring the seller that it's a sure deal. When the transaction falls apart, the credibility of the broker goes with it.