Real Estate Matters
Real Estate Matters: What it means to be a prospective buyer
Q: Is there an industry-standard definition for a "prospect"? It seems that every real estate agent has a different opinion of what this means.
A: There may be different definitions of "prospect" depending on the circumstances. Since you didn't provide any context for the term, here's a broader definition.
If you are selling a home, and that home is listed with a real-estate broker, the definition of a prospective buyer can be quite broad. A prospect can be anyone who is interested in the home during the listing period, whether they saw the "for sale" sign in the front yard, an ad in the newspaper or one of the many variations of the listing for the home on the Internet.
In addition, if the homeowner shows the home to someone, that person also is a prospective buyer.
Why is the definition of prospective buyer so broad? Well, the listing agent wants the broadest definition possible to make sure that if the home is sold during the listing period, the listing brokerage house gets its commission.
As a seller, you might think that's a bit unfair. What if you find the buyer by talking to someone who doesn't even know the home is for sale? Even if the prospective buyer never had a conversation with your listing agent, the listing agreement is written broadly enough to allow the real estate company to get its commission.
Most listing agreements are exclusive. That means that you, the homeowner, have agreed to list the home exclusively with one real estate brokerage, and that agency will collect a commission when and if the home is sold during the term of the agreement and even for a period after the expiration of the agreement.
An open-listing agreement would allow you to list your home with many agents. In such an arrangement, the agent who brings you the buyer is entitled to the commission.
If you had an open-listing agreement with several agents, you might define "prospect" differently. In such a situation, you might consider a prospective buyer to be one who was found by one broker and whose interest can be directly attributed to that broker.
You might even say that if you find the buyer on your own, that prospective buyer is yours and none of the brokers under the open-listing arrangement may be entitled to a commission.
Q: We have a first mortgage of about $160,000 and a second mortgage of about $25,000. The monthly payments are $1,450 for the first and $360 for the second. Due to a job loss, my wife and I could not pay the first mortgage payment. We relocated from North Carolina to another state for a new job and rented the house. We submitted paperwork for a loan modification because the monthly rent wasn't enough to cover both mortgages and we didn't make enough to cover the difference.
The first lender told us that since we moved, the house was no longer considered our primary residence. They would not negotiate or take partial payments. We gave them nothing, and the primary lender foreclosed in mid-September.