More Brokers Checking Customers Credentials

More Brokers Checking Customers Credentials

By Jeff Wilder

Hi, glad we met, at least in passing (for real) in D.C. Here's my article, which had a May 1 deadline, for the June 2 issue. Hope everything is going well. Jeff Wilder (jwilder1@erols.com)

More Broker's Now Checking Customer's Credentials Up Front

By Jeff Wilder

Hotel brokers are, by nature, optimistic and trusting. Their job is to service the lodging marketplace, gather salable hotel listing assignments, locate customers for deals they're brokering and close them. As a broker for close to three decades, I'll affirm what most professional brokers understand, that being our most important relationship is with the seller. We seek to prove ourselves to owners so that we may be hired to market their properties. Once employed, we energize our customer databases in order to solicit qualified buyers "interested in our wares."

How does a broker determine whether a customer is qualified for a particular opportunity? Generally, the answer to that question is straightforward. When they call in for deals, we discuss their requirements with them. How much cash do you wish to invest? What type of property are you looking for? What do you currently own and manage? We spend time on the telephone and (less often) in person qualifying customers as best we can. Then we input them into our computerized databases based upon the facts we've gleaned from our discussion. So, when a deal comes in and we set up our target customer base, it's likely the right customers will be identified and their interest solicited.

In the past, it's been the exception to the rule that brokers would require a customer to provide proof of their financial capabilities. After all, customers have their choice of brokers to call and it borders on the offensive to ask a person for supporting proof that he can perform, as a precondition for doing business with him. Property Offering packages usually are sent to 50 to 100+ prospects, so the credibility of any one particular buyer is, initially, not of great consequence. I sense that method of operation is changing as the number of hotel buying groups expands, seemingly geometrically. Remember, if a customer is offered a property, that generates providing a marketing package, follow up conversations, inspections, negotiation and so forth. Truly, a lot of time can be wasted with a buyer who indicates interest, attests to his own capacity, but may not be in a position to close on terms acceptable to the seller or the lender.

Brokers are now becoming much more discerning in their buyer qualification process, largely because time and due diligence requirements necessitate policy changes in more and more broker's offices, as the following episode affirms.

Several weeks ago, one of our brokers was contacted by a customer interested in purchasing a hotel listed with another company. That broker required this customer to provide supporting information on himself before sending out a marketing package on the subject property. He asked to receive trade references, a resume and personal financial statements. As this fellow was an honorable person we had successfully closed a deal with in the recent past, we were pleased to provide a "thumbs up." What was the other broker really saying? In today's newly popular expression, it was simple: Show me the money!

I initially had ambivalent feelings about the propriety of asking somebody to, essentially, prove they were "real." However, as I thought through this other brokerage company's policy, I realized the wisdom of their point of view. They were saying three (3) things: (a) I've got responsibility to all the owners who've listed their hotels with us to use my time as judiciously as possible on their behalf, (b) I've responsibility to each owner to assure that every customer being offered their hotel has the financial wherewithal to perform, and (c) offers from our performing customers deserve to be treated with respect by our owners, and knowing they've been vetted furthers that likelihood. Our company has now instituted this screening process for most new buyers calling our firm.