Many agents have and continue to work with buyers without the security of a formal contract. Yet, similar to the listing agreement with the sellers, there are buyer broker agreements between an agent and the buyer for a specific period of time, with an exclusivity attached to it - that exclusivity basically states that if they buy any home within that period of time, as long as they're in that relationship with us, we will get paid a pre-agreed upon sum of money. In many real estate businesses, it's 3 percent.
Nevertheless, a big weakness in the real estate business is the fact that we're mostly used and abused as it relates to buyers. Some buyers are confused as to how we get paid - they think that as long as the agent opens up the door, someone's paying the agent, and they don't really care who. Nothing could be further from the truth, but that doesn't stop agents from spinning the roulette wheel and wasting their valuable time with buyers who aren't loyal to them.
It's not totally the fault of the buyers, who often don't know any better. Instead, as agents, we could do a much better job of explaining to the buyers both our expectations and our terms under which we'll work, not to mention how their behavior does and does not affect us.
The first problem is the majority of agents assume that buyers know how the process works. By assuming these people looking for a house know how everyone gets paid, you're on a one-way ticket to getting used without receiving a single red cent. And even if the buyer has bought a home before, and it may have been 10 years ago, the buyer doesn't likely remember how everything plays out.
We whole-heartedly recommend explaining the in's and out's before going in there and asking for a buyer brokerage. The perfect situation is to arrange a buyer's meeting, akin to the listing presentation.
Alan is one of the few people who teaches real estate professionals about buyer brokerages across the country. It's a topic that agents are very afraid to broach in a conversation with the buyer. Too often the thinking is, "If I can just get the buyers in the home and they'll love it, then I can get a quick sale" - but what are the buyer's rights?
In many jurisdictions, they could call up any agent and ask to be shown as many homes as they want, and then decide to call the listing agent on the property they just viewed and ask that agent to write up the offer! In fact, they even have the right as a buyer today to have one agent write up the contract, decide that agent isn't doing a good job for them, fire them in the middle of negotiations, and hire the listing agent or another agent who's willing to cut their commission - believe us when we tell you, this happens every day. The one thing that stops these kinds of shenanigans is the buyer brokerage agreement.
Procuring Cause - R.I.P.There is a REALTOR ethics rule called Procuring Cause, which would protect us as agents amongst our industry just for being the first agent to show and/or identify a home to a buyer. Essentially, you could win the argument that you deserved the commission, if you could prove you introduced a buyer to a listing in any form or fashion, and those buyers decided to buy - not through you, the introducing agent, but another agent entirely. As a result, you could sue for half the commission! But this is no longer as clear cut as it used to be. Buyers are still the consumers and without the proper agency agreements signed, the agent loses a tremendous amount of protection if the buyer chooses to change agents almost any time before a transaction is consummated. Of course, each troublesome scenario has its own details that differ from others Nonetheless, we are left with an even greater need for some kind of exclusive agreement between buyers and their agent s.
Why a Contract?When we started out in this business, the buyer broker contract wasn't even available from the California Board of REALTORS - though, they now have a clear-cut template. Back in the day, we created our own contract, loosely written, yet ensuring that both buyer and agent were on the same page with each other's expectations.
The Benefits of a Buyer Brokerage to the AgentYour propensity for getting taken advantage of is a lot higher when you don't have one.
You're having an upfront conversation with the buyer. You're better off going to a movie than helping a buyer without an agreement. You have to be available 24/7 because you're scared they will jump ship at any time. Thus, if you have a brokerage agreement, you can sleep a little easier.
An example of a buyer broker agreement saving the day? There are many horror stories of what can happen without one.
Alan says: "One time a home was in escrow, after the buyer (who had signed with me) was somehow manipulated into using another agent to make an offer. I simply called the other agent and told him to send over the escrow documents. He was shocked at first until I explained that the buyer was already in a buyer broker contract with me! It's rare, but for the times when it happens, you are a believer in the buyer broker agreement forever."
Of course, there are a multitude of benefits for the buyer, too. And these need to be made apparent during the buyer presentation.
Also in this chapter, more tips and points for inclusion on the buyer presentation; promoting the buyer; tips to showing homes to buyers and more.
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