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Uncategorized | 141 Posts
July
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How's The Buyer Representation Practice Going?
If you're reading this Broker Bit, it probably means that you take your career in real estate seriously enough that you regularly attend meetings and training sessions in your respective offices. In doing so, you should be getting more comfortable and proficient with the new practices that will likely be implemented on August 17th, 2024, based on the NAR Settlement.
If you're not, or don't know what I'm talking about and want to work with buyers after 8/17, then it is VITAL that you get yourself into these work sessions to learn, become familiar with and practice use of the new documents and (more importantly) how you will consult your buyers. You cannot work with buyers after 8/17 without having the new form signed; this new "Broker Compensation Agreement" will state how much your fee is to the buyer. To get that form signed, you'd better become very good at articulating your value to your buyers and explaining how they can pay you.
If the thought of this conversation makes you uncomfortable, you're not alone. Only through consistent conversations and practice will you be comfortable with this to the point that it's second nature to you. This is so vitally important to your business, that all offices are now focusing time in Bellator meetings to practice, discuss and role-play this new material.
As Bellator Ninjas, we should be having our buyer's consultations prior to showing properties already. The "Buyer's Consultation" that Bellator leadership has prepared will act as a reminder to keep us on track with what we have to offer and how important it is (especially in a Caveat Emptor state like Alabama) for buyers to have fiduciary representation to be, at least, on a level playing field with sellers. If buyers hire one of you, they'll likely have the advantage over the sellers.
Most buyers will agree whole-heartedly with this and would gladly sign, making you their buyer's agent, if it didn't mention that we will be owed our fee from THEM. On August 17th, that will be the case, so be prepared to handle the questions and pushback now. We'll learn how to best explain the three ways that this fee can be paid; each of the ways is "funded" by the buyer and really always has been:
- The buyer's broker will be paid from the listing brokerage (almost all MLS transactions work this way now). The listing brokers enter into an agreement for the seller to pay for the seller's AND the buyer's broker's fees as a means of better marketing the property and incentivizing other agents to expose the property. The more potential buyers that are exposed to a seller's property, the more showings and typically a higher selling price or better terms for the seller are achieved. The buyer funds these seller expenses with the check that the buyer brings to purchase the home at closing. Loan payoffs, title search/insurance and all other seller closing costs are also funded by the buyer's check. Seller's profits are reduced by these debits but only the Buyer brings money to the closing. So, they FUND everything.
- The seller will pay the buyer's broker fee through the transaction itself. In those rare occasions when the listing broker is offering zero compensation (or below what the buyer's broker will accept per the buyer's "Broker Comp" form), the buyer may ask for the seller to pay concessions to cover buyer closing costs to include pre-paid items and buyer broker fee in the purchase agreement. Typically, this raises the sales price and allows the buyer to essentially pay those fees via their 30-year mortgage. This is far more palatable to most buyers than the third option.
- The third option is what we think they are thinking all along. This is WHY we're nervous about this conversation but, like now, it will be uncommon. This option is that the buyer will bring a check to closing to pay the buyer broker fee out of pocket. For some buyers, this isn't a big deal. But for most, this is something that they simply can't afford to do so we will make every attempt to be paid via the first two methods stated before.
If you've been in the business very long, you know that it is ever-changing. This is just another one that I feel will have a positive effect on the industry and increase professionalism in our field. It requires a bit of a mindset change for many of us, but once you get it, it makes perfect sense. And whether we agree with it or not, it's coming fast. We must all put forth the effort but know that your Bellator leadership team has your back. You have lots of opportunity to learn and to prepare. Talk with your broker with any questions and let's all get better. Let's "B" better.
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