Buyer Representation in Real Estate

Third Edition

Chapter One - Objectives

• Evolution of buyer agency• How buyers benefit• Duties of a fiduciary agent• Creating the relationship• Define agency options

Let’s Begin

• Key Terms

• Why so much attention to buyer agency?

• Major reasons for buyer agency

Buyers Who Must Be Represented• Agent purchasing for own

account

• Buyers who want to remain anonymous

Buyers Who Should Be Represented

• Current seller clients• Former clients• First-time buyers• Out-of-town or relo

buyers• Close friends

Regulations

• Common law of agency created confusion

• Laws passed to clarify role of buyer agent

• Abrogation of common law• States dictate disclosure and

contract requirements

Risk Management

• Licensees must know common law of agency and state statutes that address buyer representation

Fiduciary Agency

• Obedience• Loyalty• Disclosure• Confidentiality• Accounting• Reasonable Care and

Diligence

Risk Management

• Agent should avoid exaggeration, misrepresentation, concealment of pertinent facts

• Agent should recommend use of outside professionals

Imputed Knowledge

• Common law concept

• What the agent knows ANDshould have known

Vicarious Liability

• Principal may be responsible for, and may be bound by, the actions of his or her agent

Creating Agency Relationships • Oral agency

– verbal agreement

• Implied agency – words and actions of the parties

• Written or Contractual – documented in an agreement

between the parties

Contracts in Writing

• Required by some states

• Required by NAR code of ethics Article 9

• Reduces risk for agent

Termination of Agency

• Completion of task• Agreement expires• Mutual agreement to terminate• Death of one of the parties

Termination of Agency

• Broker files bankruptcy• Death or insanity of principal or

agent• Actions of agent warrant

cancellation by principal

Statutory Agency

• State law replaces common law as basis for agent – principal relationship

• Duties may vary from state to state

Chapter Two – Objectives

• Understand reluctance to enter into an agreement

• Respond to buyers questions• Determine service option• Describe consultation meeting

Starting Out

• Key Terms• Reasons some purchasers are

reluctant to enter into representation agreements

Service Options in Office Policy• Types of agreements• Agency options• Types of fees

Service Options in Office Policy• Multiple buyer clients• Agreements• Services for self- represented

buyers

Buyer Consultation Meeting• Should follow an agenda• Check for existing buyer-agency

agreements• Prepare interview questions

Sample Meeting Agenda

• Confirm basic data• Introduce concept• Elicit wants and needs• Identify features they desire

Sample Meeting Agenda

• Identify urgency and barriers• Review financing issues• Identify actions that you and

buyer are going to take

Responding to Buyer Questions• Agent must be confident• Avoid confronting buyer• Focus on buyer’s concerns• Buyers must be comfortable with

commitment

Chapter Three – Objectives• Identify components• Explain compensation options• Describe types of fees• Discuss areas to be negotiated• Understand importance of a

signed agreement

Type of Agreements

• Exclusive-Right-to-Represent• Exclusive Agency• Open Agreement

Discussing the Agreement

• Buyer disclosure• Purpose of the

agreement• Broker’s duties• Buyer’s commitments• Compensation

Discussing the Agreement

• Start and end dates• Disclosed dual or designated

representation (if applicable)• Equal opportunity clause• Multiple-buyer clients

Compensation Options

• Contingent fee• Non-contingent fee• Buyers are reluctant to accept

obligation to compensate agent• Listing broker often shares

fee with buyer agent

Methods of Paying Fee

• Fee due from buyer at closing• Receipt of funds from a third

party• Acceptable fee range • Retainer fee• Hourly rate

Determining Compensation• % of sales price• Flat fee• Hourly rate• Cooperative fee credited to

buyer

Self Represented Sellers

• Inform client that property is not listed

• No fee available from another agent

• Buyer must decide whether to pay agent directly or to include in offered price

• Agent must inform seller

Retainer Fees

• Amount must be the same for all clients

• Refundable• Creditable• Stated in representation

agreement

Presenting Buyer Agreement• Buyers are often concerned

about selecting the wrong agent• Issue of exclusivity is best

resolved by creating a strong relationship during consultation meeting

Presenting Buyer Agreement• Exclusivity• Fees• Fair housing issues• Multiple-buyer clients• Limitations to representation

Negotiating the Buyer Agreement • Length of term• Exclusivity• Compensation issues• Shared representation issues• Termination options

Chapter Four - Objectives

• Showing properties• Duties after property is selected• Preparing the buyers’ offer• Responding to counteroffers

Chapter Four - Objectives

• Ancillary services• Critical issues• Resolving conflicts• Effective

communications

Getting Started

• Key terms• Components of a well

established agency relationship

Mutual Task List – Agent

• MLS, newspaper, and Internet search

• Preview properties and schedule showings

• Place ‘searching for’ ad in local newspaper

Mutual Task List – Purchasers• Apply with lender• Confirm ability to extend lease,

if necessary• Gather documents for loan

application

Property Research

• Locating properties• Showing properties• Narrowing the search• Controlling emotions

Property Research

• Determining property condition• Providing pricing assistance• Performing resale analysis• Uncovering use restrictions

Creating and Negotiating the Agreement

• Disclose what you know about seller

• Establish priorities• Advocate for buyer (unless in

dual agency)

Creating and Negotiatingthe Agreement

• Creating reasonable offers

• Adding contingencies• Presenting the offer• Handling counteroffers

From Contract to Closing

• Property inspection and re-negotiation, if required

• Environmental inspections• Appraisal contingencies• Survey

From Contract to Closing

• Termite, infestation, or moisture inspections

• Title inspection • Eliminating contingencies• Final walk through

Client-Care Program

• Help them handle paperwork• Spell out client obligations and

timeline• Establish communication system• Pre-closing review • Turn closing into a celebration

Closing the Property

• Resolve walk-through issues• Review HUD-1• Identify post-closing tasks • Thank clients, other agents,

and the seller

Beyond Closing

• Call 10 days after closing– ‘How are things going?’– ‘Any problems?’

Beyond Closing

• Visit client 30 – 60 days after closing– ‘See what you’ve done to the

property’– ‘Here is a gift for you’– ‘Do you know anyone else who

might benefit from my services?’

Chapter Five - Objectives

• Generate buyer leads• Develop effective marketing

message• Conduct effective buyer

seminars• Survey clients

Let’s Get Started

• Key terms

• Success requires discipline– Prospecting– Quality service– Obtaining feedback– Adjusting service

delivery

Generating Opportunities

• Receiving referrals • Converting incoming buyer calls• Conducting buying seminars

Web Site Outline

• What our clients say about us• What our clients bought• How we do the job

Buyer Seminars

• One of the most effective tools• Schedule on a 12 month basis• By written invitation• Written thank you notes and

mail the day after

Effective Marketing Plan

• Define your vision• Create the plan

– What do you want to say?

– What benefits do you offer?

– What is your message?

Differing Purposes for Marketing• Awareness or Corporate• Targeting specific buyers• Performance testimonials,

statistics etc.• Prospecting

Marketing Mistakes to Avoid• Copycat marketing• Confrontational marketing• Promising more than you can

deliver• Failing to convey value• Underestimating the

cost and effort

Generating Referrals

• Past buyer clients• Must have a plan• Discuss at initial consultation• 75% of business should come

from past client referrals

Client Feedback

• Every transaction should be surveyed

• Conveys message that agent cares about service

• Different buyers require different service plans

• Written or oral• External company is best

Chapter Six - Objectives

• Using technology to locate potential clients

• Using technology to analyze market for them

• Providing client-level communication

Farming for Clients

• Primary activity for all buyer agents

• Use Windows-based database software

• Pre-designed templates • Consider purchasing data lists

Farming for Clients

• Gather e-mail addresses• Permission-based marketing is

best• Consistency is critical• Professional should create

Farming for Clients

• Submit address to search engines

• Abide by the Can Spam Law

Analyzing the Market

• Maintain data base of contacts to match with properties

• Use market analysis software that downloads from MLS systems

• Use MLS systems for reverse prospecting

Analyzing the Market

• Maintain profiles of clients’ needs and desires

• Cross-match new listings to internal database

Meeting Clients’ Needs

• Selecting community• Data bases from government

sources• Geodata sources display

maps • Agent should have ability to

access Internet everywhere

Contact Management

• Voicemail• Fax machine• Fax modem• E-mail• Contact management

software

Maintaining Profitability

• Regular training and reinvestment

• Personal tech trainer • Train in small increments

followed by continuous practice

• Be patient

Establish a Budget

• Technology changes often

• Equipment is outdated in 36 months

• Establish a technology budget