Posts Tagged ‘Buyers’

The Buyer-Broker Agreement

A few buyers have asked me why certain real estate brokers will not show them property or even put them in their car without first signing a buyer – broker agreement with them. In fact, when I was working at one of the bigger brokerages, I was expressly warned that unless I got a client to sign one of these very serious contracts, I was not to take them inside a home listed for sale at all. “At the very least,” one manager said at a sales meeting, “Get the Agency signed.”

It was easy for us green agents at the time to lap all this up as bringing us one step closer to being great real estate salespeople – soon on our way to making our first $100,000 in commissions (ha!) but now I believe the manager may have had other motives besides giving us confidence in real estate sales. Today, let’s look at what this contract is.

The Buyer Broker Agreement
Actually, the title should probably say the buyer broker agreements. There are three: the exclusive buyer representation agreement, the non-exclusive representation and one that calls itself simply the buyer representation agreement. They all say The essential difference between the three is simply the amount of commitment expected by the broker on the buyer’s part. They vary from the buyer hiring one broker exclusively (named, uncreatively enough, the buyer representation agreement – exclusive) to the broker agreeing to be simply one of the agents the client can hire (the buyer representation agreement – nonexclusive). The third leaves all the above negotiable.

How the Buyer Agreement Benefits You
I know most clients are afraid when it comes to signing anything before the offer is written or they have found the house they want. They fear that they will be tied to one broker or have to pay the Realtor® even if they don’t find their dream home. While this is a legitimate concern and will be discussed in a minute, buyers should remember that most real estate contracts are written to protect the buyer in many cases. The verbiage of the buyer representation agreement binds the broker to look for a house for the client as much as it binds the client to the broker. In other words, the commitment works both ways. If the broker isn’t doing his job, the buyer should be able to fire him.

What you Should Look For if you Sign These
So along those lines, here are a few things you should consider before you sign one of these agreements. (By the way, you should know that I actually had to go looking for these in my forms because I haven’t used one for years, but some real estate agents swear by them and so do some home buyers, so I feel the need to tell you about them.)

1. Is this exclusive? First off, if you trust your Realtor® and believe her to be the only one you will look for homes with, you should get an exclusive agreement. If not, sign a non exclusive contract.

2. The timeline: Check how long the Realtor® is committed to showing you homes and if that matches your timeline for finding a house.

3. Compensation: If you wish to pay your broker out of pocket (may happen if the price of the property is extremely low, as in the case of some mobile homes) the amount will need to be agreed upon and included. If not, most brokers get paid by sharing the commission with the seller’s agent and this line should say “as noted in MLS.” It is important that this line not put a percentage like “3% of sales price” because if the seller has only agreed to 2.5% of the sales price, you as the buyer will be responsible for the difference.

A Powerful Tool
One of the best things about the buyer representation contract is that it gives us as Realtors® permission to go prospecting for the right home for our homebuyers. If you don’t find the home you want, we can then legally advertise the fact that we have a home buyer who wants a certain home. It gives us permission to knock on someone’s door and broadcast a definite need. To me, that is the best use of this agreement and can be a powerful tool for any home buyer. So don’t immediately get on the defensive when a Realtor® offers you this 4 page contract. Read it over and see if you can negotiate it to help & protect your needs as much as you think it protects those of the broker.

Ask the Broker: Why has that house been on the market so long?

My recent video about how to sell a home fast in any market was driven home today by a question I got from a buyer who previewed some homes with me yesterday.

The home they asked me about was an absolute keeper, at a price that beat out all the comps not only for its neighborhood, but for any other comparable neighborhood in Sacramento County.

In fact, this was one of a few homes that was such a screaming good bargain that two buyers had asked me about it, and I was really thinking I should post it here but didn’t want to have a conflict of interest with those buyers.

Their question was about whether I could call the agent to find out why it had been on the market so long. Well, I was happy to do that, and knew that while I was looking up her number I could look up the listing history, knowing that the price change would probably tell the tale.

Here’s what I found:

image

If You Don’t Understand Why The Price Is So Low, Blink

Darn, pending sale — I’d have to tell the buyers that. But there’s more of a tale here.

Of course, the buyer doesn’t have this info readily available, so their question was perfectly natural, “Why has it been on the market approximately six months?” From a Realtor® point of view, however, this isn’t a $299,000 home that’s been on the market for six months, but a $299,000 home that sold after ten days.

In the MLS, the actual pending date is 10/3, but it was entered on 10/4 as you can see above. The price was dropped from $325,000 to $299,000 on 9/24, and now there are three offers on it. 9/24 to 10/3 is ten days.

The price it started at, $395,000, is actually almost justified by the current sold comparable sales. But $299,000 is where it needed to be to finally get it done, in a slow Fall with few buyers.

Fortunately for my buyer, it turns out that there is still a possibility of making an offer on this one, so I let them know that — we even have a pretty good idea about what we need to offer.

The Market Within The Market: What’s Being Sold Here, Anyway?

There are several morals to this story:

  • Some buyers are waiting for market prices to come down another 25% or so, and some buyers are out there buying homes that are already reduced 25% or so.
  • If you wait until the market comes down, then you get to compete with a lot of buyers. If you wait until there’s a good bargain on a house you want now, you get to compete with fewer buyers. If you think sellers won’t see you coming ten minutes after all the buyers come back and start adjusting prices upward, then you make the classic mistake of thinking yourself the only greedy party to the transaction.
  • A lot of people are selling you the market, and if you’re buying a market, then you shouldn’t buy a house. The question a smart buyer asks is “am I buying a market, or am I buying a house?” There are great buys in bad markets, and dumb buys in great markets.

I’ve actually been counseling my buyers to consider some other homes that are lower priced than this, because in their situation it makes more sense and I don’t want them to get overextended. Now the trick is to find them the perfect $340,000 home that’s priced at $260,000.

In fact, instead of writing about the market, which is kind of depressing, I think a really good article series would be “bargain of the day” (or week, or whatever). In his response to Jim Kramer, Gary Keller notes that there is a “market within a market”. As I say above, there are great buys in bad markets, and dumb buys in great markets. Keller makes a similar point.

Whether you’re buying now or later, buy well. If you’re not buying at all, that’s cool, too. If you are, call, and we’ll go bargain shopping.

What do Home Buyers Want??!?

The National Association of Realtors finally answered this question for frustrated sellers. In fact the number one answer has not changed since 2004 – it’s central air.

The second thing rated most important by home buyers is an oversized garage. In 2004 it used to be a walk in closet in the master suite.

The last few on the list are: Backyard, Cable/Satellite TV ready, High-speed internet access, Separate showers in the main bath, a patio and fencing around the home.

In fact, the majority of buyers are willing to pay a premium for the walk-in closet, hardwood floors, and granite countertops. Sellers, are you listening?