Would you make your buyer pay??

Monique:

I have always found that when the issue of the commission the buyer agency agreement is addressed up front, that my buyers will opt to NOT look at homes that would end up costing them additional money, or the entire commission.  Most Realtors I know have genuine altruistic tendencies, but it is important for us to realize we are in business.  Situations like the one you are describing can be avoided when the information is presented to the buyer(s) the right way.

Monique:  I would recommend talking to buyers about this scenario when they are signing the Exclusive Buyer Agency Agreement.  I'd make it clear to them that no matter what they buy, even if it's a FSBO, that they are hiring you and that your fee will be X%.  We usually tell buyers that we are more than happy to work with FSBOs and that we can usually work our fee into the deal with the FSBO by either negotiating a lower purchase price or directly having the seller pay the buyer agency fee.  I would not recommend walking away.  We are offering a service here, but it's not charity.  The time, expertise and other expenditures that you put into an individual client is real money... I would not throw that away.  I have found that a little education at the front end works best.  BTW... it's also helpful to warn them that if the MLS co-broke doesn't cover your fee that they could be responsible for the difference.  We have seen some alarmingly low figures in the MLS.  Good Luck!

We shouldnt be afraid of FSBOs.  I'm an Exclusive Buyer Agent and I have worked with several buyers on FSBO.  My Buyer Agency Agreement addresses this scenario by allowing us to negotiate the buyer agent's fee into the purchase contract.  Most FSBO sellers don't have a problem with this.  They are happy to have a buyer and are happy to have one that is represented because they know that the transaction will go smoother because I will be helping the buyer through the process.  As long as you disclose to the seller that they are unrepresented and that you are solely representing the buyer, you're fine.  I've even had sellers ask for my card to give to other buyers who had been interested but clearly needed representation. 

A lot of agents don't want the extra work that goes with a FSBO and I do know of some agents who thought they had to get a single party listing in order to show a FSBO and almost ruined the deal for their buyers, but a FSBO is just another available home.  Make sure your buyer knows what your practice is, though, before you start working with them, otherwise you just walked into a minefield.

Monique,

I personally WILL NEVER ask a Buyer to pay.......however I see where some have had many issues that they want and should receive some compensation.  I have had success with the FSBO issue, however I know of some who did not.

I agree when we discuss all options up front then any misunderstandings can be avoided.

Monique, If the agent didn't find the house and didn't put the transaction together, then the buyer agency agreement must not have made an impact and apparently wasn't explained properly.  If agents address the possibility of finding FSBO up front and how buyers still need to be represented, this issue shouldn't come up.  If the buyer doesn't understand the agreement, trying to make them pay now is pointless, and if they did understand, the agent would have been involved in the transaction.  In your particular example, apparently both parties lose.  So sorry.

Monique-When I discuss agency with my buyers I tell them that, if they see a for sale by owner (FSBO), they should contact me and I will contact the owner. This way the buyer is has an advantage over the seller in being represented by a professional. I further tell them that I have all the tools for doing a good comparative market analysis, so that they don't overpay. I'd present the FSBO with a notice of "no representation" that advises them that I represent the buyer's interest and that i expect the FSBO to pay the commission from the proceeds of the sale. I think that the buyers appreciate that.

Having said all that, I still don't believe in holding anyone hostage. If they go on their own after all that is explained, I would let them go. Long term, maintaining a good reputation is better than a commission on one sale.

Totally off topic, but that is a very cute little Maltese in the photo with you.

Monique, I represent primarily sellers, but I do pick up the occasional buyer as well.  Although  I have never had the issue of a buyer going directly to a FSBO.  When I rep buyers I use the buyers rep agreement as a matter of practice.  Although in theory it could be used to enforce payment in such a situation, I don't know that I every would. If for no other reason than leaving a bad taste in the mouth of the buyer and myself.  If I didn't rep them in the deal, then I really see no need to pursue it.  Now if I represented them and the seller couldn't afford the fee's then the buyer would need to come up with them.  Typically the rep agreements are used here to protect the agent from predatory efforts of some of the less ethical agents around. I have even been known to tell a couple of buyers of my listings, that they had an understood agreement with another agent, even if the piece of paper wasn't signed. Although dual agency allowed in Texas, I prefer to stay away from it unless it is a buyer that is unrepresented making a full price offer without contingencies. (rare, but it happens)

It's a rare FSBO that won't offer to pay a cooperating broker.  I don't know that I'd fight for it when push came to shove.  I have other things to do.

If you included FSBO'S in your buyers contract, I probably would not enforce it but would explain to them what they have done and then wish them best and ASK for referrals

This is a issue that we have all come across before.  For me it will come down to each client and how things have progressed up to that point.  One buyer I was dealing with a year and a half ago, if I would have had a Buyers contract signed with them, I would have totally gone after my commissions! He has a handful cost me a lot of time, and he liked to pull the strings on the what and when we saw listings. Even when it came to writing offers, we wrote 7 in total, and he didn't take my advice/suggestions on any.  He really was looking the perfect deal.  3 weeks later, after only being $1000 apart on the last offer, we (myself and the selling Realtor) just couldn't get the deal to come together that night. The next day, my buyer went to another Realtor and wrote the same offer and it was accepted and that Realtor walked away with my commission cheque.  Live and learn, and let me tell you I learned a lot from him! Now, on the other hand, I almost lost a client to a FSBO, and if I had, I would have still done business with them in the future.  The question I suppose, is how much time and energy have you put into them, and will you ever get anything back? At that point how you proceed is situation specific. Kind of related to cutting commissions, we do with some and not with others, depends on the clients and situation.

I would let them go. I actually have had the experience of having my buyer call me from the FSBO home and having me talk to the owner because she refused to make an offer even though she really loved the house if they would not work with me as her representative. A lot can depend on the relationship you have developed with the client over the time you have been working with them.

It also depends on the client and how confident they feel in their ability to negotiate a transaction on their own. I work with a lot of first time buyers (as was the case above) and many of them are afraid to do anything without your support and advice. I think part of what helps is positioning yourself as an adviser and consultant whose judgement they trust. Some people are never going to see you that way no matter what you do or say but many will.

In addition to the Buyer Broker Agreement, I now have my clients also agree to the Four Agreements which I subscribe to for my business and if they are not willing to do that then we are not meant to work together http://www.miguelruiz.com/

They are very simple, but in the world we live in and the rush we are usually in, they are not easy.

Briefly summarized from the cover of the book:

1. Be Impeccable With Your Word
Speak with integrity. Say only what you mean. Avoid using the word to speak against yourself or to gossip about others. Use the power of your word in the direction of truth and love.

2. Don't Take Anything Personally
Nothing others do is because of you. What others say and do is a projection of their own reality, their own dream. When you are immune to the opinions and actions of others, you won't be the victim of needless suffering.

3. Don't Make Assumptions
Find the courage to ask questions and to express what you really want. Communicate with others as clearly as you can to avoid misunderstandings, sadness and drama. With just this one agreement, you can completely transform your life.

4. Always Do Your Best
Your best is going to change from moment to moment; it will be different when you are healthy as opposed to sick. Under any circumstance, simply do your best

 

 

Most of the time price is arbitrary.  People get so emotionally attached to some item in their contract that they feel they have to behave poorly in order to perserve it.  For instance if the negotiations come down to $2k difference between parties and they want to look to the agents commission, ask why that price is so important.  It usually has to do with feelings.  Most people would not risk losing a buyer or a house over $2K.  They just get caught up in winning.

When its all said and done, I would let the seller go.  Its not worth the fight to me. 

I do make sure the buyer knows though:

1.  I make my living doing this.  I feed my kids, but them shoes, pay bills.  I can not work for free. 

2.  A large portion of my earned checks go to office supplies, E&O insurance (malpractice insurance), brokerage fees, gas, I can not work for free.  Not for family, not for friends.  I can not afford it, this is how I make a living. 

3.  I can't help once a deal is in place.  What ever contracts you sign, what ever you do, I am not your Realtor.  I'll let you walk away, but KNOW, I AM NOT YOUR REPRESENTATION, and will not help in the transaction.  To do so puts my Brokerage, my license, my family, and the new pair of shoes at risk. 

 So go at it alone or let me do my job and negotiate a deal for you.  At this point we are going to have to sign an exclusive buyers contract if they agree to representation.  I have to protect my license and more importantly my Brokers intrest. 

I just had to explain this last week to a client.  I pulled off the road into a parking off so I could make sure she understood me 100%.  What ever she decides I guess.  I aint waiting for the call, but i'm here it comes in. 

Let them go. It's hard but you might get some referrals from them. I agree with Chad 100% too.

Remember, you are an advocate for your client. If you toss them over to some FSBO shark how much good are you really doing them?

In the end, we don't work for free. This is not a matter of loyalty it is a matter of practicality. I already donate plenty to charity each year I can't afford to give away business. My first inclination would be to convince the FSBO to let me represent the buyers on his dime. Failing this I would discuss financing options with the buyer. Sometimes I trade referrals for coin. Knocking your fee down in return for 5 good referrals is a great way to make Peter pay for Paul.

Never assume that commissions are black and white. ALL COMMISSIONS ARE NEGOTIABLE. So negotiate! Certainly there are many things of value your client can give you in return for your services if you are prepared to think outside the box.

I would let them go. No hard feelings. I would even buy them a house warming gift and stop by to present it to them. REFERALS!

I would let them go.  BUT I would also ask them if I gave them good service and is the answer is yes then ask them if you can keep them as one of your business associates that you go to for leads and stay in contact with them.  I'll bet that will surprise them - hey - I think I'll take my own advice and re-contact one that got away last month!

Kathy Carson, RE/MAX 1st Olympic, Lynchburg, VA

If you have an exclusive buyer agency agreement they need to have a good explanation before you release them. On the other hand, an exclusive agency-buyer-agency would have been a good option if the buyer wanted to join in the search without a commission liability if the buyer procured the deal.  If you have an exclusive you should enforce your contract. Your standing up for the rights of all of your colleagues, your profession and your brokerage, as well. Your also demonstrating that your a serious agent working for your buyer. Good post, Monique. Have a great weekend.

I don't try to go after a commission that I'm not earning.  Looking at it from the buyer's standpoint only...they might wonder what I'm doing to be paid for a commission on a house I didn't find...didn't show and didn't write a contract and didn't follow to closing.  I try to work with a buyer by telling them to pay me a FLAT FEE to "Represent them" IF they happen to see a FSBO they want to purchase.  I'll even meet them at the FSBO house.  I'd rather "earn" something and maintain a relationship that their friends and relatives can have a positive feeling about for future referrals.