Buyer Broker Agreements Simplified

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Buyer Broker Agreements Simplified

OK this is a follow up to my post yesterday. I received this email:

You are right Bryant, I should not work with 2 realtors at the same time and got a bit excited after reading your blog. It occured to me you are more than an average realtor (broker/listed agent) and may get few properties ahead of everyone else and sometimes yet to be listed in MLS. There are few foreclosure specialists in Chicago area that work on fee based service.

Please don't think otherwise but appreciate if you can clarify the following: If you are like anyone else, what advantage does a buyer have in hiring you to acquire an REO? What is this retainer for? I can see some buyer advantage in short sales but for REOs I don't see any. Am I missing anything?? END

MY RESPONSE

Hi there, OK so I like the part about getting excited after reading my blog :) A Buyer's Broker Agreement (BBA) creates a bilateral agreement between you and I. It obligates you to work exclusively with me in areas we define. For example, if you had a BBA with the agent in Celebration you would not have contacted me and we would not have had this issue come up. It would have helped to solidify a loyal and professional relationship. It lays out the framework for the entire relationship. It obligates the Broker to do his job.

Also, as we had discussed on the phone, it gives the broker a monetary incentive to work harder. Foreclosures are very inexpensive (in my area) and can also be much more frustrating as it may take offers on numerous properties in order to get one accepted. Good properties sell quickly and usually with multiple offers. Finding the right property takes time.

REALTORS(R) are usually paid by co-brokes (commissions) offered by the Seller's agent or Builder to bring a Buyer. These commission usually range form 1% to 5% of the purchase price with 3% being an average. This can create a conflict of interest. Suppose there are 5 properties that are perfect for what you are looking for. All offering different co-brokes within this range. Wouldn't I rather sell you the one where I make 5% as opposed to the one where I make 1%? Of course I would. It's human nature.

The BBA elimnates this conflict by setting a minimum AND a maximum fee upfront. In my case it's $2,500 or 3% whichever is greater.**** Anything above these amounts would be rebated or credited to you at time of closing. In the price range you are looking at, $65,000, the co-broke could range from $650 (1%) to $3,250 (5%) but would probably be $1,950 (3%). If it were 1% you would have to contribute $1,850 to my compensation. If it were $3,250 you would actually receive a rebate of $375 (half of $750).

More than likely you will have to contribute $500 to $750 to a deal. Don't you think we could save at least that amount by being more aggressive with finding you a property? Of course we could. This is why what is an advantage to me (guaranteed minimum pay) is actually more of an advantage to you. Make sense?

The retainer I charge, of $1,000, is nothing more than a fee to make sure I am only working with serious buyers. I get upward of 20 buyer enquiries a day and I am not able to work with them all so I have to pick and choose. I do this by asking for a retainer and requesting a signed BBA. The retainer is applied towards any commission differences. For example, if you bought a property where you needed to contribute $750 towards my compensation you would actually get $250 back because you had already paid me $1,000. The retainer is included in the $2,500 or 3%. It's just paid in advance. If you break our BBA it is mine to keep.

The advantage of working with me is that I am very good at what I do which is evident by all that you have read and learned from me in the last couple of days of communicating. Of course the choice of whether or not to hire me is solely yours. I only have a couple of more Buyer openings left for this month but will be happy to place you on my waiting list if now is not a good time for you.

Investing in foreclosures is certainly the way to go right now. I hope we can come to an agreement to work together to get you some deals. As always, let me know if you have questions.

****Commissions are ALWAYS negotiable. This post is NOT about commissions it is about BBAs. So get off my a** Sherman!!!

Here's a sample BBA.

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Posted by Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc on 01/15/2009 03:34 PM

Comments (56)

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56 Comments on Buyer Broker Agreements Simplified

JAN

2009

Excellent post. Thanks for laying it out so nicely. As always, responses to BBA rejections are much easier when you have some scripts. And that's what I got from your post.

Wow 20 buyer inquiries a day Bryant? You are the man. It must feel good to pick and choose and have them pay an up front fee.

Clear and informative post, thank you . I'll keep it handy to refresh my memory for rejections. A quick response is always good.

Patricia Aulson Portsmouth NH Real Estate Hampton NH Real Estate

WOW where do I sign up to work with you. That is great. A true pro at what you do. Do you use the state BBA form or one you draft yourself.

Can I hire you? Excellent Post. Too many folks just don't understand - until its to late!

Clear and concise explanation..which doesn't leave much to be misunderstood. Bravo

I'm glad to see that you are requiring Buyer's Agency Agreements (BAA) with your REO clients. All too often, consumers are finding the REO on their own and bringing in any agent to get them into a property. One day Agent A, the next day Agent B.

I probably work harder for my buyers (and sellers) in Short Sale and REO transactions, often with little thanks. This is one area where the transparency of one stop shopping needs to become less transparent and more visible. I want clients to see how hard I working for them.

After reading your blog, I am not resolute that all REOs will be done under a BAA. If they don't want to hire me for my skills, then they can consume someone else's time. I don't think this is greedy, I think it actually works to be a differentiating factor!

I had discussed your post yesterday with an agent in my office earlier today and just found this one. I love your response to the email you got. If he can't understand it now, he doesn't read English too well. Great post BB.

Outstanding. You do Buyers Brokers proud.

Buyers quite often believe that having their own agent will cost them money. Not so. I'm trying to spread the word.

I love the way you just lay it out there for potential buyers. I've always looked at it like this - I'm making a commitment to them, so I have no problem asking for one in return. As always, great info, BB.

Bryant,

What an excellent post! You ACTUALLY give me renewed hope in BBA's!!!Sometimes I feel like they (BBA's) don't hold a lot of water.... here at the Ocean!LOL

Kathy Opatka, Re/Max, OCEAN CITY,MARYLAND

What a great post!! Buyer's Agency or Buyer Brokerage is highly under-rated!! You shouldn't be buying a house without being represented by an agent!!

Great post! You show your expertise and value to a customer. In the end, you're coming from a position of strength and not of needing a deal.

Of course the choice of whether or not to hire me is solely yours. I only have a couple of more Buyer openings left for this month but will be happy to place you on my waiting list if now is not a good time for you.

That's a powerful statement!

Procuring cause in many states can trump buyer broker agreements, so it's not a slam dunk. Personally, I dislike them strongly. Most people are good people and if you "earn" their trust, they will be loyal to you, regardless if having a bba. On the flip side, if someone wants to get one over on you (procuing cause issue and buying a home at an open house), then lots of luck in arbitration.

BB, you totally missed the most important point...you are soooooo good looking:). Great post too.

Great post!

Pete Olsen

Rent To Own Homes, LLC

www.50statesrent2own.com

Great post!

You're right, people often wonder why have a buyers broker and you laid it all out and quite neatly too.

This is a good post and it explains things well -- it also separates the "lookie loos" from the serious buyers.

I don't know about other states, but in Utah it is required to have an Agency Agreement. I would venture to guess that a lot of states have them in some sort of wording, and agents just haven't heard of the rules or haven't combed through the 10,000 rules for their areas to find them. I would ask your broker (problem is that Brokers in my area must not know this, because agents are STILL not using them, even though it is a disciplinaryoffense). So scratch that, I would E-mail or call your local Real Estate Division and ask them. because "I didn't know" doesn't cut it in Real Estate.

Utah Admin Rules - R162-6.1.11. Failure to Have Written Agency Agreement. To avoid representing more than one party without the informed consent of all parties, principal brokers and licensees acting on their behalf shall have written agency agreements with their principals. The failure to define an agency relationship in writing will be considered unprofessional conduct and grounds for disciplinary action by the Division.

Besides, it is to the advantage of ALL parties to have the agreement, so learn some scripts to handle it and go get those commitments :)

Great post. I enjoyed your videos as well! Very funny!

Broker Bryant - Simply one of the best explanations of the Buyer Broker Agreements ever. WELL DONE - As always.

Great info... Although I am new to the Real Estate business I had made the desision to use the BBA. I had not thought about a retainer but it makes perfect sense if you can pic and choose buyers. Thanks.

Congratulations on seeing the light in the way of retainers. I am still working almost exclusively for sellers, but do get an inquiry from time to time to act as a buyer rep. If they balk at the retainer, the conversation is pretty much over.

EXCELLENT!!!!!!!!

Your response lets them know they will be working with a Professional who knows what he is doing.

Some very interesting points.

I have often found that working with buyers without establishing a client relationship operates quite well.

Many times, I would prefer them as customers rather than clients.

Brian Madgan

Buyers are liars.... Don't be weak.... Get it in writing.

Geez. You've obviously been sticking to your guns on this for a long time. It sounds like you don't even have to think about how to answer any questions. That's how you're able to do what very few agents can... get buyers to sign an exclusive buyer-broker agreement.

Way to put it all out there on the table! Great stuff for avoiding misunderstandings!

BB-I think this is a genius idea! Here's my only thought on working with so many investors, or buyers of any sort for that matter. What IF a great home comes on the market and you have 2 or 3 buyers that would be interested? I would think it would be a conflict to represent more than 1 buyer looking for the same thing? How do you handle that? I'm all on board with the retainer fee and the BBA, but do wonder how you would represent more than one at a time, IF their search criteria were the same?

Wowser, this is cool. I have never given two cents for a BBA (what we call a BRA) in Texas. I'm one of the "old school handshake" girls. But, now dealing with foreclosures is totally different here too! Sometimes they're a dime a dozen and it takes twice the work to get one closed.

Hating my BRA...normal for me...reading your post...priceless (I'm worth a $1,000 down now!)

JAN

2009

BB - This is the only way to go. You laid this out in such a way that I am sure you would get hired. Thanks for sharing.

Great post. I'm trying to figure out how to structure my buyers agency agreements. I like some of the points that you have set up.

Wow, where do I sign? I'm convinced!

While some cheesy "buyers" will head for the hills-at least they will not be taking your time with them for the same result. The BBA is designed to separate the men from the mice.

I like to get retainers from buyers. I does separate the lookie-loes from the real buyers. Great way of explaining this to them.

Great Post BB, You said it all!

Oops, I wasn't logged in... Great Post BB, You said it all!

Not to mention, customers and clients rely on our honesty, and loyalty to look out for their best interests...why should we not expect the same..

Very well laid out. Should save that and email it as a template if you had the need... Thanks.

Well done BB, a very good post and one which makes a great deal of sense. As one who is not particularly fond of real estate agents, I think your thought process on this is both fair and reasonably priced. If I were looking for a foreclosure, short sale, REO, I would definitely want someone like you to help out.

However, and as I've mentioned in previous posts, it is the 5-6% commission on $300,000 cookie cutter houses that drives me crazy. I'd have to pay about $21,000 to sell my home in Mass. and the value of service I would get from an RE agent wouldn't come close to that number.

So it seems that on lower priced properties the min-max fee approach makes sense to me and is fair, but the loss of $21,000 of cash to sell a basic house remains a ripoff. Love your site!

Wow Bryant - I've never heard of a buyers agent charging an upfront fee, especially in this market!! With 20 inquiries a day you must be doing something right!

You go, Broker Bryant. I am very impressed with your business. I am curious to know how many buyer prospects pay you your retainer.

Bryant--So do you collect that retainer upfront? If you do, I am impressed. So many agents cant even get the agency agreement signed much less collect a retainer. Very professional...Of course I expected no less from you! :)

Bryant - Bravo. Intelligent way to conduct business.

Well hey everyone. I guess I abandoned this post. It's been very hectic in my neck of the woods!!!

Working with buyers is something I haven't done in quite a few years. However the market has changed so I must change as well.

I have used the BBA for years. When I first got into real estate 14 years ago most of my business was dealing with international buyers and taking a retainer up front was my normal way of doing business. I have just now started implementing it again so we'll have to see how it goes.

As with anything I do it is not written in stone. I do have the advantage of having way more business than I know what to do with so if I lose a few buyers over it it's not a big deal.

I work hard for folks and just want to make sure I am compensated accordingly. My market is very low priced and I have to be creative in order to make a living.

I also recently started charging an upfront fee with short sale listings. It started out slowly and I lost listings over it but now I get them with no problem at all. Things take time to germinate.

It's all about the presentation and mine is damn good if I must to say so :)

Straight out straight ahead and to the point...brilliant !

Rick

Very informative for me . . . and well written out. Thanks for sharing.

The fact that you refund to the buyer any commission over the maximum percentage, ought to compensate much of the resistance over the retainer fee - would you agree?

Love this post, very helpful. I appreciate how matter of fact and straight to to the point you are.

Very well-written. I love the explanation of how it benefits all parties, and also explains so clearly why they will be at an advantage if they're lucky enough to work with you.

JAN

2009

Bryant, this is a great use of a BBA. I took the ABR course a few years ago from Dick Fryer at ORRA but never finished it. It is so different here in FL with transaction brokerage, but I can definitely see the wisdom in this, especially since you are getting so many buyer calls! Congrats to you in your paradigm shift and success!

Bryant,

"The BBA elimnates this conflict by setting a minimum AND a maximum fee upfront. In my case it's $2,500 or 3% whichever is greater.**** Anything above these amounts would be rebated or credited to you at time of closing. In the price range you are looking at, $65,000, the co-broke could range from $650 (1%) to $3,250 (5%) but would probably be $1,950 (3%). If it were 1% you would have to contribute $1,850 to my compensation. If it were $3,250 you would actually receive a rebate of $375 (half of $750)."

I don't agree, but it's an exclent start and allot better than most!

Keep up the good work, and please report on Billy.

Bill

Always DID love the philsbury doug boy! :-).........Diddly Squat - blacksheep brother of Duddley Do Right I guess?

JAN

2009

Reading this post couldn't have come at a better time. I am working on my marketing plan to attract more buyers. I will only work with a buyer that has signed an Exclusive Right to Represent Agreement with me. I can address their objections successfully. Getting a retainer fee is something that I want to incorporate into my business and your post gives me clear examples to use. Now to attract the number of buyers you are attracting! Any tips?

JAN

2009

Great post Bryant. I see many are amazed that you have so many buyer prospects but we are seeing the same thing here. I mean who knew you could buy a newer, never lived in CBS home in Cape Coral for $75K or LESS? Seriously, we have so many buyers looking for good deals. It is tough to keep up with them all and they of course talk with others as well since most of my buyers are NOT local. They are inquiring from up north or out of the county.

Good work!

SEP

2009

I like this concept, Bryant. I think I might incorporate some of this for my investor clients.

Thanks! I always learn from you.

Robin

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Bryant Tutas Broker/REALTOR(R) Tutas Towne Realty, Inc

Poinciana, FL

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