Realtors working with a buyer, please use a buyer brokerage agreement, please

By
Real Estate Agent with Sand Dollar Realty Group, Inc. BK627826

Having been a broker for going on 13 years now, I've been involved with many different commission disputes in the past.  Nearly every single one of these disputes could have been avoided if the buyer's agent had simply had the buyer sign an exclusive buyer brokerage agreement. 

I admit I've been guilty of not using a buyer brokerage agreement myself.  And with some of my regular customers that buy from me all the time, I don't use an agreement simply because I don't feel I need one.  But with regular retail home buyers especially ones that you don't know outside of your business, you are really being naive if you aren't getting them to sign a buyer brokerage agreement.  If the buyer is reluctant to sign something, I might consider taking them out for 1 day of showings and see how it goes but I would never take them out on a second day.  My time is simply too valuable to not have an understanding committed to writing.

  

I remember a few years ago on a listing that I had where a buyer's agent showed a property and then a few days later another agent showed the same property and made an offer that the seller accepted.  Little did I know it was the same buyer getting both showings until about 2 days before closing.  The first buyer's agent had been working with the buyer for weeks showing them properties, while the second buyer's agent was the buyer's cousin who lived 2 hours away in another town.  1 year later after a long arbitration dispute the first buyer's agent did prevail and collect their $4000 commission.  I don't know if a buyer brokerage agreement would have avoided all this, but it would have put the second agent into an ethics violation situation and possibly made them go away altogether.

In fact Standards 16-3 through 16-9 of the NAR Realtor ® Code of Ethics, specifically addresses these sort of relationships.  Buyers agents are required by the Code of Ethics to find out if a buyer is committed to another agent with a signed agreement.

I remember another incident that involved a similar scenario as above except that the commission being disputed was on a $5 million home and the commission disputed was $150,000.  In this case I almost think the buyer's agent was S-T-U-P-I-D because who in their right mind would not have a signed buyer brokerage agreement (and probably their own attorney representing the buyer agent and brokerage) when a commission of that size is involved. And in this case, the buyer's agent spent over a year working on the sale and lost the entire commission - now that stinks!

This year is my first year on our local Realtor ® association's grievance committee and so far I have worked on 2 arbitration disputes and both of them involved buyer's agents and procuring cause.  Neither instance involved an agent obtaining a buyer's brokerage agreement.

My suggestion to anyone considering representing buyers (which is truly a must in this current buyer's market) is to get your Accredited Buyer's Representative designation (ABR) from NAR.  In the courses you will learn all about getting buyers to agree to reasonable terms in a written agreement.  Arbitration disputes are no fun and waste a lot of your time. 

It is a real temptation to run out and show a property as soon as a buyer calls wanting to see it.  Even if they haven't been qualified for any sort of loan.  Stop, think, and don't do it.  Your time is too valuable.

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(Copyright © 2009. Sand Dollar Realty Group, Inc. All rights reserved.)   Subscribe to my blog via RSS feed.

Rob Arnold - Your full service and investor friendly Realtor ® in Orlando and Central Florida.

ABR, CPL, CRB, CSP, GRI, Managing real estate broker, Notary Public

407-389-7318 / 1-877-389-7318 www.SDRhouses.com   We Buy Houses Florida

We sell foreclosures, short sales, and bank owned REO properties throughout Central Florida. We sell and list Central Florida real estate and Orlando real estate. Free list of foreclosure and short sale houses available.

I also provide flat fee MLS listings, For Sale By Owner, and menu-based services in most parts of Central & South Florida, the Space Coast, and the Treasure Coast including Orlando, Winter Park, Maitland, Ocoee, Winter Garden, Apopka, Altamonte Springs, Casselberry, Longwood, Winter Springs, Oviedo, Lake Mary, Sanford, Deltona, Debary, Deland, Mount Dora, Eustis, Clermont, Kissimmee, Winter Haven, Lakeland, Tampa, Sarasota, Bradenton, Miami-Dade, Fort Lauderdale, West Palm Beach, Port Saint Lucie, Melbourne, Daytona Beach, Ocala, Gainesville, Volusia, Brevard, and more. 

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Rainmaker
388,301
John Walters
Frank Rubi Real Estate - Slidell, LA
Licensed in Louisiana

Rob thanks for the blog.  I haven't used one yet but I am considering.  I haven't had anyone screw me over so far.  Thanks for reminding me of the rats out there.

Mar 08, 2009 05:38 AM #1
Anonymous
Natalie McArtor, ABR

Hi Rob,

Great comments about buyer agency.  I think most agents are so scared in asking people to sign anything, they just take their chances.  I, too, will give potential clients a 1/2 day free service and show them homes but I do expect the buyer agency signed the 2nd time we go out to house hunt.  It also helps me to feel more committed to them and hopefully, them to me!  Thanks for such a good article. 

Mar 08, 2009 05:48 AM #2
Rainmaker
655,082
Bob & Carolin Benjamin
Benjamin Realty LLC - Gold Canyon, AZ
East Phoenix Arizona Homes

Yes -- buyer broker agreements --- there are more and more would be buyers who seem to have little respect and without an agreement you might spend days and have them buy from someone else. All the best.

Mar 08, 2009 07:59 AM #3
Rainer
56,702
LYDIA LAMOREUX
ZipRealty - Volente, TX

Rob-Your post is a wise advise to all agents working as buyers' representatives. Much of the confusion and grief could be avoided with a signed Buyers Agency Agreement. When I was in the new agent training program, that procedure has been drilled into us as a must have for each buyer's agent. Realtors shouldn't be afraid to say the signed agency agreement is a must for proper and thorough service for the buyers' interests.

Mar 08, 2009 08:42 AM #4
Rainer
494,722
Lynn911.com ~ Dallas Real Estate Agent Top Team
Dallas Houses for Rent Dallas Apartment Rentals Lynn911.com - Dallas, TX

YES buyers agreement does assist makes the buyer commit more to our services.

Have a great and successful week.

Mar 08, 2009 12:18 PM #5
Rainmaker
932,975
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

John - Typically it is not necessarily people being "rats."  More often what happens is that somehow the buyer gets upset with agent #1 and decides to use agent #2.  Or the buyer works out a deal with agent #2 to discount or rebate part of the commission being paid because agent #2 is a friend or relative of the buyer.

Mar 08, 2009 12:33 PM #6
Rainmaker
2,238,843
Richard Weeks
Dallas, TX
REALTOR®, Broker

Rob,

Great advice.  If a buyer is not willing to sign a buyer's rep agreement and get pre approved why would anyone wish to work for them?

Without that buyers rep agreement you might be providing a free service.

Mar 08, 2009 11:49 PM #7
Rainmaker
54,551
Phil Hanner
Keller Williams - Daytona Beach, FL
Phil at http://www.findahomeinportorange.com/

Hi Rob -

Few weeks had a buyer call me about a listing. Pre-approved, not working with an agent. Just before the showing another agent calls me and says he is working with this guy already. Turns out there was no signed agreement, and he never brought my listing to buyer's attention. Buyer called me from the yard sign.

This agent wanted to accompany the buyer to my showing. I said no way - you show it if you want. Called the buyer and verified no agreement, and verified buyer saw this on his own. Told him pick me or the other guy - it didn't matter to me.

I had him sign an agreement with me before anything else.

I have had two buyers recently say they did not want to sign. It is fine with me if they want to pay 10 or 30% more for the same property. I walk and don't look back.

I don't send listings to people I don't have a relationship with, if one of my low priced REOs fails to close I don't call people back to tell them it is back on the market, I don't play the "keep me in mind if a really good deal comes up" game. No agreement, no work, no exceptions.

I had a buyer that was under agreement. The agreement expired by about 6 weeks. I emailed him a hot new listing - he went behind my back and bought from the listing agent - cash full price. He had high 6 figures in cash - Realtors dream. My email to him closed with "Good luck with your real estate investing future."

Two days after his contract went in the owner of the development filed BK. I would have gotten him out of the deal. Now he is up the creek. What comes around, goes around.

Good advice Rob.

Mar 10, 2009 03:05 AM #8
Rainer
68,647
Lisa Spalding
Casa Latino Four Corners, REALTOR, CDPE - Longwood, FL
REALTOR, CDPE

Cool post.  I haven't ever used a Buyer Broker Agreement as yet.  I actually have missed out on helping a few Buyers b/c of that oversight.  Maybe I should re-think it. 

Mar 10, 2009 01:38 PM #9
Rainmaker
299,825
Heather the Realtor Orlando, Lake Mary
LemonTree Realty - Orlando, FL
First Time Home Buyers, Bank Owned Homes

I think the main problem is the truthfulness of the buyers. I have had a buyer who I had an agreement with drive past a house and wanted to see it I think I do a good job of explaining things but people want things instantly anyways needless to say they said they werent working with an agent just so they could see the house right then and there from the listing agent, they had no intention of using the realtor other then to use her to show the house.

Mar 11, 2009 12:35 AM #10
Rainmaker
932,975
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Lisa - I guess he got what was coming to him.

Heather - What also happens is that a Realtor shows a bunch of homes to someone over a period of weeks.  Then the buyer either gets anxious of waiting and finds a deal on their own or else they bump into a listing agent who writes a contract up on the spot thus cutting out the buyer rep.  On the 1 I referenced above for the $150K commission, the listing agent claimed that they procured the buyer. Even though the buyer signed sworn affidavits at the time of closing that the buyer agent was the procuring cause and they hardly even knew the listing agent. However the buyer agent still lost out on the commission.  Getting that buyer brokerage agreement signed way back in the beginning of the relationship most certainly would have entitled the buyer's rep to something.

Mar 11, 2009 06:03 AM #11
Rainmaker
236,021
Debbie Summers
Charles Rutenberg Realty - New Smyrna Beach, FL

Hey Rob - I think a lot of agents are afraid to present the agreement to buyers...  Getting a commitment is the only way to protect your time and energy you invest into a buyer.

Mar 15, 2009 09:06 AM #12
Rainmaker
100,356
Andrea "Andy" Tolbert
HD Realty - Sanford, FL
Broker, Safety Expert, Instructor

Great Post, Rob!  I've usually only worked with buyers that are friends or strong referrals, so it's never been an issue, but right now I'm working with several buyers that came as sign calls off of my listings, so maybe I'll start!

 

Mar 16, 2009 02:04 AM #13
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Rainmaker
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Rob Arnold

Metro Orlando Full Service - Investor Friendly & F
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