More advice for consumers, to augment the premise that a buyer should negotiate the commission prior to seeing homes. The author, Bill Archambault, is a man I met some five years ago. he is a published author (and I've read his book "One House At A Time"), has brokered real estate, and been a lender,
That's Our Policy / A Consumer's Guide To Buyer's Brokers/Agents
That's our policy! Wake up home buyers! You're entitled to your own policy too! It's your money, it's your life, it's going to be your home!
I have over forty years of lending and real estate experience let me tell you about my policy with regard to what we call "Agency," who the REALTOR® works for!
Agency agreements, buyer's broker contracts, buyer's agent contracts are all basically the same thing, a contract to have the REALTOR® represent you, the buyer in the purchase of real estate! A contract to convert you from customer to client.
Prior to 1986 extremily few home buyers had their own agent! That agent you shared your life with legally worked for the seller as a sub-agent of the listing broker, just like so many still do. Of course they really didn't practice that way! The reality is that if they don't sell you the house they don't get paid! Every one, but the listing agent was compromised, for only the listing agent could wait for a better offer to get paid by his client, the selling agent got nothing if you, his customer didn't buy the house! Because he works for the seller he couldn't recommend any thing different than as listed! Because he works for the seller he couldn't contract with you and you were free to cut him out of the deal at will. Many did! Just like walking out on Kroger's butcher, crossing the street to A & P to save a penny a pound! Hardly a good way to build a relationship! Let alone one that determines the rest of your life!
Very specialized brokerages had a better way. Investment brokers, commercial brokers, and industrial brokers often listed/contracted to exclusively represent the real estate buyer, being paid by the buyer and having their fiduciary with the buyer! Their buyers became clients not customers. Their clients had their own real estate professional, representing them exclusively! The agents/brokers were assured of getting paid, freeing them to recommend against unsuitable properties! At that time the buyer's broker contract closely resembled an attorney's retainer agreement listing the fee for professional service normally plus expenses and often including a pre-paid retainer fee!
I took my first class in Buyer Brokering from Carol Danna Lews, CCIM through the Michigan CCIM Marketing Group in the spring of 1976. I was so impressed that I brought her to Kalamazoo to present the class to our Board of REALTORS® I remember that class well because in ten years putting on over 200 classes for the Board that one was the least attended at 10% of the Board not the usual 30 to 50%.
I opened my own two offices in September of 1976. By the end of the year I had retainer agreements with two banks, an appliance chain, and a certain sailing man's chicken chain.
It wasn't until late 1978 that I first listed a home buyer, the property was so poorly listed that I couldn't possibly represent the seller. I listed the home buyer, wrote a great offer for the buyer, I then called the listing office and ask the broker, a friend to come to the presentation with his agent and the seller. The offer was accepted as written, the seller was disapointed, but happy, the buyer was happy and saved money even after paying me! My friend left with his mouth hanging open, his agent left cursing, he was fired 8 days later never to get back in real estate again.
I was still teaching college one night a week then and my students heard about what I'd done (I told them.) and many came to me wanting a broker on their side free of a fiduciary to the seller.
By 1985 home buyers finally realized they to needed professional help.The NAR and the MAE cousins fought it! By the end of 1986 we had almost universal "Agency Laws" "Agency" is the illegitimate child of Tradition and Compromise! (Compromise is always involved with the illegitimate.) The Mae clan forced the buyer's brokers fees to appear as being paid by the seller.
Why would any one in the twenty first century go house hunting NAKED?
To be with out your own professional broker/agent is to be NAKED, exposed and vulnerable!
NAKED like a defendant in court with out an attorney! (Remember even attorneys higher attorneys!)
Put in it's simplest form if the other guy has professional help you should too!
Even worse! Two nudes! FSBO's are great, some times! How will you know? How will you get a closeable deal? How will you get a fair price?
Only the extremely ignorant ever make an offer on real estate with out their own professional, fiduciary contracted to and paid by them!
When you're presented a Buyer's Brokerage / Buyer's Agent / Agency agreement you're going to hear that a lot of it is the Broker's policy! A lot of is going to be offensive!
You're entitled to have your own policies! Let me suggest a few:
Duration: Most common is for the agent to put in 6 months. The Wise Consumer's policy should be to limit this duration when first dealing with a new agent. I recommend one day or a week-end this can always be extended! Time isn't even required. An Agency agreement can even be restricted to a property or properties physically show to you by that agent.
Location: Many agreements list the entire state in witch the brokerage is licensed, that's absurd! Location should be very restricted! Never exceeding the agent's personal service area.
Protection period: Just because you aren't willing to sign a long term contract doesn't mean you're trying to go around your agent. Accept any protection period ask for so long as it's restricted to properties that were physically shown to you.
Exceptions: You must included an exception for properties you were shown under any previous agreement! Forget this and you could find your self paying two commission on the same property!
Commission: If you want truly want a personal fiduciary then you must control the fees paid to your agent/brokerage! Home salesmen think in terms of percentages of the sale price, at amounts determined by the listing contract and the published split in the MLS, again this is absurd! You need your own policy! The agent normally expects half of the commission as listed, often 3% to his office. Check the local market. If the going rate is 3% to the selling office, I recommend you enter a dollar amount equal to say 3.5% of your meridian target price! If you're looking for homes between $200,000.00 and $300,000.00 I suggest $8,750.00 not one dollar more or one dollar less, with any and all compensation occurring because of your purchase being credited to the fee and any excess being rebated to you. You will need to be prepared to make up any shortage! You've just eliminated the only conflict of interest buyer's agents normally have. Now have a true buyer's agent! (Traditional listing agents never have this conflict because pushing for a higher sales price benefits their seller 94 to 6!)
You're are going to be told that's not their policy! Again remind them it's your policy, and there are other qualified agents.
You're going to be told they have to use approved forms, they maybe right.
You're going to be told they can't change the forms, they may be right, but you can! That's why we gave up quill pens, ballpoint pens quickly and efficiently line out offensive clauses. That's your policy!
If you're to timid or as unprepared as most home buyers are have a real estate attorney on a small retained! Have him prepare the Agency agreement.
In a perfect world you'd get what you deserve and you deserve the best, you're paying good money for it! In the real world you get what you settle for!
Naked maybe fine for the home shopping network, but never house hunting! There maybe some exceptions in Florida.
William J Archambault Jr
The Real Estate Investment Institute
email@example.com Cell 832-259-7078, Houston 832-582-8415, Las vegas 702-516-1569
From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.
©William J Archambault Jr ©The Real Estate Investment Institute ©REII