Mastering the Buyer Brokerage Compensation Conversation
Mastering the Buyer Brokerage Compensation Conversation with Both Sellers and Buyers
Since August 17th, new rules have been in effect regarding Buyer Brokerage Compensation, I have been keeping up on new issues that are cropping up across the country:
- Listing agents are trying to determine creative ways to share the compensation their seller is offering that does not require them to be on the phone, explaining it again and again for buyer agents wanting to show the property.
- Real estate companies are pursuing potential buyers, enticing them to get out of their signed buyer brokerage agreements (yes, it is illegal, but it's happening).
- Buyers aren't sure what they signed and therefore are signing multiple agreements.
- Offers are being submitted that don't represent buyer or seller intentions when it comes to paying compensation (due to confusion around the issue).
Some of these issues are regional (different MLSs are handling their requirements for disclosure differently) while others are issues seen nationally (confusion around forms, companies and agents taking advantage of this confusion). The overarching issue when it comes to working with clients is this: Communication around the process and the topic. I am finding that agents are either overcommunicating with their buyers and sellers about this issue and scaring them into not taking action or they are under-communicating and causing confusion during the offer and negotiations -not when you want to spring a surprise on them that they need to show up at the closing table with more money.
Every agent in every market should pay attention to what I am about to tell you:
Explaining the current situation isn't cutting it. You need to have visuals that explain the concept and articulate the value of working with you.
You, as agents, are in the fight for your careers right now. Large companies are putting millions of dollars into taking away half of the market (buyers). They have tools that are capturing buyer signatures at open houses, their AI is targeting interested buyers prior to making an offer and offering significant compensation discounts, and unless you can show compelling reasons for working with you, they are going to capitalize on this market.
The other threat you have is the buyers themselves. They don't know what they are signing and therefore, they are signing multiple agreements. Agents who are in business to capture signatures and not cultivate relationships are not working in the best interests of buyers, but buyers who want to just have a door opened don't know any better.
Furthermore, I am seeing sellers across the country offering low or no compensation to the buyer broker simply because they heard in the news they didn't have to anymore. Although that is true, listing agents who aren't providing compelling information about the barriers that can cause and the potential lower net proceeds that may be obtained as a result, are not doing their sellers any favors.
I have had the benefit of listening to agents in my ENCORE group talk about the challenges they have had talking with both buyers and sellers over the last several months since our MLS rolled out new forms and process last January. The Lones Group has put together a whole new suite of tools to help agents have these conversations and to provide a framework that is consistent with their business model. If you are having a difficult time, have been burned by a buyer or regret not having a tough conversation with a seller, then this suite of tools may be for you:
CONVERSATIONS WITH SELLERS
Conversations with sellers can take a variety of formats, from listing presentations to selling strategy meetings. Pay attention to these opportunities and consider including these visuals as part of your fee conversation.
Listing Presentation - 4 Strategies Format
First, make sure your listing presentation no longer refers to sharing compensation between the listing agent and buying agent. These two percentages or dollar amounts do not belong under the same umbrella. Instead, I encourage agents to really look at their listing process and services, and group these under three categories:
- Home Preparation Strategy
- Pricing Strategy
- Marketing Strategy
These three strategies are what comprises YOUR fee for listing the property.
Then, add a fourth strategy, the Buyer Attraction Strategy. In here is where you can talk about concessions offered in terms of credit for condition (such as $10K towards roof replacement), mortgage rate buy-down, seller financing, assumable mortgages, and yes, buyer brokerage compensation.
Listing Strategy Book
We have been doing a lot of listing presentation package renovations over the last few months to reorganize existing content into these categories. The presentation afterwards is smooth and easy-to-follow. You may not need a whole new listing presentation, it may just need to be reorganized.
Home Selling Strategies - 6 Options to Consider
There is another prop that you might consider, especially when talking with a seller about barriers that can cause a home not to sell. Sellers have choices - choices that make a home harder to sell will ultimately have an effect on the sales price. For example, if a home has very old carpet that is causing the house to smell, that can have an effect on the sales price. How a home is priced, how it is photographed and marketed (which is dependent on the agent they hire), what they are offering to the buyer, what limited they put on showings, and how they want to handle offers will also affect it. Having a prop like this helps facilitate this somewhat-difficult conversation.
Home Selling Strategy Sheet
Listing Fee Sheet
Many agents are already uncomfortable when talking about their fees. Having your fee, along with a summary of what the seller will receive (reference your listing presentation for the full outline), makes it a lot easier to have the conversation because the punchline is already right there, in writing, so you don't even have to say it!
Also, having a visual makes it seem like it is part of your process, and not just a number you have pulled out of thin air.
Listing Fee Sheet
CONVERSATIONS WITH BUYERS
Like sellers, your buyers also need to be aware of their options and responsibilities when it comes to compensating you for your valuable services. Consider careully these opportunities and props for explaining the buyer process, articulating your value, and discussing commission.
Buyer Presentation
Do you sit down with a buyer before going out to view properties and explain the buyer process? Do you provide them with a packet or book of information they need to be prepared to buy? Does this outline your processes…or that of your brokerage or company? Too often, agents are relying on others to do their educating and you are appearing less valuable as a result!
Having a completely custom buyer presentation for your business and operations is one of the best ways to begin establishing your value at the very first meeting - remember, that is when you should be having them sign a buyer services agreement!
Buyer Booklet
Transaction Expenses for Buyers
Although you might have a page for closing costs IN your buyer presentation, having this page as a stand-alone will help with your brokerage fees conversation. This outlines the typical closing costs buyers may need to budget for INCLUDING broker compensation.
Expenses for Buyers
Buyer Pledge & Buyer Fee Sheet
These two sheets go hand-in-hand OR you can simply refer to your buyer presentation if you don't want to have a separate pledge of service sheet. Similar to the listing fee sheet, having a prop that outlines the fee for your services and what buyers get for that will help buyers understand that you have a system and process for working with buyers. You are explaining your business model and are less-likely to agree to a lower number because it is right there on the table. The pledge is merely there to back you up and remind the buyer what they are getting.
Buyer Pledge 
Buyer Fee
Buyer Brokerage Compensation - The Gap
What if you and the buyer agree to a fee, but the seller is offering less than that, or even no buyer brokerage compensation? Agents are afraid to just say it, are dancing around the issue, and therefore are overexplaining it. What you need is a prop!
This prop we have created uses marshmallows instead of a percentage (this can be customized for your fee) but you get the idea. This allows a buyer to quickly understand that there may be a difference between what the buyer and seller want, that there is a negotiation moment, and the buyer still may need to bring money to the table to close. This is the fact of the matter!
Buyer Services Agreement
Remember…
Buyers are hiring you for your service…service that goes well beyond showing homes and writing up some paperwork. They are hiring you for your expertise, your experience, the problems you have the ability to solve, the professional relationships you have cultivated, your managing broker, your continuing education, how you give back to the community, and your insight.
If you don't have the tools to clearly articulate your value to buyers and that worth to them, then buyers are going to compare your generic services with any other agent and choose the one that costs the least.
YOUR NEXT STEP
I didn't write this Zebra Report to freak you out, but the industry is changing under our noses. You don't have a moment to lose. You need to get your tools in order beginning TODAY. We have made it easy to get the ball rolling:
- Listing Presentation and Buyer Presentation Assessment: Email us your listing and buyer presentation to support@thelonesgroup.com to get a quote for bringing it up to today's standard.
- Additional Buyer and Seller Props: Want the Home Selling Strategies, Listing and Buyer Fees sheets, Buyer Transaction Expenses, Buyer Pledge, and Buyer Services Agreement - Marshmallows props? We can build those for you! We can build them in your brand in the format your other materials are in or in Canva for $995 (ENCORE members get a 30% discount). Just email support@thelonesgroup.com to discuss options.
- Website: Of course, having a robust website that outlines your processes and services is also an important part of your suite of tools.
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Denise Live September 17th - October 8th: Over the next four weeks, I am going to be addressing how to use these tools on my weekly Denise Live webinar, Tuesdays at 9:00 am Pacific:
- September 17th Addressing Your Fees with Buyers - There's a Prop for That!
- September 24th Addressing the “What Ifs” with Buyer Brokerage Fees - There's a Prop for That!
- October 1st Addressing Fees in Your Listing Presentation
- October 8th Addressing Buyer Barriers with Sellers - There's a Prop for That!
Join Club Zebra now for $9.95 and benefit from all four of these important conversations.
From the initial interaction to giving over the keys, you need to appear polished and professional, with processes and systems that point to your experience and expertise. There is too much at stake to assume that buyers and sellers understand what is going on and what is in their best interests. They are looking to you for guidance. Make sure you have the visual tools to provide it.
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