The mechanics and techniques of the real estate industry are always changing. If a person lives in the past, their methods of doing business could be outdated.
In the past years many new words have gained a place in our real estate vocabulary: franchises, syndications, listing forms, continuing education, Wellenkamp and de la Cuesta, condo conversions, rent controls, AITD and creative finance are just a few of the new terms. Realtors now have to consider Multiple Listing Service changes, dual-agency, independent contractor vs. employee status and other problems.
There is a method of operation that will soon become more common. This is the use of a buyer agent’s contract by licensees. I believe it gives better service to the public and allows salespeople to earn more income and is more professional.
The traditional method of real estate transacting is by the use of the exclusive-right-to-sell listing. There are many types of listings. They include the exclusive, Exclusive Agency, open, net and even a verbal listing. The most common listing is the exclusive. In this context, the owner of the property gives an agent the right to sell the property for a certain expressed period of time. The agent will make a commission that is negotiated between the parties. The agent will make a commission if the house is sold by anyone during that period.
In a buyer’s agent agreement, the buyer signs a contract with a licensee. This contract is an exclusive arrangement. The agent licensee will receive a commission from the buyer when the buyer buys a home.
The type of agreement does not change the price of a home. It simply has the buyer paying half of the commission that is normally paid by the seller.
In real estate sales today, each party pays half of the escrow fees in most cases. Now, each party would be paying half of the commission.
There are many advantages to this system:
1. There is no possibility of the conflict of interest that could arise if a broker is representing both buyers and sellers.
2. The buyers now have agents who will be protecting their interests.
3. Each buyer will be dealing with only one agent and this should prove easier for them.
4. The broker can now devote more time to each buyer and give more complete service.
5. The buyer can select someone with whom they can work and if the person does not perform, they can select another when the contract expires.
In real estate sales today, most listings are of the exclusive type. Brokers and sellers have learned through years of experience that this method is best. A broker cannot spend time and money trying to sell a property if they do not have a strong agreement. This theory should also apply to buyers.
Some other points to consider:
1. This arrangement should be done only with an extremely effective agreement that spells out all the conditions.
2. The time period should not be too excessive in the beginning stages.
3. The fee to be paid to the broker should be a set amount and not a percentage of the price. If a percentage of the price is used, the broker would make less money if the price is lowered. This could mean a problem of conflict of interest as the broker strives for a better price for their buyer.
4. A buyer should use extreme care in selecting a broker and a broker should not sign up non-qualified buyers or people who have no chance of finding what they want.
5. A contract should spell out some performance standards. For example, the broker will call the buyer at least weekly and the buyer will be available weekly to look at possible purchases.
6. Some successful buyer agents are requesting a retainer fee paid at the start, or an hourly charge is to be paid for time expended by the broker if no purchase is completed.
7. If I were a buyer, I would want the agent to agree that his number of buyers would not exceed a certain number. If the agent signs up too many, I would not receive good service. It is my opinion that this procedure will prove extremely valuable in the field of investment real estate, exchanging and syndication. Also, buyers should like this arrangement for they will have someone working directly for them. This transfer of loyalty between the parties will help make the field of real estate more professional. If it has been proven that open listings don’t work, couldn’t it mean that perhaps open buyers are also dinosaurs?
No comments yet.