[photopress:buyer.jpg,thumb,alignright] For many years I have been at loggerheads with most of my peers around the country, regarding the use or lack thereof, of Buyer Agency Agreements.
After eight years of “ad nauseum”, insider agent forum discussions on this topic, I continue to feel that buyers are most often, better off without them. Most often I am the only agent, in a forum of 28,000 agents, who does not support the use of buyer agency agreements. So maybe I am the “loggerhead” who refuses to “get it”.
The only time I will use them, and I have used them, is when there is a clear and present reason for the buyer to have one, that is of benefit to the buyer. Everything I do is on a case by case basis…everything…and must pass my smell test for being right for this client at this time, given the objectives of this client. Often I wish I didn’t impose that ethical standard on myself 🙂
I was one of the first agents to use a buyer agency contract in the area I worked in at the time. The buyer had a previous bankruptcy. Under the rules in play in that area at that time, I would need to disclose the previous bankruptcy to the listing agent, even though it had no potential negative impact on the seller, as it did not affect this buyer’s ability to secure a loan. The only way I could get around this, was to explain this to the buyer and have them sign a buyer agency agreement. They agreed, we signed it, and the buyer got both the loan and the house. Some disagree with me on this and feel the seller has a right to know everything about the buyer, regardless of whether or not it will impact the seller. I do not agree.
Today, in this area, I do not need a contract with the buyer to represent the buyer, but at that time and in that place I did, so I used one in that particular case. I used one because the buyer could not attain their objective, buying that house, unless I did use one. It passed my smell test of being better for the buyer client for me to use a written buyer agency agreement.
Some of my peers argue/ask, “Why do you always use a contract with a SELLER client?” as if the issues are one in the same…a “contract is a contract” is their mantra. I always use a contract with a seller, because it is in the best interest of the seller to have all of the members of the mls show the seller’s property. In order for the seller to gain access to the mls, the sellers must sign a written agreement to pay, through me, the agent who shows the property and brings an acceptable and accepted offer. In other words…it passes my smell test for being best for my client for my client to sign it.
Ardell,
I don’t normally get into these debates because I rarely have much to add… But I’m going to disagree with you here. It’s one thing to be looking out for the best interests of the buyer when you have a contract with them, but at the point of contact with a client (i.e. before an agent has engaged in helping the potential client), I’d think an agent should be looking out for themselves.
As a consumer, I completely respect and understand Russ’ business constraints if he developed a contract that said:
The buyer’s best interest cannot be the deciding factor here because it will always be in the buyer’s best interest to get something for free. In other words, the buyer’s best interest says the agent doesn’t get paid anything! LOL!
If agents want to differentiate themselves then a clear and reasonable contract seems like a wonderful way to engage the consumer in understanding the value that a professional can provide.
Ardell,
I don’t normally get into these debates because I rarely have much to add… But I’m going to disagree with you here. It’s one thing to be looking out for the best interests of the buyer when you have a contract with them, but at the point of contact with a client (i.e. before an agent has engaged in helping the potential client), I’d think an agent should be looking out for themselves.
As a consumer, I completely respect and understand Russ’ business constraints if he developed a contract that said:
The buyer’s best interest cannot be the deciding factor here because it will always be in the buyer’s best interest to get something for free. In other words, the buyer’s best interest says the agent doesn’t get paid anything! LOL!
If agents want to differentiate themselves then a clear and reasonable contract seems like a wonderful way to engage the consumer in understanding the value that a professional can provide.
Dustin,
Washington State “Law of Real Estate Agency”…”a licensee who works with a buyer…represents that buyer…”
In “our world”, the world of licensed real estate agents, the buyer is a client when we speak…regardless of whether or not we ever “have a contract with them”.
In the business world, that is not the case. In the real estate agent world, a written contract is not what makes a buyer a “client” as they become our “client” under the agency laws without a written contract.
Dustin: “If agents want to differentiate themselves then a clear and reasonable contract seems like a wonderful way to engage the consumer in understanding the value that a professional can provide.”
Ardell responds: Agents are required by law to provide that same value, with or without a written agreement. We are not merely “a business”. As Judge Judy would say, we are always in a “quasi fiduciary” capacity, even when we are just chatting with the grocery clerk about real estate, or blogging…
I’m well aware of the points you make, but in reality, you don’t have to work with a buyer just like a buyer doesn’t have to work with you. In other words, despite your comment indicating otherwise, they are not a client when you speak.
Whether part of the law or not, the reality is that there is a certain grace period when both parties get to size each other up and decide if they want to work together. It is at this point that most professionals (non real estate) would attempt to bring a contract into the situation. While not required by WA state law, a contract would help clarify some ambiguities in the system and potentially remove a huge inefficiency. A contract similar to the one Russ described would mean that agents wouldn’t have to pass on the cost of empty leads (i.e. people they drive around for hours/days/weeks, but who never buy) to other buyers, but rather, the consumers would pay for the service that they get.
I’m aware I’m not the average consumer, but I would actually respect an agent more who insisted that their time was of value. Hence, the buyer’s agreement passes my smell test.
I’m well aware of the points you make, but in reality, you don’t have to work with a buyer just like a buyer doesn’t have to work with you. In other words, despite your comment indicating otherwise, they are not a client when you speak.
Whether part of the law or not, the reality is that there is a certain grace period when both parties get to size each other up and decide if they want to work together. It is at this point that most professionals (non real estate) would attempt to bring a contract into the situation. While not required by WA state law, a contract would help clarify some ambiguities in the system and potentially remove a huge inefficiency. A contract similar to the one Russ described would mean that agents wouldn’t have to pass on the cost of empty leads (i.e. people they drive around for hours/days/weeks, but who never buy) to other buyers, but rather, the consumers would pay for the service that they get.
I’m aware I’m not the average consumer, but I would actually respect an agent more who insisted that their time was of value. Hence, the buyer’s agreement passes my smell test.
Dustin: “The buyer’s best interest cannot be the deciding factor here because it will always be in the buyer’s best interest to get something for free. In other words, the buyer’s best interest says the agent doesn’t get paid anything! LOL!:
Not so in real estate, Dustin, because the mls system is the means of payment, by and large, not the buyer direct. So payment and representation are a given at first contact with a buyer consumer. That is how and why buyers have not been required to sign contracts for many years. The seller has already signed the contract that pays the buyer’s agent and the buyer gets representation by law, not be written contract.
The real estate world is quite different from most other business.
Dustin: “The buyer’s best interest cannot be the deciding factor here because it will always be in the buyer’s best interest to get something for free. In other words, the buyer’s best interest says the agent doesn’t get paid anything! LOL!:
Not so in real estate, Dustin, because the mls system is the means of payment, by and large, not the buyer direct. So payment and representation are a given at first contact with a buyer consumer. That is how and why buyers have not been required to sign contracts for many years. The seller has already signed the contract that pays the buyer’s agent and the buyer gets representation by law, not be written contract.
The real estate world is quite different from most other business.
I agree that there is a “grace period”, but the agent represents the buyer during that “grace period” and is guaranteed payment by the seller, if the buyer decides to purchase an mls property shown them by the agent during the “grace period”…some exceptions, of course.
Ardell,
Hate to throw cold water again but it has been hot outside…
You said
“In “our world
Ardell,
Hate to throw cold water again but it has been hot outside…
You said
“In “our world
Russ,
I have work to do, but in the meantime, take a new look at the “Law” as provided to the public at large…the agency pamphlet.
The consumer is TOLD by the STATE at the very, very top of the pamplet, and I QUOTE again “…a licensee who works with a buyer…represents that buyer”.
The consumer is not told…oh not YET…uh maybe SOMEDAY…I didn’t mean RIGHT NOW…are they?
The Agency pamphlet says that the buyer is represented by the licensee…pure and simple. So that’s how it IS, until someone changes the agency pamplet to define that “works with” doesn’t mean what it says.
Look at Section 7. Presume the buyer will read that too.
Russ,
And your point is?
According to Section 7, if a buyer meets an agent at a house and the agent opens the door…that agent “represents” him unless that agent is THE listing agent.
According to Section 7, if a buyer meets an agent at an Open House, and that agent is not THE listing agent, and the agent starts blabbing on about “What is your price range?” “What areas would you like me to find houses in for you”. That agent is undertaking, and I quote Section 7 “to provide real estate brokerage services”.
You and I can split legal hairs all day, Russ, about what constitutes “a principal”, but this pamphlet is given to average John and Jane Doe and also Mrs. English is not my first language. So please don’t tell me that the consumer is not represented until “the agent says so”, because that clearly would not be fair to the consumers of this State.
Russ,
Why don’t you tell eveyone what THEY get if they sign an agreement, that they would NOT get under Washington Law. Let’s have a conversation that is meaningful to the average Joe. What is in the standard NWMLS buyer agency agreement that is NOTprovided to the buyer consumer, under the Washington Law of Agency.
Ardell
I believe you have veered off on a tangent from the original intent of my post which was in response to your response to Dustin (that’s confusing but what the heck).
Anyway, Dustin commented that an agent could choose the type of contractual protection they required in dealing with that buyer. You responded that they could not because of some agency duty to that buyer. I responded that this was not the case because agency duties don’t start until the agent provides brokerage services. So in the typical situation where the buyer first meets the agent outside of an open house (new issue), then are we clear that the agent can negotiate as they please with the buyer without any conflicts? If the agent does not strike the deal they want and the buyer later skidoodles to another agent to write up the deal and collect the SOC, shame on agent #1 as they had their chance.
Now you raise the issue of a buyer coming into first contact with an agent who is holding an open house but is not the listing agent. My recommendation has been and continues to be that the showing agent should have a subagency agreement with the listing agent/broker for that home only and therefore would also represent the seller. If you go the subagency route, the showing agent will not be a buyer’s agent which would be in line with the expectation of the buyer that the agent opening the door is somehow connected to the seller.
If there were no subagency relationship, then you are correct that the showing agent would represent the buyer the minute they start showing them the home. That being the case, there is nothing that would prevent the showing agent from discontinuing the agency relationship and let the buyer go run free if the buyer refused to sign the agent’s contract of choice.
Your original post revolved around why you do not use a BAA and your logic is because the BAA is not good for the buyer. I am not going to comment on the NWMLS form but I have drafted several such agreements for brokers and they all contain a section to include specific additional services and metrics that are not even hinted at under state law. Good for a buyer? Absolutely! Because these agreements define the scope of services that the buyer will receive and the buyer can hold the agent’s feet to the fire for nonperformance. Good for the agent? Absolutely! Because it sets the expectation that the agent does not work for free and their compensation is not beholden to some unreasonable SOC.
May not be for you but I think it makes a lot of sense to many.
Cheers
Russ
Ardell
I believe you have veered off on a tangent from the original intent of my post which was in response to your response to Dustin (that’s confusing but what the heck).
Anyway, Dustin commented that an agent could choose the type of contractual protection they required in dealing with that buyer. You responded that they could not because of some agency duty to that buyer. I responded that this was not the case because agency duties don’t start until the agent provides brokerage services. So in the typical situation where the buyer first meets the agent outside of an open house (new issue), then are we clear that the agent can negotiate as they please with the buyer without any conflicts? If the agent does not strike the deal they want and the buyer later skidoodles to another agent to write up the deal and collect the SOC, shame on agent #1 as they had their chance.
Now you raise the issue of a buyer coming into first contact with an agent who is holding an open house but is not the listing agent. My recommendation has been and continues to be that the showing agent should have a subagency agreement with the listing agent/broker for that home only and therefore would also represent the seller. If you go the subagency route, the showing agent will not be a buyer’s agent which would be in line with the expectation of the buyer that the agent opening the door is somehow connected to the seller.
If there were no subagency relationship, then you are correct that the showing agent would represent the buyer the minute they start showing them the home. That being the case, there is nothing that would prevent the showing agent from discontinuing the agency relationship and let the buyer go run free if the buyer refused to sign the agent’s contract of choice.
Your original post revolved around why you do not use a BAA and your logic is because the BAA is not good for the buyer. I am not going to comment on the NWMLS form but I have drafted several such agreements for brokers and they all contain a section to include specific additional services and metrics that are not even hinted at under state law. Good for a buyer? Absolutely! Because these agreements define the scope of services that the buyer will receive and the buyer can hold the agent’s feet to the fire for nonperformance. Good for the agent? Absolutely! Because it sets the expectation that the agent does not work for free and their compensation is not beholden to some unreasonable SOC.
May not be for you but I think it makes a lot of sense to many.
Cheers
Russ
Russ,
How could I have veered of on a tangent from the “original intent of YOUR ‘post'”, when it was MY original post that you veered off into the bike lane? Clearly this string of comments was not the original intent of MY post, article, entry…what DO we call these things?
I’m just funnin with you there, Russ…I know you meant your COMMENT to MY post.
The “shame on you agent #1” method of resolving commission disputes is only supported by the “every buyer should always sign a contract to see a house” crowd. To date the “Shame on you agent #1 because you are a dumbass”, method is only touted by the “he who writes it gets it” crowd.
Well if there are any agents signing any “subagency agreements with listing agents” then handing a buyer an Agency Pamphlet that says they represent the buyer, they better have a big picture of themselves with a big red circle around their face and a big red slant line painted across their face that says “Buyer Agent NOT”.
Otherwise the poor consumer attending the Open House might think they are entitled to the rights given them under the Laws of this State.
How many agents out there, please answer, have EVER signed a “subagency agreement with the listing agent” when agreeing to sit their Open House? Contracts between agents…that’s a novel concept. Who’s teaching that class and how many clock hours does one get for over riding the State Law and Pamphlet that CLEARLY tells the public at large that they ARE represented by EVERYONE except the one person who’s name is on that rider in the front yard?
When you draft that special agreement, agent to agent, to make the pamphlet that the state requires be given to consumers invalid, do you modify the pamphlet that they give the consumer as well?
I had you up to “metric” So buyer’s get these wonderful little metric thingies and a whole pile of these little metrics somehow compensate for the buyer being tied up and not being allowed to wander up to Lynnwood and down to Tacoma trying to find their way and a house they like.
Those “metrics” must be something real special. Can you post a picture of one. Can you specifically tell me what a buyer gets from the agent who makes them sign a contract, saying they can’t run into Uncle Joe and buy his house without paying an agent. The buyer can’t go to a party and find out that Susie’s brother’s sister is selling a great place in Capitol Hill soon, but the buyer can’t buy it without paying an agent, because he signed something saying the agent gets paid, even if he has nothing to do with Susie’ brother’s sister and that house and it is not even “for sale”.
These little “metric” thingies must be quite valuable indeed. Can you give us a list of them, so we can verify that agents who represent buyers, as provided under the Law of this State, who do not use contracts, don’t give these “metrics” to buyers now?
I have to go back up there and read MY original POST and try to remember what the heck I was trying to talk about, because it certainly was NOT about “Good for the agent? Absolutely! Because it sets the expectation that the agent does not work for free and their compensation is not beholden to some unreasonable SOC.”
How the heck have we all stayed in business this long by working for “free”. Last I heard there was a concensus that we made “too much”, NOT that agents worked for free? Last I heard, and I’m pretty sure it was from YOU, the SOC was TOO HIGH. How come now it is “unreasonable”?
Russ,
How could I have veered of on a tangent from the “original intent of YOUR ‘post'”, when it was MY original post that you veered off into the bike lane? Clearly this string of comments was not the original intent of MY post, article, entry…what DO we call these things?
I’m just funnin with you there, Russ…I know you meant your COMMENT to MY post.
The “shame on you agent #1” method of resolving commission disputes is only supported by the “every buyer should always sign a contract to see a house” crowd. To date the “Shame on you agent #1 because you are a dumbass”, method is only touted by the “he who writes it gets it” crowd.
Well if there are any agents signing any “subagency agreements with listing agents” then handing a buyer an Agency Pamphlet that says they represent the buyer, they better have a big picture of themselves with a big red circle around their face and a big red slant line painted across their face that says “Buyer Agent NOT”.
Otherwise the poor consumer attending the Open House might think they are entitled to the rights given them under the Laws of this State.
How many agents out there, please answer, have EVER signed a “subagency agreement with the listing agent” when agreeing to sit their Open House? Contracts between agents…that’s a novel concept. Who’s teaching that class and how many clock hours does one get for over riding the State Law and Pamphlet that CLEARLY tells the public at large that they ARE represented by EVERYONE except the one person who’s name is on that rider in the front yard?
When you draft that special agreement, agent to agent, to make the pamphlet that the state requires be given to consumers invalid, do you modify the pamphlet that they give the consumer as well?
I had you up to “metric” So buyer’s get these wonderful little metric thingies and a whole pile of these little metrics somehow compensate for the buyer being tied up and not being allowed to wander up to Lynnwood and down to Tacoma trying to find their way and a house they like.
Those “metrics” must be something real special. Can you post a picture of one. Can you specifically tell me what a buyer gets from the agent who makes them sign a contract, saying they can’t run into Uncle Joe and buy his house without paying an agent. The buyer can’t go to a party and find out that Susie’s brother’s sister is selling a great place in Capitol Hill soon, but the buyer can’t buy it without paying an agent, because he signed something saying the agent gets paid, even if he has nothing to do with Susie’ brother’s sister and that house and it is not even “for sale”.
These little “metric” thingies must be quite valuable indeed. Can you give us a list of them, so we can verify that agents who represent buyers, as provided under the Law of this State, who do not use contracts, don’t give these “metrics” to buyers now?
I have to go back up there and read MY original POST and try to remember what the heck I was trying to talk about, because it certainly was NOT about “Good for the agent? Absolutely! Because it sets the expectation that the agent does not work for free and their compensation is not beholden to some unreasonable SOC.”
How the heck have we all stayed in business this long by working for “free”. Last I heard there was a concensus that we made “too much”, NOT that agents worked for free? Last I heard, and I’m pretty sure it was from YOU, the SOC was TOO HIGH. How come now it is “unreasonable”?
It seems like a buyers contract would never work. A good portion of buyers probably aren’t in a big hurry to buy a home so if they didn’t like the agent they signed a contract with, they would just wait for it to expire. And how would you define area? What if a buyer started out looking in West Seattle for a house and ended up deciding to buy one in North Tacoma? Most buyers agents specialize in certain areas do they not- so isn’t signing a contract also basically committing you will live in a certain area, or if you don’t your agent will be basically be useless for everything but the negoitations (which you can do yourself with the help of an attorney anyways).
Not to mention the enforcement factor. If a buyer signed a contract with a agent in Seattle what would really stop them from signing another one for an agent in Tacoma? The agents in Seattle would probably never find out and the buyer could just blow off all their calls until the contract expired.
It seems like a buyers contract would never work. A good portion of buyers probably aren’t in a big hurry to buy a home so if they didn’t like the agent they signed a contract with, they would just wait for it to expire. And how would you define area? What if a buyer started out looking in West Seattle for a house and ended up deciding to buy one in North Tacoma? Most buyers agents specialize in certain areas do they not- so isn’t signing a contract also basically committing you will live in a certain area, or if you don’t your agent will be basically be useless for everything but the negoitations (which you can do yourself with the help of an attorney anyways).
Not to mention the enforcement factor. If a buyer signed a contract with a agent in Seattle what would really stop them from signing another one for an agent in Tacoma? The agents in Seattle would probably never find out and the buyer could just blow off all their calls until the contract expired.
Eric:
1) Never say NEVER! Working for whom?
2) I wish everyone would answer from the perspective of WHEN AND WHY DOES IT WORK FOR THE BUYER consumer. The purpose of the contract can’t be SO THAT THE AGENT GET’S PAID!
If an agent isn’t getting paid, it is not because they don’t have a contract, it is LOOK IN THE MIRROR TIME!. A Buyer Agency Agreement should not be something an agent uses when their effeciency is inadequate for the job at hand. If an agent can’t evaluate why something isn’t working, they shouldn’t be asking people to contract with them, to compensate for that weakness.
Seller’s are DOGS and Buyer’s are CATS who need lots of freedom or a very, very, very long leash. And it “Takes a Village” for a buyer to get from square one to the end of the road. Sometimes we are merely a stepping stone along the way, and we know from day one if we are the agent they will end with, or a kindly agent helping them along the long path to the end of their journey. That IS the business, trying to CAPTURE them on day one is not a reasonable request.
Two ways signing an agreement can be good for the buyer:
1. Straight talk, clear expectations. This is back to the transparency issue we talked about on the commision. An explicit agreement clarifies what the buyer can expect. (Russ made this point too…I couldn’t really tell if you answered it.)
2. Get the best output from an agent. If people commit to an agent, that agent has more incentive to invest time and energy finding them the best home. The less reliable that lead is, the more incentive the agent has to invest time in better leads.
And yes, one of the purposes of the contract is to spell out the conditions under which the agent get’s paid. The contract helps both sides. Transparency is good.
Ardell
Once again you misquote me. Please stop. When have I said SOCs are too high? I don’t mind being called on the carpet for saying dumb things (which I do on occasion) but let’s keep things real.
I am sitting at the Inman Connect Opening Session so can’t talk very long…but you asked a question about metrics that deserves a quick answer.
Metrics are a basis of measurement that are used in business every day. Most great companies live and die by them. Since metrics allow for measurement, you can determine whether one acheives a promise based on metrics or does not.
For example, if a buyer agent says that they will send an update email to the buyer each and every day, that is a metric that is measureable and defined and can be tracked as to whether the agent performed or did not. Compare this with the (un)metric of “I will keep you informed on a regular basis.” What is regular? Don’t know. But I do know that in many cases the expectation of the buyer will not match definition of “regular” in the mind of the agent.
GTG (that, as my daughter has told me, means got to go)
Russ
Ardell
Once again you misquote me. Please stop. When have I said SOCs are too high? I don’t mind being called on the carpet for saying dumb things (which I do on occasion) but let’s keep things real.
I am sitting at the Inman Connect Opening Session so can’t talk very long…but you asked a question about metrics that deserves a quick answer.
Metrics are a basis of measurement that are used in business every day. Most great companies live and die by them. Since metrics allow for measurement, you can determine whether one acheives a promise based on metrics or does not.
For example, if a buyer agent says that they will send an update email to the buyer each and every day, that is a metric that is measureable and defined and can be tracked as to whether the agent performed or did not. Compare this with the (un)metric of “I will keep you informed on a regular basis.” What is regular? Don’t know. But I do know that in many cases the expectation of the buyer will not match definition of “regular” in the mind of the agent.
GTG (that, as my daughter has told me, means got to go)
Russ
Russ,
Have FUN! at the conference…to be continued…when you return 🙂
I agree with you Ardell.
Agency is a good thing, but agency agreements, as they are used, hurt clients as much as help many times because too many agents use these contracts as a ball and chain once signed. See my post on the subject at:
http://realityofrealestateblog.blogspot.com/2006/07/how-agency-agreements-are-ruining-real.html