Tag Archives: agreements

Whose client is it, anyway

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Scenario: buyer says that they will be buying in 3 months. You say, perfect, let’s get you pre-approved so you’ll be ready by then. You believe the buyer until they call you 5 days later with the great news that they just bought new construction from a site agent! Aren’t you happy for them? 

But before you get really mad [photopress:mad_face.JPG,thumb,alignright]and start telling your clients they didn’t have representation, consider the following and you’ll see it’s not black and white. 

Most buyer’s agents hate new construction sites, especially those with site registration policies since they could lose their clients to the site agent. A few builders (notably an ex-agent on the Eastside, name will be supplied upon request!) will only pay the buyer agent 1% if the buyer goes to the site the first time without the agent (whether or not the buyer says they are working with said agent). But normally the site agent, if they are getting paid by the builder will be agent friendly and not give you a bad time and if you write it up, you’ll get paid.

The question is, can a site agent adequately represent a buyer?

The answer:  It Depends.  Here are the different models that I know about 

1. Builder can hire an in house team, where the agents work for the builder, sometimes on salary and are generally the listing agent and are privvy to all the deals that have been written.

This is the best scenario for the builder since the agent can not go elsewhere to earn money. The agent isn’t paid if the site doesn’t sell.  This agent is not able to represent a buyer. 

2. Builder can sub-contract to a marketing team, say “company A”, where the listing agent again can not pick up clients and take them off site under any circumstance. If there is a buyer for whom that product does not fit, then the listing agent is encouraged to refer that buyer to one of the team of agents who is associated with Company “A” but not a site agent. The site agent, the builder and “company A” each share in the referral portion of the commission if the referral agent sells the client. These agents are labeled buyers agents and are often on site to meet with buyers, but first the listing agent must be thoroughly convinced that their site is not a fit for this buyer. This can be a great source of buyer clients for the referral agent although there is a stiff referral fee Not as good for the builder, except for his 1/3 share of the referral fee since there’s not any incentive to sell the builder product especially if the client wants to come back to the site, the referral agent will not get the sale.  Can this work for the buyer? I’d say, maybe but there’s the big problem with going back to the original site to buy in which case the referral agent won’t get paid and may try to talk the buyer out of this.

3. Builder can sub-contract to a marketing team, say company “B”.  Here, the listing agent is not the agent that puts in time at the site. The listing agent represents the seller and hires a staff of agents out of company offices that are buyer’s agents. These agents may get a couple hundred per door, but they say they are buyer’s agents and in general are not privy to insider information.  These agents will likely have a sign, “buyer agent” on their desk and should advocate for their buyer in any discussions with the seller.  However, if this agent continues to work the seller for price considerations, etc, you can be pretty sure the builder will ask for the removal of that agent.  So, I still see a conflict of interest here.  If the agent consistently works on one builder’s site, then I’d wonder to whom loyalty is given.

4. Builder can sub-contract to a single listing agent.  In this case, the listing agent is probably too small to have much of a program in place for a team of site agents. They might casually bring other agents in to the site just to pick up buyers and to work when the listing agent doesn’t.  If the site is small, this is often the case. The listing agent in this case is often the agent that brought the builder the land. The buyer’s agent rarely know anything about inside information and are on site simply to help buyers. I call this Site fill in work:  This is a great avenue for prospecting for a buyer but I’ve never understood why a builder would want to have his site full of agents who earn an SOC either off or on site. At the first negative hint that a buyer might not like the builder product, the agent whips out the computer and starts showing buyer other properties. If I were the builder, I would be looking for 2 person listing teams to cover all shifts.  Does this work for the buyer? [photopress:j0400346.jpg,thumb,alignright]If the buyer meets the fill in buyers agent and connects, I believe this is a great situation for a buyer without an agent already, otherwise you’ll be working against the site agent for this client.  The site agent can represent the buyer possibly better than a non site agent because they know the plat and product better and presumably know new construction better. That agent owes no allegiance to the builder and can very well advocate for that buyer.  For instance,understanding how a builder addendum and limited warranty really affects a buyer isn’t something most agents are familiar with. Did you know that one very prominent builder requires the first buyer to hold the builder harmless if there is a sale before 4 years and the second buyer is part of a class action law suit? Would the average agent understand those 12 pages of builder addendum well enough to read this and have their buyer consider the repercussions? and to realize there is often an automatic removal of the financing contingency in 2 weeks?

So before buyers or other agents decide how bad it is for a buyer to choose to work with an agent they met on site, first you have to know the relationship of that agent to the seller and in some instances, I think the site agent makes a very strong buyer’s agent.  So best move is to tell your buyers ahead of time what will happen when they go to a new construction site without you and study those builder contracts.  I used to give out a blue “buyer passport” book that had a spot for my business cards and a place where the buyers could write down each site they visited. That way, you’ve gotten a step ahead of them and it makes a great opening for the “watch out for the site agent” speech. 

The Rockford Files leads to "The Escrow Files"

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For those of you who grew up in the 70’s, if you were like me and missed an episode of the Rockford Files, you were really bummed out. Missing the Rockford Files was almost as bad as my parents making me late for my soccer games. Not a good thing. Tivo, where were you?

Jim Rockford (James Garner), what a guy. He always seemed to get into a pickle and get out of it. That Pointiac Firebird of his; all my friends wanted one, even if it meant riding my dirt bike to the store and buying a $2.50 model of it and putting it on my dresser. That was good enough for me. Those humorous one liners with “Angel,” brings back lots of great memories. The humor reminds me of some of the things we have come across in the world of escrow. In escrow, if you can’t find any humor in the business, it will eat you up.

Rather than send out mundane APB’s to our entire client base about issues that come up or tips based upon transactions that go haywire, we think that adding humor into the fold has more impact and can also be helpful to our Realtor customers in providing better service and foster smoother closings for their clients.

For example, escrow companies are extremely busy at months end and the phones ring constantly. It’s hard to get work done when you receive phone calls from nearly every party, sometimes two or three times in a day, asking, “is it closed yet?” So, to help reduce stress at month end, we started a “counting” system where we tally the transaction with the most phone calls asking, “is it closed yet?”

We made the question, “Is it closed yet?” into a funny YouTube video parody skit, starring our kids who play the Realtor, the buyer, the seller and loan officer. The movie series is called “The Escrow Files.” This Fall our series will be both print and video.

Since the month ended yesterday, the transaction with the most “is it closed yet” calls was nine! For perspective, if our small office closed 30 purchase transactions this August, you get a good picture of all the people calling: buyers, sellers, agents, loan officers, funding depts, etc….on just one deal…now multiply by 30. Maybe we should get another number from Verizon dedicated as our “Is it closed yet?” hotline!

To tickle your funny bone here’s a sample from this year’s, The Escrow Files:

  • Written on an “Addendum” during 2nd quarter 2006: “Buyer to walk through house prior to closing.” Didn’t they do that already, like many times?
  • Lowest earnest money amount winner ytd: $200 cash. Wow.
  • “Should I stick around for you to cut my commission check?” –agent with clients who just signed their loan docs and the deal won’t close for another week.

Stay tuned for more and have a great three day weekend! We are looking forward to the day off!
Tim & Lynlee

Why I do not support the use of Buyer Agency Agreements

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[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.