By Marylyn B. Schwartz and Mark Leader
RISMEDIA, April 5, 2007-Rarely has an article sparked so much interest, questions and concerns as did "Time to Stop Fighting Buyer Brokerage," when it was featured as RISMedia.com's lead story on April 2nd. We didn't intend to create a two-part article, but the need to clarify and expand on the issues raised by many readers necessitated a follow up.
It is quite apparent that there are countless thousands of sales professionals out there who either do not practice buyer brokerage, have no knowledge of the Accredited Buyer Representative (ABR) course, or plain believe, for a myriad of reasons, that getting an Exclusive Right to Represent Agreement signed, and a buyer's agent commission included, is impossible despite the thousands who get them signed every day.
However, the issue that raised the most ire in the previous article stemmed from the statement that if a buyer chose to see a property where the buyer's agent's fee was not paid in full by the seller from the transaction, the buyer could "…decide to make an offer on such a property, …subject to the seller paying my (buyer's) fee in full. If the seller does not agree, you (buyer) can withdraw your offer and look elsewhere or choose to pay my fee from your funds."
The troops rallied, fearing that if an offer were to be submitted in that way, said offer would be out of integrity with the NAR Code of Ethics, Article 16-16. Take heart… there would only be an ethics violation if the offer to purchase in some way asked or was contingent upon the seller's agent having to change his/her previously negotiated commission compensation with the seller. In part, according to Article 16-16, a buyer's agent cannot interfere with a previously negotiated compensation agreement.
However, note that since the request comes directly from the buyer, it is no different than the buyer asking the seller to assist with any other expense such as inspections, repairs, points or other closing costs.
Read the interpretations at realtor.org noted in the link below, particularly case #16-17. The opinion is clearly in favor or what was suggested in the dialogue of the previous article.
If there is a client agreement between a buyer and an agent, it is the agent's duty to advise his/her client in ways that may assist them in negotiating an acceptable offer on a desired property. The agent suggesting to his/her buyer client that a seller may be willing to assist in paying a portion of the buyer agent's fee is certainly within the boundaries of acceptable information. Sellers are often willing to make concessions to achieve a sale.
Since the seller makes the final decision and can "spend" his/her funds as they see fit, what right would anyone have to say that the seller could not assist a buyer with their closing costs if and/or when those costs included compensating the buyer agent? Every day across the country sellers and buyers negotiate payment agreements that bring properties to closure.
In conversations with several experts on ABR training, it was noted that misunderstandings occur frequently relative to compensation issues. While buyer broker agreements have been around for quite awhile, it is still relatively new in some areas to have them signed with guaranteed buyer's agent compensation clearly stated. There is a great deal of fear relative to getting buyers to commit to financial responsibility for services they receive. Sellers have been on the "hook" for compensation to their agents, of services rendered, for many years.
Adorna Carroll, president of Dynamic Directions, Inc., a noted speaker and ABR instructor, said offering options are the key to success.
"We must give our buyers options relative to making offers. By suggesting to them that they may ask the seller for a "seller funded rebate from seller to buyer to be used to defray closing costs," we often provide just what is needed to move the transaction along, yet doing nothing to hurt the seller agent's compensation previously agreed to with his/her client."
Curtis Hall, RE/MAX Anasazi Real Estate, helped to create the ABR program and is considered an expert in helping agents work within the confines of buyer brokerage and to ensure they are paid for services rendered, and he offered this witty, as well as wise, analogy.
"When we go to a doctor, we are asked to sign an agreement that states that the doctor will bill the patient's insurance company for the cost of the visit. If the fee is subsequently covered by the patient's insurance company, there are no monies due from the patient. However, if the insurance pays none or only part of the fee, the remaining balance is the patient's responsibility. Once agents are willing to raise their standards and feel proud and worthy of being paid for their time invested, buyer brokerage compensation agreements will be gotten by all."
To complicate the issue of compensation a bit further, the truth of the matter is that one can make a very good case for the buyer having been the one to pay both sides (agents) of the transaction right along. Since the funds needed to compensate agents come directly from the proceeds of the transaction, and there would not be a transaction if the buyer was not paying for the home, then the buyer is paying both sides no matter whose names are on the checks.
Once again, please allow this article and the questions it raises to demonstrate and stress the need for in depth, more detailed understanding of buyer brokerage, the ABR designation, and the need for the industry as a whole to stand up proudly for the extraordinary job we do to help people achieve their dreams. We have a duty to our profession and families to be duly compensated for our time invested in the transaction and to be proud that we earn our living through real estate.
Mark Leader is the president of Mark Leader Courses. For more information please visit www.leaderschoice.com/ or e-mail firstname.lastname@example.org. Marylyn B. Schwartz, CSP, is an expert in real estate and corporate sales training/management and team development. She is president of Teamweavers and a trainer for Leader's Choice®. Contact her at www.marylynbschwartz.com or e-mail: Teamweaver@aol.com.