By Craig Proctor
RISMEDIA, Oct. 29, 2008-Traditional wisdom in this industry states that if you want to succeed in real estate, you must chase listings. This mindset springs from the fact that, historically, working with buyers was very much a hit and miss situation. Because there was no such thing as buyer agency, it was quite common for agents to spend hours and hours driving buyers from house to house to help them find a home, only to have these buyer prospects find a home through another agent. In too many cases, all your hard work with Mr. & Mrs. Buyer would not only not make you money, it would actually cost you. After all, time is money. The time you wasted with this buyer could have been spent making money on a different transaction.
What was wrong with this picture? Well, lots of things were wrong with it – on both the agent’s and the buyer’s part.
First of all, choosing homes for buyers to look at really was a hit and miss game because it was very rare for agents to have a real system for accomplishing this.
In most cases, an agent would leaf through an MLS book, pick out 6 or 8 homes which seemed to represent a reasonable fit with what they thought the buyer was looking for, show the buyer 3 or 4 of these homes, and then pray that they would put an offer on one of them.
The problem, of course, is that like so many traditional real estate marketing practices, this manner of working with buyers doesn’t focus on the buyer’s needs.
Instead, it focuses on the agent’s loose interpretation of these needs and his or her own self interest. No wonder buyers freely and guiltlessly used and abused the services of several real estate agents. It was the only way they could be sure they were getting a broader perspective than a single agent’s bias.
Nevertheless, even if this motivation on the buyer’s part is understandable, you all know the feeling of being taken advantage of by a buyer. Because they didn’t have to pay for your services – either with money or their loyalty – they didn’t value the time you were giving them. It is for this reason that working with buyers for the average agent used to be a lose/lose situation.
While all of us work with buyers as a normal and expected flip side of working with sellers, many agents still look upon buyer agency as a relatively new concept. Even though the largest percentage of real estate agents are using buyer agency, I predict that many of you are still not using buyer agreements, which means that you almost certainly have been in situations of the kind I’ve just described.
The fact of the matter is, if you do not have a system for working with buyers, including a mechanism that ensures your compensation, you’re really cheating yourself. In fact, you’re sending a clear message to your buyers that your time is not worth anything, and you’re giving them permission to abuse you.
Would you agree to list a seller’s house without getting them to sign a listing agreement? Of course you wouldn’t. Well, I can’t think of a single reason why the situation should be any different with buyers. You all know that helping someone find the right home can be a time-consuming process. Don’t give your time away!
Instead, develop a system that will help you work effectively with your buyers to ensure that:
– Your buyers get what they want (i.e. a home they love at the best possible price), and
– You get what you want (i.e. fair compensation for your efforts, and a happy client who will send you referrals)
Buyer agency is a win/win situation for you as an agent for two reasons:
– You have a legal way to ensure you get paid for your efforts in helping buyers, and
– Buyers actually represent an easier, less expensive, more predictable and steadier client base than sellers do.
Let me explain this last point, because I’m sure many of you will read what I’ve said and disbelieve this statement. But let’s look at the facts.
When you list a seller’s house, you make a contractual promise to this seller that you will effectively market their property to ensure it sells fast and for top dollar.
What this means is that you will write and place ads on their behalf, market to get buyers through their homes, prepare feature sheets, etc. I don’t need to tell you that all of these things take time. More to the point, they take money – your money. So when you list a seller’s house, you make a substantial commitment of time and out-of-your-pocket money.
What happens if this seller’s home does not sell? Forget about the reasons why it didn’t sell for a minute. We all know there are lots of reasons why properties don’t sell: some of these reasons may have to do with the agent (how effective or ineffective their marketing was), some have to do with the client (too high a price, poor showings of the property, etc.), and some have nothing to do with either of you. As is currently the case, maybe the market is just bad (fewer buyers, lower prices, higher inventory, etc.)
Whatever the reason, we all know that a certain percentage of homes listed don’t sell the first time. The seller will then either take their home off the market, or they will try to sell it again. And if they try to sell it again, three times out of four they will re-list with another agent because they perceive that the reason their house didn’t sell was because you didn’t do your job.
So what happens in a case like this, where one of your listings doesn’t sell? Well, what happens is that you are out-of-pocket for the money you invested in the marketing of this seller’s property. AND you’ve wasted time you can never recover (you can always earn more money, but you can’t earn more time.)
Now you may counter that you have an excellent “Success Ratio” (i.e. the percent of listings you sell vs those you list.) Well, so do I. But the fact remains that there are always some slow period in the market, and buyers represent not only a highly profitable opportunity in and of themselves, but they also can buffer your business when times are bad, as they are now.
When you sign a buyer to contract, you have no out of pocket costs. You’re not on the hook for advertising or promotion of any sort. Your only contractual obligation is to help them find a home.
In a bad economy, when it’s tough to sell your listings and many of them expire, this is the best time to work with buyers. If buyers have signed a contract with you to buy a home, they will buy … especially in a poor market when “deals” are easier to find.
Of course this means that buyers themselves are harder to find in tough markets, which is why it’s so critical to have a great marketing system to attract buyers. In a future article, I’ll discuss how to find ready-to-act buyers who will happily pay you for your services, even if they don’t buy a home through you.
“Just like we wouldn’t market and show a seller’s home with a signed listing agreement, we shouldn’t be working for buyers without a signed Buyer’s Agreement.” – Willie Miranda, Clifton Park, NY.
To find out more about working profitably with buyers, you can visit http://www.hypertracker.com/go/cp/a36a081029/ where you can learn about my 3-day SuperConference where I train agents on my VIP Buyer System which ensures you get paid by every buyer you work with, even if they don’t buy a home through you.
Billion Dollar AgentTM Craig Proctor has been in the top 10 for RE/MAX Worldwide for 15 years. To receive free training from Craig with no obligation, visit: http://www.hypertracker.com/go/cp/a36b081029.