By Ross Wilson
In this sixth in the series about our industry’s fee for service, let’s look at this controversial topic from a buyer agent’s perspective. Though not nearly as significant a concern for buyer clients, we should, in our evolving marketplace, still be reasonably competitive for them too.
Let’s start with some questions. When do you ask your buyers to sign a Buyer Representation Agreement (BRA)? When you meet for the first time? After you’ve shown a few homes, or immediately prior to signing an offer? Do you ask for a short-term commitment such as 24 hours and include only the specific properties you intend to show? Or a longer-term general contract? Do you delegate this task to a junior agent on your team? Or do you even ask for a commitment – in writing or otherwise? Maybe you rely on an implied, trusting verbal arrangement. Or, as I’ve heard stories, maybe before you even agree to step out the door to show any property, you flatly refuse to invest any time unless they commit to signing with your brokerage. The practice of buyer agency has certainly been contentious since its inception and largely inconsistent.
My normal practice was to ask for a commitment once my buyers and I had become mutually comfortable. Unless they were friends or former clients, prior to formalizing our relationship with an agreement, I needed assurance they were serious, sensible and most importantly, financially qualified.
Another critical factor was my personal determination of whether I could work with them. Would we be compatible? Usually, though, I got a signature on a BRA and an offer contemporaneously. However, to protect yourself and comply with legislated requirements, you’re supposed to obtain a written commitment as early as is practically possible in the process. Inherently, current practice involves a lot of discretion.
When drafting a BRA and inserting your commission rate, you must once again decide your worth (see my last column). To preclude my buyers from having to pay additional fees, I usually set my rate to coincide with what was typically offered to co-operating brokerages. However, if they chose to offer on the rare listing that advertised a lower rate, I obviously advised them of the additional fee they’d have to pay if their bid was successful. But without a previously signed BRA, this option would be unavailable to you. Unless the seller agrees to pay your normal rate, you’d be forced to accept the lower fee.
Many agents avoid the potentially lucrative scenario of dual agency. Why? Well, I’ve been told they’re afraid of erring and placing themselves in legal or financial jeopardy. Or they say there’s no point in taking the risk because they’d be forced to cut their fee anyway. Accordingly, they steer clear of navigating these potentially hazardous waters.
This is obviously a personal choice, but consider the proverbial man against the sea. If you’re familiar with fundamental seamanship and are well-trained and equipped to handle a ship’s operation, then the odds are greater that you’ll arrive unscathed at your destination. Dual agency is no different. If you understand the process and carefully follow procedure, you’ll most likely satisfy both clients’ needs. It’s just a matter of mediating a duel, thinking and carefully choosing your words, maintaining appropriate confidentiality and caring equally for each party.
However, when a brokerage represents two competing buyers for the same property, the possibility of a conflict increases. Challenges can be further exacerbated if the subject property is listed with the same brokerage that represents the buyer. But as I said, dual agency seems more problematical than it really is. Just ensure you understand the procedure and your responsibilities.
In the next column, I’ll address the subject of commissions from the perspective of what is referred to in our industry as double-ending, which of course, involves dual agency.
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” – Mark Twain