Residential Real EstateRealtors: How To Make A Buyer"s Agent Work For You
Today it"s in vogue to talk about having a buyer"s agent. It seems everyone who is anyone has one, two or even three! Yet behind closed doors agents keep asking me: "Greg, how can I make my buyer"s agent work? I thought a buyer"s agent would save me time and make me money, but they have turned into a giant headache that"s keeping me up at night. I am too embarrassed to tell anyone it"s not working for me, when all those other agents keep talking about how great life is with their buyer"s agent."
So what"s really going on? Is having a buyer"s agent going to help you or drive you nuts? The answer is: it depends.
The good news is that with a little thought, foresight and this article, you can save yourself a lot of grief. First, let me start with defining what a buyer"s agent really is. I believe that a true buyer"s agent is a full time employee of an agent who, under the direction of the employing agent, previews, shows and writes up offers on homes for the clients of the employing agent. They promote their employing agent throughout the process and once an offer is accepted, they turn all contact over to the closing coordinators of their employing agent and have no further contact with that client.
This concept of a buyer"s agent was created for highly successful agents who were taking so many listing that they did not have the large amount of time it takes to preview and show properties to their buyers. So to improve the quality of their service and to not lose clients to another agent, they hired buyer"s agents. Often the employing agent, the buyer"s agent and the clients would meet and talk about what the buyers were looking for in a home. Then the employing agent would have the buyer"s agent preview and show the client homes. After finding a home, the buyer"s agent would take the clients back to the employing agent to write up the purchase offer. This model works very well for agents who have lots of clients and can keep one or more buyer"s agents busy showing homes. The buyer"s agent does not have to worry about prospecting, marketing and the other challenges of being an independent contractor.
Among the best buyer"s agents for this model are older agents who are knowledgeable about real estate, and are people oriented, but who have always struggled to generate new clients. This type of agent loves the security of getting a fixed regular monthly income with a small override -- five percent on each closing. They have to understand that they are a role player in your business who is excited about playing that role because they are making more than they could else where.
What you don"t want in this position is an agent who wants to learn the ropes from you. It may work in the short run, but you are setting yourself up to lose your client base and to create a lot of bad feelings.
This buyer"s agent model works very well when your marketing efforts are generating enough buyers to generate $600,000 or more in sales each month. Best of all, it allows the employing agent to maintain strong client loyalty, provide outstanding customer service and care, and still make more money.
Unfortunately, over the years, agents who were not quite able to generate enough business to hire a full time buyer"s agent, and were regularly watching business slip away because they did not have the time to show property, started coming up with plans to give agents their leads in exchange for a percentage of the commissions.
In realty this is a variation on receiving a referral fee from another agent. The biggest problem is that most agents have not set up clear expectations for exactly what is supposed to happen and who is representing whom. If the buyer"s agent gets a referral from the client -- how do you determine whose client it is and who gets the commission?
To make things worse, many agents hire new people and pay them less in exchange for teaching them the business. However, it does not take long for the new person to start resenting the other agent and feel taken advantage of. I have taken hundreds of calls from agents desperately trying to win back long-term clients after one of their buyer"s agents left and took a lot of clients with them. At the start it seems like such a good deal -- it is saving you time and making you money -- but I have seen it blow up time after time.
The key to hiring a successful buyer"s agent is to make sure you talk about all the difficult issues up front. As the employing agent you need to have a clearly written outline of how to treat your clients, and how you want to be represented and promoted by the agent when they are working with your people. I have also found that it really helps if you can make sure that your buyer"s agents ends up making more then they expected and needed.
So before you jump into getting a buyer"s agent, think it through. What are your goals for a buyer"s agent? Are those goals a win-win for both of you? How do you want your clients serviced? What is your plan for how your buyer"s agent represents you and promotes you to your client base? Does it make real economic sense, or are you doing this because it"s the cool thing to do right now?