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Realty Builder
Jax Daily Record Friday, Apr. 12, 200212:00 PM EST

You can't please two masters

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by Walter Sanford

Inman News Features

In the last 15 years, there has been an outcry for a representative of buyers. Under traditional real estate, either the same agent or cooperating agents shared a commission paid for by the seller. It is successfully argued that the seller is due a fiduciary duty and the buyer a duty of something less. In order to change this, we have instituted state laws, guidelines, regulations, and even new franchises and educational programs. All these have the goal in mind to better represent buyers and all, to a certain extent, have been very successful!

Being an old veteran who has watched, participated, and mentored in literally thousands of transactions, there’s one simple truth we still have to overcome. If the seller pays a commission, regardless of what the laws are and what disclosures have been signed, the agent representing the buyer is still mentally working for the seller.

In any transaction where a commission is involved, where payment of that commission is predicated upon a successful closing, it is paramount to get the client’s cooperation for their part of that closing. Cooperation consists of the buyer agreeing to buy the property and the seller agreeing to sell. However, it also means that cooperation consists of the seller agreeing to pay a commission. No matter what the disclosure or law, if the seller has to pay that commission, the agent representing the buyer wants to make sure that the seller likes the deal. Therefore in real life, as long as we have a system where the seller pays for the majority of all real estate transaction commissions, there will never be true buyer brokerage.

Buyer brokerage will only come about when the seller pays their agent and the buyer pays their own agent. You can’t please two masters! We are currently working a farce upon buyers, by explaining to them about current buyer brokerage protections on transactions, that still have the seller-paid commissions and buyer-agents whom eventually receive their commission from a debit to the seller’s proceeds!

The only way to successfully combat this is for agents to become more ambitious and aggressive in offering and preparing a presentation to buyers (e.g. Have the buyer pay for services rendered). In traveling the United States and meeting with top agents, I see very few buyer presentations that would excite a buyer to pay one-half of the commission on top of the purchase price and closing costs of the property that they want to buy. The client will just go down the street to the local “tour guide.” In my opinion, for a buyer to be motivated to pay their own commission for services rendered, the

service provided by typical real estate agents would

have to improve by adding the following services:

• Provide a larger inventory of property available to the potential buyer by direct mail and e-mails to the agent’s and company’s present and past client database searching for potential properties not currently on the market.

• Disclosure of the new listings at the agent’s real estate firm during that critical 24 hours prior to MLS submission to the potential client.

• Direct mail and e-mail campaigns centered around the geographical area and demographics of the buyers’ needs looking for properties not currently on the market.

• Solicitation of all expired listings that meets the buyer’s needs, as far back as the MLS keeps records.

• Solicitation of all for sale by owners currently on the market.

• Relationships cemented with banks and savings and loans for properties in distress, foreclosed or owned by the bank.

• Proof that the buyer’s agent can substantially beat the current real estate board’s list-to-sale ratio averages.

As you can see this is a much larger inventory availability list than just the typical Multiple Listing Service. I for one would suggest that if a buyer is to pay one-half of the commissions they should receive a much larger offering of properties and a better than average negotiator. The current retail list on the MLS is not enough. It’s just not real life to preach buyer brokerage and have the seller pay the commission so lets improve our services so we can make a case for the buyers paying good real estate brokers what they are worth.

— Walter Sanford has written 13 books on strategies for top producing real estate agents. Walter can be reached at [email protected].

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