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As Aug. 17 approaches — when newly mandated changes, based on the National Association of Realtors’ commission lawsuit settlement, will be enacted — there is no shortage of angst, primarily amongst buyer agents. Knowing that significant changes will be enacted in a scant few weeks, those who function primarily as buyer agents should be using the time remaining to hone their skills and deepen their knowledge in preparation for the new reality.
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Here are seven key areas buyer representatives need to be focusing on:
1. Know your value
As we inch towards the settlement enactment date, we are already seeing a deflection in buyer agent commissions. While not widespread at this point, the overall average has dipped in our area and many believe it will slide even further after Aug. 17.
In my opinion, we are going to see a few months of confusion as sellers — based on blatantly false media commentary — believe they should no longer incentivize a buyer’s agent. However, I believe we will see a return to historic norms once sellers begin to understand that it will not be buyer agents who will be avoiding their listings; it will be buyers who will simply be unable to pay their agent in the absence of compensation from the seller.
In the meantime, buyer agents will be required to start using buyer-broker agreements as of Aug. 17, which includes the compensation the agent requires for representing their clients. Since this is a new policy in many parts of the country, we can expect initial pushback from buyers.
As a result, buyer agents need to have a well-defined value proposition they can present to their clients to justify their compensation. Agents need to know their value as buyer representatives and should also have taken the time to put their value proposition in writing to give to their clients.
2. Know your clients
The days of willy-nilly showing up at a property and expecting to work with buyers will soon be over. Since buyer-broker agreements will now be required nationwide, agents need to spend preemptive time with prospective clients before they start showing properties.
This necessitates a well-conceived buyer consultation where agents begin to demonstrate their value right out of the gate. Since effective representation is always based on relationship, time should be spent getting to know the clients, doing a needs analysis with them, gathering key information, setting the stage for the best possible results and laying the foundation for long-term relationships.
3. Know the market
This should be obvious, but I am always amazed at how little many of our local agents know about the prevailing economic factors in our area. Extensive time should be spent studying the local market, including industry trends, local joblessness rates, impending hiring or layoffs, current interest rates, local economic trends and proposed governmental legislation.
While NAR, local state associations, MLSs and sites like TrendGraphix can provide trends, they are always lagging at least 30 days and show where we have been, not where we are going. While it’s important to know where the market has been, clients need to know where the market is going to be able to make informed decisions.
4. Know the inventory
While buyers often believe they know what they want, they frequently end up buying something else. Effective buyer agents need to know the full extent of local inventory so they can present the widest range of options. They also need to be able to explain the differences between the various types of properties available and the plusses and minuses of each.
Lastly, they should know what is currently available off-market and be willing to scour areas in which their buyers want to live to uncover potential opportunities. Bottom line: Agents need to drive the search process, not let it default to the buyers.
5. Know current loan programs
With the current growing array of options, buyer agents need to know where to direct their buyers to avail them of the best possible loan programs. Since no single lender covers all the bases, this will more than likely mean that they need to have established relationships with a few lenders to get access to the widest possible number of options and programs.
6. Know key negotiating points
Not all sellers are interested in the highest price. Some may want 60 days rentback, others may want a longer close of escrow, some might be willing to buy down the buyer’s interest rate … there are many potential options available to buyer agents who take the time to effectively negotiate the best possible deal on their client’s behalf.
This means taking the time to talk to the listing agent to ascertain any potential needs and wants of the seller so that an offer can be crafted that ticks as many of the seller’s boxes yet falls within the buyer’s parameters.
7. Know the forms
As a result of the settlement, real estate associations across the country are gearing up for what might be the largest single forms update in history. To be brutally honest, many buyer agents we have dealt with over the years have not fully understood the current contract documents, and I suspect that with the onslaught of impending releases, this will get worse before it gets better.
If buyer agents want to get offers accepted, they had better make sure their offer is correctly written to the new standards and includes all the newly required forms. Additionally, they need to take the time to effectively communicate with the listing agent and carefully read the required documentation prior to putting ink to paper.
We have some interesting days ahead of us. If buyer agents want to succeed in the new reality, they need to start gearing up now. We do not have a lot of time left.
Carl Medford is the CEO of The Medford Team.
