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How to Leverage the New Buyer Agreements

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ideas on how to navigate buyer-broker representation agreements

Today’s real estate landscape is radically evolving due to the recent NAR Settlement. This is particularly true for how you as an agent working with buyers should handle the newly mandated Buyer Agreement (abbreviation in this article will be BA). Although BAs are not new, they were often overlooked in practice, except in some states that required them by law. As a result of the NAR Settlement, BAs will now be required for all “MLS participants” that are “working with” buyers. Come August, you as a buyer’s agent must have your buyers sign an agreement of compensation before you can show them homes. And the biggest change is that it is now the buyer’s responsibility to pay you directly, rather than the seller. This represents a radical change in the industry which has for decades placed commission responsibility on sellers. Following are ideas on how to leverage the new Buyer Agreements:

MAKING SENSE OF THE NEW BUYER AGREEMENTS

First off, it’s necessary to understand the new rules. As per NAR, here’s what is currently known about the upcoming rule change requiring agents to use Buyer Agreements (BAs):

  1. WHEN: New rules are expected to be mandatory as of August 17, 2024 and every “MLS Participant” must use them.
  2. WHO: All MLS Participants working with buyers must have an executed Buyer Agreement prior to touring homes.
  3. WHAT: BAs must include a “specific and conspicuous” disclosure of the amount or rate of compensation the agent will receive.
  4. AMOUNT: The amount of compensation must not be open-ended and can go lower but never over the agreed upon amount.
  5. CAP: It must include a term that prohibits the agent from receiving compensation for brokerage services from any source that exceeds the agreed upon amount.
  6. LANGUAGE: It must include a “conspicuous statement” that payment is not set by law and is fully negotiable.
  7. ENFORCEMENT: MLS is responsible for enforcing BAs.
  8. CONDITIONS: Two conditions make BAs mandatory for MLS Participants: “Working with” buyers and “touring homes” with buyers. (See #52, FAQs for NAR Settlement).
  9. OPEN HOUSES: An Open House on behalf of the Seller does not require a BA for prospective buyers who attend.
  10. WHEN IT’S NOT REQUIRED: MLS Participants working on behalf of the Seller or as a sub-agent of the seller are not required to have BAs when talking with buyers.
  11. TYPE OF AGENCY: A BA is required when working with buyers whether it’s an agency agreement or non-agency relationship (unless required at an earlier time by state law).
  12. DUAL AGENTS: Agents working as dual agents (representing both sides) must have an executed BA in place.
  13. DESIGNATED AGENCY: BAs are also required in a designated agency relationship (where both agents work in the same brokerage and on the same deal).
  14. PAPERWORK TO MLS: MLS is not required to receive a copy of the BA but may request it.
  15. UPDATING OLD TO NEW: All BAs currently in place should be updated to reflect the new rules once they are in place (estimated to be August 17, 2024).
  16. NO OFFERS OF COMPENSATION ON MLS: All offers of buyer-agent compensation are strictly prohibited from the MLS, including in the Notes.
  17. RESIDENTIAL VS. COMMERCIAL: The new BA rules focus almost exclusively on residential property, not commercial (commercial real estate has its own version of an MLS).

DEFINITION OF A BUYER’S AGENT (BUYER-BROKER)

At the moment, these soon-to-happen changes may feel unimaginable. But soon all agents will be required to do this in order to get paid. As such, your strategy must be to normalize the experience and get comfortable talking about it with your buyers. The sooner you begin the better.

What makes a buyer’s agent include the following:

  1. You identify potential homes
  2. You arrange showings
  3. You negotiate on behalf of the buyer
  4. You present the buyer’s offer
  5. You perform other services

HOW TO MARKET YOURSELF AS A BUYER’S AGENT

If someone you didn’t know (but maybe only met online) suddenly asked you to sign a legal document promising to pay them for showing you homes, would you do it? Most would answer no. After all, you don’t know them and have little information on how good of a job they might do. However, that answer could change if you felt you knew them, knew they were good at their job and had your best interests at heart. This is your challenge–and opportunity–as a buyer’s agent. Your job is to make it clear that in addition to having market expertise, you offer the invaluable service of representation. This can never be matched by the listing agent. As such, your goal as a buyer’s agent is to become familiar, knowable, and perceived as highly competent. You are not just there to open doors; you are there to offer unparalleled market expertise. As such, you know things like the number of properties sold, the number that you’ve shown that have sold, and the money you’ve saved your clients in negotiations. You must get your buyers to know, like and trust you.

How do you do this? One way is with long form social media content. This is best accomplished by creating and using a YouTube channel that shows people who you are and what you know. In this way, your would-be clients will come to feel that they know you long before you start showing them property. Then, when it’s time to have them commit, they will feel they know what they’re getting and be more comfortable promising you payment via a Buyer Agreement. (Watch this YouTube video for tips.)

Another way is to meet over Zoom or do a showing as a first date of sorts, to see if you work well together. It may be best to not include a compensation form at this point. If the chemistry is right, then proceed to the next step of the Buyer Agreement. And keep in mind your buyer agreement can include a seller concession to pay your fee if directed to do so by the buyer.

Bottomline: Treat your buyers like you would your sellers. You would never take a listing without the accompanying relationship building or paperwork. The buyer side now needs to be handled with the same care. Days on market, statistics, list to sales price ratio–have all these points on hand, the way you would in a listing presentation. Be prepared to compete for your buyer and to stand out. Build out your buyer-agent process with expertise and care. Be able to explain the value you give to the home search and transaction. And ask your buyers to give you a Google review after a closing, the same as you would a seller. This new world of Buyer Agreements ups the game for buyer agents. The better you master the game the more successful you will be.

THE ROAD AHEAD

It’s hard to say exactly how the new agent landscape will play out in the weeks and months following August. How will the new rule affect brokerages? Will it thin the ranks? How will it impact seasoned agents and new agents? How will NAR and regional MLS systems adapt and how will this affect their membership? How will it affect buyers? Will it make housing more – or less – expensive, and for whom? Will we see more attorney representation for buyers? Will more buyers go it alone and/or go directly to listing agents? There are certainly more questions than answers at this point. But it’s important to keep abreast of the changes, understand the implications, and formulate a game plan. More than ever, the locus of control will be found on the listing side of the equation. Learn to use the new rules to be an amazing buyer’s agent. Know that every happy buyer transaction brings you closer to listing opportunities in the future. Because the quicker you can live and work in the listing arena of the industry, the more secure your business will be. (For tips on breaking into the listing game, click here.)