Accredited Buyer s Representative Designation Core Course A Program by the Real Estate Buyer s Agent Council Student Manual
Copyright 2012, Real Estate Buyer s Agent Council (REBAC) Note: The National Association of REALTORS and the Real Estate Buyer s Agent Council, its faculty, agents, and employees are not engaged in rendering legal, accounting, financial, tax, or other professional services through these course materials. If legal advice or other expert assistance is required, the student should seek competent professional advice. Real Estate Buyer s Agent Council 430 North Michigan Avenue Chicago, Illinois 60611 800-648-6224 (phone) 312-329-8632 (fax) REBAC@Realtors.org www@rebac.net
Contents Introduction... 1 Welcome... 2 Achieving the ABR Designation Requirements... 3 ABR Elective Courses... 5 15 Business Tools for REBAC Members... 6 Course Learning Goals... 9 6 Skill Groups Learning Objectives... 9 Exam... 10 1. Winning the Buyer as a Client... 11 The Buyer s Advocate... 12 The Evolution of Buyer Representation... 13 What Buyers Want... 15 How Buyers Start Searching for Homes... 16 Can the Internet Replace You?... 19 Ride the Confidence Wave... 21 The Winning Edge Your Value Proposition... 21 Will You Be Buyers-Only?... 22 2. Forming a Buyer Relationship... 24 First Meetings... 25 Staying Safe... 28 Goals of a Buyer Consultation Session... 30 How Is Agency Formed?... 31 Are You a Secret Buyer s Agent?... 32 How Will We Work Together?... 33 What Are the Options?... 34 What Are Your Duties and Responsibilities?... 38 Duties to Clients Real World... 40 Realtors Property Resource... 44 Responsibilities to Customers... 47 The Ideal Home Needs, Wants, Parameters... 50 Shaping Expectations How Is the Market?... 55 Do You Want to Represent This Buyer?... 58 Buyers or Renters?... 59
The Buyer Representation Agreement... 61 Four Contracts in Real Estate... 63 Compensation... 64 When Buyers Won t Sign... 69 Skill Practice Meet Your Next Buyer... 72 3. Putting the Buyer Representation Agreement Into Action... 75 The Search Is On House Hunting... 76 When the Search Includes FSBOs... 77 Buyer Loyalty... 79 Showing Property Dos and Don ts... 81 Procuring Cause... 83 Fair Housing and the Buyer s Representative... 85 Skill Practice Scenarios... 88 4. Offers, Counter Offers, and Negotiations... 92 Preparing the Buyer... 93 Prepare a CMA... 95 Formulating an Offer... 95 Contingencies... 98 Negotiation Know-How... 100 1. Evaluate the Buyer s Negotiating Position... 100 2. Reassess the Buyer s Objectives... 103 3. Develop an Offer Price... 103 4. Plan an Offer and Negotiation Strategy... 104 5. Present the Offer and Follow Through... 104 Skill Practice Scenarios... 107 Presenting an Offer... 111 Offers on REO Properties... 114 Offers on Short Sale Properties... 115 Multiple Offer Situations... 116 Counter Offers... 118 You Make the Call... 120 5. Bringing the Transaction to a Successful Close... 122 After the Contract Is Signed... 123 Obtaining a Mortgage... 124 Data Security Planning... 128
Property Insurance... 129 Title Insurance... 130 Final Walk-Through... 132 What Derails Closings?... 132 Prepare the Buyer for Closing Day... 134 6. Winning Repeat Business and Referrals... 138 Would Buyers Work with You Again?... 139 Sharpen Your Skills... 141 Do Your Homework... 141 Ask for Feedback... 145 Ask for the Business Again... 145 6-Minute Brainstorm... 147 Your Referral Network... 150 REBAC Supports Your Marketing... 152 Postcards and Ad Slicks... 153 Resources... 155 Next Steps REBAC Candidacy... 157 Prospect ID Form... 158 Sample Agency Disclosure and Brokerage Fee Agreement for Unlisted Property... 159 Buyer Needs Assessment Worksheet... 160 Buyer Information and Disclosure Checklist... 162 Tenant Information and Disclosure Checklist... 162 True Cost of Homeownership... 164 REO Transactions: Protecting the Buyer Client... 166 Make These Scripts Your Own... 167
Acknowledgments The success of the Accredited Buyer's Representative (ABR ) Designation Core Course and designation program is driven in large measure by the standards of educational excellence that our course providers, instructors, and fellow buyer s representatives uphold. REBAC expresses gratitude and appreciation to the following ABR Designees for their contributions, ongoing support, and commitment to excellence in buyer representation education. Mary Ann Bush, ABR, CRS, GREEN, GRI, SRES Portage, Michigan Adorna Carroll, DSA, ABR, ABRM, CRB, GRI, SRES, PMN Berlin, Connecticut Lori Cox, ABR, GRI, SFR, SRES Glenview, Illinois Curtis Hall, ABR, CRS, GREEN, GRI Chandler, Arizona David Kent, ABR, ABRM Mt. Pleasant, South Carolina Frank Ledermann, ABR, CRS, GRI, e-pro Scarsdale, New York Lynn Madison, ABR, ABRM, BPOR, GRI, SFR, SRES Schaumburg, Illinois Eloise Eriksson Martin, ABR, SRES, GREEN Dallas, Texas Frank Mears, ABR, ABRM, CRB, GRI, SRES Augusta, Georgia Michael Toomey, ABR, CRS, GRI Seattle, Washington
Introduction 1
Introduction Welcome Welcome to the Accredited Buyer's Representative (ABR ) Designation Core Course. This two-day course is the foundation of the ABR designation program. REALTORS who earn the ABR designation demonstrate: Commitment to protecting the interests of real estate buyers Experience in representing buyers and helping them find the right property for their specific needs Professionalism by completion of the designation program The ABR designation is conferred by the Real Estate Buyer s Agent Council (REBAC), a wholly owned subsidiary of the National Association of REALTORS (NAR). With more than 30,000 members, REBAC is the world s largest organization of professionals who specialize in representing buyers in residential real estate transactions. Students who complete this core course are on the way to meeting the educational requirements for the ABR designation. 2
Introduction Achieving the ABR Designation Requirements Membership active membership in the National Association of REALTORS or cooperating international association and the Real Estate Buyer s Agent Council (REBAC) Education successful completion of the ABR Designation Core Course plus one elective course Transaction Experience documentation of 5 completed buyer s agent transactions 1 Be an Active NAR Member You must be an active member of the National Association of REALTORS or cooperating international association. Find your NAR membership (NRDS) number or a list of international cooperating associations at www.realtor.org. 2 3 Complete the ABR Designation Core Course You must complete the 2-day ABR Designation Core Course and pass a 50- question, closed-book exam with a grade of 80 percent or better. The course is also offered online. Find information on course dates and locations and links to the online course at www.training4re.com. Become a REBAC Member 1 st year free The ABR Designation Core Course includes a free one-year REBAC membership beginning when the course provider notifies REBAC of your successful course completion. REBAC confirms your free membership by e-mail which includes your REBAC membership ID number, a designation application, and a link to www.rebac.net to update your member profile and access member benefits. 4 Complete One Elective Course You must complete one approved ABR elective course within 3 years of completing the ABR Designation Core Course (page 5). Find an up-to-date list of ABR elective courses at www.rebac.net or www.training4re.com. 5 6 Submit a Designation Application Documenting Transactions Complete an ABR designation application including documentation of 5 closed transactions in which you represented only the buyer. Valid transactions include any closed prior to and up to 36 months after ABR Designation Core Course completion. Submit the application by e-mail to REBAC@realtors.org or by mail to REBAC, 430 North Michigan Avenue, Chicago, Illinois 60611, USA. Ongoing REBAC and NAR membership You must maintain membership in REBAC and NAR or one of its international cooperating associations. 3
Introduction FAQs What You Need to Know About the ABR Designation When can I access the members-only side of the REBAC website? When the course provider (the school) notifies REBAC of your course completion, REBAC will e-mail you a membership confirmation. The e-mail confirmation contains your REBAC membership ID number, which you will use to log on to the members-only side of the website. How does REBAC know if I completed the Designation Core Course or an elective course? The course provider must notify REBAC of course completion. Where can I get an ABR Designation application? You will receive a designation application along with your membership confirmation. Or go to www.rebac.net and login using your REBAC membership ID number. Select ABR applications under My Membership. Where do I send the ABR Designation application? Submit the completed application by e- mail to REBAC@realtors.org or by mail to REBAC, 430 North Michigan Avenue, Chicago, Illinois 60611, USA. How long does it take to process a designation application? Allow REBAC staff 2 business days from receipt to process your application. When can I start using the ABR Designation logo? When you receive notification from REBAC that your designation application has been approved. How do I find out if my designation application has been approved? You will receive a notification by e-mail from REBAC. Depending on instructions from your local REALTOR association, your ABR Designation kit will be sent to your preferred mailing address in the National REALTOR Database System (NRDS) or your location association. What are REBAC s membership dues? 1 st year: free 2 nd year: prorated based on ABR Designation Core Course completion date 3 rd year: $110 annual dues Why am I receiving an invoice for membership dues before the free oneyear membership expires? REBAC membership dues are billed in November for the upcoming year and are due on January 1st. That means that you will receive a dues invoice in November for a prorated amount of dues for the second year, less than $110, based on the month that you completed the ABR Designation Core Course. For example, if you completed the ABR Designation Core Course in June, you will receive an invoice in November for $55 half a year s dues for the second year. The amount billed covers the months remaining in the calendar year after your free membership expires and syncs your membership dues with REBAC s annual dues-billing cycle. Can I continue to use the ABR Designation logo if I drop my REBAC or NAR membership? No. You must maintain both memberships. 4
Introduction ABR Elective Courses 20+ courses/programs to choose from and many count toward other designations and certifications. For course dates and locations go to www.training4re.com or www.rebac.net Course Title and Affiliation Offered online Duration Also Counts Toward Designation/Certification At Home with Diversity (REBAC) 1 day CIPS, PMN, RSPS BPOs: The Agent s Role in the Valuation Process (REBAC) 1 day BPOR Buying and Selling Income Properties (CRS 204) 2 days CRS Effective Negotiating for Real Estate Professionals (WCR) 1 day PMN e-pro Certification Program (REBAC) 2 days e-pro Generation Buy (REBAC) 1 day Global Real Estate: Local Markets (CIPS) 1 day CIPS Graduate, REALTOR Institute (NAR) Harnessing the Power: Skill Based Performance Management (WCR) Introduction to Real Estate Auction (NAR) GRI 1 day PMN 1 day Land 101: Fundamentals of Land Brokerage (RLI) 2 days ALC NAR s Green Designation (REBAC) 3 days GREEN Real Estate Marketing Reboot: Innovate>Relate> Differentiate (REBAC) Realtors Property Resource (NAR) REO Properties: Responsibilities, Education, and Opportunities for Real Estate Professionals (REBAC) 1 day ½ day 1 day Resort and Second-Home Markets (RSPS) 2 days RSPS Seniors Real Estate Specialist (SRES ) Designation Course 2 days SRES, RSPS Short Sales and Foreclosures: Protecting Your Client s Interests (CRS 111) Short Sales and Foreclosures: What Real Estate Professionals Need to Know (REBAC) Successful Buyer Representation in New-Home Sales (REBAC) Successful Buyer Representation in Relocation (REBAC) 1 day CRS, SFR 1 day SFR 1 day 1 day 5
Introduction 15 Business Tools for REBAC Members 1. Home Buyer s Toolkit a 10-step quick-reference guide 2. Consumer handouts for your buyer presentation kits free, printable handouts on topics to address in a buyer-consultation session or while working with buyer clients 3. Postcards customizable through the REBAC Print Shop 4. Ad Slicks numerous themes coordinate with postcards 5. ABR Brochures showcasing the benefits of using a buyer's representative 6. Mailing Services further simplify your Print Shop orders 7. Online Membership Directory linking home buyers to buyer s representatives 8. Logos downloadable ABR logo 9. Press Releases written for you to customize and distribute 10. Enhanced Profiles for all REBAC members in the online membership directory 11. Guide to Conducting Home Buyer's Seminars a comprehensive online tool Access all of these tools and benefits at www.rebac.net. Sign in with your REBAC Membership ID number. 12. Buyer Counseling Session Template key questions and topics 13. Structuring Buyer s Agreements template common provisions in a representation agreement 14. REBAC Connection Webinars special experts cover timely topics 15. Education and networking opportunities at the annual REALTORS Conference & Expo 6
Introduction 7
Introduction 3 More Benefits Exclusively for ABR Designees ABR Facebook Business Splash Page Install this ABR tab on your Facebook business or group page. Tell the world about your ABR designation and the value you offer to home buyers. ABR App for Your iphone The ABR App lets you access home buyer resources, finance calculators, marketing tips, and articles from Today's Buyer's Rep. ABR Designees can download the App for free at the itunes App store. Search on ABR App. Compatible with iphone, ipad, and ipod Touch. ABR Network Online Community Start building your buyer representation network with this interactive online community exclusively for ABR designees. The site features forums, groups, and blogs to share expert advice and best practices, referral directory, and much more. 8
Introduction Course Learning Goals The goal of the 2-day ABR Designation Core Course is to establish a foundation of training, skills, and resources to help you succeed as a buyer s representative. Let s look at what you can expect to learn over the next two days. Build a buyer representation business Value the services you perform on behalf of buyer clients Increase confidence to work toward a signed buyer representation agreement Gain methods, tools, and techniques to provide the support and services that buyers want 6 Skill Groups Learning Objectives The course material is organized into six modules based on the skills and knowledge you need to fulfill your value proposition as a buyer s representative. The learning objectives of the skill-group modules are: Skill Group 1: Winning the Buyer as a Client Gain the confidence to present the case for buyer representation Articulate a value proposition as a buyer s representative Skill Group 2: Forming a Buyer Relationship Connect different relationships (client or customer) and forms of representation to duties and services provided Conduct an interview and consultation session that leads to a signed buyer representation agreement and wins buyers loyalty Help buyers evaluate if they are ready to purchase homes Help buyers establish their needs, wants, and price range Skill Group 3: Putting Buyer Representation into Action Search for properties that meet the buyer s needs and wants Follow federal, state, and local Fair Housing laws when selecting and showing properties Work with listing agents to arrange property showings 9
Introduction Prepare a buyer for property showings Show properties Apply safety procedures when showing property Maintain confidentiality of client information Skill Group 4: Offers, Counter Offers, and Negotiations Assess the strengths and weaknesses of offers and negotiation positions of the buyer and seller Help the buyer formulate an offer Use valuation tools RPR, AVMs, CMAs to help the buyer evaluate price/value Present your buyer client s offer to the seller Help the buyer formulate and implement a negotiation strategy Guide buyers through the offer and counter offer process Cope with a multiple-offer situation Skill Group 5: Bringing the Transaction to a Successful Close Guide buyers through the required actions and processes between contract and closing Skill Group 6: Winning Repeat Business and Referrals Create and strengthen your brand Take advantage of NAR and REBAC business tools Implement strategies for maintaining contact with clients and customers as a source of future business Exam The course concludes with a 50-question multiple-choice exam. Successful completion is 80 percent or better a total of 40 or more correct answers. 10
1. Winning the Buyer as a Client 11
1. Winning the Buyer as a Client Building a successful buyer representation business is like building a house. You, the builder, need a vision of what your business looks like, a business plan blueprint, and some building skills. Just like building a house, some construction elements are required, like complying with state laws and the REALTOR Code of Ethics. Other design elements are choices. Will you be an exclusive buyer s representative? Will you use social media in marketing? Will you focus on a niche market? The ABR Designation Core Course provides the skills and knowledge you need to build your buyer representation business. The course will help you find the winning combination for your marketplace, your business, and your personal style. Let s get to work! The Buyer s Advocate Buying a home is a complex process involving a major financial commitment. For most people, it is the largest single purchase they will make in their lifetime. Beyond the financial commitment, homeownership is an important milestone in a buyer s life. It is an expression of lifestyle, as well as the place that will shape their family life for years to come. With so much at stake, buyers want a trusted guide who can help them make good decisions and minimize risks. What do we owe buyers when they put their confidence and trust in us to help them find the home of their dreams? In simplest terms, as a buyer s representative, the real estate agent owes the client fidelity and fiduciary duty in all transaction matters. That duty includes finding the right property, guiding buyers through the process, securing the best deal, protecting their interests, and safeguarding confidential information. As an experienced real estate professional, you know that getting the process right is crucial but there is a lot more to putting a transaction together than following the letter of the law. Buyer s representatives find success by matching their services to buyers motivations, concerns, and needs. But here is the bottom line: the reason you are in this business of representing real estate buyer clients and providing service, information, knowledge, and guidance is for compensation. 12
1. Winning the Buyer as a Client Buyer Representation the Flip Side of Seller s Agent? As we progress through the course, we will learn how buyer representation puts the buyer on the same footing as the seller. Although representing buyers is more involved than just the flip side of representing sellers, you can adapt the skills you use to prospect, make listing presentations, and market properties to build a buyer representation business. The Seller s Agent Find the right buyer for the property Get the most money from the sale Financial transaction The Buyer s Agent Find the right property for the buyer Get the best combination of price, location, features, and terms Financial and emotional transaction The Evolution of Buyer Representation The development of buyer representation, or buyer agency, transformed the real estate marketplace. If you started your career within the last decade or so, you may be surprised to learn that buyer representation was not always part of the real estate scene. The prevailing idea was that buyer agency was not legal under state agency laws or permissible under MLS practice and requirements. Furthermore, many brokers thought that 13
1. Winning the Buyer as a Client they could not split commissions with buyer s representatives because the MLS blanket offer of compensation was predicated on cooperating agents acting as subagents of the listing broker. Listing agents represented seller-clients but no one represented the buyers regardless of the emotional and financial stake in their transaction. You have probably heard the echoes of the old ideas: list or die, no one owns the buyer, buyers are liars! Within the last 20 years, we have transitioned from representation only for the seller to representation and client-level service, on the same footing as the seller, for the majority of buyers. In fact, NAR s most recent home buyer study found that 59 percent of them were represented; of those, 40 percent had a written buyer representation agreement and the remainder had an oral agreement. 1 Some Things Change While buyer representation transformed real estate business models, the Internet revolutionized the availability of information. Pre-Internet, listing agents had a lock on information about available properties. Can you imagine a time when home buyers were not permitted to see MLS listing information? Although no longer in control of property information, the buyer representation revolution benefitted listing brokers by mostly eliminating subagency and vicarious liability from the marketplace. The listing broker is freed from responsibility for the words and actions of every agent who shows a property. The Internet provides a wealth of information about properties and the process of buying real estate and buyers are increasingly savvy. But sometimes conflicting information inundates them. More than ever, buyers need an expert guide with the inside track on the real estate market. Some Things Stay the Same Despite the market transformations, real estate remains a face-to-face, people business. Your reputation as a personable, knowledgeable, reliable, and trustworthy real estate professional wins the loyalty of clients and customers and their recommendations. NAR research shows 1 2012 Profile of Home Buyers and Sellers, National Association of REALTORS, www.realtor.org/research 14
1. Winning the Buyer as a Client that most buyers (40 percent) found the agent they work with through word of mouth recommendation by a family member or friend or used the agent previously (10 percent). Eleven percent of buyers relied solely on the Internet to find a real estate agent. 2 What Buyers Want Where do you begin building a buyer representation business? Let s start by looking at what buyers say they would like you to do for them and the benefits they say you provide. 12% Help me negotiate the terms of sale 50% Help me find the right home to purchase 12% Help me negotiate price 4% 8% Tell me prices of comparables 7% Help me with paperwork 3% Help me determine how much I can afford Help me find and arrange financing 2 Ibid., page 14 15
1. Winning the Buyer as a Client Do Buyers Value Your Services? 3 Benefits Buyers Say Real Estate Professionals Provide 60% 53% 17% Narrowed search 20% 21% Expanded search Provided lender info 28% Shortened home search 35% Negotiated a better price 42% 43% 43% Negotiated better contract terms Provided a better list of service providers Improved my knowledge of search area Pointed out unnoticed property Helped me understand the process How Buyers Start Searching for Homes Buyers now begin the home search online. NAR research shows that on average, buyers spend about 2 weeks looking at properties online before contacting a real estate agent. In fact, the Internet may shorten the time you spend helping a buyer narrow search parameters and finding the right home. When buyers are ready to get serious about buying a home, they seek out expert guidance to help them find the right home and navigate the process. 3 Ibid., page 14 16
1. Winning the Buyer as a Client How Buyers Start the Home Search 4 Visited open houses, 3% Contacted a lender, 6% * Other, 6% Talked with family, friends about the process, 6% Looked online for properties, 41% Drove by homes, neighborhoods, 8% Contacted a real estate agent, 18% Read about the process online, 11% * Newspapers, magazines, seminars, builder contact, home seller contact, books and guides about the process 4 Ibid., page 14 17
1. Winning the Buyer as a Client How Buyers Found Their Real Estate Agent Referred by friend, neighbor or relative Used agent previously 10% 40% 55 percent of buyer contacts involve people who know you. Referral from another agent 5% Internet website 11% Met agent at open house For sale or open house sign Relo or employer referral Walk in or call while agent on duty Personal contact by agent Newspaper, home book, Yellow Pages 6% 6% 4% 3% 4% 1% Source: 2012 Profile of Home Buyers and Sellers, National Association of REALTORS, www.realtor.org/research 18
1. Winning the Buyer as a Client Usefulness of Information Sources 81% 81% It's A Tie. Buyers ranked agents the same as Internet. 39% 41% 42% Internet Real Estate Agent 21% 24% Home magazine Newspaper, print ad 27% Relo company Open house Yard sign Home builder % of Buyers Who Purchased Their Homes through a Real Estate Agent, 2001 2011 Can the Internet Replace You? Do you sometimes feel like you re competing with websites or the latest phone app? Despite dire warnings, the Internet has not replaced real estate agents as a valuable source of information. In fact, the trend in the number of buyers who purchase their homes through real estate agents has edged upward for the last decade from 69 percent in 2001 to 89 percent in 2011. 5 89% of buyers found the home they purchased through a real estate agent. 5 Ibid., page 14 19
1. Winning the Buyer as a Client The information bombarding consumers makes your guidance and interpretation more important than ever. Sorting out what is timely, valid, and valuable challenges even the savviest consumers. The Internet has not replaced you, but you cannot discount or ignore it. As a source of information, buyers rate its value as equal to real estate professionals. Satisfaction with Real Estate Agent Skills and Qualities Honesty and integrity Knowledge of the process People skills Market knowledge Responsiveness Communication skills Local area knowledge Technology skills Negotiation skills 87% 86% 83% 83% 82% 80% 80% 74% 71% Skills and Qualities Buyers Want You to Have 1. Honesty 2. Knowledge of the process 3. Responsiveness 4. Market knowledge 5. Communication skills 6. Negotiation skills 7. People skills 8. Local area knowledge 9. Technology skills Your Past Clients Really Like You Need more proof that buyers see the value you bring to the transaction? NAR research shows that your past clients were really pleased with your services, expertise, and personal qualities. You score very high on all of the skills and qualities that buyers say are important to them. Furthermore, almost 9 out of 10 (89 percent) of your past buyer-clients say that they would work with you again and very important recommend you to others. They wouldn t take the chance of recommending you if they didn t think you could do a good job. 20
1. Winning the Buyer as a Client Ride the Confidence Wave The good news is that buyers see the benefits of working with you and want the services you offer. Whether you have been representing buyers for a long time or you re just getting started, all of the data in these charts should boost your confidence in the value of your services to home buyers. The Winning Edge Your Value Proposition Buyers understand the value of working with real estate professionals. Your past clients are ready to recommend you to others. So, how can you combine these advantages to make your name synonymous with real estate? The formula is your unique value proposition and how you express it in the marketplace. Why are some professionals sports stars, attorneys, hair stylists paid more than others? They have qualities that outshine their competitors. Some qualities are innate like natural ability and passion, but most are the result of experience and training. They also know how to talk to the marketplace in a way that distinguishes them from their competitors, whether winning a case, shaping a flattering hairstyle, or making the game-winning play. You could call the combination of talent and ability the winning edge. Your value proposition your winning edge is your market distinction expressed as the services you offer to buyers. Three elements form the foundation of your buyer representation value proposition: Education: specialized training, like the ABR designation, in the business of representing real estate buyer clients Expertise: knowledge of the market and process plus skills like negotiations and communications Experience: what you learn day-to-day on the job 21
1. Winning the Buyer as a Client Will You Be Buyers-Only? Is exclusive buyer representation in your future? Some real estate professionals specialize in representing buyers. A buyers-only business approach has pros and cons. For example: Pros No agency conflicts means less legal risk No confusion over who you represent and serve Focused approach Marketing and prospecting concentrates on acquiring buyer clients instead of listings Cons Inventory is not in your control, you must rely on listing agents Can only have one side of the transaction, not both Must refer a seller-client to another company Listing agents already have a relationship with a seller-client 47 percent of sellers use the same real estate agent for their home purchase 6 Look back to the charts on what buyers want from agents and see as a benefit. The agent s listings doesn t appear on either chart. Buyer clients don t choose a buyer s representative on the basis of the agent s listings. 6 Ibid., page 14 22
1. Winning the Buyer as a Client Why Work with an ABR Download a printable PDF version of this consumer one-sheet at www.rebac.net. Sign in with the REBAC membership ID number you will receive after REBAC processes course completion information. 23
1. Winning the Buyer as a Client 2. Forming a Buyer Relationship 24
2. Forming a Buyer Relationship First Meetings Think about your last five buyers. How did they find you? Chances are they were referred by one of their friends or relatives or one of your past clients. Among the ways that buyers find you, more than half probably involve someone who knows you personally. Consider this important fact if you are the first real estate agent that buyers talk to, you ll likely be the one they decide to work with. NAR research shows that almost two-thirds (66 percent) of buyers stick with the first real estate agent they interview. What if your first contact is a phone call that goes something like this? Meeting someone you don t know at an empty house is not a safe action and we ll look at safety measures in the next chapter. First meetings should take place in your office or a busy public place, like a coffee shop. You could say: I don t need to meet with you first. I already know the house I want to see, just meet me there. Our company policy is to meet for the first time in our office. Our company policy is to meet for the first time here in our office. The house you want to see may or may not be right for you. Our first step is to be sure we are looking at the right property for you. You can waste time and possibly miss out on the right home while you re just running from house to house and agent to agent looking at homes that may not be what you re looking for. Our first meeting will last about minutes and we ll go over your needs and price range and I ll go over what I can do for you to find you the right property at the right price. In the meantime I ll do some research on the home you are interested in, including a check to make sure it s still on the market. What time works best for you? I can meet with you now or The first meeting sets the tone for your agent-client relationship. It gives you an opportunity to engage the buyer, find out about their situation and how far along they are in the process, and describe how you can help them find the right home. How you meet buyer-prospects also impacts if and how you will work together. 25
2. Forming a Buyer Relationship When meeting the buyer for the first time, you might consider asking the following questions to begin the process: How long have you been looking for a home? How have you been doing that? Did any agents show you property? What did you sign with them? Are you in an exclusive agreement with another broker? Did you see anything you liked? What kept you from buying it? REALTOR Code of Ethics Standard of Practice 16-9 REALTORS, prior to entering into a representation agreement, have an affirmative obligation to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to provide the same type of real estate service. (Amended 1/04) 26
2. Forming a Buyer Relationship Agency Disclosure and Confidential Information Early in your interactions with prospective buyers, you should make an agency disclosure consistent with state laws. Most states require the disclosure to provide a written explanation of all legal forms of brokerage relationships available to consumers, even if the brokerage does not offer all of those options. States may have different standards for the timing of disclosure but to be most effective the disclosure must take place before any substantive discussions about real estate needs and financial capabilities or exchanges of confidential information. In states that presume buyer agency (you are automatically the agent of the person with whom you are working), the explanation will differ from that in states where the buyers must sign a representation agreement. Why is this discussion of agency so important? Agents must caution prospects against sharing confidential information. In states that require a written agreement, you could say: At this point, because we don t know if I will be representing you in your real estate transaction, please don t give me any information you would not want another party to know. In states where agency is created at first contact: By virtue of this conversation, I am your agent. This means that you can speak freely about your real estate wants and needs because I have an obligation to keep such information confidential. REALTORS Code of Ethics Standard of Practice 1-13 When entering into buyer/tenant agreements, REALTORS must advise potential clients of: 1. the REALTOR s company policies regarding cooperation; 2. the amount of compensation to be paid by the client; 3. the potential for additional or offsetting compensation from other brokers, from the seller or landlord, or from other parties; 4. any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g. listing broker, subagent, landlord s agent, etc., and 5. the possibility that sellers or sellers' representatives may not treat the existence, terms, or conditions of offers as confidential unless confidentiality is required by law, regulation, or by any confidentiality agreement between the parties. (Adopted 1/93, Renumbered 1/98, Amended 1/06) 27
2. Forming a Buyer Relationship Staying Safe Meeting prospects and showing property can place real estate professionals in potentially dangerous circumstances. Office policies should include safety procedures and cover risky situations that real estate professionals encounter every day, like those described on the next page. Perhaps the best guide you can follow is your intuition. If a situation doesn t feel right or a person makes you feel uncomfortable listen to your gut feelings. At worst, you may be overly cautious but you could be avoiding a very dangerous situation. For more information and resources on staying safe on the job, go to NAR s REALTOR Safety webpage at www.realtor.org/topics/realtor-safety. Staying Safe in Everyday Situations 7 Meeting a prospect for the first time Risks: Meeting a stranger Precautions: Meet at the office. Require completion of a Prospect Identification Form. Ask for and photocopy ID or take a photo of the person. Introduce the prospect to a colleague. Showing a property alone Risks: Touring a vacant property with a stranger Precautions: Walk behind the prospect. Don t go into confined spaces like cellars and attics. Keep groups together. Let coworkers, friends, or family know where you are going. Use the buddy system. Schedule a call-in time if you don t call in, the office knows to contact police. Use a smart phone app to preprogram a phone call as an excuse to leave an uncomfortable situation. Call the office and give a predetermined distress signal. Park your car for a quick getaway. Open houses Risks: Waiting in an empty house and anyone can enter Precautions: Note in open house publicity that ID is required. Jot down license plate numbers as lookers arrive. Introduce yourself to neighbors. Keep groups of people together. Use the buddy system. Schedule call-in times if you don t call in, the office knows to contact 7 Adapted from Real Estate s 6 Most Dangerous Everyday Situations, by Melissa Dittmann Tracey, REALTOR Magazine, September 2010, www.realtor.org 28
2. Forming a Buyer Relationship police. Stow away your valuables. Open drapes and turn on all lights. Plan an escape route. Let local law enforcement know you are holding an open house. Park your car for a quick getaway. Flashy personal marketing Risks: Inviting the attention of criminals Precautions: Avoid provocative, glamour photos in your marketing. Wear modest business attire and avoid flashy jewelry. Protect personal information on websites. Don t publish your home phone or address or information about your family. Driving prospects around to look at houses Risks: Driving strangers in your car Precautions: Drive in separate cars. Watch where you park. Make sure your car is not blocked so that you can make a quick getaway without backing up. Screaming and running to a neighboring house may be more effective if you know someone is at home. Entering a vacant or foreclosed property Risks: Encountering squatters, former owners, animals, hazardous conditions Precautions: Inspect the perimeter for signs of break in or occupancy. Don t confront squatters, occupants, or animals. Visit during daylight hours. Use the buddy system, your partner can wait in the car and keep in touch by mobile phone. Let coworkers, friends, or family know where you are going. The Buyer Consultation Session When you meet a buyer-prospect for the first time how can you convert the contact into a successful transaction that adds to your bottom line? Achieving a positive outcome requires two skill sets: People skills to foster an interpersonal relationship Client-representation skills in accordance with state agency laws, the REALTOR Code of Ethics, and your broker s business policies These two skill sets come together in the buyer consultation session. The consultation process is your opportunity to show how a buyer representation commitment opens the door for you to fulfill your value proposition by providing the services buyers want. 29
2. Forming a Buyer Relationship Goals of a Buyer Consultation Session The interpersonal and contractual relationships come together during the buyer consultation session. By the time buyers are willing to sit down with you for a consultation session, they have most likely moved beyond the just looking stage. They are ready to take action. Your interview strategy combines gathering and communicating information, advising on the buying process, and laying the groundwork for a productive buyer client relationship. Although the real estate professional and buyer may start the session with somewhat different goals, the bottom line is the same for both do we want to work together? Real Estate Professional s Goals Build rapport Showcase your services Learn the buyers needs and wants, financial situation Help the buyer form realistic expectations Obtain a representation commitment Plan a strategy for finding the right home Decide if you want to work together Buyer s Goals Get acquainted with the real estate professional Learn what the agent can do for them Describe the ideal home Learn about market conditions Obtain answers to questions and concerns Learn about the search and buying process Start looking for the right home Decide if you want to work together 30
2. Forming a Buyer Relationship How Is Agency Formed? Express Agreements An agency relationship may be in the form of an express agreement with both parties consenting to the agreement. Although agency agreements are usually written with the terms of the agreement spelled out, an express agreement can be made orally or by an affirmative action. For example: Written Buyer representation agreement Listing agreement Right-to-lease agreement Property-management agreement Oral or Action Spoken, handshake agreement to represent a buyer Cooperating broker s acceptance of a listing broker s offer of subagency in a sale or leasing transaction Implied Agreements According to the law in many states, when the licensee acts or speaks like an agent and the consumer relies on those statements and actions, the licensee and the consumer have formed an agency relationship. In these states, agency relationships can result even unintentionally, accidentally, or inadvertently regardless of the conduct of the parties, or their intent, description, or understanding of the relationship. Key facts to remember about implied agreements include: An implied agency relationship may be created without the agent s knowledge as a result of the agent s actions and statements, thus causing the duties and obligations of agency to arise without the agent s consent. The conduct of the parties can create an agency relationship even if they have signed an acknowledgment denying the existence of such a relationship. The matter of implied agency is highly state specific. Please check your individual state licensing. Implied agency relationships may occur when a seller s agent works too closely with a buyer customer and does not make the proper disclosures. 31
2. Forming a Buyer Relationship Are You a Secret Buyer s Agent? Although state specific, an implied agency relationship can occur when the real estate professional acts or speaks like an agent and the buyer relies on the agent s actions and statements. Regardless of either party s intent, description, or understanding of the relationship, conduct can create an agency relationship even if the parties have signed an acknowledgment denying the existence of such a relationship. You might be a secret agent if you: Talk and act like a buyer s representative without clarifying the relationship Avoid discussing a representation agreement because you don t want to pressure a buyer into signing anything Rely on your state s default agency position Assume that buyers know you re on their side Leave the nature of the relationship vague because of discomfort about discussing disclosures and compensation Delay signing a buyer representation agreement until the buyer is ready to make an offer Performing client-level duties without full disclosure and, preferably, a signed agreement opens the door for a range of conflicts, misunderstandings, lost income, and potentially serious legal consequences. Aside from the legal ramifications, how can you expect buyers to be loyal if you keep the client relationship under wraps? You miss the opportunity to showcase your services as the buyer s advocate. 32
2. Forming a Buyer Relationship What is your agency relationship at first contact? At open house: Contact by phone: Internet: In-person counseling session: How Will We Work Together? Starting off the interpersonal relationship on the right foot eases the next step the contractual relationship. The nature of your first meeting, the buyer s previous search efforts and priorities, and information gathered during the consultation all point to the type of relationship you ll establish with a buyer. Only when you are working with the buyer as a client can you offer the full range of services that buyers want. The services buyers value most express an opinion about property value, evaluate properties, help negotiate can be offered in only an agentclient relationship. Your representation relationship with a buyer client and how you will work together is determined by: State law: State real estate laws regulate the relationships between agents and clients. Some states assume that a real estate professional is the agent of the consumer with whom he is working unless the agent specifically states otherwise. Some states allow a non-agency transaction facilitator approach; the real estate professional helps a buyer and seller reach an agreement, but does not represent either party as a client. REALTOR Code of Ethics: References to applicable Code of Ethics articles and standards of practice are noted throughout the course. Office policy: Within the parameters of state laws, your broker s business policies can specify the type of agency relationships the company offers. 33
2. Forming a Buyer Relationship What Are the Options? Buyer or Seller Only Although terminology for it may differ, the most straightforward type of relationship is single agency. The agent represents only the buyer or only the seller or the landlord or tenant not both. Some brokerages keep things simple by practicing only buyer agency or only seller agency. Dual Agency Dual agency occurs when the agent represents concurrently both parties in a real estate transaction, such as buyer and seller or landlord and tenant. Depending on state laws, these situations can occur when: Buyer clients are interested in properties listed by their broker or agent. Two buyer clients are interested in the same property. Exclusive buyer s agents try to avoid this situation by limiting the number of buyer clients that they work with at a one time. Two agents in the same office represent the two parties to the transaction. A listing agent works too closely with a buyer who assumes the listing agent is looking out for the buyer s interests. Dual agency is inherently conflictual. The duties of confidentiality, undivided loyalty, and full disclosure cannot be reconciled between two clients. For example, the duty to a buyer client of confidentiality compromises the duty to the seller of full disclosure. Undisclosed dual agency is illegal. For example, when a listing agent s conduct creates the impression of working on behalf of the buyer, the agent has created an undisclosed dual agency relationship, which is illegal in all states. Disclosed Dual Agency Disclosed dual agency is workable, but only if a timely, meaningful, and written disclosure is made and both the buyer and seller consent. Most commonly, the brokerage company asks the buyer and seller to help the 34
2. Forming a Buyer Relationship resolve the conflict by allowing a modification of fiduciary duties, or acknowledging the fiduciary duties required of a dual agent. In either case, the buyer and seller must accept a reduced level of service. An agent should not, however, try to obtain a blanket consent to disclosed dual agency before the situation arises. When a potential dual agency situation does occur, informed consent should be sought before the property is shown (unless otherwise provided by law). Verbal consent, if permissible, should be confirmed in writing when the purchase offer is submitted. Realtors Code of Ethics Standard of Practice 1-5 REALTORS may represent the seller/landlord and buyer/tenant in the same transaction only after full disclosure to and with informed consent of both parties. (Adopted 1/93) A disclosed dual agent can: Provide property information to the buyer Disclose material defects Help the buyer compare financing alternatives Provide information on comparable properties to help both parties make a good decision on price A disclosed dual agent cannot Discuss motives of the buyer or seller Disclose confidential information about either buyer or seller without permission Recommend or suggest a price Disclose the lowest price the seller will accept or the highest price the buyer will pay, or the financial position of either without permission 35
2. Forming a Buyer Relationship Designated Agency Designated agency (also known as appointed agency) eliminates the dilemma of in-house dual agency situations because both the buyer and seller continue in an agent-client relationship. In states that allow designated agency, the broker appoints one agent to represent the buyer and another agent to represent the seller. The broker s appointments specifically exclude all other agents in the office. Check your state laws, MLS rules, and company policy to determine if subagency is still offered in your marketplace. Designated Agency: Protecting Confidential Information When the designated agents for the buyer and seller work in the same office, maintaining confidentiality of information is a major issue. Written policies implemented, enforced, and observed consistently prevent information leaks. Company policies and procedures, should address the following: Sharing information at office meetings Office layouts privacy when meeting with clients Access, maintenance, and destruction of electronic and paper files Posting information on websites, Twitter, text messages, and social media Notices on bulletin and sales boards Staff training especially those who work on transactions for multiple agents Access to locked filing cabinets Use and privacy of computer networks, passwords, data files, voice mail, and e- mail Fax machine privacy can anyone in the office read incoming or outgoing faxes? Staff with whom the client may safely communicate 36