Roundtable Discussion on How ACREs May Assist Home Buyers

Mary: Thanks. Next, how does being an ACRE and working as a consultant impact the way you assist buyers as they're viewing homes? (Do they do more legwork on their own? Do you take them out and educate them at properties? Or do you come in once they've identified a property only?)

Brent: Being an ACRE impacts the way I work with buyers. I'm showing homes to because I am paid a set fee per property shown after the first two or three properties. (The first couple are on me.) If detailed market analysis is required to assist in making a final purchase decision, I'm also compensated for that analysis. (I've never worked with buyers or anyone for that matter prior to being an ACRE:)

Mollie: Mary, because of the entrenched co-broke system (buyer agents being paid a split of the commission from the listing agent at close of escrow), at first glance there's not as much opportunity to use consulting options with buyers. However, hourly and fee options work great for motivated buyers who are willing to do a lot of their own "legwork" - they benefit with an arrangement where you are paid by the hour, payable after the hours have been logged. I used to bill on a monthly basis. Whatever is paid goes against the offered co-broke and is the balance is credited to the buyers at closing. For buyers that have some up-front cash, it's a great way to get a present: some extra money at closing.

I also used fee and hourly options extensively with buyers that found their own home - this often happened when it was a private sale between family members, friends, or neighbors. I would step in and do the negotiating and troubleshooting of the transaction. The buyers have the fiduciary counsel and quarterbacking of the transaction that is so needed.

Merv: I developed the following approach using the SmartBuyer plan as a template with a potential buyer:

Or, I might be able to save you some money depending on how much of the research and narrowing you can do for yourself. For example, you are in the market at $300 to $400 thousand dollars. A seller typically provides 3% of the selling price to me for representing you. On the low end that is $9,000 (note to readers: I am a 100% agent with RE/MAX).

Mary: Merv, so you pitch this as a "discount" or "rebate"?

Merv: Not really. Instead, it's about getting paid for the work I do, regardless of whether the buyer buys, that than being paid nothing if they don't buy and being paid a co-broke if they do. I explain to them:

Mr and/or Mrs buyer, I would love to work with you. You can hire me in the traditional sense and I will be paid at closing out of the seller's closing cost, whatever the seller is advertising they will pay.

The really expensive part of working with a buyer are the "showings" which can be the kiss of death from a time and expense standpoint. Co-broke (the commission offered by the listing agent) may never pay for it all with an undecided buyer. So instead of hoping to get paid if they buy, I charge a certain amount for various services performed. I'm getting paid for the work that I do for them. Here's how it works... Back to our example of the $300,000 to $400,000 home:

My initial time and expense to get you started is $750. Negotiating a contract and handling all the close details is $2,500. That leaves a budget of $5,750 for my time showing you properties. I charge $1,200 a day for showings that you want to see. The more you do on your own, the more I will give back to you at closing as a rebate against closing costs.

Here's how it works in my practice:

1) $750 for initial qualification and research paid on buyer agreement signing. Credited back to you at closing. (With the understanding that if the buyer doesn't buy, I have still been paid for my time, expertise and effort.)

2) $2,500 guaranteed at closing for getting you to close.

3) I will track the time we spend on showings and rebate to you any of the $5,750 that is not used.

Mary: So, Merv, this is a good deal for someone who does a lot of the legwork and doesn't use a lot of your time.

Ron: Right now I'm working with a buyer couple who are within a few years of retirement, each with a house to sell and initially wanting to either build or buy a new home. The proposal I made them with respect to buying was to provide whatever services they wanted on a consulting basis. My hourly rate would apply to everything I did for them. They would pay me $1,000.00 plus tax upon signing the Buyer Brokerage Agreement and a further payment for accrued billable time (less the initial payment) upon attainment of a firm Agreement of Purchase & Sale. There will be a final billing at the end of the engagement, even if they haven't bought a property. In other words, my payment is not sale-contingent. When I receive my co-broke commission, I will pay them the difference if any between what they have paid me and the co-broke.

Interestingly, they quite early on abandoned the idea of buying land and building a house, in favor of contracting to buy a new construction condominium apartment yet to be built. Most of my work is done and I have received payment but they won't have the product for about a year and a half.

Brent: I can be compensated via menu based pricing of real estate services for all tasks related to "contract to close" services, or as in the situation I'm currently working on, I can assist as a consultant only in location and negotiation of a property and receive commission at closing. Careful though, depending on where you are, you may need to disclose compensation received from the buyer directly to all parties involved.

Mary: Good reminder, Brent, as real estate laws may vary from state to state. It may also be good to get an understanding of whether or not this impacts agency relationships (or if by working off a menu of services, possibly limited services, it becomes a non-agency relationship).

Merv: The real point is providing choice and being able to make business decisions which are win-win for you and your clients.

Ron: Our clients really appreciated being "consulted with" rather than "sold to." It really mattered to them.

Mollie: One more thought to add: having the options in my "hip pocket" was a very powerful tool when working with buyers, even when they opted to go with a traditional co-broke. If they gave me any suspicious comments during the house-hunting process such as "you just want me to go for this house because you get a big commission", I could always politely respond that I would be happy to switch to an hourly compensation. And they knew I meant it. They had choices, and we were working together the way that they wanted for us to work. Most agents couldn't or didn't offer any choices, but we did and our buyers really appreciated it.

Mary: So to summarize, consulting enables real estate professionals to provide choices to home buyers in the way that they want to work together and the way in which the agent is paid. In some cases, the consumer may save a little by chosing a "menu of services" or a flat fee for set work, especially if they do a lot of the work themselves. ACREs are happy to provide the menu of services so that they are paid whether the consumer ever buys a home or not. It all boils down to choices, doesn't it?