Section 5: Buyer Agency
Texas broker Tex Wilson is trying to explain a buyer representation agreement to his newest licensee, Joe. Which of these explanations best describes this agreement?
"A buyer representation agreement forms an agency relationship between the buyer and the broker."
Your buyer presentation should include a brief buyer questionnaire. This questionnaire should include which of the following questions?
"What type of property are you looking for?"
Who Do You Want as a Client?
-"I am excited about working with you. I'm free to look at homes this weekend if you're available." -"I met with a lender earlier this week so I have a good idea of what price range we should start looking in."
The buyer agent advises the client through contract negotiations and closing in the real estate transaction. On which of these items can a client expect counsel from the agent?
-Advice on writing an offer -Review any counter-offers from the seller
Buyer Agency Agreement Termination
-The client, Arnold Smith, died suddenly of a heart attack prior to making an offer on a property. -The buyers, Carmen and Anna Ruiz, were able to locate and purchase the home of their dreams with the assistance of their buyer agent, Karen Hoffmeir. -Tim Micah and his buyer clients, Bob and Ann Marie Williams, had entered into a buyer agency agreement with a term of 90 days. After the 90 days had passed and the Williamses still had not found a property they were interested in, the two parties agreed to part ways.
Three Reasons to Represent Buyers
1. EXCLUSIVE-RIGHT-TO-PURCHASE MEANS GREATER CLIENT LOYALTY 2. CLEAR DUTY TO PROMOTE THE BUYERʼS BEST INTERESTS 3. NOT LIABLE FOR THE ACTIONS OF THE LISTING BROKER
What is a buyer agency agreement?
A binding, written contract entered into by the potential buyer of a property and a broker
Which of the following agreements formalizes the relationship between a broker and a buyer?
A buyer representation agreement
Fiduciary Duties
A buyer's agent owes the same fiduciary duties to the buyer that the listing agent owes to the seller. A buyer's agent doesn't owe these same duties to the seller.
Brenda is discussing ways in which buyer Brett can make his offer more attractive to the seller. Which type of relationship is probably in place?
Buyer agency
Property Conditions
Buyer's broker must disclose any known defects about the property for sale to the buyer.
Agency Relationships
Buyer's broker must disclose representation to the seller and listing agent.
Brokerage Services
Buyer's broker must provide this written statement at the time of first substantive dialogue about a property.
An agent in which one of these roles works with a buyer as a client?
Buyers agent
What's something you should definitely do when conducting a buyer presentation?
Explain the transaction process
Competing Clients
Explains that the agent may represent other buyers and show the same properties to other clients and customers
Intermediary
Explains the option to allow the broker to offer limited representation to both the buyer and the seller.
Buyer's agent
Greater client loyalty
When there is no agency agreement in place between you and a buyer, which of the following duties do you owe that buyer?
Honesty and fairness
By determining how the buyer found you, you will know what type of buyer you are dealing with (a cold buyer who got your name out of a phone book, or a warm prospect referred by a favorite past client). Let's assume the buyer was referred by one of your past buyer clients. What do you want to ask next?
How long have you been looking for a home?
It's important to know what the buyer can afford before looking at properties. You don't want to waste time by looking at houses that the buyer has no chance of purchasing. If the buyer hasn't started working with a lender yet, this is a good opportunity to suggest a few. Remember, provide contact information for a few lenders and let the buyer decide which one to work with. Let's assume the buyer has a lender and knows they can afford something in the $300,000 to $400,000 price range. What do you want to ask next?
How soon do you intend to buy?
Addenda
Identifies which attachments are part of the agreement
Definitions
Includes the market area where the buyer wishes to acquire property
In Texas, which of the following documents must you present to a potential buyer client prior to entering into a buyer agency agreement with them?
Info about brokerage services
Required Disclosures
Information about brokerage services
Exclusive agency
Joins agent representation and self-representation.
Buyer Kristin has a buyer agency agreement with Carlotta, a licensee. Kristin's brother, Dalton, is going to showings with Kristin and working to help her decide which house is the best fit. Who is/are Carlotta's client(s)?
Kristin
Exclusive right to represent
Offers the highest level of representation.
Which type of buyer agency may limit the amount of representation but offers the flexibility to work with multiple agents?
Open agency
Buyer customer
Provide copies of transactional documents.
When working with new buyers, it's important to qualify the buyers before devoting too much time to them. What type of qualifying is important?
Readiness
Buyer client
Review documents for accuracy, and answer and follow up on questions.
What's the purpose of sharing the history of buyer agency with the buyer?
Show how agency has evolved to benefit buyers.
Client
Stronger negotiation strategy
Which of the following is something a licensee would typically do for a buyer customer?
Submit all offers to the seller promptly.
Which of these actions is typical of a real estate licensee who has a buyer customer relationship with a buyer?
Submit all offers to the seller promptly.
When there's no buyer agency agreement in place, which of the following tasks can a licensee perform for the buyer?
Submit an offer on a listing
Which of the following options is something that you would only do for a buyer client and not a buyer customer?
Suggest an earnest money amount based on the practices in your area.
Chester has been providing some real estate services for new buyer customer Tom. Which of these is a task that Chester may only perform if he signs an agency agreement with Tom?
Suggest negotiation terms for a listing Tom would like to buy.
Texas law says that at the first substantive conversation with a consumer, you must provide them with what?
The Information About Brokerage Services form
In a buyer agency relationship, who does the licensee represent?
The buyer
Who benefits from the limitation of liability for acts of the listing broker in the buyer agency relationship?
The buyer's agent
Ways to Work with a Buyer
The listing agent may work with the buyer as a customer. The listing agent or a sub-agent (not associated with the broker but representing the seller) represents the seller's interests and must disclose this agency relationship to the buyer. Alternatively, if allowed by the seller or the broker, the broker may act as an intermediary to work for both the seller and the buyer in a transaction. Or, the agent may agree to represent the buyer as a client, and owe the buyer fiduciary duties.
If a buyer wants to write an offer and asks for your help but doesn't want to sign an agency agreement with you, who do you represent?
The seller
If you've shown Suzie three properties, and she decides to put an offer in on one of them but hasn't signed an agency agreement with you, who do you represent?
The seller
Which of the following is a legitimate reason to terminate a buyer agency agreement?
The term of the agreement has expired.
How does the exclusive buyer's representation agreement benefit the buyer's agent?
There's a better chance of the agent earning a fee.
After meeting with the Johnsons, broker Marcy declines to represent them. Which of the following is an acceptable reason for Marcy's decision?
They filed for bankruptcy three years ago, and won't be eligible to get a loan for another four years, at least.
What's the purpose of a buyer presentation?
To build rapport with the buyer
From a real estate licensee's standpoint, what's the purpose of qualifying buyers before working with them?
To determine their readiness to purchase and make sure they're not already working with another agent
What is the purpose of the buyer agency agreement?
To identify the terms of the buyer agent/buyer agency relationship
Why might you want to share the progression of buyer agency over time with a buyer?
To show how it has evolved to benefit buyers
Conducting an effective buyer presentation helps to establish a good foundation with a prospective buyer client. When preparing for a buyer presentation, what main purpose should you keep in mind?
Trust building
Alex is a licensee working for Bay Realty. He has worked with Janice in the past a couple of times when she listed a property for sale with the brokerage. Now she is looking to buy a property and would like to work with Alex again. Should Alex get Janice to sign a buyer representation agreement for this transaction?
Yes
You're working with Angela, your buyer customer. Since there's no agency relationship in place, it's important for her to understand which of the following?
You represent the seller.
Which of the following is a true statement regarding working with buyers?
You should pre-qualify buyers before deciding to work with them.
Buyer Agent Tasks II
-Helping schedule the home inspection -Showing properties -Preparing and presenting the buyer's offers -Contacting the lender to make sure the loan is in process -Attending closing
Let's say the buyer has just started their search and is looking for something with more space. What is a good question to ask next?
Do you need to sell your current home before you can buy?
Emilio wants out of his contract, because he doesn't believe his buyer agent is working hard enough to find him a property that meets his criteria. What must happen before the buyer agency agreement can be terminated?
Emilio and his agent must mutually agree in writing to terminate their agreement.
Which of these tasks must a licensee perform for buyer clients?
Ensure that the buyer receives copies of all signed paperwork.
As soon as potential buyers contact Amelia, she sets them up to receive weekly emails with listings that fit what they're looking for. The thing is, they hardly ever get in touch with her after that. What's the best thing Amelia could do to improve her likelihood of sealing the deal?
Have an in-person buyer presentation meeting.
Open agency
Limits the amount of representation received from any one professional in exchange for the flexibility to work with multiple agents.
What's an advantage an in-person meeting has over another way of communicating with a potential buyer client?
Since they've had face time with the licensee, buyers are more likely to stay with that broker.
Clients only
-Agent negotiates the best price and terms for the buyer -Agent counsels the buyer and offers expert advice about the purchasing decision
Broker's Fees
-If a client or a relative of the clients buys a property during the protection period and the property was one that the broker brought to the attention of the client, the client owes the broker compensation even though the representation agreement has ended. -The broker will seek to obtain payment of the commission first from the seller, landlord, or their agents. If they don't pay, the buyer will pay the broker's fees.
Best Practices for Buyer Brokers
-If the seller agrees, the buyer's broker can be compensated by a share of the listing agent's commission from the sale. -A written buyer's representation agreement is not required by Texas law. However, a written notification of compensation is required if the broker chooses to pursue legal action for non-payment of fees. -The buyer representation agreement is owned by the broker, regardless of whether the broker or one of the broker's licensees is the person working with the client. -The sales contract references an existing agreement, but does not make a promise to pay.
Benefits of Scheduling a Buyer Presentation
-It helps the buyer invest in you as a professional. -It demonstrates your level of professionalism.
Let's face it, not everyone wants to come in for a meeting just to see a house they may or may not be interested in. It's up to you to overcome these objections, to get buyers to sit in front of you, and to establish yourself as a professional they want to work with. So let's get them in front of you. What three things could you say to prospective clients who don't want to come in for a meeting?
-It is part of my service to meet with my buyers before we begin to work together. This avoids misunderstandings down the line. -It is my policy to meet before we begin working together. It will help me serve you better if we can put faces to our voices. -I have a short client questionnaire that will really help me drill down on your needs and will save us from looking at the wrong types of properties.
Offer and Negotiation
-Negotiate on behalf of buyer clients with the goal of obtaining for them the best terms and sales price. -When working with a buyer customer, never suggest negotiation terms. -You must promptly submit your buyer customer's offer to the seller.
What three pieces of information are generally covered in a buyer agency agreement?
-Obligations of the buyer and the buyer agent with regard to locating and placing an offer on a property -The type of property being sought -Terms under which the agency relationship will be conducted and terminated
Qualifying a buyer varies, depending on how the buyer found you. What are some ways you could meet potential buyers?
-Saw your sign -Called your office -Referred by someone -Stopped Into your office -Found you on the internet
Buyer Agent Tasks
-Show buyers properties that meet their criteria and fall within their budget. -Ensure that buyers receive all required property condition disclosures from the seller. -Ensure buyers understand the importance of due diligence to include a professional property inspection. -Review transaction documents with buyers, clarifying anything that could be confusing, without stepping outside the scope of your license. -Negotiate contract terms that are fair and agreeable to buyers.
Buyer representation agreements must contain certain elements. Now that you've had a chance to review the TAR Residential Buyer/Tenant Representation Agreement used in Texas, indicate whether the information listed below is included in the TAR contract.
-Start and end date of the agreement -Broker compensation -Duties and responsibilities of the licensee to the prospective buyer and the buyer to the licensee
Presentation Tips
-Start the buyer presentation with agency disclosures. -Prepare, prepare, prepare! -Explain the transaction process, including the search, negotiations, inspection, appraisal, and underwriting, and any out-of-pocket expenses they will incur. -Tell buyers how you are paid -Be sure to mention your unique selling proposition.
You might be wondering why it's so important to disclose agency relationships to all parties in a transaction. What might happen if a buyer customer believes they are in fact the client of the listing agent? There are two correct answers.
-The buyer, believing that the listing agent represents their interests, may reveal some information that they wouldn't want the seller to know. -A listing agent representing the seller could accidentally create an undisclosed agency relationship with the buyer, which is in conflict with their duty to represent the seller.
Benefits for Buyer's Agents
-The exclusive buyer representation agreement obligates the buyer to be loyal to the agent. -The agent is not liable for any misrepresentations of the listing broker.
Buyer Client vs. Buyer Customer: Earnest Money
-You must safeguard any funds, according to state law, brokerage policy, and agreement between parties, regardless of your relationship with the buyer as a client or customer. -You should suggest earnest money amounts to your buyer client. -You should advise buyer client that earnest money may be forfeited in the event of buyer default.
Customers and clients
Agent shows the buyer properties available for purchase
Gordon is a buyer represented by Elaine, a broker. Gordon signed a TAR Buyer Representation Agreement promising to pay Elaine 5% of the sales price if Gordon purchases a property in Houston. Elaine helps Gordon find and negotiate an offer on a property offered by Dana, a seller represented by her listing agent, Barry. In the listing agreement, Dana agreed to a commission split with cooperating brokers. What best describes what will happen after the sales transaction closes?
As the buyer's agent, Elaine will seek payment of her commission from the seller or the listing agent first.
Which of the following is an advantage of scheduling an in-person meeting with potential buyers?
Because they have invested time with you, they'll be less likely to want to start all over with another broker.
The buyer previously said they were looking for more space, which means their current living situation isn't working for them. Are they going to need to sell that current space before purchasing something new? This will help you understand their ability to commit to a new purchase or whether you need to talk contingencies. Let's assume the buyer has a renter lined up for their existing space (bummer that you won't land that as a listing). What do you want to ask next?
Have you met with a lender to determine a price range to shop in?
Sara is your buyer customer. She doesn't want to sign a buyer agency agreement. What duty do you owe her?
Honesty and fairness
After determining that the buyer is not already working with another agent, what is the first question you should ask the buyer?
How did you find my name?
Earned and Payable Scenario
Talia signed a buyer representation agreement with Miriam, a licensee with Bayview Realty. Talia entered a contract to buy a property for sale by Oceanside Realty, where Chelsea is the listing agent. Before the transaction closed, Talia changed her mind and breached the sales contract. Choose the appropriate text for each blank to complete this scenario. Since the broker's fee is earned and payable when either the sale closes or the client breaches the sales contract, Talia owes Miriam her broker's fee. In this scenario, Chelsea didn't earn a commission to split.
Without a buyer agency agreement in place, which party does the agent who's assisting the buyer represent?
The seller
