Residential Real EstateA Traditional Agent"s Struggles With Buyer Representation
Traditional real estate practices are alive and well in the small town of Williamsport, Pennsylvania, where sellers are still regarded as more important assets to brokers than buyers.
And that poses some problems for Realtors who are traditional agents and wish to serve buyers. While they have the intention of treating the buyer as professionally as a seller, i.e. getting them under contract, life doesn"t always turned out as planned, especially if the buyer chooses to buy an unlisted property. Then the buyer feels justified to back out of the buyer"s representation agreement, even if it states that the agent will represent him/her for all properties. And they know they can get away with it because local brokers won"t pursue them.
Realtor Chris Wallace says unhonored contracts are a particular problem in her market where:
many buyers and sellers know each other
there aren"t a lot of new people coming to town
buyers have done their research on the Internet and think they know everything
local attorneys are all too willing to help the buyer slide away for a fee, and help them with the closing
brokers are reluctant to enforce buyer agency agreements
brokers don"t see buyer"s representation as equal with seller representation
"I have recently had situations in our seller’s market where buyers have found properties on their own directly from sellers," explains Wallace. "These properties were not even FSBO’s, but through their networking they have found homes through friends or co-workers. When I negotiate a buyer relationship contract I am careful to explain that the contract covers all properties, including unlisted/FSBO properties. However, in the cases I have mentioned, the buyers cancelled their buyer relationship contracts upon the advice of a lawyer. They did not want to pay a commission for a property “they found”, even though I pointed out the benefits of advice, market analysis, negotiation, skill in getting the contract to closing, being an independent 3rd party should any problems arise from these co-workers or friends, etc."
In each case, Wallace and her broker decided not to pursue compensation hoping, "that we will at least get the listing to sell their homes," says Wallace.
Why is a contract with a buyer so easily dissolvable? "We are a small town of 32,000 and the broker is of the opinion that it is better to walk away and not destroy goodwill in the community. Even if it is a good contract, a good attorney can find a loophole."
But that"s hardly consolation to Wallace who may have spent days or weeks working on behalf of a buyer who can easily slide away on the advice of an attorney.
"There are so many occasions when I want to say what is the sense of putting things on paper if they can"t be enforced?" questions Wallace. "Instead of pursuing and fighting for it, let"s just hope we get the listing when they list.
Wallace says that her brokerage has held staff meetings to discuss the problem but the agents keep circling around to the same points.
"Others brought up in the staff meeting that there aren"t a lot of legal cases regarding buyer agency and who wants to be the first?" says Wallace. "The contract isn"t to find the home but to buy the home, what came out of our staff meeting is while we earn a certain percentage for a listing. When we are working with a buyer, the numbers are more up to us to negotiate, and there is less direction. We see that other areas are asking retainers and things of that nature, but not here in Williamsport, Pennsylvania. The big cities can do that, but our area isn"t ready for that yet."
While Williamsport has some relocation business, the problems with buyers wiggling out of their representation contracts to buy homes they found themselves is more a problem with locals.
"The cases are local individuals with strong networks here," says Wallace. "I think there is a different buyer mentality between someone who has lived here forever vs someone coming into the area. As I mentioned to the buyers, you are probably going to pay someone to do the contractual work, and attorneys are looking to get a piece of the pie. Attorneys have been losing business to the title companies, which are relatively new in our area. I was at a bank breakfast meeting and kept hearing attorneys lamenting that there were too many attorneys in the areas and grasping for the business. It is more difficult for them.
"If that same buyer purchased a property, the attorney would be getting compensated by the title search, as most no longer charge over and above the title insurance," explains Wallace. "So, they are looking for alternatives. If a buyer is seeking counsel, the attorney could do the title search, write the contract and charge a little more than they would charge to do a closing."
That makes it hard for the agent to compete. "I"m sure that an attorney is going to charge less than a real estate commission to write a contract, but the buyer won"t have the full service like knowing the market and performing duties that we do," says Wallace."
Wallace says that some agents are already beginning to tell buyers that they will only show them multi-list properties, and if they want to buy a FSBO, they are on their own. She doesn"t feel that"s the right answer. "I want to work towards a transaction, not just presenting MLS homes," she says. "What does the public value in a real estate agent? We aren"t just homefinders. We have so much more to offer than finding a home. We can help buyers get the best price, terms, conditions - protect their interests. It is experience and knowledge that we bring to the table.
She wonders if the Internet isn"t a little to blame. "The trend is that people are devaluing agents - is that because they can do their own research? They think so, but they find they still do need us, and I can see it will impact how much they value us, and how much they are willing to pay."
But one lesson is clear to Wallace. "The two people I had were feeling that most of the service that we provide is in the finding of the home."
She wishes things were like they were when she moved to Williamsport eight years ago from New York. "I asked all the brokers when I interviewed, and they said we don"t do buyer"s agency here, " says Wallace. "I worked for a broker in upper New York State, and buyers got the same amount of time in our staff meetings for wants and needs as the sellers did, so that has a lot to do with the acceptance of buyer"s agency. When I came here, I found that when I tried to be present when an offer was presented to a seller, I was flatly refused and that practice has never been accepted here, and it was commonplace in New York. I have been well respected in the community and have become a top agent in the area, however, a lot of practices have not caught on and have not become standard operating procedure. In a way, I can see why. A listing is something tangible, maybe they don"t feel a buyer is tangible."
Buyer"s wiggling away could be a self-fulfilling prophecy - they aren"t treated as tangible, therefore they aren"t.
"The problem starts with the brokers on down," says Wallace."Most of the leading brokers in town inherited their companies from their families. They see no reason to innovate."