What Buyer Agency really means

Marching to the beat of a different drummer

This really is the case -- at least if the concept is sufficiently understood and correctly applied.

There's a sharp contrast -- or there ought to be -- with the traditional approach to the market, which reflects the real estate industry's ingrained belief in looking after a seller's best interests and getting what can be described as "the most money for the house."

In effect, Buyer Agency is focused on looking after a buyer's best interests and getting what I like to call "the most house for the money."

And my website does, of course, point out and discuss this difference.

However, several aspects of taking care of buyers as opposed to sellers have, by now, become increasingly clear to me and I like to think that some of them are worth sharing with my readers. They perhaps have roots in my approach as an Exclusive Buyer Broker, but I'm not afraid to argue that a Buyer Agent who's doing the job properly -- and will, unlike me, be either interested in acquiring listings when they can or perhaps work as a member of a team that aggressively goes after them all the time -- will abide by these findings of mine to no less a degree.

The rights and wrongs of a property

Once in a while, there's an obvious choice for a buyer. A particular property may, in fact, be the only one of its kind and bears no comparison with anything else, if only because there isn't in fact anything else.

More often than not, however, finding the "one right house" involves looking at enough of what I'm inclined to call the "wrong 'uns" or -- if I can borrow a wonderful phrase that one of my clients came up with recently -- "the good, the bad, and the ugly."

Thus, the answer is perhaps found in an ad, whether in a local newspaper or magazine or during a search of mls.ca or the likes of it. Or it may lie in a property that seemed perfect when a buyer had been driving around a neighbourhood or perhaps visiting Open Houses. Or it could make itself felt when the buyer looks at a list of properties that I've drawn up in response to the criteria I've been given. And it may just end up being one that I'm already aware of and consider to outdo all the alternatives.

But the point that deserves mention is that my job goes beyond simply letting a buyer's enthusiam (or, for that matter, my own) justify the idea of rushing forward with an offer.

More than likely, there will, of course, be a Home Inspection condition in the offer and this allows time to determine that there are no flaws or faults that haven't been recognized. But if the offer is a sound and sensible one, it will be also be at least supported by due consideration of what else the buyer's money could buy. This naturally calls for some degree of Comparative Market Analysis -- seeing what else is currently available and what recently sold at the same sort of prices and probably of a similar house size and style -- but, into the bargain, it ought to take the market history of the property into account. This will include knowledge of how long the property has been on the market and/or how often it has been previously listed without a sale. As far as the records show, it's also useful to find out when the sellers bought it for what price and in what condition. By extension, of course, this anticipates the likelihood (or not!) of a mortgage approval or, if it's a cash purchase, the commensurate return on the investment.

In effect, though, the key question to be asked is whether the buyer will get the value they're entitled to receive for what they're willing to pay -- or, now and then, whether their only option is to settle for what the seller wants even if it's more than it really ought to be.

A different mindset

Such a sceptical view of what seems to be the perfect property isn't intended to stop people from buying a property that appeals to them, but it does imply consideration of the reasons why they perhaps shouldn't. And this goes, as it were, against the grain that governs the real estate industry's traditional belief in working for its sellers. Indeed, the emphasis from an agent's studies for first getting a licence through all his/her ongoing company sales meetings and a variety of "How to Succeed in this Business" seminars is on one thing only: how to get listings and then sell them as quickly as possible, be it, if you like, by fair means or foul.

This isn't to say that agents are expected to lie. Far from it. The industry's Code of Ethics is an oath to behave honestly in all dealings, and agents ignore or depart from it their peril.

But it also doesn't put agents under an obligation to tell the truth as in the whole truth and nothing but the truth. On the contrary, the caveat emptor principle is, as more than one authority doesn't hesitate to confirm, the abiding rule for buyers to take note of. They are under notice to protect themselves rather than rely upon sellers and listing agents (or those who, as co-operating agents, are on the seller's side) to point out what may not be as apparent as it could or ought to be.

And enter here, of course, the Buyer Agent who exists to even up the odds. Never mind letting the buyer beware. There's a case for making sure that there aren't any surprises -- and this requires an awareness of the negatives as much as the positives, as well as a responsibility to see that a buyer is privy to both.

However, despite my considerable respect for a great many Buyer Agents who readily accept these consequences, I do fret at least a little about how hard it has to be for them to work in an environment where listings are considered to be the primary objective of agent activity. Indeed, I've now been honouring the concept of exclusive buyer representation (i.e. letting all prospects of a listing go hang) long enough to know how much easier it is for me when I'm no longer concerned about what's often called "the Name of the Game."

In the initial licencing courses, the weeky sales meeting, the regular tour of new listings, the motivational seminars, the corporate and individual agent websites, the industry's magazines, almost all the professional development courses that agents have to take in every two-year licence renewal period -- throughout it all, the Buyer Agency concept is considerably underplayed.
Thus, to my mind, a Buyer Agent is largely left to his/her own devices to learn what to do and how to do it.

Admittdly, there's now an Accredited Buyer Representative designation that Canadian agents can acquire but, even in the US, its graduates add up to no more than 4% of the total NAR membership. In Canada, they amount to only a few hundred out of some 80,000 licensees.

Tradition lies hard in the real estate business and I can't help feeling that it has a long, long way to go before it gives the concept of buyer agency the respect it ought to be given.

Buyers are liars, aren't they?

Part of the rationale for laying stress on listings rests on the gathered experience of numerous agents that buyers themselves don't tell the truth. Frequently they end up buying something that's quite different from what they lead an agent to believe.

Certainly, I've seen this happen to me. One example was the purchase of a townhouse in St. Catharines that started out as an enquiry about character homes in Dunnville. In another case, the end result was an accepted offer on two student-occupied semis in Thorold, despite an inital interest in looking for an executive type home in Beamsville or Grimsby.

Moreover, adding to the agony of many agents is the likelihood that a buyer will use the services of another agent instead of the one who's shown them dozens of houses and regularly mailed them information about new listings. Of course, this is a problem that the industry tries to overcome by getting its buyers to sign Buyer Agency Agreements, but this is often easier said than done (and I haven't held back on arguing against it in a previous newsletter, anyway).

But, just as I don't think that buyer agents are given enough opportunities to learn, understand, and appreciate the role they've chosen (or nowadays are sometimes specifically hired) to play, I'm very satisfied that a key point is being missed.

Well over fifteen years ago I attended a seminar in which the guru dealt with the question of buyer loyalty and the answer -- which no one in the audience got right -- was that you don't so much earn it (which you must of course do) as you need to train people into giving it to you (!!)

It is, in my view, fair to say that the way the real estate business works is poorly understood -- if at all -- by most of its buyers and sellers. For whatever reason, we seem reluctant to explain that we get paid only when we put a sale together and see it brought to a close. No matter how many houses we show, regardless of the number of offers we prepare and present but fail to get accepted, and never mind if we e-mail new listing sheets every other day to a prospective purchaser, there isn't a single dime going to come into our pockets until a seller's lawyer sends a commission cheque to the listing agent's brokerage.

To paraphrase a phrase: it's the commission, stupid.

With listings it's going to happen, just as long as agents get the places sold.

With buyers, though, you need to convince them -- and, I believe, give clear demonstration of the fact -- that you'll spare neither time nor effort in helping them find the "one right house."

Pieces of paper in the form of Buyer Agency Agreements and a barrage of Just Listed e-mails aren't going to do this. You need to get out there, to preview homes, to set up showings as often and in whatever price, style, and locale it takes, to come up with the reasons for NOT buying as much as the argument for making up an offer -- to show, beyond all doubt, that you're in the buyer's corner, on his/her side, well and truly committed to looking after his/her best interests (and never mind what the sellers and/or listing agents want to see happen), and, in effect, doing everything that a Buyer Agent is supposed to do.

Do this and, in the process, explain that, on the one hand, it's their money that pays the commission (all the seller does is authorize the payment) and, on the other, that your share of it will reach you as compensation for everything you do -- and are unreservedly willing to do -- on their behalf, just so long as they let you (and no other agent) put an offer together for them when and as they decide to buy, even if their discovery of the property results from their own efforts instead of yours.

Is it hard to do this? No, not in my experience, not one bit.

And, although, I don't expect every enquiry to result in a sale (any more than every listing is bound to get sold before it expires), I've certainly been finding that "Selling to Survive" pays off handsomely in contrast to my results when, like my former colleagues, I was focusd on "Listing to Live."

I couldn't ask for more than this, could I?

With my usual warmest regards and sincere hopes that the Easter Bunny was kind to you and yours.

Duncan Pollock, Real Estate Broker,
427 Gate Street, Niagara-on-the-Lake,
Ontario, Canada L0S 1J0
Tel: 905-468-3154 Fax: 905-468-3812
Cellular: 905-704-9037
email: duncanpollock@sympatico.ca
Note: e-mail address changed as above on November 3 2007
website: http://www.duncanpollock.com

PS. One of my web pages provides a list of the other newsletters I've sent out. If you choose to go to it, you can click on any title to bring up its full text.
PPS. I've recently been invited and encouraged to create a second website, one that deals with my approach to the industrial, commercial, and investment real estate market. You can reach it, if you're so inclined, at http://www.iciniagara.com.