Getting your brokerage ready for a new world of buyer agency 

The outcomes of several major lawsuits related to real estate commissions are yet to be determined, but brokers and agents should start preparing for a world in which they present exclusivity agreements — and their fees — to buyers early on in the process.

During a webinar this week on the real estate industry's compensation structure, T3 Sixty's CEO Jack Miller, along with EVP of Brokerage Consulting Dean Cottrill and VP for Brokerage and Team Consulting Lisa Piccardo, shared their thoughts and recommendations for brokers and agents who may soon need to adapt to different ways of doing business. (Note: T3 Sixty and Real Estate News share a founder, Stefan Swanepoel.)

The idea is simple: If sellers are no longer responsible for compensating the buyer's agent, the buyer will have to pay their agent directly for their time, expertise and guidance. This would represent a major shift from the current and widely adopted practice of the seller paying commission to the listing agent, who then breaks off a percentage for the buyer broker. 

But it could be a change that sets savvy buyer agents — and the brokerage leaders who train them — up for success.

Explaining the buyer agent value proposition

There are several key do's and don'ts, Miller said, when approaching buyer clients about exclusivity agreements and fees. One of the most important things agents should do? Be very clear about the value they provide, and lay it all out in a comprehensive buyer presentation. 

That means buyer agents need to be prepared to explain exactly what they do, why it benefits the buyer, and how their expertise and negotiation skills — which are solely in the buyer's best interest — will get the buyer to the closing table. 

"Don't say your services are free, don't say your services will be paid by the seller and don't be a transactional broker," Cottrill said during the webinar. "You're a professional, and professionals get commitments for their time and their expertise. So don't devalue your services."

Piccardo suggested that agents track their hours when working with buyers so they know exactly how much time they spend on each task or issue along the way. The idea is to help agents really understand the amount of effort it takes to close a deal, which they can then highlight when discussing an exclusivity agreement with a buyer client. If an agent doesn't see value in what they provide, neither will a buyer.

"An Uber driver makes more money than half the agents out there, right? Because you're driving people around and not guaranteed any sort of compensation. So really think about the value of your time," Piccardo said. 

Handling buyer objections to exclusivity, fees

Even after hearing the value and services an agent provides, some buyers may simply not want to commit, or they may balk at the idea of having to pay their agent directly. But there are ways to overcome these hurdles, Miller suggested, including having an arsenal of "strategic alternatives" to offer. 

"A strategic alternative is a trade that's acceptable to you and to the client that moves the relationship and the transaction forward," Miller explained. "Most objections come from a place where [buyers] don't understand the services being provided."

Miller provided several examples of objections and their corresponding strategic alternative. 

Objection: 'I want to represent myself and save money.'

Response: "Again, take them back to the services provided," Miller said. An agent might say, "Let me walk you through the steps in the process so you understand the work involved. Here's what I'm going to do for you. Second, representing yourself may not end up saving you any money and may end up costing you money."

Strategic alternative: Unbundle your services, Miller suggested. For example: "I'll show you ten houses and you're going to pay me X amount of dollars for that work," he said. "That's just one way of unbundling your services."

Objection: 'It's a lot of money.'

Response: "Yeah, you're right. I'll just work for free," was Piccardo's tongue-in-cheek response. Then she and Miller again emphasized that agents need to explain their value and the risk they're taking on behalf of the client. One script Miller proposed was, "First, I want to make sure you understand the value of my professional services and how they'll ultimately save you money. And second, I don't get paid unless you buy a home. I'm willing to take a risk with you and sign an exclusive agency agreement with my compensation specified. I'm willing to put my time on the line, and if you decide not to buy, that's okay with me."

Strategic alternative: Miller suggested a retainer with a success fee. "Say, 'Look, I understand you don't want to pay that. You feel like that's a lot of money. How about you pay an upfront retainer and I'll provide some services for that? And there may be a smaller success fee at the end.'"

Objection: 'I want to keep my options open.'

Response: "I can invest my time and skills when we work in a partnership," was Miller's suggested response, followed by, "In a competitive market where we have one listing for every three agents, it takes time and attention to win the home you want."

Strategic alternative: Miller said one option is offering specific or limited agency. "This is saying, look, how about I show you these houses, and if you decide to buy any of these houses, then I will get paid," he explained. "And if you'd want to do more of that, then we'll just sign an additional agreement that says we're going to look at more houses."

"At some point, your client's going to say, 'Well, this is silly. Why don't you just sign an agency agreement? I don't want to sign a piece of paper every time we need to go out and do showings.'"