Why Realtors Need A Buyer Broker Agreement

shaking hands

I know . . . you love to hate buyer broker agreements. But here’s a true story.

A client of mine spent two years showing a couple high end condominiums.  They didn’t make even one offer in all that time.  The condos were going very fast.

After two years, the buyer heard from a friend about a possible sale not yet on the market.  Client calls the listing broker, tells the listing broker he is working with an agent but wants the listing agent to show the unit to him.  He loves the unit. Even though the listing broker was perfectly willing to work with a buyer’s broker (and said so), the buyer decided to offer the listing broker an unsolicited incentive.  He told the listing broker he was not going to use his buyer’s broker.  The listing broker properly asked if the buyer had told the buyer’s broker that he was being cut out.  The buyer lied and said yes.

The sale was substantially over a million dollars.  The listing agent made a killing.  My broker client didn’t.  He didn’t have a buyer broker contract.

New rule: Tell your clients they can’t get in the car with you without a buyer broker agreement.  🙂

  1. Jack KearneyJack Kearney11-27-2015

    Sage wisdom, Kate. I think there are several things that need to be in writing or documented. First, the Buyer Agreement. Second, the Proof of Funds or Pre-Approval Letter. Third, a short sale approved price. With the first two, don’t let them in the car. With the third, don’t even entertain showing it.

    The Buyer Agreement comes in handy with new construction listing brokers who poach buyers from other brokers. The listing brokers don’t interfere with a contract if there isn’t a signed agreement. It’s a “shame on me” situation if one of my buyers goes that way. However, I think it’s an ethical issue that should be addressed at the Realtor Board level.

    Proof of Funds and Pre-Approval Letters should be provided by the buyer client before they get in the car. Brokers should vet the source, too. A statement from a questionable bank with names and account numbers redacted isn’t that solid. I trust that about as much as a Countrywide pre-approval written by a broker in Tennessee circa 2006.

    If you’re representing a buyer on a short sale, I think sellers and banks should be subject to the same pre-approval rules that buyers face. If they’re not serious enough to have negotiated a set price, they’re generally just going to waste your time. It’s ridiculous to list a property at $150K if it’s worth $190K and the first-mortgage bank won’t take less than $225K. Just a thought, eh?

    Thanks for your good work, Kate!

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