Episode 40 - How to get 90% of your Buyer Broker Agreements signed!

Episode 40: Strategies for Securing Buyer Broker Agreements

Introduction:

• Welcome to Episode 40 of the If You List You Last podcast with Bob Mangold, the Listing Coach.
• Gratitude for the growing audience and engagement.
• Discussion focus: Conversations and strategies for getting your buyer broker agreements signed.

Key Takeaways:

1. Mindset Shift:
   • Approach the buyer broker agreement confidently; it’s business as usual for experienced agents.
   • Importance of improving your skills and presentations.
2. Four Essential Buyer Broker Conversations:
   • Tailor conversations to different personalities and value propositions.
   • Customize and practice scripts to sound natural and conversational.
3. Mortgage Market Update:
   • Interest rates are decreasing, which will influence the real estate market.
   • Impact of upcoming jobless numbers revision on mortgage rates.
4. Understanding Buyer Broker Agreements:
   • Clarification that the paperwork, disclosures, and conversations have changed, but the core remains the same.
   • The importance of explaining the benefits of these agreements to clients confidently.
5. Addressing Common Misconceptions:
   • Why sellers not offering buyer agent compensation is a bad idea.
   • How not offering compensation limits traffic, competition, and ultimately the sale price of a home.
   • Importance of explaining the risks of dual agency and the potential for legal issues.
6. Buyer Conversations:
   • Scripts for explaining buyer representation, including legal obligations and the benefits of having an agent.
   • Different ways to structure your commission, including percentage-based or flat fees.
   • Addressing concerns about the new legal requirements and how it protects buyers.
7. Value Proposition and Liability:
   • Emphasizing the liability agents take on and why this justifies their commission.
   • The importance of educating buyers on the value you bring to the table, including helping them save on long-term costs.
8. Innovative Compensation Strategies:
   • Introducing an hourly fee model as an alternative to traditional commission-based compensation.
   • How this model can make your work more efficient and respected by clients.

Conclusion:

• The real estate market will adapt, and it’s essential to stay informed and prepared.
• Encouragement to join the Real Estate Asset Advisor Facebook group for continued discussions.
• Reminder: “If you list, you last.”

Join our Facebook Group at: https://www.facebook.com/groups/realestateassetadvisors

Visit our website to watch replays of our Wednesday "Elevate Business Briefings" at: www.RealEstateAssetAdvisors.org

Download a copy of my book, "If you list, you last!" at www.IfYouListYouLast.com

Transcript

Hey, welcome fellow listing agents. Bob Mangold, the listing coach here with episode 40 of the If You List You Last podcast. Hey, as always, thanks for listening, sharing, and downloading. Our audience continues to grow  now that our big buyer's agent comp moment has arrived yesterday or over the weekend. I'm going to share some conversations and strategies with you that you can have to get your buyer broker agreement signed.

Now for many of you listening, I know this seems like a really big deal, but for those of us that have always used buyer broker agreements, This is just business as usual. And what I can tell you is I guarantee if you make it a big deal in your mind, it will be instead, change your game, up your skills and practice your presentations.

Now, today, I'm going to share four different conversations you can have. Why four? Everybody's got different personalities. Everybody offers different things and has different value benefits. I'm going to go through and give you some ideas of what you can talk to. Now, I'd certainly recommend modifying them to fit your personality and then practice them.

until your presentations appear natural and sound conversational. Just a reminder, make sure you join our Real Estate Asset Advisor Facebook group so you can join in on the conversation, share your thoughts, comments, or questions on any of the topics that I discuss right here on the podcast

just a reminder, make sure you join our Real Estate Asset Advisor Facebook group so you can join in on the conversation, share your thoughts, comments, or questions on any of the topics I discuss right here on the podcast. So let's get started. First, I want to get back to giving you a real quick mortgage minute update because like it or not, folks, the mortgage market is going to have an impact on what is happening for us as agents, right?

 First and foremost, just understand interest rates are coming down. They're going to come down even further, but they are coming down, which is extremely favorable. So get ready. What's important to understand is that all the factors that go into seeing interest rates go down will continue to play in the market, right?

This Wednesday, they're going to announce a 12 month revision for all the jobless numbers that the Bureau of Labor Statistics has given us for the last year. So if you listen to the podcast on a regular basis, I tell you to be careful watching the numbers that they report because most times they're full of bull.

The expectations are that there'll be revised down from somewhere from 600, 000 to a million jobs that were actually lost. Now, as horrible as that sounds, what that really means for us is that.  The worse the jobs get or the worse the unemployment rate gets the more you'll see the interest rates come down You'll see the fed react quicker, which will lower interest on everything else And we're going to be in for a ride now the downside I know that everybody thinks that well when the mortgage rates come down more buyers will come into the market and that's absolutely true What we can hope for is that more sellers come into the market because they can replace You Their loan they're not getting it at two and a half or three percent again, but remember this folks  people the vast majority of the population over the last two years Has burned through their savings has run up incredible amounts of credit card debt in extremely high interest rates And remember credit card debt is not tax deductible.

So many times when we sit down with somebody we can actually show them how their cash flow increases. My son has a loan client that will be able to take and pay off 42, 000 in credit card debt and increase their monthly cash flow after buying a new house at a much higher rate, almost three times what they currently have. 

And they'll still be 1, 300 a month ahead in cashflow. So it's all a good thing for us in the business. We just have to educate ourselves and be prepared.

Now, before I review the different client presentations, let me start here. First. I have been teaching a lot of classes and monitoring social media. And the number one thing I can tell you right now is that 80 to 90 percent of agents do not understand these changes. Now, here's what I can tell you. Very little has changed.

Except for the paperwork, disclosures, and conversations. Buyer broker agreements are not new. I've always worked by them. I've never worked without a buyer broker agreement. The majority of sellers will still offer buyer's agent compensation, and buyers still need our help protecting them. Now, I'm not naive, and I know there are sellers saying that they don't have to offer comp, and they don't. 

And buyers are saying they'll go right to the listing agent, And some will.  Our job is to tell them why that's a bad idea. Now, let me tell you why both of those are bad ideas, and I'm going to take it from the seller's side first. Number one, just imagine if a seller says, I'm not offering buyer's agent compensation. 

They're really no different than a FISBO, are they? The MLS means nothing. Other agents mean nothing to them. They are a FISBO.  Which means they will have very little traffic for their home. Which means very little competition. Which means they simply won't get the highest price. Period.  Now we can explain that to them and we should,  and then they have to make a decision.

Do they still want to stand by that? And if they do, what I'm going to tell you is you have to decide if you really want that listing then,  because you're going to have to work 10 times harder  to sell that property. You're not going to get as high of a price because you're not going to be able to build any competition or traffic around it  because real estate agents should be.

In theory, anyway, spending their entire day  finding new clients, whether that's advertising, cold calling, marketing, open houses. Sellers don't do any of that. The sellers don't have the buyers. The only tool they have at their disposal is Zillow and like fizzbo. com.  So without agents, they're severely limiting their ability to get the most money for their house.

Now, if they decide to do that, great, but you as a listing agent are going to have to make that decision  About what you're willing to do for me personally I wouldn't do it, but that's my opinion  because we're it's going to take a ton of time to sell You're going to have a dissatisfied client because guess what?

It's going to be your fault  and in some ways it should be because you have the ability to say no I don't want to work in that environment  number two.  What do we get paid? Or why do we get paid so well for what we do now? I've been asking this question for 25 years to real estate agents You And very rarely does ever, has anybody ever answered the question properly. 

The answer is liability. There's liability in everything you do.  Now, in the new listing paperwork, at least what our company put out,  there's a spot in there where you actually get to talk to the seller about what happens if a buyer comes directly to me.  What do you want me to do?  The logical answer that any seller is going to say is I want you to do the work for free. 

Your answer has to be, if I have liability,  and we're massively increasing the odds of being sued, do you want to do that for free? Number one, dual agency transactions are the most likely to see lawsuits.  Number two, I just seen an article in Inman today by Michael Ketchmark, That warned the real estate industry that we will be watching everything that you do. 

When they go into county records and see that there were no, there was only one agent involved in the transaction. If you were a lawyer,  would that be the first one you would think of going to? And then you'd contact the buyer, you'd run ads saying, hey if you recently bought a house without an agent. You probably got screwed. 

They're going to be reaching out to them to find out what you did wrong. And even if you did nothing wrong, they're going to still find things. Oh, did they tell you about this? Did they tell you about that? Oh, did you know this? Did you know that? And you're going to get sued  just the way it is.  Now, are you willing to do that and take on all that additional liability for free? 

And number two, you have to explain to the seller, it's not just us that's going to get sued, it's going to be the seller.  So I know in your mind, you think that it's cheaper for me to take and let somebody else, have the buyer come directly to me and do the paperwork for free. But in the long run, I take on more liability, you take on more liability, And we have the entire legal community looking at these transactions.

Do you really want to run the risk?  And if we're going to pay a commission to do that, we're simply going to raise the price. So you have nothing to lose. Mr. Mrs. Seller to doing that way.  Here's the thing, guys,  we're going to start getting sued. You think that would change the seller's mind? It's your job to explain the entire picture to the seller. 

And you have to explain it in a way that they're going to understand. And most of what I'm reading on social media right now from agents. It's because they simply don't understand A, the process, or B, how to explain it properly.  If we don't understand why we really get paid the fee that we get paid,  and we do get paid a good fee, but it's because we take on all the liability.

Now, if I have a seller that says, nope, you're doing it for free. Again, I will tell you folks,  that you have to ask yourself, do you want that listing? Again, for me, my own opinion,  I would not do it.  I simply wouldn't do it. The liability that I would take on for me to do that  would be ridiculous.  So I simply explain, and I'm actually glad that it's in the new paperwork,  that it forces us to have that conversation. 

Now, you can decide to do the paperwork yourself. What we have always done, we always referred it to another agent. Because we didn't want the dual agency. Could we get paid more? Yes. Is the state that we're in okay with dual agency? Yes.  But it's not okay with me because now I take on more liability. So I simply don't do it.

Now you are going to have to decide what you want to do and how you're going to handle that. But here's what I do really believe, folks. Within a year,  Sellers are going to realize that they'll not get the most money for their homes by drastically reducing the number of buyers that see their homes.  The sellers and listing agents are going to be sued for dual agency  and agents will stop offering to write the contracts up without compensation. 

Now, that's going to take six months to a year, because sellers are feeling pretty emboldened now, right? We're hearing I don't have to offer a commission. And the real answer is, you never did.  But if you want to get traffic, and you want to create competition for your home, which is what's going to get you the highest price,  and you're going to ignore 99 percent of the buying population,  will that help you accomplish the goal? 

And the answer is no, it won't  on the flip side, the buyer saying, Hey, I'm going to go directly to the listing agent. That's just the natural. It's just a natural reaction folks. But here's the thing. We're going to start seeing more and more instances of buyers being taken care of. So last week I did a class for my group  and I showed a couple of social media posts about how the seller said, no, your earnest money of, I think it was 15, 000 had to be hard, no refunds, no nothing.

Once you sign a contract, you do that. And we're not doing repairs and we're not doing this and it was just like a terrible deal for the buyer  The truth is folks buyers don't realize that they have the ability not to do that And so as you start seeing more and more buyers being taken advantage of you're going to see more and more Buyers suing  and they'll be suing the sellers  And so at the end of the day, I believe about a year from now You'll see things really go back to what they are now where sellers understand.

Hey, they have to hire an agent You And they have to offer buyers compensation and buyers will actually really understand your value And i'm going to give you a conversation today that will clearly outline your value to them So with that, let's get to our buyer broker agreement conversation So remember I said I was going to give you four  and i'm going to do them I did it this way because I want to be able to take and Give you some different ideas of what you can say  I'm going to tell you what I've done over the years.

So here's the first one. Hey guys, let me start by, again, you're sitting down with your clients. Hey guys, let me start by pointing this out up front. By law, agents are now required to work under a buyer representation. You could say by statute, but there are 17 states right now that have laws in place that say you must.

So you can say either by law or by statute.  By law or statute, agents are now required to work under a buyer representation agreement. Which is actually great news for you as a buyer. So you'll have me acting as your fiduciary advisor, providing answers and solutions to things when they come up, and always having me in your corner protecting your rights. 

And best of all, you don't pay me a penny until you've actually found the perfect house, you got it at the right price, you got your financing sorted out, all your inspections are done, and maybe we have to renegotiate with the seller at that point, and the transaction is closed. That's actually when I get paid. 

Now, if I don't help you get to the finish line, I don't get paid a dime.  My fee for representing for representation, if you get to the finish line, is three percent, or two and a half percent, or whatever you think you're worth.  Or you could do it as a flat fee, right? If they're buying a 500, 000 house, you could say 12, 000, 15, 000.

This is where they get to negotiate their own commission with you.  Now, in many cases, we negotiate directly with the seller  to have all or part of that fee paid on your behalf. They may be open to even paying some of your closing costs and appraisals on top of my fee. It'll just depend on their level of motivation. 

But I'm going to make the process super transparent for you. I'll do the research on homes that you're interested in prior to visiting them so you'll know exactly what your out of pocket expenses could be on those properties. That way you can decide up front  If you still want to see those homes, make sense  now on any property that you want to write an offer on I'll also give you a net sheet on every transaction outlining your out of pocket expenses up front  So you can factor that into your offer Some sellers would cover my fee closing costs appraisals and warranties depending on the situation When we get to the end, you'll have a transparent document that you can make a informed decision on your offer  Any questions on how that'll work? 

So that's a fairly benign way. I didn't really do anything to speak to my value proposition. But what's important, folks, is you have to start explaining that in a confident, competent manner.  You need to practice and rehearse these things so that it comes across powerfully. Not like you're trying to avoid it, right?

See, people like to work with confident people who know their value. This approach will help you get more comfortable, which is essential. Now notice how I actually in the beginning also said, Hey, it's actually great. This is great news for you as a buyer. And the reality of it is folks you do it is.  So that's script number one. 

This is a revision of a script that I've always used. So this is how I always set it. I had, when I say I revised it a little bit.  Because it's changed. So we get to this part and I go, Hey, there's two different ways that we can work together  in the past. I could represent the seller.  So before this came about, I would simply say I could represent the seller because if you didn't sign a buyer broker agreement, if you guys didn't realize it by statute, you were representing the seller. 

So now I can't say that, but I say in the past, I could represent the seller.  Let me give you an example of how that worked. Let's say I, I found a house.  that the seller would be willing to take 50, 000 less for the home because let's say they were being relocated.  Under that scenario, I wouldn't have been able to tell you about that discount. 

Anything that I could discover about the seller's motivation, I wouldn't be able to tell you. I'm assuming that's not something as a buyer you'd ever be comfortable with. Am I right?  And they always said, no fortunately, recent changes require that I represent your interests only  by having you legally require me  to sign a legal and binding contract to represent your best interest.

You're now forcing me to sign that contract to make sure that you understand. I'm looking out for you.  I could never have a buyer thinking that I wasn't looking out for them when I was legally bound to represent the seller. I've always done that business that way. So I don't need some lawyer telling me to do it.

Now  agents just no longer have that option, which is, I believe is a significant benefit.  Here's why that's really the only responsible way to work with homebuyers. Now, in the event that I learn about a seller's motivation, discounts, or issues that would impact your decision to buy a specific property.

Maybe I find out that there was a roof leak and they didn't disclose it. I would be legally obligated.  to let you know anything that I find out.  I'm assuming you'd be more comfortable working in that way, right?  And they say, yes. Guys, I have used this for 30 some years.  Unlike the past where the listing agent negotiated my fee to represent you, I now can negotiate my fee directly with the seller.

Now my fee is 3 percent of the sales price, or if I want to do two or two and a half or 10, 000, whatever your number is,  My fee is 3 percent of the sales price of an existing home and up to 5 percent on a new construction home.  Now, why did I put that in there? Because there are builders in different markets in the country that are literally offering up to 5 percent on a new construction home.

I just got an email from OfferPad today that they're offering 3 percent on all their homes.  Why do you think they're offering that, folks? Because other buyer or sellers, I'm sorry. I think that I don't have to offer a commission or a buyer's fee.  And offer pads listings now become more  attractive, right? 

So now I say, now the seller can pay all or part of that fee. And in most cases, the builders will always pay my entire fee, but now it's my job to negotiate directly with the seller.  If they're simply not willing to cover that fee, you could be responsible for the difference.  Now, it's important to understand, I don't get paid a penny  until you've found the perfect house.

You get it at the right price, got your financing sorted out, all your inspections are done and negotiated with the seller, and the transaction is closed. That's when I get paid. Now, if I don't help you get to the finish line, I don't get paid a dime.  Now, one last choice. You do have the option to instruct me not to show you homes where the seller Will not cover the entire fee.

It's totally your decision.  What are you most comfortable with?  Here's the thing, folks, most agents don't realize that's an option.  It has to go into the buyer broker agreement that says, Hey, I'm instructing you not to show me any homes where the bill, the seller's not willing to cover your entire fee. 

Totally your decision.  Here's the good news folks, you have five, six, eight, ten buyers over the course of the next few months or a year, whatever it is. When you go into listing appointments, and you just show them, hey guys, here are eight closings that I had. Every one of them instructed me not to show the home  that wasn't offering a buyer agent's compensation. 

See, eventually guys, the market's going to figure this out.  The real estate market worked great just the way it was before. It's just, we don't get to work that way anymore. The buyers and the sellers are going to figure this out. It's our job to explain it to them. Do you see how I explained how  I protect them and how I wouldn't have been able to protect them before?

And you explain that  now I'm going to give you, I'm going to skip over my notes here  and I'm going to give you  the rest of what I always said.  So we get to that point. And they say yeah, no, don't show me those houses or yes, still show me those houses. And hey, great. You know what? I just want to make sure you're going to be comfortable paying my fee if they won't. 

And they can say yes or no.  Here's where it gets better though. This is where you have to start to provide the value.  And then I would go great. Finally, I'd like to share the real benefit of hiring me to represent you.  I'm going to be around long after you close on your home.  If you're open to it, I would like to set up a plan  and help you execute it where you can get your home paid off in seven to 10 years.

We're going to use a 30 year fixed rate loan to do it,  to give you an example. And I would have these numbers done in advance because I'd know what price point they were looking at. But let's assume a 400, 000 house right now.  Buying a 400, 000 house. Using a government rebate  and a few small changes to your cash flow,  you can have your home paid off in 10 years and 9 months, which means you just eliminated 19 years and 3 months of payments. 

Here's the most important thing to understand.  Over the course of those 10 years and 9 months, you would save 402, 355  in payments.  You'd actually save more in payments and interest than you paid for the home.  Now, that's an explanation of compound interest that I would take them to, but if they asked a question, right?

But stay with me because I didn't let them interrupt there. Now, after paying the house off, You started making the same monthly payment you were making, right? Same money leaves your house every month, but now you put it into a retirement fund using the same money you were already given to the bank. 

Assuming you only got a 3 percent return on your money,  you'd have accumulated 847, 355 in cash.  And I'm going to be able to do that with the same amount of money that every other agent lender would have you give to the bank.  Obviously, after closing, we'd need to create your own personalized plan with your exact numbers to see how quickly we can get your home paid off.

And my goal would be to do it faster.  Is that a conversation you'd be open to having?  Here's what I can tell you, folks. Of all the agents I've taught,  all the years I've done this, I've done this for 32 years, I have never had anybody say, Nope, I wouldn't be open to that. 

Here's the number one response we get to that. Bob, that sounds too good to be true. And I say, I actually agree with you. I know it does. But it's just math.  And I've created a software program that does all the math. You're more than welcome to go online and verify the math. You could go and do it at bankrate.

com. You could go to Suzy Orman, Dave Ramsey. Go to your account and go to anybody and just verify the math.  And what I have to explain to people, if you were buying a 400, 000 house at 6%,  you would pay a total of 843, 000 in payments and interest, right? You'd have to pay the 400, 000 back  plus another 483, 000 in interest. 

Of that 483, 000, by working with me, I can save them 402, 355 in payments and interest.  I can cut that down from 484, to 82, 000.  Here's my question for you. Do you think anybody's going to object to paying me a fee, even if it had to come out of their own pocket?  Because the answer is no, it wouldn't.  And again, you're seeing all this stuff on social media and your brokers talking about figure out your value proposition.

That's mine.  And then I want to give you one other option to think about.  And I call this the hourly pay script, right? So at the end of me explaining whichever of those options I felt comfortable with, right? Hey, one last choice. You have the option to instruct me not to share your homes, right? What are you most comfortable with?

Great. After that discussion, you go, Hey, I do have another option. It could be a win for both of us.  In order to help me be more efficient, I have an hourly fee program that I can offer you.  It will allow me to work a lot more efficiently and you potentially to save a lot of money. Now, here's what I mean by that.

Many times buyers call me and go, Hey Bob, I want to look at this house, but we know we don't like it. But I, we just have to go look at it. And I don't know how this works guys. This must be Murphy's law, but they're always an hour away.  Now you're telling me upfront that you don't want to go see it and it's not going to be the right house for you, but let's go see it just to be safe.

Depending on the distance, that could take me two to three hours. And full well, you really don't like the house.  So what I'm willing to do  is I charge 175 per hour for everything related to searching, researching properties, setting up showings, talking to the agents, et cetera,  driving there, all of it. 

Now, when we get to writing the contract, negotiating escrow surveys, inspections, renegotiations, and everything that's required to close the transaction. My fee is 400 per hour. The reason that's more expensive, all of these taxes are where my liabilities drastically elevated, 

requiring a higher cost of my time. Now I'll track all of my time in 15 minute increments, just like a lawyer. So the more you can help me work efficiently, especially on the showing side of the transaction.  You can save money, potentially a lot of money. At the end, I'll see what the seller is offering, and if your total invoice is less than what my fee is, or if they are willing to pay that, and your fee is less,  we can rebate that towards your closing costs or interest rate buy downs. 

Is that something you consider? Or would you be more comfortable having me negotiate my fee with the seller? Just know I couldn't rebate the overage to you in that way. Would you be more comfortable with that?  Think about that, folks. 

So let's do the math on this. Think about it this way. If you spent 40 hours a week in all of the showing processes of things  at $175 an hour, you'd make $7,000 a week, $28,000 a month.  Here's what I can tell you, folks, and this isn't something I came up with. I had a good friend of mine work like this years ago, really the late 90s and early 2000s, and he made a lot of money. 

But the reason that we explain it that way is because that's what happens, right? They just want to go out and show you, I know we don't really like the house, but let's go see it anyway, because there's no value for your time.  But when they know they're paying for your time,  They're going to respect it a lot more, wouldn't they? 

Now you'd have to get this idea approved with your broker and things like that, but there's nothing wrong with doing it that way. Folks, that's exactly how attorneys work. Why would we be any different?  Now in my state, we have the same by law rights  as an attorney to prepare contracts and do this work. I believe most states are probably the same way. 

So by statute, we're able to be an attorney, but on the real estate side. All this showing and everything else gets in the way.  But if we started explaining to people what we do when we put a dollar amount in there guess what, folks? Let's say it only took you 20 hours to close a buyer transaction, would you make less money?

Yeah, maybe, depending on what a seller is willing to pay. But now you have buyers that are respecting your time. And believe me, when it comes down to their money,  and money that they could get at closing, yeah, they're going to be very respectful of your time. My friend used to be able to take and close about 10 buyers a month doing an hourly fee. 

So totally up to you. I wanted to give you some different ideas. I wanted to share with you my conversations over the years with buyers and how effective it was. And folks, I never had an issue getting a buyer to pay me. And I wouldn't in this environment. It hasn't changed. Sellers are still willing to offer compensation.

It's my job to negotiate with them.  That's it.  And it's also my job to instruct the buyer, if you don't want me to show you houses where they're not willing to pay that fee,  I don't have to. Your call. They get to decide. Which is really what this lawsuit was all about, right? The buyer's in control. We have to negotiate our own income.

Okay, big deal.  Now I know this is a lot of information to digest and I really hope it helps. The good news is that while this is a podcast and you can listen to it as much as you need, right?  So we'll talk to you next week. And remember, if you list you last.