7 New Rules Of The Road For Real Estate Transactions

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Minding your manners in the arena of transactions has always been an important skill set for agents in any market. Just as etiquette has changed and evolved over time, the nuances of being a courteous and professional agent changes with each new generation — and when new laws and practices are introduced to consumers.

In preparing to write this piece, I reviewed an article I had written on real estate etiquette during the pandemic. Much of what I touched on is still applicable today; it just has a new twist on it given the practice changes in place. 

In 2020, I wrote that despite the fact that the ability to gather, travel, hold events and host celebrations has been severely impacted, most everything in life could still go on. It just had some extra steps involved, and the same goes for showing homes. 

Well, real estate has continued post-Sitzer-Burnett, but like the pandemic, there are just some extra steps and new etiquette we need to undertake with consumers and other agents. 

Here are eight things new (and experienced) agents need to be aware of now that we have a new set of rules and the game of real estate has changed once more.

Proper education is key

To properly advise the consumer, agents must ensure they thoroughly understand the practice changes and all related documentation so they can correctly advise consumers. This means they must be comfortable with the various forms they are utilizing and can explain in plain English what they all mean.

They should be able to explain the differences among the various options for buyer representation agreements as well as what options sellers have with regard to buyer’s agent compensation and concessions. Failure to have a solid understanding of the mechanics of all of this, coupled with the nuances and details involved, can result in mismanaged expectations and negotiations falling apart.

It is a disservice to our industry and the consumer to not be able to clearly articulate the new ways of doing business and the available options to the consumer as a buyer and/or seller.

Avoid commission inquisitions 

The practice changes don’t call for knowing the exact amount a seller is paying a buyer’s agent before showing the property. If you are working with a buyer, don’t question or press the listing agent if they say the seller will consider offers of compensation, but they do not have a specific amount the seller has committed to.

Don’t overcomplicate it. Show the property and put the request for compensation in your offer. There is nothing wrong with communicating to the buyer that the seller will consider offers of compensation, but they are not specifying a particular amount, and your fee will need to be negotiated as part of the offer.

It is important to manage the expectations with the buyer with regard to what you went over in your consultation regarding compensation.

Do’s and don’ts of working with buyers

Buyers have choices when it comes to what kind of agreements they can sign. There are varied types of forms that range from seeing one property to a specific few to an exclusive representation agreement.

The settlement was about consumer choice. Agents should not tell a buyer they cannot work with them unless they sign X type of agreement, or it must be for X amount of time. In some states, like California, a law went into effect that states they cannot be longer than three months.

Being inflexible on the front end, particularly in working with a buyer that you just met where the reservoir of trust is little to none, is not going to build trust or showcase your value. Build confidence in your value by not just your words, but your actions in showcasing your knowledge and expertise. 

Do’s and don’ts of working with sellers

Sellers have choices, too. They don’t have to offer compensation to a buyer’s agent if they don’t want to, nor do they have to commit to a specific amount of compensation to a buyer’s agent upfront. As a listing agent, telling them that they have to offer something or they will be “blacklisted” or no one will want to show their property is a huge faux pas.

During a recent seller consultation I had, the seller had already met with two agents and was extremely confused as to what they had been told about buyer-agent compensation by these agents. This seller was aware of the practice changes and appeared to be well-read on the subject from a consumer perspective, considering many sellers know a little about it, but not very much.

They shared that the seller was told they would be blacklisted and no one would show the house if they didn’t establish a specific amount of compensation upfront. This assertion is just plain wrong and a total misrepresentation of the settlement.

This consumer wasn’t aware of the details with regards to MLS listings and no compensation appearing in MLS, so their listing would not get singled out that way. 

Refine buyer consultations

Agents, please have the consultation meeting before you show the property. This means providing the buyer with your buyer presentation showing all that you will do for them along with explaining the new rules of real estate and how you will get compensated. Please take the time to go over the buyer representation forms ahead of time and determine what form is best for the buyer’s situation and have them sign it. 

Using a seller’s home as a meeting place is not appropriate, nor should you be trying to do this on the front porch (with the video doorbell recording), on the hood of your car in the driveway or on the street, making a buyer sign a form right then and there. There is always a coffee shop or some kind of café or restaurant a short distance from most neighborhoods.

Set and manage proper expectations with the prospect from the beginning. How does this make you look as a supposed professional trying to get something signed right before you open the lockbox? You control the appointment and where/when you meet. If a prospect won’t respect that, then that is very telling.

A colleague of mine relayed that a buyer went to see a high-end home on their listing and the buyer’s agents were running behind and were from outside the immediate area. The buyer had already gone into the home to start the showing, since the listing agent was present, and the agents, who were late, ran into the house to escort the buyer outside to go over the needed forms. Talk about back against the wall.

By that point, the buyer had already started talking to the listing agent because they had to be there for the showing. In that instance, if the buyer resented having to sign these forms, they could have just continued with the listing agent and dismissed these other agents.

It was not clear how well the agents knew the buyer, and it almost seemed as if they had avoided this discussion for fear of losing the lead. Don’t put yourself in a compromising and potentially embarrassing situation. 

Implement lender consultations

In real estate’s brave new world, lender consultations are more important than ever. It is important to walk through potential scenarios about compensation and how that could affect the buyer’s purchasing power ahead of time and formulate some strategies to avoid disruption to the home search and negotiation process.

As an agent, you owe this not only to your client but also to the listing agents and sellers that you are crossing paths with. Walk through what happens if a seller is only willing to pay the buyer’s agent 1 percent or 1.5 percent, for example.

• What options does the buyer have to account for the difference they have to pay their agent?
• Can they put less money down in that case, or would that make them no longer able to qualify for a loan program?
• What about asking the seller for concessions to cover the difference in the buyer agent’s compensation not being offered?

You don’t want to have 11th-hour discussions that can stall or jeopardize the property for your client. Maybe the worst-case scenario will never happen, but it is better to plan for it vs. hoping it doesn’t happen.

Don’t ‘police’ buyer consultations

Along the lines of buyer consultations, it is important to remember that we are not the police. It is not your role as an agent to ask another agent or buyer if they’ve signed a buyer representation agreement before they come to see your listing, unless that buyer contacts you directly to see your listing, or if the buyer is someone you plan on meeting with to discuss potentially working with and representing them.

If that is the case, then yes, you absolutely need to know if they have signed something, what kind of agreement it is, and what the terms are, etc. 

At an open house, agents should not be asking prospects if they have signed a buyer agreement because if they have not, they cannot come in the open house or if they won’t sign one with you, they can’t see the house. In addition, agents should not be using a sign-in sheet to force a buyer to sign any kind of agreement with them at an open house.

With regards to the listing side of things, it is not appropriate to ask a buyer’s agent to show you their buyer representation agreement when they submit an offer or if you are negotiating one. 

Just like listing agreements, a buyer representation agreement is considered confidential, and a buyer’s agent would never ask a listing agent to provide their listing agreement for review. 

What agents may have heard in this regard may have varied and depends on the situation. A buyer’s agent is not required to provide this to a listing agent, so if you are newer to the listing side, or not familiar with the practice changes, make sure you stay in your lane. 

Leave it to the agent’s brokerage and the MLS for compliance with regards to agents and their buyers and having signed representation agreements in place. If an agent does not have the required documentation that matches up with the compensation agreed to in a transaction, they cannot get paid. Showing homes requires a bit more preparation than it once did. 

In the post-Sitzer-Burnett era, we must be better informed, better prepared and have thorough consultations with the buyers and sellers that we interact with, to provide them with the best service and advice. This translates into real estate etiquette that helps elevate our industry in the eyes of the public and each other. Whether you are a brand new agent or experienced, all of us need to elevate our game.