Good ideas slow to catch on
Originally appeared in Hills Publications, April 23, 2004 and ANG Newspapers, April 24, 2004
In the past, I have written about the virtues of hourly consulting and buyer brokerage. Now, years later, these concepts remain underutilized and misunderstood by the public and local Realtors alike. If you are now, or plan to be, involved in a real estate transaction, you should educate yourself about hourly consulting and buyer brokerage to see if either is for you.
Hourly consulting
It seems sensible to pay a professional for services based on the number of hours he or she works. While not feasible in all situations, in some cases it is the most suitable solution.
Real estate consulting involves working directly with the principal (buyer or seller), but not with third parties (termite companies, title and escrow, inspectors, etc.). A consultant provides information and advice, but he is not your agent.
I have seen numerous business cards of real estate people that say “consultant” on them. Few, if any, actually do hourly consulting or are clear on the difference between a consultant and agent.
Anyone with a real estate license can call himself a consultant; nevertheless, not everyone knows enough to give quality consulting service. Before committing, a professional will give you a detailed consulting contract to acknowledge. Without this, be wary.
Not long ago, a long-time client called and asked if I would help her buy a condo directly from a seller who did not want to put it on the market. They had already negotiated the price and needed help with the paperwork and disclosures. With my consulting support the transaction closed and saved the parties a substantial amount.
Another consulting client found me online. She wanted to purchase a property near where she was renting. Once again, the seller had chosen not to openly market the home and there was agreement on the price. The sale was successfully completed for a sizable savings.
Late last year, I consulted with a woman who had decided to buy the condo she was renting. She knew there were other units in her complex with the same floor plan for less; regardless, when she thought about the excellent location of her apartment and the hassle of moving, she felt it was worth the extra money to buy the rental. As above, this client was extremely pleased with the results.
You might be thinking that, by not openly marketing their property on the MLS, the respective sellers might have saved in commissions and actually lost by accepting too low a price. There are times this may be true, but there are other considerations.
I have consulted with both buyers and sellers. Hourly consulting is appropriate in situations where the seller has already decided, for whatever reason, to sell directly, without full market exposure. In those instances, consulting saves the seller commission and the buyer usually pays less because of it.
Buyer representation
If you are a traditional buyer looking at listed properties (which most homes are), hourly consulting is not the answer. There is, however, another approach that is definitely worth exploring: buyer representation.
It is not unusual, in this seller’s market, for a Realtor to work with the same buyer from six months to well over a year before successfully closing escrow. Buyer representation is desirable because it indicates a high level of commitment on the agent’s part as well as the buyer’s. Serious buyers want excellent agents; top agents want serious buyers. Establishing this relationship in writing is logical and intelligent.
In our local area, all sellers who advertise on the Multiple Listing Service first sign a contract called a Listing Agreement. There is a similar form for buyers, called a “Buyer-Broker Agreement,” that is used regularly in most of the U.S., but not in our area.
The Buyer-Broker Agreement explains the relationship between the agent and the buyer. It sets forth responsibilities for each. This agreement has a time limit, as do all real estate contracts. Some buyers have a concern about being trapped for a specified time in a signed contract. I handle this by inserting a clause allowing either the buyer or myself to cancel with 24 hours notice.
What is also different and off-putting to some buyers is the responsibility to pay the agent a commission if he does not receive it from the seller (e.g., a For Sale By Owner). In the vast majority of transactions, the seller pays and this is not an issue. Although it is not common, in a Buyer-Broker Agreement the agent could be compensated on an hourly basis.
Final Thoughts
Hourly consulting or buyer representation could be right for you. Talk to an experienced Realtor who understands what these are and offers them on a regular basis.
Related Articles:
Consultant or Agent?
Understanding Agency
Buyer Representation Makes Sense