How To Tame the Buyer Agreement Madness

Searching for a home in Sarasota, Charlotte, or Manatee counties? 🏠 Our latest podcast reveals how to navigate buyer-broker agreements and avoid costly mistakes. Learn why commissions are negotiable, how to choose a trusted agent, and why local expertise matters. Contact Slice of Florida for expert guidance or read more at sliceofflorida.com. Start your homebuying journey with confidence! #Homebuying #SarasotaRealEstate

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Brought to you by Steve Martin Smith,
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Transcript

Buyer broker agreements, real estate transactions, NAR lawsuits, consumer confusion, agent representation, Florida real estate, buyer representation agreement, transaction broker, commission negotiation, buyer-agent relationship, real estate contracts, legal advice, real estate professionals, buyer protection period, real estate market.

Speakers

Speaker 1 (43%), Speaker 2 (29%), Speaker 3 (27%), Speaker 4 (1%)

0:00
I knew better than to let you come to the podcast studio. Oh, my goodness, you do what it takes to make
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Speaker 1
0:06
it because we are in the business of people and getting people into their homes, and it shouldn't be. They shouldn't lose the house real estate.


0:19
And now your host, Steve Martin Smith,
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Speaker 2
0:25
okay, I'm just double checking this does seem to be recording. I am in the studio today, again with the illustrious Lauren Cole, and this time, my wife has joined me. She has turned her head and is laughing because she can't believe I used the word illustrious.


0:43
I'm so happy you invited me back. Thank you. Do


0:45
you mind being illustrious? No, I love being illustrious. Thank you, man, industrious.
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Speaker 2
0:51
So we are today going to be discussing the topic of agreements between buyers and their agents and brokers, and I've been hitting on this a lot in little segments and videos and whatnot. I've touched on it in some other podcasts. But as always, when I can have you as an attorney address these topics, it gives so much more authority to this, and I understand that. So thank you. You're
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Speaker 3
1:23
welcome. And I do talk to both buyers and sellers about this every day, because there is so much confusion around it. So I think it's great that we might be able to put some clarity to it.
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Speaker 2
1:34
All right, excellent. So I think it might be a good place to start though, with a story from Katrina. Okay, kind of set the stage for one just this is just one of many examples that we have had since the changes last year that it's just chaotic, and I don't know a nicer word to adequately describe it. Before she tells her story, I'm going to say one other little story. I was in an open house, and a couple had come in, and they were asking me about the rules and whatnot, and they said that, you know, everybody they talk to tells them a different story. I believe it. And, yeah, and, and this is talking to different agents, not just talking to people on the street, right? And, and I have been in communication with a lot of different agents who have brought offers to my listings, or I've brought offers to their listings. It seems like almost everybody is doing it differently. So how can the consumer possibly have an understanding of what the actual rules are when it seems like the rules keep changing, depending on who you're talking to? So what I really want to address today, after you know, we set the stage here, with Katrina's help, is just what is the actual law and what is it that because of the NAR lawsuits, some rules have changed. Now those rules aren't laws in the state of Florida, but they are the guidelines that realtors have to abide by, or they will it's considered an infraction against their affiliation,
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Speaker 3
3:03
yep, and I think part of the problem is, is that everybody's rushing through everything, and consumers are being boxed into corners, as I think Katrina's story will tell, and I've seen it also where kind of lengthy documents are put in front of a buyer and They're asked to sign it without having time to read it, or even ask an attorney for an opinion, because only the attorney can give a legal opinion as to what they've just obligated themselves to do. Okay,
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Speaker 2
3:33
so with no further ado, I give you Katrina. Well, I don't give her to you, but you can listen to her.
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Speaker 1
3:39
Hello, all you listeners out there. I've got a great story for you, and I won't take up too much of your time, but I think you'll quickly realize why this story is very important, and you're probably going to be able to relate to it. If you're confused, you're not alone. I was doing a showing, and for our showings on one of our properties, we go and have all the lights on the windows up, make sure that everything's clean, neat and tidy, so that when they come to the home to view it, it shows beautifully as best as it possibly can. I arrived 15 minutes beforehand, got all the lights turned on. Was Was everything was ready. Now, the potential buyers came without their agent. They were there first, the agent ran approximately 10 minutes late. I went ahead, let them through the house, and they were asking a lot of questions, and, you know, just kind of making small talk with them, minding my place, minding my business, letting them just kind of look around, get a pre look. In walks their agent, and he has a very confused look on his face as to, who am I? What am I doing there? In fact, he even asks me, who am I and what are you doing here? And I said, this is our listing, and I'm here as a courtesy to our. Seller to help you understand what you're looking at. Well, he became very frustrated, and he says to me, Well, I haven't even signed a buyer broker agreement with them yet. And I said, Well, that's not on me. So he nervously goes over to his customers, and he introduces himself as if they've never met before, and I believe that he hadn't met them before. To make the long story longer, they I noticed, were not being shown the house, as if they were there because they were a buyer. In fact, it came out that their house wasn't even on the market. They just were using our property to meet each other, and in doing so, he had them kind of cornered in the kitchen, and had papers in front of them, and was having conversations with them about, you're going to have to sign this. And I overheard her saying, Well, why am I paying you 3% and I thought to myself, maybe I should leave the room, because apparently this is not going to go well. So after hearing her say that, he says, Well, don't worry about it. The seller can pay for that. He never answered her question as to what she was getting for that 3% and then he turns around and says to me, Well, what is the seller offering in commission? And I said, and this was the shocker, which he was not prepared for. The seller is not offering any compensation, but it is negotiable. He did not know what to do with that information, just like he had never heard that before, and he was at a loss for words. And then he so he quickly just moves on and tells me how highly I don't know if he said the word unethical or highly unusual that was, but she says, if I sign this, am I obligated to use you as an agent? And he said, Oh, no, no, this is just a formality, which I had to leave the room at that point because I knew that wasn't true, and there was nothing I could say andor do. But the whole situation was extremely uncomfortable. They were clearly not there to see the house, and I had rushed over there to make sure everything was presentable. I did not appreciate them using our property in this manner, and it was so embarrassing. What just happened? It was embarrassing to not only myself, but to our industry. It sounds
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Speaker 3
7:14
like it was a waste of time for everyone involved, and you didn't mention it, but what would you say was the age of that buyer, late 30s. Okay, so I am hearing from a lot of buyers that will call me and they say that they have some interaction with a real estate professional over the internet. Okay, maybe they're looking on Zillow or something like that, and they believe that they might be meeting the actual listing agent at the property, because these online sites, you know, spit out names of real estate professionals who pay for leads, and they tell me that they arrive At the home, and out jumps this broker with a clipboard and a document and says, you have to sign this before you come in the property. Recently, a client of mine who was in his 80s, this happened to him. He drove half an hour to see a home, met this agent for the first time, signed something reluctantly, without reading it because he didn't have time to read it. Came to my office the next day and said, What did I just commit to? Now, the way that these buyer broker agreements work is they're fill in the blank like most of the other Florida real estate forms, and so when a realtor or real estate professional or broker presents one to a prospective purchaser. They can run for one day, one week, one month, six months, whatever you fill it in. There's also a designated location or area. It could be the entire state of Florida, it could be a county, it could be a zip code, it could be a neighborhood. And this type of agreement deserves time to read through. And this for this particular client of mine, he had committed to working with somebody who he didn't know. He didn't know their experience. He didn't know if their personalities would even jive. And this is happening over and over again, that people are committing to something far above what they ever anticipated.
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Speaker 1
9:27
And he signed it because the agent would not take him into the house without that being signed, that's
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Speaker 3
9:33
correct. And he had driven a half an hour. He was in his 80s, and he thought that he had a real interest in this home. He did end up making an offer on the home that didn't come together, and that's when Then he said to me, now, what do I do? Because I don't want to work with this particular broker going forward. And he did have to wait for that particular agreement to expire, in that case without
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Speaker 2
9:57
seeing the actual. Whole document that he signed. I know that if he had signed the one that I use section nine on there gives you a very clear out. It's as simple as sending an email to the brokerage terminating the relationship,
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Speaker 3
10:13
and this one did not include that. So there's a variety of agreements. There are some agreements that are prepared by the Florida Association of Realtors, and then some brokers choose to create their own and as I'm looking at them on the table, the agreements prepared by the Florida Association of Realtors are called buyer broker agreements. Another one that I'm looking at, which is for a very large real estate company, is called a buyer representation agreement. And the name of that is misleading, because it implies that the buyer will actually be represented by the broker, when, in fact, if you read the small print, it says that if you choose to sign this agreement and work with this very large national brokerage company that they are acting as a transaction broker, whereas the Florida forms give three options of representation, transaction broker, actual single agent or no broker. And the public doesn't know this, they're being cornered into signing them, and sometimes it's not for the best. And
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Speaker 2
11:22
I will say to the listener that there is a full podcast on this with myself and Lauren. Just go back a few episodes ago, and you can get a lot more detail on that.
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Speaker 3
11:31
So another interesting thing that happened in my office recently was a client of mine, a buyer, entered into a buyer broker agreement, and was under contract to purchase a property, but that sell fell through because of the condition of the property. They then contacted me a couple weeks later and said they found another property that they would like to purchase and that it wasn't listed, that they were going to buy it directly from, you know, what we call a FSBO, and they asked if I could represent them, and based on what they had told me, I could represent them without any brokers. But then I said, Well, wait a second, did you sign a buyer broker agreement with that other agent who showed you the property? And they said, Yes, but we don't think that we're obligated to anything else. And I said, Well, let me look, because even though it was going to expire at the end of April, there was a protection period. And most of these agreements say that if the buyer sees any property with anybody during this protection period, they still owe that broker a commission. But everybody was kind of friendly, so I called that broker, I told him what was going on, and this particular buyer had planned on listing their property for sale with that broker. So what we decided to do is ask that broker if they would release the buyer from the buyer agreement, because this for sale by owner wasn't willing to pay the commission. Would you do this broker knowing that you're still going to get the listing? And he said, Lauren, you have a different problem that you're not even aware of. That property that they want to make the offer on was listed and is conditionally withdrawn, which means that seller owes whatever broker shows it a commission. So what I actually had was two consumers, a buyer and a seller, trying to do a contract without paying brokers who they were obligated to pay through the various agreements that they signed, and they didn't know it, because neither of them understood the paperwork that they signed.
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Speaker 1
13:43
This is the time that I'm going to remind you to subscribe and leave a review for the real estate agent man podcast. More than ever before, there is so much more to know about buying and selling your home. That is why we provide professional coaching to Florida sellers and buyers on every episode, we want our customers to have the knowledge needed to make the best decisions possible for themselves and their families. Our real estate team personally covers Sarasota, Charlotte and Manatee counties. That's a wide area. However, Steve also interviews agents from around the state and the entire country to find great agents for customers that are out of the area. Visit slice of florida.com for more information. And now back to the podcast. We knew about a month in advance that this individual was going to be coming down, and he would get in contact with us, and there was a particular house that we actually had the listing on that he was interested in and wanted to see he comes into town, doesn't tell us he's here, just texts us and says, Okay, let's meet at the property. I would like to see it. And we have a policy here in our brokerage that says we never, ever meet a customer at a property for the first time you come to our office. Office, and we can, and we do that not to be annoying or to waste your time. It's because this is the time that we use to show you the forms, explain them. We're giving you time to read the documents, to see the type of contracts that are available, to write an offer on. We're taking that time. And do you know that this person refused to meet us at the office?


15:24
Did they say? Why? Nope. Just said, Send
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Speaker 1
15:26
me the paperwork. I'll sign it. And they did. We, we didn't. We did not send it. Yeah, we won't do that, because we want to see number one, that you're a real person, right? We want to get your driver's license. We want to have conversation with you. We want to find out, you know, some things. And then we also want to make sure that you thoroughly understand the paperwork that's in front of you and what your responsibility is,


15:48
what our responsibility is, and that's what an agreement is,
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Speaker 3
15:51
right? And I just see it time and time again on some of the agreements, the buyers are obligated to pay the buyer's broker, and they are shocked when they see the settlement statement that we prepare and they say, Wait a second. I didn't understand that I was paying this amount. And I wonder, how did they sign it and not understand that?
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Speaker 1
16:14
Oh, I can tell you how, just like what happened at my showing they're just meeting them on site, the papers of works of formality. Just sign here, because, you know what? Now, it explains why he was so shocked. How did they get in the house? Because his intention was to have them sign that document before they ever came into the house, because that left it left it open for me to be able to write an offer, because I'm the one who, in essence, showed him the house. Right. Wasn't my intent, and I would never do that to somebody, yeah, but that makes a lot of sense.
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Speaker 3
16:46
So I'd like to segue onto a related topic, if I may, and I want to try to remember what my train of thought was. So I'm finding that many buyers are thinking that they will get a better deal if they go directly to the listing agent, and maybe sometimes they will, and maybe sometimes they won't, but I think you'll both agree with me that we've shifted somewhat to a buyer's market from a seller's market, absolutely. And so if you have a good buyer's broker working for you, they might be able to get you a better deal than you would get if you went directly to the listing agent, right? Because
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Speaker 2
17:22
how is the listing agent? And I'm speaking as a listing agent who has been the one who's written the contracts for a lot of buyers for my listings, right? And it does work, but not one of those. Have I been in the corner of the buyer trying to get them the best deal, right? Right? Nor have I been in the corner of the seller trying to get them the best deal, because at that point, I'm a transaction broker and I'm a mediator, so I basically make the offer that the buyer wants me to make and do the counter offer that the seller wants me to make. So neither of them are getting any of my actual negotiating expertise, right? So I love that you said that,
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Speaker 3
17:59
yeah. And because we see it time and time again, I went directly to the listing agent because I thought they would reduce the commission, and only to find out that they didn't reduce the commission at all. So really, they weren't served the purpose that they had hoped to. The other point that I want to make is that we're kind of explaining the worst case scenarios, and many transactions go off without a hitch, because there are a lot of really good real estate professionals out there who do explain it, who establish the trust of the buyer or seller that they're working with, and who play nicely with the real estate broker on the other side. But it's these meeting these people in the parking lot and trying to get them to sign something before they can digest it. That's when it goes wrong. Yeah,
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Speaker 2
18:48
and that's what I love about the podcast platform, because when I do these as you know, I'm speaking to potential buyers and sellers out there, trying to get them educated so that they don't put themselves in this position. And truthfully, it is the buyer just calling to see a property without already having a relationship with an agent that's putting them in that situation. But they don't know they're going to be in that situation unless they've listened to this podcast and now they understand, oh, I don't want to do that. I mean, for 10 years, I've been saying it's never too soon in your life to start building a relationship with a real estate professional, right?
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Speaker 3
19:29
A lifelong relationship, lifelong relationship, and then your kids and their kids and your aunts and uncles. But
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Speaker 1
19:34
I have something to add to that, if I may. I find I find this. I watch and I listen to a lot of people as they move through an open house, and I notice that most all of them, I would say, have no realtor that they're working with. Well,
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Speaker 3
19:52
they believe they can get all the information they need on the internet, and they can get quite a bit of information, but when the home inspection reveals. Is that maybe there's some carpentry work that needs to be done. In my experience, the real estate professionals know a carpenter who can come there, give a good estimate and get it done. So the value added by a real estate professional who's local and been here for a long time, they can say, Oh, I know that this particular neighborhood had six models. This model sells better than that model, and this lot positioned at this part of the neighborhood is much better than a lot on the far end, where you can hear maybe the traffic. You've got to know the professional that you're working with, and know that there are 1000s of real real estate professionals in every market. Choose one who knows what they're doing, and they will get you the better deal and add the value that you deserve. How
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Speaker 1
20:47
many hairdressers have you gone through before you found one? Yeah? How many? Yeah? No, you're right. I was a hairdresser for 25 years, and so, you know, people will come to me say, oh, haircut only. I do my own color because they don't. They don't need me. They can go to the store and buy it themselves, and they put it on but you know when they need me, when they when they messed it up exactly, and then, you know what? Sometimes it's too late, and it's, it's so that's, that's something I just wanted to parallel. It's the same.
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Speaker 3
21:14
You're right. One other thing I wanted to say about the buyer broker agreements, I mentioned the fill in the blanks. Okay, a buyer may work with more than one broker at a time on different properties. So sometimes people come to our area and they are exploring Tampa to Naples, and I've seen some realtors try to, you know, do a blanket for the entire state, but you might want somebody for Pinellas County, somebody for Sarasota County, or I have seen sometimes where a buyer says, you know, I feel that this particular broker knows the condominium market. But if we buy a single family home, there's another broker who seems to specialize in this neighborhood that we're looking at, so as long as they don't overlap, it could be condo, single family, it could be waterfront and golf front, and does not have to be six months. And if I were a buyer, I would like to get to know my real estate professional. So I might start out with a 30 day agreement. Then after we establish that trust and camaraderie, then I'll feel more comfortable saying you're my guy or gal, I'll sign the six month, you know, agreement with you now, yeah,
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Speaker 2
22:34
and that gives the agent an opportunity to prove themselves Absolutely. And I think we need to be willing to prove ourselves. That's
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Speaker 3
22:41
the purpose, I think, of this whole settlement right to not transparency,
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Speaker 2
22:45
supposedly transparent. Yeah, that's and
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Speaker 3
22:50
options and some of these agreements that the brokers are trying to eliminate the options, right?
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Speaker 2
22:55
Yes, because I hear over and over again that we're still doing it the same way our broker, our brokerage is being told, just keep doing it the same way we always have. I'm going into listing appointments where they're interviewing multiple agents or brokers, and I'm hearing that the other people are still doing it the same way they've always done it. And I'm saying, well, we can do it that way. However, with the changes that have been made, I believe in this situation, we should take advantage of the flexibility that we have, because you will very possibly benefit from it financially at the end.
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Speaker 3
23:31
I think you're right. And when they're coming from another state, they might have a completely different idea, even though it is a nationwide thing, but I think in most of the other states, they're doing it more the way you are doing it, because we've got a real old school, you know, mentality here, where I think in states that have the younger population, they are more willing to look at alternatives
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Speaker 2
23:54
well, and talking about like nationally. So I listened to drive with NAR, as far as you know, one of my podcasts that I listen to, just to gather information on what's going on out there and everything that they're talking about. You can tell they are. They don't have Florida law in mind, right? Because it's just, it's different everywhere else. I think you're right. So I'm gonna throw that out there. Drive with NAR if you want to, you know, hear what I'm talking about, because they're everything's fiduciary, everything they say is that, and so they're not even taking to account that. I mean, I'm guessing 90% of our transactions are done as like a transaction brokerage relationship,
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Speaker 3
24:32
right? And so your listeners might not all know NAR is National Association of Realtors, but this podcast is open to the public, not just members of NAR. That
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Speaker 2
24:41
is correct. Yes, anybody can listen to it. Okay, yeah. And I'll throw Jared James out there too. I think Jared James is one of the most logical voices on the airwaves. If podcast is an airwave, yeah, is it is Podcast Network, the internet, waves, the cloud, yeah. Yeah. The cloud, yeah. Jared James, definitely want to listen to I don't agree with everything he says, but probably 97 98% of
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Speaker 3
25:07
it, yeah. So anyhow, I guess to the listeners, there are agreements, and you should meet with your professional let them explain it to you. You can always call somebody like me or some other trusted attorney, and they'll tell you that you might be able to modify the agreement, strike through some clauses, and that those blanks that are for fill in that it's an infinite number of, you know, items that you can enter in there in between one and 10 years. You know, what is the percentage, what is the location, and it's supposed to protect the consumer, not the broker.
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Speaker 2
25:45
I had a buyer recently who was coming down from another state. We were working for a couple of months just online. We had a buyer broker agreement, and he was committed to pay 3% of the purchase price for whatever he purchased with me, and so I ended up finding him a condo on the island, and he makes his offer. It was a 650 offer. He had a $700,000 budget, and he was planning on paying me that compensation. And when we got all the way to the point of we're about to go under contract, the listing agent says, Oh, by the way, we are paying 3% commission to the buyer's agent, so that seller gave up $19,500 that they would not have had to give up if they would have signed a listing agreement that said whatever their percentage and just negotiable to the buyer's broker. So that person, I'm guessing, probably paid a total of 6% but only would have had to pay three because my buyer thinking he's going to be paying his own he might have made a 670 offer if he knew that they were paying it, but he's a smart guy. He didn't want to raise the price almost $20,000 to have to pay taxes and extra fees on that $20,000
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Speaker 3
27:06
yeah. So the point is, you never know what the other side is offering until you ask Correct, right?
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Speaker 2
27:12
Yes, and that's this thing. Is just it's changed so much, and having an appropriate buyer broker agreement that you understand is priceless. And
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Speaker 3
27:24
are you seeing that, even though a seller might say that they're not willing to pay a commission, that once a good offer is put in front of their eyes, that sometimes, especially in this buyer's market, they change their mind and actually pay, Oh, absolutely, or
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Speaker 1
27:41
they'll offer something, whatever they can afford after they're you know, because they do have a bottom line. NARS has made it very clear that when you sign that buyer broker agreement, that no one is to see that, and you better not collect more than what's on that paper, right? But here's the problem double dip. When they are submitting their request for compensation, they're always asking for three right? And I know darn well, because I have seen it with my own eyes. I saw a listing agreement, I'm sorry, a buyer broker agreement at 1.5% to get that buyer to work with them, and then had the nerve to ask for 3% on the sale. And NAR said, very plainly, do not circumvent this. But yet there's no accountability. It's too
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Speaker 3
28:34
new, I think. And I was actually discussing this topic with my son, who's graduating from law school this weekend, and he said, Has this been litigated yet? And I said, actually, it's too new. He said, Well, I bet you there's going to be a lot of litigation, and I think that will happen, but it's still being worked through, and it's new to everybody.
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Speaker 2
28:56
And as we wrap this up, I want to go back to something you said a little while ago, Lauren, about when you're working with an agent that has been in the community for a long time and whatnot. However, you were losing to that they have resources, right? You are possibly the best resource that we've ever been able to get into our circle, and we really appreciate you. Thank you, and to the listener, the value of that to you, when you are working with an agent who is has this close of a relationship with an attorney like Lauren, is it was just experienced with us yesterday, with a customer. We have a listing it. We received an offer on it. They had an attorney put a bunch of language on it and whatnot, and we could tell, okay, this is not going to fly, but because it was written by an attorney, we need to have an attorney. And fortunately for our customer, we had you, because he didn't hire you up front. Right, right? So if, if you are on your own and you try and get an attorney at the last minute. In a rush when you're trying to do something, how easy is that to get an attorney to just say, Oh, sure, I'll just drop what I'm doing and help you as a stranger?
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Speaker 3
30:07
Well, right? Because we get a lot of phone calls and they end up in voice mail, but when my receptionist gets a call and says it's Steve Martin Smith, or it's some other agent who we know the name and the familiarity, we know that they're a high quality, you know, caliber individual, yeah, then, you know, then my receptionist is going to put them on hold and say something like, Steve has a referral for you. Can you take the call? And if I don't have something super urgent to do, then I'm taking the call, because I know that you have already pre qualified this person and that they're a legitimate client, not somebody trying to get free legal advice. My


30:44
favorite one was on a


30:46
Sunday, and we're just getting off of a boat.
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Speaker 3
30:50
I won't always do that. No, I had a dream, just
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Speaker 1
30:53
like I can't always give money towards the closing ages closing costs, either, which my husband is killing me at the moment. But anyways, the value added, if it's that was an urgent it wasn't that was urgent, yeah, but you know what? There's agents that shut down after five o'clock and we can't even get a hold of, there's, there's lenders that shut down at five o'clock we can't get a hold of, but it's so nice that you did that, because you saved the whole deal. It
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Speaker 3
31:19
was going to go south very quickly if I didn't step in. So I won't always be available on the weekend, but I was that day. Yes, I'm
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Speaker 2
31:27
not saying she's available on Sunday, so I'm ready to wrap this up. Did you have any final things that you didn't get to
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Speaker 3
31:32
hit them? Nope, I did hit the topics. And thank you again for inviting me.


31:35
Okay, excellent. And


31:36
until the next time, until the next time, yes,