After four complaints to the Board Office in as many days, we realize the need for a refresher on what it takes to establish a buyer agency relationship. When first contacted by a buyer, you might be tempted make some calls and jump in the car to start showing them homes in the Berkshires. But stop. Whoo-Nelly. If you intend to serve as a buyer’s agent, there are steps you must first take to establish this FIDUCIARY & LEGAL relationship.
Mandatory Steps in Establishing a Client Relationship with a Buyer
- Mutual Agreement between the broker and buyer
Numero uno, if you want to work for a buyer, the buyer has to want to work with you too. They should, having met you and heard what outstanding services you will provide, elect to work with your firm and have you represent their real estate interests. For a day or for a year. On a specific property or in all of their real estate needs. This can be agreed upon verbally or in writing, but you cannot represent someone who doesn’t hire you. And you don’t usually get paid either.
- Explanation of Agency Options in Massachusetts
Explaining the relationship between the parties is a great icebreaker. The licensee-consumer disclosure form is there to help you explain the roles of the agents in a transaction. You should clarify the services the buyer can expect to receive (or not receive) from the various types of agents, and what agents will/will not maintain their confidential information. And you should disclose the type of service that you are offering to provide them. Which leads to…
- Obtain Signed Consumer-Licensee Disclosure
Pièce de ré·sis·tance… the MANDATORY form needs to be signed at the first personal meeting to discuss a specific property. And did you know that the Code of Ethics takes it one further and obligates you to make sure the nature and terms of a contractual relationship are disclosed prior to being established, if handled electronically? Creating a relationship via email or text from an online lead? Yes, this means you have to explain and agree to the nature of your relationship before beginning work on their behalf.
- Advise of company policies of compensation
The Code of Ethics mandates that when entering into buyer/tenant agreements, Realtors® must advise potential clients of your company policies regarding cooperation and compensation, how fees are paid, who is responsible to pay fees, etc. Kind of important for them to know going in, right?
- Use reasonable efforts to determine if buyer is working with another agent
The Code also advises that it is your affirmative responsibility to “use reasonable efforts” to make sure the buyer isn’t already working with another agent. So that’s a great question to ask them!
Then, after you’ve done your job, established a fiduciary relationship with a buyer client, you can make appointments on their behalf – but PLEASE making sure to IDENTIFY YOURSELF as a buyer’s agent with your firm when first speaking to a listing agent.
Extra HELPFUL steps, not required
- Complete an Identification Form to secure in your office for safety purposes.
Follow your office policy if you’re required to complete a client identification form for every buyer, at a neutral location (office, coffee shop etc…). It’s imperative that you meet all prospects in a public location and obtain basic information to protect yourself. Also, it gives you a chance to meet someone face-to-face to talk about the items listed above. If you complete an Identification Form and you are not at your office, email to it your office. This form should contain a copy (take a photo) of the buyer’s drivers license, as well as their car and contact details. If this policy exists and is applied for all new clients, it protects all agents in your office (1) from those who wish to remain anonymous / untraceable to do harm (2) allows police to follow up if there is a theft or issues arise from a showing (3) ensures there is no discriminatory behavior when applied uniformly.
- Consult with buyer on qualifications, get pre-approval from a local lender
Don’t waste your time, the co-broker’s time, or seller’s time and appear unprofessional without a basic discussion about the buyer’s financial qualifications and help in obtaining a pre-qualification letter. This is a simple step that not only protects your time, but also promotes the safety of those around you.
- Review how Buyer Clients should handle inquiries, appointment setting, open house attendance.
It’s a confusing process, and the internet has made it more so for buyers to navigate! Explain how you expect buyers to operate, outline your role in the search process, and it will go a long way to helping improve the system. (example: “If you go to an open house, here are a bunch of my business cards. Please make sure to give one to the agent showing the home…” OR, “if you want more information about a home, don’t click a button on Zillow to get more information but instead go to the MLS Portal I created for you”, etc…) It’s an easy way to establish ‘good practices’ and show yourself off as the professional you are!
- Obtain a dual/designated agency consent form if your office offers both seller/buyer agency
If your office offers more than one form of agency, it’s good to have a discussion up front on how your office handles conflicting fiduciary duties. You can also get the buyer to agree, in advance, on how those situations will be handled. You don’t want to wait until the buyer falls in love with an in-house listing to discover they want a FULL buyer’s representative and won’t agree to dual agency.
- Have a signed Buyer Agency agreement that outlines the above terms of agreement.
We love a buyer’s agency agreement to firmly set the obligations and expectations in writing, but if nothing else, those items should be verbally discussed and agreed. Are you exclusive? How will you be paid? Are you representing them on this house or many? Do they want client services such as MLS portal access, email updates, etc…A buyer’s agency agreement is a beautiful thing – it establishes everything in writing so there are no questions later about how the relationship will go and aligns expectations. Pretty please won’t you consider it?
Special thanks to Ashley Stolba of MAR Legal Team for helping to make sure the information was accurate and clearly presented. You rock!