Wendy Cole is the managing editor of REALTOR® Magazine. She can be contacted at email@example.com.
Make It All About the Buyers
A focused business model and clear-cut agency relationships have convinced many brokers to focus on the buying side.
June 1, 2011
Mike Crowley has been a successful real estate professional for 18 years. But since 1997—the year he opened his own brokerage in Spokane, Wash.—he hasn’t put up a single yard sign, held an open house, or done a listing presentation.
You might assume he just decided to focus on the management side of business. But, in fact, he made a carefully considered decision to exclusively represent buyers. And he has never looked back. "I’ve been able to show that you don’t need listings to last in the business," says Crowley, broker-owner of Spokane Home Buyers.
In an era of dodgy real estate markets, it might seem foolhardy for any broker or practitioner to limit his or her business opportunities by shunning listings—long considered the meat and potatoes of any successful brokerage.
However, a dedicated cadre of residential brokers contend that embracing exclusive buyer representation makes for a happier, less complicated professional path.
"The buying experience, compared with selling, is far more positive for the people involved," says Crowley, who also serves as president of the National Association of Exclusive Buyer Agents. "Sellers often are there because of something difficult that happened like bankruptcy or divorce, and when a place doesn’t sell after a month they’re unhappy about having to lower the price. The relationship can get worse as time goes on."
Avoiding Risks of Dual Agency
Exclusive buyer’s agents practice single agency, which helps to keep the client relationship clean and simple. Because 31 states now allow for transaction brokers who work for clients without a written agency agreement, exclusive buyers’ agents say their approach offers greater legal protection to brokers and clients. While dual agency is a widely accepted practice—and it poses no ethical dilemmas as long as it’s fully disclosed in advance of any transaction—some practitioners say they’d rather steer clear of any perceived conflicts of interest by working for companies that represent only buyers.
"We recognize there is less liability in single agency," says John Rygiol, ABR, CRS, of Buyer’s Broker in Seal Beach, Calif.
Rygiol has been an exclusive buyer’s agent for more than 20 years—well before it was a professionally recognized niche. He was one of the 11 founding members of NAEBA, which launched in 1995. The group has mushroomed to 500 members, about 300 of whom are brokers.
Rygiol, whose company covers a wide geographic swath, with 12 agents handling 15 counties in California, says that buyer’s brokers typically have to target a larger physical market than listing agents to keep an active pipeline of business.
Having spent the first two years of his real estate career working with both buyers and sellers, Chris Whitehead, ABR, broker-owner of Homebuyer Experts in Akron, Ohio, made the switch because he likes the single-minded focus on the buyer’s needs.
"Traditional agents have to shift their mind-set back and forth depending on whom they’re negotiating for. There’s no conflict in my thought patterns of whether I’m trying to get the highest price in the shortest possible time on behalf of a seller or the lowest price on behalf of a buyer," he said.
Still, most practitioners continue to represent both buyers and sellers, and say representing buyers effectively doesn’t require an exclusive buyer’s agreement. Curtis Hall, ABR, CRS, broker associate with Metro Realty Professionals in Phoenix, who co-wrote the Real Estate Buyer’s Agent Council (REBAC) course for the Accredited Buyer’s Representative designation, says that even exclusive agents can run into potential conflicts. "If an exclusive buyer agent takes on two buyers who are looking for the same type of house in the same location, they’ll find themselves in the same boat as someone working as a dual agent," he says.
The Importance of the Contract
If you’re thinking about going the route of exclusive buyer agency, you need a business model that pays. Typically, buyer’s brokers won’t start showing houses until they have a completed contract in hand—and many also require buyers to be preapproved from a lender. But brokers vary in their approach to getting clients to sign exclusive agreements.
Rygiol’s agreements last only two weeks, far shorter than those of his competitors, but he says practically all of his clients renew without question. "I’ve found that people don’t like entering long-term agreements of three to six months," he says.
Whitehead also requires a $300 nonrefundable retainer from new clients, along with the signed contract. "Something clicks when people write that check. It’s a sign of commitment," he says. "It’s the same logic behind a loan application fee." The money is credited back to the buyer at closing.
In return for signing a contract, buyers get the reassurance that their agent will be ultra-focused on their needs, Crowley says. "I take on no more than five or six clients at a time. They often feel like I am working for no one else but them," Crowley says.
While it is true that negotiating a lower price for a buyer client results in smaller commission checks, Whitehead says that’s not a disincentive for him. "I’m much more concerned about the experience I have with the buyer and the opportunity for a future referral. If a client refers me to someone else, I’ve more than made up the money from a reduced purchased price. The integrity piece is what matters. That’s our leverage," Whitehead says.
Crowley says a successful year for him means between 12 and 15 sales. Last year he sold 17 homes, up from 13 the year before "with a lot fewer conflicts and problems" than when he worked on the listing side. He says about 90 percent of buyers he works with ultimately buy a home with him.
As for the growth of his operation, Rygiol, who formerly focused on training new college graduates to be agents, has found more success in working with experienced salespeople who come from traditional brokerages. "Not everyone wants to make the switch from the listings side. The truth is that most don’t want to give up working both sides of the business. That’s why this will always be a niche."
Perks of a Buyer Business
Brokers who focus exclusively on buyers say their business has many benefits. Among them:
- The niche provides a straightforward message that resonates with clients.
- You have immediate differentiation from the vast majority of your competition.
- Clients are almost always happy, compared with sellers, who are more difficult to satisfy.
- Satisfied clients lead to a robust referral stream.
- There is never any pressure to "sell" a particular home.
- Advertising expenses are minimal; no more hosting open houses.
- There are lower overhead costs and fewer administrative duties when listings aren’t involved.