Mastering Buyer Representation Rules and Commission Changes

(0:07) Hello out there to everyone in the real estate realm. Welcome to the Game of Homes where (0:12) I, Mike Mills, your master of whispers, come to you each week with news from the seven kingdoms. (0:18) I've been warning you for months and months now that winter is coming and August 17th (0:23) is finally here.

This is the Texas real estate and finance podcast market update for the (0:28) And that'll be enough of the Game of Thrones references, at least for now. So winter's not (0:32) here because it's 105 degrees where I am. And because August 17th came and went and no white (0:37) walkers have come to take your real estate livelihood.

But we are officially now in the (0:41) new era of real estate. And today we're going to talk all about it. I'll briefly highlight (0:46) what the changes are just in case you've been sleeping under a rock and didn't know.

(0:50) But more than anything today, we're going to discuss the implication of these changes (0:54) and how it could impact your business depending on the market and what other companies are doing (0:58) to adapt to this shift. So on today's episode, we're going to talk all about your money and (1:02) your business and where it's all headed. Again, I'm your host, Mike Mills, a North Texas mortgage (1:06) banker with Geneva Financial.

And when I'm not here sorting through market chaos with you, (1:11) I'm helping people all over the country find the perfect home loan to suit their needs. (1:15) We do them all FHA, VA, conventional rehab, HELOCs, DSCRs, bridge loans, construction, (1:20) and on and on and on. So if you have or need a house, we can find the loan just for you.

(1:25) So just give me a call if you or your clients need someone to show you how to navigate the (1:29) loan process. I'm happy to help in any way that I can. Okay.

Now that my personal commercial is out (1:34) of the way, what is on the docket for today's episode? Well, to lead things off, we're going (1:37) to do just a quick breakdown of the NAR compensation changes, just so everyone is on the (1:41) same page with the new rules that took effect on August 17th. Then sliding into the number two (1:46) spot, we'll discuss mortgage rates, where they're at, where they're headed, but also how these (1:51) changing rates combined with the new compensation rules could impact buyer. After that, we're going (1:55) to touch on some national inventory numbers.

Are we officially in a buyer's market now, (1:59) or is the rate of new listings starting to slow as we move into the fall? And if the market is (2:05) tilting more towards buyers, how could the new rules affect buyer agents? Then I've got a few (2:10) quick hits related to how companies are adapting to these new changes. And to close the show out (2:14) today, I'm going to give you the 10 steps to the perfect home purchase process for buyers in this (2:19) new era of real estate. So stick around for the playbook.

Now, quick ask before we jump into the (2:23) good stuff. If something on today's episode sparks an idea, teaches you something new, or just gives (2:29) you a laugh, spread the love. Maybe it's with a colleague, a friend, or that person who's always (2:33) asking you about the market.

And also don't forget if you or someone you know needs mortgage advice, (2:38) I'm your guy. This podcast is a fun gig, but getting people into the right home loan, (2:43) that's where I'm all business. So share the wealth and let's keep building this community together.

(2:47) All right, let's kick things off with a quick rundown of the new NAR compensation rule changes (2:51) that went into effect on August the 17th. Now, I know many of you out there have been tracking (2:56) these developments closely, but just to make sure that we're all on the same page, let's break down (3:01) exactly what changed. First up, if you're working with buyers, things are going to be a little bit (3:06) different now.

From here on out, you must have a written buyer representation agreement in place (3:11) before you show a home. No exceptions. That agreement needs to state the following.

Number (3:16) one, your compensation. You've got to disclose exactly how much that you're earning, whether (3:20) it's a flat fee, a percentage of the sales price, or an hourly rate. This is all about transparency, (3:25) so no more vague terms like whatever the seller offers.

You need to put that number down in black (3:31) and white before the first tour takes place. Number two, compensation limits. The agreement (3:36) has to spell out that you won't be receiving more compensation than is written in the contract.

This (3:42) is key because it sets clear expectations and ensures everyone's on the same page. Buyers, (3:48) sellers, and agents alike. And number three, negotiability of fees.

There's also a required (3:54) statement in the agreement that says commissions are not set by law and are fully negotiable, (4:00) which we all know that they are, but it's important to remind your clients that they (4:04) have the power to discuss and negotiate fees with you. All right, next, let's talk about the MLS. (4:10) Now, if you've been used to advertising cooperative compensation on the MLS, well, (4:14) those days are over.

Of course, cooperative compensation, meaning the commissions offered (4:18) to the buyer's agent from the seller. These can no longer be advertised on the MLS platform itself. (4:23) However, sellers can still offer that compensation in other ways off the MLS, (4:28) like through direct communications, your website right now, perhaps, or even via text message.

The (4:33) key takeaway here is that cooperative compensation is still in play. It just has to be marketed a (4:39) little bit differently now, but be very careful with this right now. Lots of folks are watching (4:43) and promoting this a little too boldly or making it a little too blatant might bring heat on you (4:48) that you really don't want right now.

So just be smart. Also, sellers can still offer concessions (4:53) on the MLS. This might look like a credit to cover closing costs, interest rate buy downs, (4:58) or a similar buyer benefit.

And the important part that concessions can be used to help pay (5:03) the buyer's agent. But this is a conversation that you will need to have with your clients (5:07) before writing your offer, especially as to who that money in the interested party contribution (5:13) box goes to. But again, this will now be in the public comment section of the listing rather (5:19) than the MLS cooperative compensation field.

Finally, there's a new rule for your listing (5:24) agreements and buyer representation agreements. You must now include the same conspicuous statement (5:28) about commissions being negotiable and not set by law in every agreement you sign. It's all about (5:34) full transparency, making sure that your clients know that there's room for discussion when it (5:39) comes to fees.

So in a nutshell, we are seeing a major shift towards transparency and clear (5:43) communication with buyers and sellers about compensation. So the days of fuzzy commission (5:48) structures are gone. Now it's all about clarity, which ultimately can help build stronger, (5:53) more trusting relationships with your clients.

And as we all adjust to these new rules, it's (5:57) going to be crucial to stay on top of your paperwork and make sure your agreements reflect (6:01) these changes accurately. All right. So that's a quick rundown of the rule changes.

If you've (6:06) got any questions, make sure you're checking in with your broker or legal advisor to make sure (6:11) that you're handling these updates correctly in your business. Okay. Next up, we're going to dive (6:16) into mortgage rates, where they're at, where they're headed and how they could interact with (6:20) these new compensation rules to affect buyer demand.

So let's dive into that question that (6:24) never gets old in this business. Hey Mike, what are the rates? Well, according to mortgage news (6:28) daily, as of August 28th, 2024, the average 30 year fixed conventional mortgage rate is about (6:34) 6.37%. The average 30 year FHA rate is about 5.75%. The average 30 year VA rate is about 5.74%. (6:43) And the average 15 year conventional rate is about 5.92%. And the average jumbo rate is around (6:49) 6.60%. Look at that. Over half of those numbers are all starting with a five.

So we're moving in (6:55) the right direction. Now rates have been cruising in neutral for just a bit, but last week, Jerome (7:00) Powell dropped some big news at the fed's Jackson hole conference. He signaled that the fed is ready (7:05) to start cutting rates and shifting gears from fighting inflation to saving the job market.

And (7:10) news of this caused a big rally in the bond market last Friday, helping bring mortgage rates down (7:15) further and climbing up above those lows established in the previous week. Now analysts widely expect (7:20) the fed to begin cutting rates at its September 17th meeting with a central bank likely to start (7:26) with a quarter of a percentage point cut. And some have even speculated a possible half a percentage (7:31) point cut in September.

Now with three more fed meetings left this year, many are speculating (7:36) that we could see up to a full point shaved off by the time we ring in 2025. But remember, (7:41) as loyal listeners of this podcast know fed cuts don't directly impact mortgage rates, (7:47) but they sure do set the stage for race to slide down. As the economy begins to soften, (7:52) could we unwrap a nice 30 year conventional rate with a five in front of it by Christmas? (7:56) Well, it's certainly on my wishlist for Santa, but what do you think? Where do you see rates (8:00) landing by the end of 2024? Hit me up with your predictions.

Okay. Now what does all this mean (8:04) for buyers and your commissions? Well, my personal expectation is that we're going to see a continued (8:10) low volume purchase market for the remainder of 2024 rates are definitely moving in the right (8:14) direction, but I'm expecting a relatively slow purchase market to stick around through the rest (8:19) of this year. Sure.

Rates are on the right track, but with economic uncertainty sneaking in and a (8:24) heated presidential election season coming up, plenty of folks are fine clinging to their cozy (8:28) little 3% rates and staying put at least until the dust settles. So if you can find a buyer, (8:34) which is easier said than done these days, sellers are typically happy to pay your commission right (8:39) now because if they're selling right now, it's out of necessity and not curiosity. (8:43) And this often means better deals for the buyers that you bring in.

So for the remainder of this (8:48) year, I don't see much changing in terms of buyer agents getting their commission paid by the (8:52) sellers. Now, if rates keep dropping and listing starts stacking up, we might start to see a shift (8:58) in 2025. As far as demand is concerned, the spring could bring a rush of transactions as buyers gain (9:03) more affordability and sellers lower their expectations.

But if demand does increase, (9:08) but inventory doesn't continue to climb as well, then more competition for homes could make buyer (9:13) agent commissions harder to come by. Winter might be a bit of a grind this year, but hang tight. (9:17) Spring is when the housing market should really start to bloom.

Okay, let's talk inventory. Is it (9:22) piling up like it did last year or are we starting to see a slowdown? Let's dig into a little bit of (9:26) data. So last year we didn't hit the peak of inventory until late November for most parts (9:31) of the country.

This year though, things are playing out just a little bit differently. Why (9:34) you ask? Well, first off this time last year, interest rates were spiking faster than Dogecoin (9:39) after an Elon Musk tweet, but now they're on a little bit of a downward slope and it's making (9:43) the market a bit friendlier for potential buyers. We're not exactly drowning in transactions, (9:48) but the demand is relatively steady compared to last year.

At the same time though, more homeowners (9:52) are deciding to pull their listings off the market and wait until the low demand season passes, (9:58) possibly holding off until next year. Because right now we're seeing close to 35,000 (10:02) listing withdrawals a week compared to about 25,000 per week the same time last year. And (10:07) with low financing costs and manageable payments right now, many homeowners are thinking, why should (10:12) I list if I don't have to? Now at the moment, there are about 704,000 single family homes (10:17) sitting unsold on the market.

Just a slight uptick from last week, but nothing to write home (10:21) about nationally. We haven't hit the peak of inventory just yet, but it is slowing down and (10:26) I would expect a peak to hit in the next few months. Now on the buying side, there were close (10:30) to 65,000 new single family contracts, pending a slight decrease from last week, but a few percentage (10:36) points higher than this time last year.

So it is nice to see a few more sales, but we're not (10:41) exactly on fire here. There are now 368,000 single family homes with pending sales, which is up 2% (10:48) from last year, but basically has just been holding steady. Now NAR reports that national (10:52) sales increased by 1.3% month over month to an annual pace of about 3.95 million transactions (10:59) in July of 2024.

And that's for the whole year, the pace that they're trying to set. And while (11:04) that is a little bit of an uptick from the first quarter, it's still a two and a half percent drop (11:08) from last year. And remember 2023 was the slowest year for existing home sales in 30 years.

So (11:15) we're not exactly breaking records here, at least not any good ones. The median price of homes on (11:19) market is holding at about 449,000, which is just a smidgen lower than last week and unchanged from (11:25) last year. Now we have passed the seasonal peak in pricing, which is normal this time of year.

(11:30) So the big question now is whether sellers will get more aggressive with discounts this fall (11:35) or just pull their listings and wait until next year. And overall new listings are priced just (11:40) shy of about $400,000, a tiny bit higher than last year, though that margin is starting to shrink (11:45) homes going under contract this week are priced at about $385,000, which is down two and a half (11:51) percent from last week, but still about 4% higher than we were a year ago. And currently about 40% (11:57) of homes on the market have seen a price cut from their original list price.

And as inventory starts (12:01) to decline for the year, we should see the percentage of price cuts start to drop as well. (12:06) But again, this is following a normal seasonal trend. You see withdrawals typically increase in (12:11) the fourth quarter.

If the home isn't sold by then many sellers are going to pull their listings off (12:15) the market for the holidays. So we're near the seasonal peak and price reductions. Unless of (12:20) course we see another mortgage rate spike like we did the last two Septembers, but that seems (12:25) unlikely at this point.

So that's the national scene. What about Texas? What's the outlook for (12:29) Texas real estate in the latter half of 2024? Is it a smart time to buy right now? So Texas along (12:34) with Florida saw a dip in unsold housing inventory this week. Fewer homes are available for sale (12:39) than they were last week.

And it seems like the inventory has hit its seasonal peak and is (12:45) gradually starting to decline. However, with significant inventory growth earlier this year, (12:49) the current slowdown could be a normal seasonal trend, but make no mistake. Overall inventory has (12:56) surged this year in the lone star state in Texas, housing supply increased from 3.1 months in the (13:01) second quarter of 2023 to 4.6 months in the second quarter of 2024 marking the highest inventory (13:08) level in the state that we've seen in over eight years.

But despite this huge spike in supply, (13:13) the median home price in Texas still grew, but only slightly by 0.6% year over year to $345,000. (13:21) And as of the end of July in 2024, Texas had about 158,000 homes on the market. It's a 22.2% (13:28) increase compared to last year.

And the average supply is about four months now in the big (13:32) markets in Texas inventory has spiked considerably compared to last year in Dallas. For example, (13:37) active listing search 44.7% with a 3.8 month supply Houston inventory climbed 42 and a half percent (13:45) bringing this month of supply to 4.2 and San Antonio listings increased 43.4% with a 5.2 month (13:53) supply. And Austin had a smaller increase of 29 and a half percent in listings with a 4.8 months (13:59) of supply on the market.

So is it the right time to buy in Texas or should you wait? Well, the (14:06) or the perfect house may come along that you want to jump on. If so, there are certainly some (14:11) positives to this market. If you're in a buying position, there's less competition (14:15) because with fewer buyers, bidding wars are going to be much less frequent.

You've got (14:18) negotiation power right now. Buyers may have more leverage in the slowing market, asking for things (14:23) like seller concessions and reduced prices. Rates are starting to stabilize.

So overall rates are (14:27) starting to level off at the end of this year, potentially drawing more buyers back into the (14:31) market. And there are some regional differences. Dallas and Fort worth and Austin may still be (14:35) compared to some of the smaller towns around the area.

Right now there's very strong economic growth. (14:39) Texas has a strong job market that attracts new residents every single day, which is going to (14:44) sustain demand and new construction. Right now there's more homes hitting the market in Texas (14:48) than most other markets in the country, adding more benefit to potential buyers.

So although (14:52) right now it's not a clear cut buyers market, Texas is offering more opportunities for buyers (14:57) than it has in many recent years. The market's balancing giving buyers who've been waiting for (15:01) a home, a good shot at securing one, depending of course, on the location and property type, (15:06) but don't expect prices to fall dramatically anytime soon. Even with this burst of high (15:11) inventory and high rates, you see prices have remained stable.

And if rates fall further next (15:16) spring, when more buyers may look to get back into the market, you could expect prices to start (15:21) tipping up again. So while it's not a hundred percent ideal right now, and you're still (15:25) straining affordability. If you can, the best time to buy was still yesterday, but the second best (15:31) time is today.

Okay. Next up, just a few stories from around the world of real estate. That'll (15:35) help you better navigate these commission changes.

So with the NAR commission lawsuit (15:40) settlement requiring agents to have assigned buyers representation agreement before home tours, (15:45) Zillow has rolled out 24 state specific versions of its touring agreement. Now, (15:50) these agreements are covering about 80% of Zillow's premier agent, real time touring connections, (15:55) and they are optional for agents, but will become automated for those who opt in. (15:59) Buyers who request a tour with a premier agent using the agreement will need to sign a seven (16:05) day contract before touring the property.

After the tour, they'll receive information on longer (16:10) term agreements, detailing what to expect from their agent and how the agent's going to be (16:15) compensated. Now, these state specific agreements are available to Zillow premier agents in 24 (16:19) States, including Texas, California, and Florida. Now agents in other States or without premier (16:24) status can still use Zillow's original agreement.

And Zillow did initially face criticism in Virginia (16:30) over compliance issue, but since then have adjusted the agreement to meet the state specific (16:35) legal requirements. Okay. Next up a recent article from housing wire highlighted some major shift in (16:41) commissions that we need to pay attention to.

So first off the buzzword right now is commission (16:46) compression agents across the country are seeing by side commission shrink even more than before (16:52) the NAR settlement kicked in. Brian Husky, a broker in Montana points out that commissions (16:57) that used to hover around five to 6% are now sliding down to four and a half to five and a (17:01) half percent. Meanwhile, a broker on the East coast noticed that some of the weaker agents (17:06) are starting to drop their fees to just get buyers to sign with them.

And this is where things start (17:10) to get a little tricky. You see agents cutting commission short-term might be sacrificing long (17:15) term success for everybody. This industry has never been a place where you can survive by just (17:20) slashing prices and with sales volume at 30 year lows, more and more agents are getting desperate (17:25) and cutting fees just to win a deal.

Now here's the key takeaway. Those agents who demonstrate (17:30) their value and give clients that wow factor are going to outlast those who focus solely (17:35) on lowering costs. If you want to stick around, you need to focus on showing your clients that (17:40) you're worth every penny they spend on you, whether it's better marketing, top-notch service (17:44) or negotiating skills.

It's all about making sure your clients feel like they're getting the best (17:48) bang for their buck and fully understand what it is that you're doing for them. Communication (17:54) is always the key. Let's also talk about brokerage margins.

We're not just talking about agents (17:59) feeling the squeeze. Brokerages are also in a tight spot as well. Many of these firms operate (18:03) on razor thin margins.

So even a slight dip in commission rates could push many of them into (18:08) the red. A study from account tech found that if commissions per side dropped 2% around 80 of the (18:14) brokerages in the country would become unprofitable. That's a pretty scary statistic.

So the (18:18) pressure's on for brokerages to either cut costs further and let's be real. Many of them have (18:22) already done that or increase production per agent. So basically you got to do more with less (18:27) and there's no doubt we're going to see some consolidation in the market.

Brokerages are (18:31) going to have to get bigger and get more efficient to survive. Steve Murray from real (18:35) trends expects buyer broker commissions to drop by 30 to 40% over the next couple of years. That's (18:40) going to hit a lot of firms really hard.

So what's the move for brokers? It's all about getting lean, (18:44) driving up revenue without ballooning overhead and where possible leveraging other services like (18:50) title and mortgage to offset the hit. And it wouldn't hurt to learn a new technology like (18:54) maybe AI. One of my favorite subjects to get lean and mean on processes and services.

Now on a (19:00) positive note, the agents who excel on the listing side and continue to innovate are going to be (19:05) fine. Sure. They'll have to hustle a little bit harder and be a little more efficient, (19:08) but the good ones will always find a way to thrive in this environment.

So now it's time to focus on (19:12) your value proposition, get smart about your operations and be ready to navigate these changes. (19:18) It's not going to be a walk in the park, but for those who adapt, there are still plenty of (19:22) opportunities to succeed. Okay.

Now for the main story. Now, August 17th has come and gone. And (19:27) the way people buy and sell homes has forever changed as a realtor.

How do you adapt and thrive? (19:33) Well, I'm going to break down the newest formula for success. Now understand much of these steps (19:39) you have already, or should have already been doing with maybe a slight shift in focus or the (19:44) way you communicate it. But if you haven't been doing it this way, then there's no time like the (19:48) present.

So let's break it all down here. The 10 steps to the perfect home buying process for your (19:53) buyers. Step one, find a buyer.

Okay. This step is going to require its own segment in the coming (19:59) weeks. And I promise I'm going to bring it to you because finding the buyer is the hardest, (20:04) most labor intensive part of what our current market requires.

So next week, I'll give you (20:08) some strategies to help here. But for right now, we're just going to have to assume by some (20:12) miracle that you found a buyer or they found you just for the sake of time. Step two, set up the (20:18) buyer consultation.

So you have to set up a time to meet with your buyer so they can see your face (20:23) in person is the best. If you got to do a zoom or a FaceTime call, fine, whatever you have to do. (20:29) So clear communication can be had.

They can't see your face. Then you're going to be at a (20:34) So get in front of them. You need to connect on a personal level, not just with a phone call, (20:39) make them feel like they're your number one priority because they are these days.

Transparency (20:43) and communication are the most important things that buyers are looking for, especially in this (20:47) ever changing, complicated home buying process. So the first meeting is crucial in establishing (20:53) your value. Step three, establish their needs.

Now that you're in front of them, it's time for (20:58) you to put on your listener hat and establish your home buyers wants and needs. Dive deep into (21:04) what they're looking for in a home or a neighborhood, get to know their timeline, motivation (21:08) for buying, or which of these things is most important to them at that time. Take notes, (21:13) ask questions, turn off your phone and be engaged.

This is where you figure out the most important (21:18) things to them and adapt your presentation to match what they want and not just what you think (21:24) they need. Number four, establish your value. Post August 17th, this part is the most critical.

(21:30) It starts here, but it will be the theme of every other part of this process. Your number one job (21:35) is to negotiate on their behalf to find them the most home for the least amount of money. And this (21:40) is where you share that really big brain of yours.

You want to say things like, based on what (21:44) you've shared with me, I think this neighborhood would be best ideal for your family. Or based on (21:49) what you're sharing with me, I think this kind of home would suit your needs the best. This is (21:53) really where it's the most important thing to be an expert in your area.

When you can recall (21:58) specific neighborhoods, specific builders, or areas that would suit your buyers needs just off the (22:03) top of your head, you come off as a true expert at your craft. You're a house hunting Jedi among mere (22:08) mortals. So now that you've established their needs and your expertise, it's time for the (22:13) next step.

Number five, explain the process. Be a teacher, not a teller. Now this is the longest (22:20) part of the process, but plays the biggest role in establishing your value.

Your buyers might know (22:24) how to browse Zillow, but they don't know the ins and outs of the buying process. That is where you (22:28) come in. Break it down in simple ways that they can understand.

Remember, it's their first time (22:32) or maybe their first time in the last five years. So what's the buyer's agent role? What do you do? (22:38) Now in the past, you could say something like, I'm going to be your guide through this wide (22:42) world of real estate. Everything from property searches to negotiations, I've got you covered.

(22:46) But today is not like it was before. Now you have to be very specific and unfortunately, (22:53) very long winded, just like this. So as your agent in the process, I'll handle the following (22:57) things on your behalf.

Property search and showings, search properties through the local (23:01) MLS, arrange and conduct property showings, highlight key features and potential issues (23:05) during viewings, market analysis and valuation, analyze, compare properties to determine their (23:10) fair market value, provide insights on market trends and neighborhood dynamics, offers and (23:15) negotiations, help draft offer letters. I'll lead negotiations for optimal terms and price. (23:20) I'll review contracts and disclosures.

I'll do transaction management. I'll coordinate with (23:24) all parties involved like the lender, the inspector, the appraiser, et cetera. I'm going (23:28) to oversee contract terms and ensure that they're met.

I'm going to attend closing and address any (23:32) final details. I'll give you my expert guidance, explain the home buying process from start to (23:36) finish, provide advice on specific ways to meet your goals in the current market and offer insights (23:42) on the resale potential for all properties. Oh, and by the way, I also offer some additional (23:47) services like relocation assistant.

I can provide relocation packages for out-of-town buyers. (23:52) I offer detailed information on neighborhoods and local amenities. I do post-purchase support.

(23:56) I provide lists of reputable contractors and repairs for renovations. I offer complimentary (24:01) market analysis once a year for tax appeals and financial planning. I offer you enhanced property (24:05) information as a whole.

I pull detailed tax records on properties of interest. I provide (24:09) archive reports when requested. I do off-market property access.

I reach out to owners of (24:14) unlisted properties that may interest you as the buyer. I negotiate fees with for sale by owner (24:18) sellers. I have specialized market research.

I conduct in-depth analysis of market preferences (24:23) for specific floor plans or areas, and I can provide detailed information on current issues (24:28) like oil tanks, lead paint, or radon gas. That is a lot, but that is the point because your fee (24:35) is a lot, and your time is valuable. And since the person in front of you might have to pay that (24:40) fee, they need to know what they're getting for their money.

Again, transparency, communication, (24:45) and emphasize the negotiation piece. Break down the math for them. Your job is to figure out how (24:49) to bridge the gap between how much cash they will need for the transaction and how much they (24:53) actually have for the transaction using seller concession, price reductions, repair amendments, (24:58) et cetera, et cetera.

Again, show your brain and flex your knowledge. Remember, your job is to also (25:04) retain this client and their network of friends and family. So they think of you the next time (25:10) there's a decision to buy or sell a home.

So the more you can line out all the things that you can (25:14) do for them, especially after the purchase, then you can demonstrate an even higher level of value (25:19) that you bring to this transaction. And oh, by the way, you also need to let them know what the (25:23) seller's agent role in this process is, especially in this new environment. It's critical to remind (25:28) your buyers that the seller's agent is not on their side.

They're working to get the most money (25:34) for their seller. So if they think that it might be a cheaper option just to reach out to the agent (25:39) that's listing the property, then they must understand that that person is not in their (25:43) corner. But you are.

The selling agent is trying to sell the home for the most amount of money and (25:49) net their clients the most cash at the end of the transaction. So they are not your buyer's friend. (25:54) They can call the selling agent to check out the property, but as the old saying goes, (25:58) buyer beware.

All right, step number six, dive into the fees. Do not dodge them. So it's time (26:04) to talk money.

Don't shy away from it. Tackle it head on. Your clients need to understand the cost (26:09) involved in buying a home, including your fee.

Start with the upfront costs. Walk them through (26:14) everything from earnest money to inspections to appraisals. Then talk about the fees paid at (26:20) taxes, insurance, lender fees, their down payment, et cetera.

And of course your fee. And again, (26:26) you have to address this head on. Don't hide from it.

Don't gloss over it. After all, (26:30) you are a professional and you do this every day. So it's no big deal.

It's just part of the (26:34) process. And it is very critical that you control the conversation on this. Don't let someone else (26:39) bring this up to your buyers.

If you haven't addressed it, if they hear it first from someone (26:44) else, after they met you, then they lose trust and confidence in you and your service. (26:49) So just explain to them what your fee is and how it can be paid. You could say something like this (26:54) in order for me to do all these things that I've laid out for you and to have the advantage of my (26:58) experience in negotiating the best deal for you, we have to sign an agreement to work together.

(27:04) By the way, do you know how it is that I get paid? Well, I make a portion of the sales price when (27:09) you purchase a house and I can get paid one of three ways. It can be negotiated that the seller (27:14) will pay my fee in full. It could be negotiated that the seller will pay a portion of my fee and (27:20) you'll make up the difference.

Or you might have to pay all of my compensation if the seller does (27:25) not agree to. But oh, by the way, you're going to know all of this before we even walk in to (27:29) see a property. Here's what my standard fee is.

And now the negotiation is just about who pays (27:34) it. Very straightforward, very simple. And if your client's worried about affording your fee, (27:39) then present them with options, a reduced menu of services, a flat fee, or even recommend that (27:46) they explore other agents, which if you do your job well, will likely bring them back to you (27:52) anyway, when they realize your value compared to everyone else that they talk to.

So then we get to (27:57) important number seven, get that buyer's rep agreement signed. You've laid it all out and (28:02) now it's time to seal the deal, get the buyer's rep agreement signed. And if they're hesitant, (28:07) then give them some time to talk it over, but set another meeting right then.

Never leave the house (28:14) without a signed agreement or a followup appointment. It's a simple rule of sales. (28:18) Number eight, get them pre-approved.

Connect your buyers with a lender you trust. They need someone (28:24) who's going to reinforce all the important points that you've discussed and help them secure the (28:29) best possible deal. Think of your lender partner as Robin to your Batman.

You need them to get this (28:35) job done. And right now it's more critical than ever to have someone on your team who can help (28:40) structure the best and most affordable way to get your clients across the finish line. And oh, by the (28:45) way, if you need someone to ride shotgun in your Batmobile, give me a call.

I'm more than happy to (28:50) team up. Step number nine, the fun part, find the property and negotiate. This is the part where you (28:54) really get to flex those brain muscles.

When your buyers find a home that they love, it's time to (28:59) dig into the seller situation, fish for information, call that agent. What's the seller's motivation? (29:04) Price is just one piece of the puzzle. Find out their timeline, what they need, and how flexible (29:10) they are on concessions.

You got to negotiate like a pro, start high and ask for everything. Remember (29:15) negotiation is an art form and you are the artist because once you've got that deal under contract, (29:21) you and your buyer are in the driver's seat at that point because you can always renegotiate (29:25) after the inspection. And finally, step number 10, close the deal and earn that future business.

(29:31) It's closing time. So make sure that your buyers feel like they got the best deal ever because they (29:36) did thanks to you celebrate the win. Remind them of everything that you did to make the process (29:42) smooth and successful.

Make them feel special on closing day because you want to build that long (29:46) term value. You've got to stay in touch, offer services like tax exemption, reminders, (29:51) contractor referrals, and regular market updates because you're not just closing one deal. (29:56) You're securing a client for the rest of their life.

Remember guys, (30:00) every transaction is an opportunity to create more business. Use each win to build a network (30:07) of referrals and keep showing your value long after the deal's done in this new era of commissions. (30:13) It's all about being proactive, transparent, and most importantly, invaluable to your clients.

(30:19) Well, my friends, this one took a while. We got it out late and it was long, but Hey, (30:25) I hope it helped. I'm here working hard each week to try to add value to your business.

(30:30) And I hope I accomplished that goal today. Please tune into my next episode as economists, (30:34) Vance Ginn and I dive deep into the affordable housing crisis in the United States and how the (30:40) government is not exactly helping it out. It was a really great episode and I think you're (30:44) really going to enjoy it until next time.

Be great humans. Just keep grinding. (30:49) Life is what you make it.

So make it great. See you later.