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Posts tagged ‘fiduciary responsibilities’

31
Mar

Client or Customer? If It Quacks Like A Duck…

duckWe all know it. In real estate there are differences between clients and customers. We learn these differences very early in our education and training. We talk about fiduciary duties, accounting, fair and honest service etcetera, but the reality is that often those lines get blurred and that puts us into a difficult situation. Case in point. An agent, lets call him Terry, gets a call on one of his listings. The couple want to look at it at 5pm on a Thursday. Terry is not available to show the property so he gives the lead to Fran, an agent in his office who often acts as a buyer agent for him. Fran meets the couple at the condo and shows them around. They spend a long time there and ask Fran a bunch of questions about the property such as, what closing are the sellers looking for, what is included and excluded, and what facilities are in the building. Fran is happy to answer their questions. After a few minutes, it is clear that this couple is very interested in the condo. They start asking more questions about past sales, additional parking costs, maintenance fees and reserve funds. Fran knows the building and answers their questions. Finally the couple tell Fran that they are prepared to make an offer. They want to know why the seller is selling, what the Seller is likely to accept, closing date, and how much commission the seller will be paying and what clauses they should include in their offer. Fran is no dummy. She advises the couple that the property is inline with past sales and is well priced but gives no details into motivation or details into the listing contract.
The couple tell Fran that their lawyer has advised them not to sign a BRA and that they should only enter into a customer agreement. They also feel that it is only fair that since they contacted the Selling agent directly they should only pay 1/2 the commission however they still want Fran to prepare the offer. So here is the crux of the situation. Fran, has treated them, for the most part, like clients. She has provided information and offered advice on the property before establishing what kind of relationship the couple wished to assume. This creates a problem for Fran. If something were to go wrong during the transaction the couple could hold Fran responsible. She has after all put herself into an implied client/buyer relationship. If she knew that the couple wanted only to be customers, her answers on most of the questions would have been much simpler…”Please have your lawyer direct his questions to the Sellers or the Sellers agent”. By doing so, she exonerates herself from any potential question of representation.
As to the comments about commission, the answer again is simple. “My firm has been retained by the sellers to market their property for sale. The details of that contract are confidential and do not impact the sale price”.
It is only human nature to want to help and that desire becomes stronger when there are dollar signs on the other side, but the pitfalls of taking too many assumptions can be equally devastating. The example above highlights the importance of that critical first interaction with a potential buyer who you meet through a direct call or even at an open house. The realities of the Toronto market are that buyers are looking for a price advantage, just don’t let your eagerness to make a deal cloud your judgement.

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

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27
Nov

Mastermind for November 26th. Do Incentives Really Work?

incentives We had a rather interesting debate during our Mastermind yesterday about offering a buyer agent incentive as a way of generating more activity to a listing. We had a pretty big crowd and I was surprised to see that there was no general consensus on the matter. In fact opinion was split right down the middle, 50-50. So, looking for some more input on the matter (read tie-breaker) I did what any manager would do, I consulted the great oracle itself…Facebook. More specifically one of the several groups I belong to. While I got some great stories there, I didn’t find the tie-breaker either.

One side of the argument seems pretty clear. Price the property well, work hard, don’t leave any marketing stone unturned and generate exposure. It’s a simple theory…as long as the property is “saleable” you don’t need to offer any incentives to the buyer agent. This side of the discussion felt that incentives might add fuel to the consumer’s potential belief that agents are greedy or that offering more commission only generated interest from the buyer agent and not the buyer.

The other side argued that offering a higher commission got their properties more showings. More showings meant more competition which lead to a better price to the seller and a faster sale. One agent said that it worked particularly well when there were a number of comparable properties in the area or in situations where the property had some serious disadvantages, like deficiencies in the reserve fund. I can remember a condo building downtown that had an unusually high special assessment on all the suites. Sellers would agree to pre-pay the fee down in order to make their properties more attractive. Much like buyer incentives for a new condominium project, this is somewhat different as it is not an advantage geared toward the buyer agent, more just a marketing tool.

I especially loved some of the stories from the naysayers who told of sellers throwing in fast cars, cash bonuses, and even a free massage (but I think they might have been kidding about that one). Now, when we sign a Buyer Representation Agreement (BRA) we specify the commission that we would like to receive so if the offering is more than that amount, are we duty bound to return the difference to the buyer? The short answer is that it depends. One agent fills out the commission portion like this…”X% or as offered by the MLS Agreement, whichever is greater” while another credited the extra commission back to the Buyer.

Finally, I would caution everyone to remember their fiduciary duties to their Buyer clients. When in doubt….disclose!

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

8
Oct

Mission Possible. The Ultimate 12 Week RE Sales Contest. Task 5. Know Your Competition.

When all is said and done, there are only a few simple truths about real estate….First, it’s a numbers game. The more people you know and the more often you contact them, the likelier you are to get their business and make some money along the way. We like to call it prospecting. The second truth is that in order to prove your worth, you need to know everything about real estate, and you have to be able to answer questions quickly and accurately. That knowledge starts with big picture information about interest rate trends and market conditions, and filters down to new neighbourhood statistics, then to the most minuscule information about home improvements and how to maximize your return on a bathroom renovation.
But there is another truth about real estate that applies particularly to our market. If you are going to win an offer presentation, you need to gain any advantage you can find. One of the best and easiest ways to do that is to have a solid relationship with the agents in your market. In many ways this is a hard concept to wrap our heads around but hear me out on this one. Many years ago, before MLS, there were only a few hundred people practicing real estate. Agents survived on relationships. They would trade “pocket listings” like baseball cards. If an agent didn’t like you, he kept his cards close to his chest and didn’t share. If his relationship with you was great, you’d be the first person he called when he got a new listing. Sure this may not translate as well when you have 40,000+ agents in our city and an active MLS system but the reality is that, for the most part, our trading areas are relatively small. After a few months in the business you start to recognize the same players over and over again. It is important to nurture these relationships as best you can because you will be doing business with them at some point and if you are good to them, they will be good to you. I’m not suggesting they would break their fiduciary responsibilities, but being on good terms with your opponent will go along way.
So this week’s task is to go out and build relationships with agents in your farm area and it is especially important to agents who are new to the business. Why? Because, they will put you in the loop. Consider that the work you do over the next 7 weeks will help you gain access to an exclusive club. I equate it to the crossing paths with another runner and getting that quick little wave or a simple nod of the head that says “Hey good to see you out. Isn’t this awesome?” That, in itself, will help you more than you will know.

mark mclean is the Broker/Manager at the Bosley Real Estate Queen St W office and President-Elect for the Toronto Real Estate Board. The opinions expressed here do not reflect the opinions of TREB or Bosley RE.

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