Wednesday, May 17, 2023

I’d like to use this space to sing the praises of standard form buyer agency contracts, in all their various formats. But first, for some context, I’d like to backtrack and talk about value for service and how we value things. I’m not an economist, but in my experience, I think we all expect to receive something worthwhile in exchange for what we pay. Our economic system is based on this premise. Every day, buyers decide how much of their money they want to part with in exchange for what they’d like to buy. Sellers do the same, except they decide how much they want to part with their property in exchange for the money being offered.  

Everyone has different ideas about the meaning of value for services and things. Anyone growing up during the Great Depression had to be, by necessity, very careful with their money. In happier times, people tend to be looser with their money, and scrutinize the meaning of “value” less if they really want an item. 

"I confess that I’ve never been able to distinguish between something I need and something I want. To me, they’re the same thing. But I do have limits. Even I will put my foot down and say, for example, I’m definitely not paying that much for that. I don’t need it that much."

How do you determine value? Often the answer is decided by presentation and perception. Remember when software was invented? Maybe you don’t. But for those of you who do, remember the 8”X8” cardboard box you’d get? Inside, there’d be some floppy discs, and later CDs, along with a thick printed manual, other fluff and packing material. The software developer could have just mailed you the floppy discs. But there’s a chance you wouldn’t have thought they were worth the $499 you paid, if that was all you received.  

Another example: Have you ever offered some service or product to the market for free—and then had no takers? The market is saying, “No way. What you’re presenting must not have any value if you aren’t charging for it.”  

There’s more. Have you ever picked up a really low-priced item in a store, held it in your hand and wondered about its quality, based on price alone? A low price doesn’t always mean little value. But it may make you pause.  

I sometimes find myself thinking, “I don’t trust that this widget is a good one. It’s priced way too low. I’m going to buy one that costs more.” That kind of thinking probably explains why luxury items are stratospherically expensive. There’s no way the material, costs, and labour even approach the sticker price. But then, luxury item buyers expect to get hosed. They like it, I’d guess, because it’s part of their buying experience. For them, the price convinces them that they’re getting something really valuable even if the thing being bought is insubstantial.  

I got caught up in that once. I went into a Hermes store to look for a present for my mother. What does one buy for a 96-year-old woman? “Ah ha,” I thought. “I’ll get her one of those nice silk scarves.” I nearly fainted when I saw the price tag. But I paid it, because I wanted to buy something nice for my mother; something with a valued name attached to it.  

As an aside you should have seen the pained look on the store clerk’s face when I pronounced Hermes as “Hurmeez.” His face was a poem. “Actually, it’s hermaze,” he said with a wince and a flourish. I stand corrected.

"Which gets us back to why buyer agency contracts need more respect. After 44 years in this business, I think I can say that we’ve trained buyers to think that we don’t charge anything for our services, and there’s a price to be paid for that. Are we valued by buyers? Who knows? "

Buyer agents usually (but don’t have to) get their commission from the seller’s brokerage after the seller has paid the commission. Indirectly, of course, it’s the buyer who puts up the money to buy the place, a portion of which ends up in the buyer agent’s bank account. With buyers not usually writing a cheque to their agents for services rendered, its reasonable to assume some of them are going to think their agent works for free.  

If they paused and considered how ridiculous a notion this is, they’d have to assume their agent is being paid, just not by them. Does this affect how they value our service? I think it could.  

It almost certainly will affect their loyalty to you. If they didn’t sign a contract or there’s no apparent fee for a service being provided, how married will they feel to you, the service provider? That may explain a lot about why buyers are tempted to work with multiple agents at the same time, without telling any of them about the others. 

That’s why I sing the praises of buyer agency contracts. Get a buyer to sign one and they’ll be in no doubt about value of the services you provide. Why? Because there’s going to be a price tag on those services, backed up by that signed contract. What you charge is up to you. But whatever it is, buyers who sign those contracts are going to make the connection between what you do, what they receive, and what they’re paying. I think your relationship with buyers will be stronger as a result. I also think there’s less chance of you being ghosted if you make a practice of having buyer sign a contract. After explaining what you’re worth and what you charge, the buyer who agrees to sign a contract is going to remain loyal to you.  

"Buyer agency contracts also do a great job of nailing down the agency relationship—spelling out your obligations and the buyer’s. They also reduce the chance of a commission dispute with another member. What’s not to like?"

I know what you’re thinking: “But buyers won’t sign those. If I insist, they’re going to go to someone else who doesn’t require they sign a buyer agency contract.” This may be true, so there’s a chance you’ll lose some potential buyers. But who cares? Wouldn’t you rather have a buyer married to you by way of a contract than the alternative—a loosey-goosey relationship that can go sideways in a heartbeat? 

I wish you the best.