The goal of this guide will be to: 1. Educate you on the steps to take when representing a buyer; 2. Ensure your documents are in order to get paid from the transaction; and 3. Get paid!
I. Prior to showing your buyer any properties:
a. Obtain proof of funds from the buyer; or
b. Request a mortgage pre-approval from the buyer.
c. If your buyer will not provide you the above information, move on to another buyer.
d. Once and if you have verified that your buyer has the funds available to purchase a property, move on to the below.
II. Three ways of getting paid when representing a buyer
a. Negotiate a commission split with seller’s listing agent
i. When representing a buyer you can, and usually will, be paid a portion of the commission that the listing agent of the property your buyer is interested in, is offering to pay out to a buyer’s agent. This amount is usually 50% of the commission the seller is paying his/her listing agent.
1. Contact the listing agent of the property in which the buyer is interested in and ask what commission they will pay you as the buyer’s agent if you bring a buyer to the table.
a. If the listing agent offers you a commission split that you are satisfied with you should exchange a commission breakdown sheet with the listing agent which will spell out who the broker’s/agents are, the property address, the buyer and seller information, and the respective commission amount being paid to the buyer’s agent (see Co-Broker Agreement).
b. Negotiate a commission with your buyer
i. If the listing agent will not split his/her commission with a buyer’s agent you need to have your buyer execute your “Exclusive Buyer Agency Agreement” (see Exclusive Buyer Agency Agreement) with the buyer to ensure the buyer will pay you a commission which you will negotiate with the buyer.
ii. If the buyer will not execute your “Exclusive Buyer Agency Agreement” because they don’t want to assign any exclusive rights to any one broker/agent, you must have the buyer execute your “Non-Exclusive Buyer Agency Agreement” (see Non-Exclusive Buyer Agency Agreement).
c. Negotiate a commission split with seller’s listing agent AND with your buyer
i. You can negotiate a combination of a. and b. above and have the listing agent split their commission with you and have your buyer pay you commission as well. In this case you should have a commission breakdown exchanged with the listing agent and have your buyer execute your Exclusive Buyer Agency Agreement.
d. If neither the buyer nor the listing agent is willing to pay you, the buyer’s agent, a commission, move on to another property and/or another buyer.
III. Ensure your documents are in order
a. Did you receive the buyer’s proof of funds or mortgage pre-approval?
b. Has the seller’s agent/listing agent executed your co-broker agreement?
c. Has your buyer executed your buyer agency agreement?
IV. Get Paid!
a. Once you have helped your buyer find the right property for their needs you can refer them to an attorney if they don’t already have one.
b. You will then exchange a deal sheet with the listing agent.
c. The deal sheet will be used by the seller’s attorney to draft a purchase and sale contract.
d. The seller’s attorney will send that contract to the buyer’s attorney for review and comments.
e. The buyer will then execute the contract and provide a down payment for the transaction.
f. The seller’s will counter execute the contract. At this stage a legally binding contract exists.
g. Buyer’s attorney will order title.
h. Closing is scheduled.
i. Closing takes place.
j. You get paid.