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Avoiding Common Mistakes with Buyer Agreements and Compensation in Real Estate
In today’s evolving real estate market, understanding how to effectively manage buyer agreements and compensation is crucial for every agent. With the recent changes in regulations and increased scrutiny from governing bodies, it’s more important than ever to stay compliant, while also providing top-notch service to clients. For agents, both listing and buyer agents, there are several potential pitfalls that can lead to miscommunication, missed opportunities, or even hefty fines. Today, Tony Geraci, Broker/Owner of Century 21 HomeStar, shares his insights on navigating these complexities.
Are You Making Mistakes with Buyer Agreements? 
One of the most common issues emerging in today’s market relates to how agents are handling buyer agreements and compensation discussions. According to Tony Geraci, a seasoned real estate broker with over 30 years of experience, some agents are misunderstanding the core essence of the rules that govern buyer agreements and negotiations. Geraci emphasizes the importance of clarity and professionalism when entering into these agreements with clients.
One significant mistake Geraci sees is agents waiting too long to present or finalize buyer agreements. “The essence of these new rules is to ensure transparency and proper compensation for all parties involved,” Geraci explains. Agents should avoid waiting until the last minute—such as when they’re calling listing agents to discuss compensation—before having their buyer agreements signed. It’s crucial to establish the agreement with your buyer client before you even start working with them.
“Some agents think that ‘working with a buyer’ only starts when they show them a property,” Geraci says. However, working with a buyer begins much earlier—when you discuss their wants, needs, budget, and property criteria. Waiting until the moment of property tours or negotiations to finalize a buyer agreement can lead to confusion and may cause you to violate regulations.
Communicating Buyer Compensation with Listing Agents
Another common issue is how buyer agents communicate with listing agents regarding compensation. Geraci points out that calling each listing agent to find out what their seller might offer in compensation can lead to inconsistent agreements. “I’ve heard of agents showing five different houses in one day and calling each listing agent to find out what their sellers are offering,” Geraci says. “Then, they go back and sign five different buyer agreements for each property. That’s not the essence of what these rules are about.”
Geraci encourages agents to have a clear, upfront conversation with their buyers. Establish the compensation agreement early on, based on the services you are providing, and stick to it. “Your services and compensation can vary based on the level of effort and expertise you’re putting in,” Geraci adds. “If you’re showing one property, that’s one thing. But if you’re conducting an in-depth search for a client that may last months, you’re offering a different service level, and your compensation should reflect that.”
Verbal Promises Aren’t Enough
One of the most dangerous misconceptions among agents is relying on verbal agreements when discussing compensation. Geraci warns that verbal agreements, even if confirmed by the listing agent, are not binding until they’re in writing. “If a listing agent tells you verbally that they will offer a certain amount of compensation, that’s not guaranteed,” he cautions. “Until it’s in writing and signed by both parties, it’s all subject to change.”
Buyer agents should never rely solely on verbal agreements. Instead, they should ensure that all compensation agreements are documented in writing, either in the buyer agreement or through a formal addendum to the contract. This protects both the buyer agent and their client from any last-minute changes or disputes.
The Importance of Clear Communication
One of Geraci’s key recommendations is that buyer agents communicate more clearly with both their buyers and listing agents. “If you’re presenting an offer and compensation hasn’t been addressed, pick up the phone and talk to the listing agent,” he advises. “This avoids any misunderstandings later, like when the buyer agent realizes at closing that they never discussed their compensation, and it wasn’t included in the agreement.”
In fact, Geraci suggests that in some cases, it may be beneficial to include the buyer agreement with the offer itself. This ensures that everyone is on the same page and helps to prevent any last-minute complications.
How Listing Agents Can Avoid Problems
Geraci also shares advice for listing agents. With the changes in how compensation is handled, some buyer agents are failing to include compensation information in their offers. “If you’re a listing agent and you receive an offer without compensation details, don’t assume the buyer agent isn’t expecting to be paid,” Geraci warns. “Have a conversation with them to clarify the terms and avoid any issues down the road.”
The responsibility for clear communication falls on both sides. Listing agents should take the initiative to confirm compensation details, while buyer agents should be proactive in presenting this information upfront.
Final Thoughts
In today’s real estate market, buyer agreements and compensation are more complex than ever. However, by adhering to the essence of the new rules, agents can ensure they are working ethically and transparently. Geraci’s advice for agents is clear: establish buyer agreements early, document all compensation discussions in writing, and maintain open lines of communication with both buyers and listing agents.
As the real estate industry continues to evolve, staying informed and compliant will help agents avoid mistakes and fines while providing top-tier service to their clients. For more insights and guidance on navigating these changes, contact Tony Geraci and the team at Century 21 HomeStar, who are always ready to help agents succeed in this new landscape.
By following these best practices, Cleveland-area real estate professionals can ensure they remain compliant and continue to thrive in this changing environment. If you have questions or need further clarification, don’t hesitate to reach out to Century 21 HomeStar for expert advice.
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