Q&A: How close should a real estate agent get to a buyer’s agent?

Q&A: How close should a real estate agent get to a buyer’s agent?
Jennifer DukeJune 2, 2014

Obviously, the real estate agent’s job is to get the best price possible for the vendor, while the buyer’s agent is there to negotiate and get the best price for the buyer. With these two conflicting roles in mind – how close is too close?

Whenever you discuss with a buyer’s agent their role, they say that there are many aspects that make them good at their job. This often includes their relationships with local real estate agents, and their ability to access off market sales and snap up bargains for “under market value”. Anything that a buyer’s agent does to legally get their client a better deal is that expert doing their job well and so criticism should not necessarily be levelled at buyer’s agents for being savvy negotiators.

As a result, it isn't exactly surprising that vendors may express concerns when a buyer's agent is expressing interest in purchasing their property.

An agent acting for the vendor should, prior to going to market, set a base line of offers that will be submitted to the vendor.

However, real estate agents are there to protect the vendor from buyers, and their representatives, who are looking to get a cheap deal. Clearly, there’s a disconnect here. If buyer’s agents are building relationships with real estate agents to get cheap off-market deals, does this mean that the real estate agent is not doing their job properly?

Not necessarily.

We note that some buyer's agents are hired by owner occupiers who are happy to pay market value, but are looking to get into a specific market or to take the hassle out of the buying process. They are also often hired for their ability to "find" investment-grade product (here, for instance, is buyer's agent Rich Harvey's take on how to find the top performing properties) and for their strengths when bidding at auction. This article refers to their negotiating strategies, particularly via private treaty or prior to auction. If you are interested in whether or not you should hire a buyer's agent, we recommend reading this for/against article first.

This is a dangerous liaison if the vendor’s agent is going to be persuaded to undersell the property, or accept first offers.

Just Think’s Edwin Almeida answered Property Observer's Tuesday Q&A about the dynamic between real estate agents and buyer’s agents.

What offers do you absolutely have to put through to the seller?

First and foremost let’s get it clear, an agent acting for the vendor should, prior to going to market, set a base line of offers that will be submitted to the vendor. These offers, be they in writing or verbal offers, need to be discussed beforehand. This eliminates any misconception that the agent will try and “condition” their vendor into lowering the asking price. I believe this will also make the agent more accountable to their own market opinion when submitting the proposal to be the selling agent.

Under our regulations [the Property, Stock and Agents Regulation 2003]

Schedule 2
Principal to be informed of an offer

Section 3(1)
The agent must, unless the principal has instructed to the contrary in writing, inform the principal of all offers of purchase as soon as practicable after receiving the offer up until exchange of contracts has taken place.

So in theory all offers must be put to the vendor not just the written offers as most quote. However;

Sub-section (2)
If the agent is not going to inform the principal of an offer, the agent must inform the person who made the offer that the offer will not be submitted to the principal.

Most agents forget, that they further to the above, even when a verbal offer is submitted and this is passed on to the vendor, the agent must confirm this offer in written form (Sub-section (3)).

Should real estate agents keep their distance from buyer’s agents (or buyer’s advocates, as they are also called)?

This is a dangerous liaison if the vendor’s agent [which is what we could also call the real estate agent] is going to be persuaded to undersell the property, or accept first offers. The relationship between BA and VA works well when selling off the plan properties, and developers need quick sales to satisfy bank funding requirements. In essence, the relationship works when the vendor is in need and is under some sort of pressure to achieve quick sale; financial, legal obligation or timing issue.
This relationship also works well when dealing with developments and the VA is looking for the unsophisticated would-be developers, typical of foreign investors.

Can off-market sales ever be good for a vendor?

Only if the buyer’s agent meets the asking price.

Or if the vendor does not wish to publically advertise the property; this is when we rely on buyers agents. The silent listings that require discrete marketing strategies may also be an opportunity for an off-market sale to benefit a vendor. There are a number of these. Some development sites fall into this, but there are some high end homes also out there on the silent market.

What are the tactics of buyer’s agents that real estate agents should shield the vendors from?

Low offers: Offers that are ridiculously low and the BA insist they be submitted just because they have made these in writing. This only works with agents that do not truly understand the process. As above.

Pest and building reports: Protect your vendor by obtaining a P&B report prior to the marketing, this way most, if not all, objections will be dealt with, as opposed to subjecting the vendor to objection pressure during the selling campaign. Remedy the problem at a low cost rather than an exaggerated perceived cost.

Dealing with dummy buyers: Some, although not all buyer’s agents, will send in dummy buyers to place low offers on properties, again another way to so-called ‘condition’ the agent and vendor. Once more this is quickly dealt with if the real estate agent knows the value of the property and has already discussed the strategy how to handle low offers.

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What topic would you like to see covered in our next Tuesday Q&A? Send requests for topics and experts to news@propertyobserver.com.au

Photo courtesy of pallspera.com/Creative Commons.

Jennifer Duke

Jennifer Duke was a property writer at Property Observer

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