Trusted Advisor Or Pushy Salesperson?

Mike Cooke, Employing Broker Business Development

Real estate agents have a very easy job if they frame issues correctly for themselves. Great agents don’t make decisions for their clients. There is not a single decision in a real estate transaction that is yours to make.

Instead, great agents empower their clients to make informed decisions. A good agent is a consultant that explains the pros and cons of any course of action and then lets the clients decide what is best for them.

This philosophy is enshrined, actually in the Exclusive Right-to-Sell listing agreement we sign with sellers. In Section 6, one of the “agency duties” is as follows: “Counseling Seller as to any material benefits or risks of a transaction that are actually known by Broker.”

Substitute the word “Buyer” for “Seller” and you’ll find the exact same language in the Exclusive Right-to-Buyer agreement where we are hired to be a buyer’s agent.

[Note: This particular duty does not apply when acting as a transaction broker but most of us are acting as a seller’s agent or a buyer’s agent most of the time.]

How should this agency’s duty play out in real life? 

We’ve all been in real estate transactions where the agent on the other side says, “I would never let my client ___________!” The blank might be filled in with any number of items like:

  • Accept a contingent offer where the buyer’s property is not even on the market yet.
  • Agree to a closing that is not going to happen for 120 days.

That approach, however, is inconsistent with our duties to a client. Our job is not to say what they can or should do.

A game plan that is more congruous with our duties is to never react negatively to any offer by the other side. Hear them out even if you think it unlikely that your client can accommodate a particular request. Get curious. Ask questions about what motivates the proposal. Thank them for their interest.

Next, go away and list the pros and cons of the offer. Allow your creativity to see how the downsides might be mitigated. Explain everything to the client and then let them decide what is best.

This approach is not only consistent with our agency duties … it also has practical benefits like establishing a better rapport with the other side and opening up our imagination to look for possible innovative solutions.

Let’s work through an example using the request for a delayed closing. There are plenty of downsides for a seller in the 120-day closing scenario:

  • The property is tied up for a long time.
  • Since buyers can’t easily lock in an interest rate for more than 60 days, increasing rates could jeopardize the buyer’s loan qualifications.
  • The buyer might lose her job, or he might stumble on a house he likes better.
  • If the deal falls apart just before closing, market conditions might be very different than they are right now and this could make it harder for the seller to sell.

By all means, these risks need to be outlined for the seller. At the same time, we have to ask if there are any benefits to the seller. 

Imagine that the seller’s objective is to get the absolute highest possible price for the home. Does this buyer’s unusual need create an opportunity for this to happen?

Perhaps we can counter with an above-market sale price combined with an appraisal waiver. The counter can also specify that all contingencies be resolved within the first three weeks of the contract so the earnest money is “hard” after that time. Add a requirement for a healthy earnest money deposit that is two or three times the normal amount and you’ve mitigated many of the risks of the extended closing.

There are a couple of nuances to this way of approaching the business that is worth considering.

First of all, this approach does not mean that we never make any recommendations to our clients. After thinking through the risks and benefits of a given scenario and knowing the client’s objectives and constraints, we may think one decision is better than another and it can be appropriate to express that after laying out the pros and cons. Clients frequently ask for recommendations and it’s fine to give our opinions.

Secondly, there are times when we need to document our strong recommendation that a client does not do something.

Example: Imagine your seller is asked to let a buyer move in before closing. This is fraught with peril. While we have a post-closing occupancy form that allows a seller to stay after closing, there is no commission approved a form for pre-closing occupancy by a buyer. This is intentional. The real estate commission thinks that buyers and sellers need help with a pre-closing occupancy beyond what an agent can deliver. It’s a practice they discourage.

In this case, you’d explain the downsides to your seller and recommend that the seller get help from an attorney or a property manager or both before agreeing to this request. Some sellers may ignore this advice and find a rental agreement on the internet and suggest that it be used.

We have to follow any legal instructions from our clients and what the seller is doing, in this case, is certainly legal. If the seller demands to move forward without getting expertise from an attorney or property manager, we’d have to follow those wishes.

However, we also have a duty to inform clients when they need assistance that is outside our expertise as real estate licensees. To make sure the client has truly understood the issue, we’d want to document our advice in an email exchange where we lay out the matter and have the client respond if they want to proceed without following our advice.

Doing so is not just CYA. Writing out the advice gives us time to make sure we’ve covered the issue, thoroughly. Also, it is less likely that it will be misunderstood by the client when the information is conveyed systematically in writing.

Ultimately, this approach lets the client decide, but goes the extra mile when we think the client is making a poor choice. While pre-closing occupancy has many risks for a seller, it may be the lesser of evils for some sellers depending on their particular circumstances. 

So consider empowering your clients to make great decisions by always explaining the pros and cons. It’s consistent with agency duties, has many practical benefits, and repositions you with your clients to be seen as a trusted advisor rather than a pushy salesperson.