An exclusive buyer agent only represents home buyers, never sellers. When real estate agents work at firms that represent both buyers and sellers conflicts can arise. Massachusetts home buyers should demand 100 percent loyalty 100 percent of the time from their real estate buyer agent. The following audio is from an interview on The Money Show on Boston Herald Radio on February 27, 2015. Host Rick Shaffer discussed exclusive buyer agency, the Massachusetts real estate market and other home-buying topics with Rich Rosa, co-owner of Buyers Brokers Only, LLC.
The following is the transcript of the interview between The Money Show host Rick Shaffer and Buyers Brokers Only, LLC co-owner / co-founder Rich Rosa on February 27, 2015.
Recording: Now, The Money Show with Rick Shaffer and Susan Kaplan.
Rick Shaffer: Welcome back. I guess I have been promising you all day. We have a guest as the remaining part of the investment show on radio. Joining us today is Rich Rosa who is an attorney and a buyer's broker with Buyers Brokers Only LLC. In the interest of full disclosure, I should mention to you, and if you listen to the last ad, you could figure this out that Buyers Brokers Only is an advertiser here on Boston Herald Radio, and we're very happy to have them as such. Rich, thank you very much for joining us.
Rich Rosa: Hey Rick, thanks for having me.
Rick Shaffer: Our pleasure. We're going to get into the specifics about Buyers Brokers Only in a bit. Quickly, give us an overview of your career, how you came to be an attorney, and then how you came to be a buyer's broker with Buyers Brokers Only LLC.
Rich Rosa: Sure. My undergraduate degree is in Journalism from Northeastern University. I went to New England School of Law. I've been a license attorney since 1995, so almost 20 years now. I don't practice law anymore. About 10 years ago, with my business partner Dave Kres. We started Buyers Brokers Only, and that's what I do full-time.
Rick Shaffer: When you were practicing law, did you practice real estate law, or did you practice some other time of law, or a mixture of many types?
Rich Rosa: It was a mixture of real estate law and I did quite a bit of trial work.
Rick Shaffer: Okay. It's a mix. What gave you the idea to start Buyers Brokers Only?
Rich Rosa: Well, it's interesting. Dave was actually my law clerk when he was in law school. When he graduated, we got to talk in about what he was going to do after he graduated. One of the things that I suggested to him was that he consider maybe looking into working as a real estate broker. Around the time we graduate from law school, you get a lot of friends there at that point in life where they're going to be buying houses. I told them that might be something that he could help his friends out with, and he did. It worked out pretty well. We started talking about how ... We felt buyers didn't get that quite representation than sellers, that the industry is seller focused, so that's where we came up with the idea of simply representing buyers only.
Rick Shaffer: It's interesting. I hadn't thought of this, but when I first ... When I got out of law school, I actually had transferred from the original law school. I went to North Eastern, and because of that, I was basically a semester behind. The long and short of it is I ended up having to take the bar in the winter as supposed to in February, as supposed to July, right after people graduate, which is when most people take it. In any event, when I got out of law school, I've realized, and I think it’s still the same in Massachusetts, if you have graduated from law school, you can get your real estate broker’s license without having to take all the test.
I end up becoming, at that time, a rental agent, and then I did some seller's ... I was a seller’s agent for a while, after I got out of law school. I’ve been in real estate, not as a broker, but in many other capacities, for most of my life. It’s interesting. I was on somewhat of a parallel paths to your partner. Explain what a buyer’s broker is. Most people know what a seller’s broker is. I think a lot of people are still not fully versed in what a buyer’s broker is.
Rich Rosa: Sure. Well, in Massachusetts there's basically two types of buyer’s brokers, or buyer agents. One is referred to as designated buyer agent. The other is what's called an exclusive buyer agent. Like you said, everyone understands that the listing agent represents the seller. They have an obligation to look out for the seller's best interest, get the highest price, things like that. The buyer agent, whether it’s a designated buyer agent or the exclusive buyer agent, their duty is to the buyer, not the seller. The difference however is when you’re a designated buyer agent, you work at a real estate firm that represents both buyers and sellers.
The issue that can come up is that designated buyer agents that you’re working with is listing property for sale. You choose to make an offer on that property. That buyer agent then turns into what’s called a dual agent. What that means is that dual agent has been representing both the seller and the buyer. As you could see that could be a problem. You’re no longer getting the full 100% loyalty that you were getting prior to that. The other issue that comes up is that if you're interested in a property, the buyer is interested in a property that someone else in that designated buyer agent’s firm is listing for sale, that designated buyer agent represents you. Everyone else in their office does not represent you. In fact, they technically represent the seller.
You could see where there could be a little bit of a problem there, where your buyer agent works with the listing agent in the same company. There’s also situations sometimes where companies are giving buyer agents compensation or incentive to have their buyers buy properties that are being listed by that company. With an exclusive buyer agent, you never have to worry about whether or not they’re going to try to get you to buy a house they list, because they don’t list any property for sale. You don't have to worry about anybody else in the office listing property for sale, because everyone in the company just represents buyers.
It’s really ... As you could see, lots of people use designated buyer agents too, but as you could see, it’s a cleaner transaction when you're dealing with an agent that’s only representing buyers.
Rick Shaffer: I'm surprised. I must admit, I wasn't aware that, that company is ... That dual agents used designated buyer brokers as opposed to exclusive buyer brokers will give incentive to the buyer brokers to sell properties that are being listed by that firm. I would think that would be, on its face, a conflict of interest and illegal, but apparently, Massachusetts does not seem fit to make it illegal. Correct?
Rich Rosa: That's my understanding, yeah, that does go on. I don't know the specifics of it. I've never worked with a traditional real estate firm, but it is my understanding that, that is something that happens, whether it's compensation or some other incentive, I'm not 100% sure. Massachusetts does allow dual agency.
Rick Shaffer: Yeah. One thing pops to mind, because I know a lot of people will have a dual ... When they're buying a piece of property, often times, people will use an attorney to represent them, but also use that attorney as the bank's attorney. Just to make a delineation, for the most part, if an attorney is representing you as the buyer and also representing the bank, the interest of the buyer and the bank are usually pretty much the same. The chances of there being a conflict of interest are slim to none. If a broker is representing both the buyer and the seller, on its face, it's quite obvious that there are all kinds of conflict of interest that come up. I would say ... I've said, I've been talking about your being on today, that I used to not be a big fan of buyer agents for a number of reason, but I become a fan of them. I think what I will ... I'll caveat that by saying, if you use a buyer broker, I think you should use only an exclusive buyer broker. I think there's too many conflicts of interest involved in using a designated buyer broker, and you've done a very good job of explaining why.
Rich Rosa: Another way to look at it too is you're not just hiring an agent, you're hiring a company. You have to understand what that who company is doing, not just what your agent is doing.
Rick Shaffer: In the past, and I think a lot of people still, as I said, they don't understand buyer's brokers and all the things attached there too. In the past, at least in some states, and I think in Massachusetts, there were situations where a buyer's broker was sometimes compensated by actually charging a fee to the buyer. That's not the case anymore. Correct?
Rich Rosa: Different buyer agents have different business models. We do not charge our clients any fee.
Rick Shaffer: Okay.
Rich Rosa: The typical situation is a seller hires a listing agent. That listing agent and the seller comes to an agreement on what the commission will be. In Massachusetts it's almost always 4 or 5 percent. That listing agent then puts the house on the MLS. On the MLS, there's what's called a cooperating commission. That's the commission that's paid to whatever buyer agent brings the buyer, so the seller is essentially paying both sides the commission.
Typically, that commission is split between the listing agent and the buyer agent, although the listing agent is not under any obligation to make it an even split, but it typically is.
Rick Shaffer: Basically, it's the same as ... For example, if a seller's agent list a property and then an agent from another agency, who's not acting as a buyer's broker necessarily, but brings someone who ultimately buys the property, then the listing agent ends up spiting the commission with them, so it's really the same thing with the designated buyer's broker. Correct?
Rich Rosa: Correct. It is, that is the same thing. I think that what you were talking about where some people have the idea that maybe it was better to go at it alone is because there's this myth out there that somehow, if you don't have a buyer agent, that you're going to get a better deal, because there's going to be no commission paid to a buyer agent. The reality is, is the listing agent is going to keep the entire 4 or 5%, as opposed to splitting it. Basically, it's not going to cost you anything to have a buyer agent, and you're going to get representation, as opposed to not having any representation. Nothing is really going to change, other than the listing agent gets the full commission.
Of course, the listing agent doesn't have ... No. We've already mentioned that their obligation is to the seller, but I think one thing that a lot of buyers don't quite get is that there's no obligation from that listing agent to hold anything that their told confidential. In fact, they've got a duty to tell the seller if anything they're told by the buyer to help in negotiation. It's really a better situation when you have a buffer between yourself and the listing agent being your buyer agent.
Rick Shaffer: I've said for a long time, one of the reasons I think people always should have attorneys, both buyers and sellers, is to have one of the attorneys acts as a buffer, and to have that additional buffer of having a broker is plus. We're going to have to take a break in a second. One other myth that's still out there ... I know that when buyer's brokers first came on the scene, a lot of seller's agent were ... not all of them, but some were hesitant to work with buyer's agent for any number of reasons. In some cases, if you had a buyer's broker representing you, it could hurt you as a buyer. My impression however is that buyer's brokers have been so totally accepted at this point that that's not the case anymore. Is that correct?
Rich Rosa: Yeah. I would agree. I think that most agents are representing buyers and sellers, doing both side of the transaction. They're promoting both sides of that, so they're comfortable with and willing to work with buyer agents.
Rick Shaffer: The industry really has changed a lot, at least in that sense, in the last 10 to 15 years.
Rich Rosa: Yes.
Rick Shaffer: Our guest this afternoon is Rich Rosa who is founder in Buyers Brokers Only LLC. We'll take a break, we'll come back and continue our conversation with him, right here on the best money show on radio on Boston Herald Radio.
Recording: Because human genius has now destroyed the impediment of the terrestrial radio. Boston Herald Radio. Boston Herald Radio. Now, the Money Show with Rick Shaffer and Susan Kaplan.
Rick Shaffer: Welcome back. Our guest this afternoon is Rich Rosa who is one of the founders and also a broker at Buyers Brokers Only LLC. There are a lot of good reasons having buyer's broker, but I think we've established that the biggest reason is that the buyer has someone who's allegiance, and who is looking out for the best interest solely of the seller, just like the seller's agent is looking out for the best interest of the seller. What that is really is a fiduciary duty. Explain what in legal terms or in layman's terms, actually, what a fiduciary duty is, Rich.
Rich Rosa: It's a duty to the party you represent to your client, a duty to act on their behalf, and in their best interest.
Rick Shaffer: We were talking about dual agencies before. Are there any benefits to ... I can't see it, but are there any benefits from the buyer's standpoint of a dual agency?
Rich Rosa: Obviously I'm biased, but I can't think of any either.
Rick Shaffer: I agree with you. I don't think that's biased at all. You point out in your literature that despite the advantage of it, many buyers still don't hire buyer's brokers. Two questions, do you have at any ... Do you even know or have a guesstimate as to what percentage of buyers do hire buyer's brokers? Whatever the percentage is, do you know why the people who don't hire buyer's brokers don't?
Rich Rosa: I think if I had to do a estimate, I would say probably about 75 percent or so of transactions include both a listing agent and a buyer agent.
Rick Shaffer: Really? It's gotten that high.
Rich Rosa: I think it is probably that high. The difference so is that a very small percentage of that is exclusive buyer agents. To answer your question as to why people don't do it, I think there's still disbelief that somehow they're going to get a better deal if they don't have a buyer agent. I think some people just haven't done their homework and don't understand the benefit of having a buyer agent. I think when most people understand why they should have a buyer agent, and most people understand what the benefits of working with an exclusive buyer agent is, they chose to go that route. I think it's just a matter of ... I know you said on the show many times that people will do quite a bit of research to buy a $40,000 car, but not so much for a $400,000 house. I think that's the case.
Rick Shaffer: Yeah, I agree. It amazes me how little research people do when they're buying for what 90% of the people in the world is the most expensive thing they're going to buy, or if they buy a number of homes in their life time, or sell a number of homes in their life time. They don't do their research. Let me just get it straight. You said you'd guess that 75% of people use a buyer's broker, but only a small percentage of those use exclusive buyer's brokers, which, I agree with you, is really the way to go, but a lot of people think they get a better deal if they do a designated buyer broker. Correct?
Rich Rosa: Well, they think they're going to get a better deal. It's not like the traditional real estate firms are talking to clients about exclusive buyer agents. They're just telling them, "We could be your buyer agent", and that's pretty much the conversation. They're obviously not talking to them about the difference between the designated buyer agent and an exclusive buyer agent. The other thing is there's not many of us. Less than 1% of the real estate agency in Massachusetts are exclusive buyer agent. Most traditional firms want to be able to get all sides of the transaction, so that's how they operate their company.
Rick Shaffer: I would assume that you certainly and that you expected that the number of exclusive buyer agents only, not just having the same name, but what that describes is going to increase as people become more and more aware of the benefits of having an exclusive buyer agent.
Rich Rosa: I hope so. Dave and I are trying. We've added about 20 or so exclusive buyer agents in the last 5 or 6 years.
Rick Shaffer: I would assume that in addition to the other things that an exclusive buyer agent does, they can also help point buyers in the direction of good professionals like a property inspector, an attorney, and a lender that they can use.
Rich Rosa: Yes absolutely. We helped our client's recommendations for all of those things, lenders, attorneys, home inspectors, insurance agents. Not just say, "Hey, go hire this man or go hire this woman", but explain to them what they should be looking for, the questions they should be asking all those other professionals, and trying to help them get a good understanding of what to expect when they call up these people. Especially the financing part of it, that could be very complicated. There's a lot of misinformation floating around out there. We spend ... I spend a lot of time with my clients, talking to them about mortgages and things that they should be looking out for.
There's a lot of mortgage programs too. Sometimes, you go talk to a mortgage person, and for whatever reason, they're pushing people towards one program or another. Sometimes, it might not be the best program for that particular buyer. We try to just give them all the information, so that they could at least ask the question when they're talking with their mortgage person.
Rick Shaffer: Whenever I tell a seller to get a seller's broker, I tell them one of the most important things is the seller's broker can help them ascertain what a fair asking price for their property is. I would assume that as a buyer's broker, you're as aware of the market as a seller's broker is, that you, one of the things that you help buyers with is figuring out what a fair offering price for a particular property is as well. Correct?
Rich Rosa: Yes. That's a big part of what we do. We call it a CMA, which stands for comparative market analysis. Brokers do it different ways. I like to actually download all the data into a spreadsheet for my clients. I'm not just telling them that I think a property is worth X amount of money, but I actually give them all the data, and say, "This is how I came to that conclusion." It's not just a question of saying, "Well, this is what the property is worth", but it's also, "Okay. How are we going to get ... How are we going to negotiate this? What's the strategy?"
I tell clients all the time. It's important to have a negotiation strategy. Buyers and sellers sometimes get very emotional about the negotiation process.
Rick Shaffer: Yes, they do.
Rich Rosa: What I try to explain to buyers is, "Look, it's a business transaction. You want the best price, they want the highest price. If you have a strategy and just stick to it, it'll take the emotion out of it." I do talk to my clients a lot about not just what the property is worth, but we should go about negotiating. There's so many factors that go into what someone should offer and what's ultimately the agreed upon price is going to be.
Rick Shaffer: A: You took the words right out of my mouth. B: One of the reasons, again, why I tell people to get an attorney is for exactly the reason you're talking about. In this case, if you have a broker doing the negotiation, it's even better. It takes even more of the emotions out. As you said, you want to look at it as a business transaction, not an emotional one. Let's segue into Buyers Brokers LLC itself. You told us how it was established. How long have you been around?
Rich Rosa: It'll be 10 years in November.
Rick Shaffer: Okay. You get a lot of experience under your belts. How many brokers does Buyers LLC employ, and what geographic areas do you cover? Do you cover all of Massachusetts and even New Hampshire?
Rich Rosa: We have ... I think including Dave and I, there's 24 of us now. We cover Eastern Massachusetts, Boston, the North Shore, South Shore, MetroWest, Central Mass, and Southern New Hampshire.
Rick Shaffer: You've gotten to be pretty big. Before we go to a break, one other question. All of the buyer's brokers that Buyers Brokers LLC are attorneys, correct?
Rich Rosa: Yeah. Everybody at Buyers Brokers Only is a licensed attorney. We only use attorneys as our exclusive buyer agents.
Rick Shaffer: By law, you don't have to do that obviously, but you've decided to. I think it's a great idea, but why did you decide to do so?
Rich Rosa: When Dave and I started the company, we were both attorneys obviously. As we start to expand, we worked alone for a couple of years. The feedback we got from clients was that they really appreciated our knowledge we had about real estate, from going to law school and things like that. We thought that we wanted to really keep that same level of professionalism throughout the company, so we decided to only employ attorneys.
Rick Shaffer: Frankly, I think it's great. Now, you don't act as their real estate attorney. You, in fact, will get into a program you have, are refund program. You urge your clients to also get a real estate attorney, to represent them, correct?
Rich Rosa: Yeah. That's true. We do not do any ... We don't provide any legal advice. We're not a law firm. We're a real estate firm. We encourage all of our clients to get attorneys. It's very important to get an attorney. As you know, as an attorney who does real estate, the purchase and sale agreement that every buyer is going to sign at some point is very seller focused. A good real estate attorney is going to make quite a few modifications to that, and it's important that buyers are protected.
Rick Shaffer: You're 100% right on that. I've got an addendum whenever I represent a buyer that's longer than the purchase and sale agreement itself simply for that reason, because the standard purchase and sale agreement is very much seller oriented. Our guest is Rich Rosa who is both one of the founders and a member of Buyers Brokers Only LLC. We have to take a break. We'll come back and continue our conversation with him right here on the best money show on radio on Boston Herald Radio.
Recording: Boston Herald Radio News will take you up to Lansdowne out to Upton, and back to the waterfront. Now, the one show with Rick Shaffer and Susan Kaplan.
Rick Shaffer: Welcome and welcome back. Our guest this afternoon is Rich Rosa, my English is failing me at the end here, who is one of the founders and is also a broker at BuyersBrokersOnly.com who are our exclusive buyer agents. If you're just looking to buy a home, you really should get one. A couple of things. We're up against the clock, but there's a few things I definitely want to get through. We mentioned that although all of your brokers are attorneys, you don't act as attorney. In fact, you give a portion of your commission to the buyers to help offset the cost of a buyer hiring an attorney. Is that correct?
Rich Rosa: Yes. That's what we do. We don't act as attorneys, and the reason why we don't act as attorneys is because we're trying to provide a business model that is as conflict free as possible. We don't want to be both the attorney and the buyer agent, but we do want people to hire an attorney. It's so important. What we do is we give a small portion of the commission back to our buyers after closing, so they could offset the cost of the attorney's fees. Basically, we rebate it based on the price of the house, and it's either $200, $350, or $500.
Rick Shaffer: That's an excellent idea. I complement you for coming up with that idea. You also have ... If someone hires Buyers Brokers Only, you have a free home for sales email program. Explain what that is.
Rich Rosa: Sure. Anybody who comes to our website and wants to see the latest listings, they could simply sign for them, and we're happy to set up what's called an MLS account. With that account, they'll be able to put in a specific search criteria, what city or town they're interested in, what price range. They'll get a daily email that tells them any new properties that come on the market that meet their criteria, and also when there's any price drops.
Rick Shaffer: How long is the contract that a client, a buyer, signs with Buyers Brokers Only for? For example, I usually tell sellers to only sign 3, 4, 5 months at most, of contract with the seller's agent. How long is the contract between a buyer's agent and the buyer?
Rich Rosa: This is another thing that makes us a little bit different. Our feeling has always been that those contracts really have one purpose, and that's to keep buyers working with a particular agent for a particular amount of time. Others would argue that it provides the buyer with some guidelines as to what the buyer agent's responsibilities are, but we don't require a contract. My feeling has always been that we're going to give 110 percent. For any reason a buyer doesn't think it's a good fit, we don't think they should be stuck with us. They should be able to move on.
Our goal with every client is that when they finish at the closing table, they can't wait to go tell a friend, or family member, or a coworker about us. That's our goal. We don't want any unhappy clients who feel like they were stuck with us, so we don't require a contract. Some people in the business think we're crazy for not having buyers sign a contract, but we don't. There are some things that buyers have to sign. There's some disclosures.
The state of Massachusetts a has form called the Massachusetts Mandatory Licensee Disclosure Form, which all real estate agents have to give the clients to explain to them what kind of real estate agent they are.
Rick Shaffer: Frankly, I don't think you're crazy at all, because one of the things I talk about on this show is basically customer service. Companies that give great customer service tend to ... It comes back in spades, because people will, basically by word of mouth, say "If you're going to hire, use this type of company. Then you should go to them." I think the fact that you don't force people to sign a contract is a great idea, and I think it'll serve you well. Congratulations again.
Rich Rosa: Thank you. I should say one thing. The state in New Hampshire has a law that requires a contract, so what we do in New Hampshire is that we have a contract that says they could terminate the contract at any time in writing.
Rick Shaffer: Basically, they can terminate it anytime they want, they just have to give you a written notice, and it's done.
Rich Rosa: Then we have to give them a written contract. It's essentially the same thing, but it's required in New Hampshire that it'd be in writing.
Rick Shaffer: We've only got about 2 minutes left, so I'm going to give you ... I feel ... Frankly, as I told you, have come around to being ... I didn't use to be, but I come around to being in favor of buyer's brokers. Frankly, the research I did on Buyers Brokers Only, I was very impressed with, but having talk to you ... I will tell you, I don't give out compliments like this unless I mean it. I really like the way you guys have basically set up your business mode. You've done a great job. Here's a softball for you.
Rich Rosa: Thank you.
Rick Shaffer: In as many words as you can get out in a couple of minutes, why do you think people should hire Buyers Brokers Only LLC, as opposed to another buyer's broker, when they hire if they're buying a piece of property and they need a buyer's broker, and I think people do?
Rich Rosa: I think first and foremost, people should really consider hiring an exclusive buyer agent, whether it's Buyers Brokers Only or whether it's another exclusive buyer agent. I think that buyers owe it to themselves to do their homework and to talk to at least one exclusive buyer agent. I hope it'll be one of my brokers, but if it's not, it's still important, that I think that when you talk to agents, talk to an exclusive buyer agent, and understand the difference.
What I would say about our company is I tell all my brokers, "The only thing I like you to do is do what's best for you client, whether it means more work and less money. It doesn't matter." Like you said, good customer service pays off. We've earned the Angie's List Super Service Award in 2010, 12, 13, and 14. We have an A rating on Angie's list. On Yelp, we have a 5-star rating. We have more 5-star reviews than any other real estate company in the state on Yelp. We're proud of that.
I tell all my agents that, "The only thing that'll get me mad is if you get a rating that's not an A or not a 5-star."
Rick Shaffer: Rich, you've done a great job. I really do congratulate you. We got to run, but before you do, tell people how they can get in touch with you or somebody at Buyers Brokers Only.
Rich Rosa: Sure. They could go to BuyersBrokersOnly.com. That's buyers with an S, brokers with an S, only.com. They can follow us on Facebook, Facebook.com/BBOLLC. If they have general questions, they can call 978-835-5906.
Rick Shaffer: Very quickly, give out the email address and the phone number one more time.
Rich Rosa: Sure. The Web site address is BuyersBrokersOnly.com, and the phone number is 978-835-5906.
Rick Shaffer: Rich Rosa, who is founder and one of the brokers at BuyersBrokersOnly.com, a pleasure talking to you, a pleasure talking to somebody who's got the right idea on how to run a business. I will look forward to talking to you again, and best of luck with Buyers Broker. I know you've done well so far, but continued success with Buyers Brokers Only in the future.
Thank you very much for joining us. I'm Rick Shaffer, I'll see you Monday at 4, right here on the best money show on radio on Boston Herald Radio.