5.3 Buyer’s Agent Duties

Educating the buyer

Depending on the experience level of the client the new buyer consultation may take different routes but in general, it will be a high-level overview to strategize different investment models, showing them how to use tools to support their needs, and connecting them with ongoing learning opportunities.

Support tools

• Your network
• MLS
• Vrolio proforma
• Vacation rental consultants
• Vacation Rental Formula

It’s important not to make any promises, or guarantees of rental income potential, or occupancy.  While you can provide actual statistics and figures from tourism boards and introduce them to historical data sets available online, don’t make estimates of what they could possibly earn.

Your job is to help your client to evaluate each opportunity by providing an unbiased review of the financials provided by the seller, so always back up the numbers and stay conservative.  The Vrolio proforma provides the structure for creating a fair picture of the property’s potential.

Negotiating the Contract

Mortgages

Furniture can cause appraisal issues on any loan if not valued properly.

Mention of rental income in contracts can be red flags to underwriting on a second home loan, so investment property loans are the safest option for vacation rental sales.

The risks of a second home loan should be explained to a buyer as they do not offer buyer protection on a turnkey purchase.

Furniture

Discuss whether the furniture is worth keeping at all and take note of the condition of the furniture when showing the home.  Look for wear on couches and chairs, check the mattresses for stains and bedding for wear and tear. If the property has been used as a rental it may have been through countless rental guests and in need of full replacement.  In educating the buyer, make sure they are aware of the high standards expected by rental guests and that renting a property with inferior furniture and furnishings can result in poor reviews.

• Ensure a property valuation of the included furniture.
• Create a video inventory to record everything that is included.

Bookings and marketing collateral

All items transferring in the contract should be in the contract and include:

• Rental profiles
• Websites
• Social media accounts
• Email lists
• Future bookings
• Media – branding etc
• Advance deposits must transfer to the new buyer at close

The inspection period

This is more than just a home inspection – it is a business requiring due diligence to ensure everything has been covered.  During this time the buyer will secure quotes and contracts with service providers, property management companies, vendors etc.

They need to understand all management fees, start-up costs.

Accessibility must be factored into the contract in the case of a property being rented so ensure this is taken care of with extensions granted and time available for study of reports.

During this time the owner must supply all income and expense documentation, booking records, income history, expense and utility information.

Creative negotiating

If the seller is unwilling to close at the buyer’s price that you and the buyer feels is reasonable, you might want to consider some options such as:

• Offer the seller a week stay after closing in the slow season
• Requesting the seller stay on to coach the buyer
• Lease options with seller profit sharing for longer closings
• Seller financing if the ROI is higher than the rental income

Management introductions

If a client has no interest in the DIY model of short-term rental and you have explained the benefits and drawbacks of each model explained in Modules 2.4 and 3.4, you will need to introduce them to some property management options.  The best course of action is to remain neutral and not show any bias towards a specific manager.

• Give more than one option before they put in an offer- at least 3 – and remain unbiased.
• Any kickbacks must be disclosed – this is an ethical issue as well as a legal issue.
• Provide a list of questions to ask managers (See Resource Guide for list of sample questions)

Staying management neutral removes you from post-sale blame; the client views you as an unbiased advisor, and it protects your reputation if anything happens to the management company.  It also allows you to see the sale from the client’s perspective.