Buyer Question of the Day
BUYER REPRESENTATION 2016
Dual Agency - Agents Representing the Bride and the Mistress?
A first-time home buyer once posed the question to me as to what the drawbacks were when using the seller's agent to save the seller commission costs in the hopes of possibly gaining favor with them. The answer is very controversial and almost always draws passionately opposing views, mostly from agents who either loathe the practice and others who relish it. I will disclaim that you are about to read is simply my opinion.
Dual agency is when a listing agent/brokerage represents both the buyer and seller in the same real estate transaction. It is legal in CA and must be agreed upon in writing by both parties. In spite of this, it always surprises me that even the most savvy of first-time home buyers will not seek out their own buyer representation from someone who has limited to no interest in the seller's side of the transaction. The buyers have been led to believe somehow that they will save so much more more money if the seller will consider their offer above others due to the "lowered commission" given to the one listing agent.
WHO BENEFITS THE MOST FROM DUAL AGENCY? There is one party giving the money (buyer) and another party(ies) getting paid the money (seller). Who has the most to lose in that scenario? To make things worse, a home buyer can decide to forego exclusive representation, and opt instead for limited representation by hiring the listing agent who is already contractually obligated with a fudiciary duty to the seller to get them the highest and best offer possible at the best terms available. Hm. In addition to that, a buyer must also take into consideration that if the seller needs to buy another home after the sale of their current house, who are the sellers most likely to use as their agent? You guessed it, the same person the buyer called their agent. It's a tough enough job being a listing agent solely representing the seller, let alone adding a home buyer into the mix. The buyer at that point can never be truly sure as to whether or not they were represented by someone who had their best interests at heart because they already know for sure the agent didn't solely have it. Not to categorically state that a listing agent can't with all sincerity try their best to take an unbias and neutral role post-listing contract in an attempt to make both parties happy (I know some great agents that practice this, but not without great difficulty), however, it can become very tricky as each party pushes the agent to make demands on their behalf. The liability of dual agency is so great, that many states have discontinued the practice of dual agency altogether. Besides, what first time home buyer wants a "neutral" agent representing them in the biggest investment of their life anyway?
"Do You Listing Agent, Hereby Swear to Get The Seller As Much Money as Possible on the Asking Price of Their Home? I DO.
WHY A BUYER NEEDS EXCLUSIVE REPRESENTATION
Home buyers often do not know or fail to remember that the listing agent worked for the seller FIRST. He/she had a pre-established contractual relationship with the seller before they came on the scene. The listing agent is someone that is already considered "taken." The listing agent has already by deed and action impressed upon the seller how they will get them the most money possible for their home, as they should.
Then here comes the cute, innocent flirtatious first-time home buyer walking into that agent's open house or calling their number on the lawn sign without their own agent's present.
I liken the buyer in that particular situation to a mistress. The listing agent is already "married" to the seller. In most cases, someone will get the first fruits, the other will get what's left. Oh it can be very exciting at first when that buyer appears to be getting all of the attention, but once the moving dust has settled, then what? The doubt increases even more, if and when after the close of escrow the listing agent then becomes the seller's buyer representation. It may not be a bad idea to ask the agent if he/she will be representing the seller in their next transaction and if so, how hard can they possibly work for you and get you the best deal without upsetting the seller who is expecting the highest and best negotiations from them?
I would be remiss in not admitting that there has easily been a time or two, even recently, when I was the listing agent and wished I had simply went ahead and represented the buyers as well. If for anything else, to control every facet of a deal that had otherwise gone haywire. But I simply cannot bring myself to be either side's "neutral," watered-down version of representation. When I am the listing agent, I aggressively represent the seller and make every attempt to get the seller the highest and best offer possible. When I represent the home buyer, I aggressively pursue getting the home buyer the lowest purchase price possible with as little out-of-pocket costs to them. So how could I or any agent do both aggressively? In my opinion, they can't.
Apparently I'm not the only one who believes so. This quote from the National Association of Realtors says it all:
“Dual agency is a totally inappropriate agency relationship for real estate brokers to create as a matter of general business practice…The disclosures and consents necessary to make a dual agency lawful are so comprehensive and specific that a typical real estate broker cannot undertake them as a matter of routine.” Pg 10 of NAR's "Who Is My Client" A Realtor's Guide To Compliance with the Law of Agencycirca 1986
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