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I Would Never Allow the Same Agent to Represent Seller and Buyer!

There is no good reason I can think of where putting in an offer on a house with the agent that has listed it.  Unfortunately, some people still believe that they are going to “get a better deal”  or the transaction will go smoother if they deal directly with the Listing Agent.  Knowing what I do now about the real estate industry and witnessing deals that were “double-ended” by the same agent, I WOULD NEVER choose a real estate agent that has ever double-ended a transaction to represent me. Our industry has this perception by some that we’re used car salespeople and the agents that double-end transactions are prime examples why this perception exists.  While California allows dual agency (the official term for double-ending), other states don’t. But just because it’s legal in California doesn’t mean it’s the right thing for an agent to do for a client.  An agent that double-ends the transaction is doing it because they will make twice the commission, not because they are wanting to provide the best service for the Seller or Buyer. In fact, what most people don’t realize is that once a dual agency is formed, that agent’s service ends for the Seller and Buyer because they can no longer give advice as that’s illegal. For the Buyer and Seller, the agent becomes a contract administrator only and that’s all they can be per the law.

When a Seller hires an agent to list their home, one would expect they are paying the agent to represent their best interests and get the best possible price for the home. The agent would be working 100% for the Seller.  Similarly, a Buyer’s Agent represents the Buyer 100% and is working for the Buyer’s best interests.  When a Buyer goes to a Listing Agent to submit an offer, dual agency is in effect as the agent is now representing both the Buyer and Seller. This means that the agent can no longer represent the Seller 100%.  The only allowable representation is 50% for the Buyer and 50% for the Seller which means that the agent has to legally stay neutral.  The agent can no longer give ANY advice to either party. For the Seller, the agent can no longer represent their best interests to get the best possible price for the home as that is illegal in a Dual Agency.  All the agent can do is provide facts to both parties, but no advice or opinions.  If they do provide advice, then the agent can be sued by either the Buyer or Seller and a complaint can be filed with the Department of Real Estate and they may lose their license. What’s worse is that the Buyer or Seller can also sue the other party too (not just the agent) if dual agency was violated.  Who needs all this mess??

So questions like the following CAN”T  be answered by an agent in a dual agency transaction as it’s illegal:

  • How much should we offer?
  • How motivated are the Sellers?
  • What do you think their bottom price is?
  • Should we ask for closing costs in the offer?
  • Have they had any other offers? What were they?
  • How much is the Buyer qualified for?
  • Should we ask for the appliances?
  • How much should we counter back?
  • What contingencies should we include?
  • What repairs should we ask for?
  • What repairs should we agree to?
  • How emotionally tied are the Buyers to my home?
  • This offer is real low, should we even counter back?
  • This isn’t feeling right, should we just walk from this home and look for another?

If an agent can’t provide advice then you risk not getting the best price or having something happen in escrow that makes the deal fall apart because the agent’s hands are tied to try to negotiate.

If you’re a Seller, why would you even let your Listing Agent not represent you and your interests 100%?  From what I’ve seen with dual agency transactions, the Listing Agent’s #1 priority becomes making the deal happen so they get paid twice the commission. That’s the cause of “sleazy” things like telling one party confidential info about the other party.  I’ve also witnessed a situation where there were multiple bids for new listing, one being from a Buyer through the Listing Agent. The agent didn’t return calls from the other agents that had submitted offers because the agent was stalling for time to get their Buyer’s offer submitted. The agent pushed their own offer and probably cost the Seller’s $10-$15K because the priority for that agent was to get their offer accepted and not to use the multiple bids to negotiate a higher price for the Seller.

If you’re a Buyer, why would you think the Listing Agent is going to work in your best interest when they already have a relationship with the Seller?  Get yourself a good Buyer’s Agent that knows the area where you want to live and is a good negotiator.  Being a Buyer with your own Buyer’s agent means your agent can go find you another home. Just this fact is a powerful negotiating tool, one you don’t have if you use the Listing Agent to put in the offer.

If a Listing Agent did get an interested Buyer, there is an easy solution. They can refer the Buyer to another Agent and get a referral fee (typically 25% of the Buyer Agent’s commission).  Having another agent representing the Buyer means that the Listing Agent is still working 100% for the Seller.  If the other agent is ethical, there shouldn’t be any exchange of confidential info.  You can even ask that the Buyer agent be someone from another Brokerage if you think that the Buyer’s agent they pick is too close of a friend of the Listing Agent. The Listing Agent ends up getting a piece of the Buyer Agent’s commission and both the Buyer and Seller are represented 100% by their respective agents!

If you are selling your house, make sure you add something to the listing agreement that says that the Listing Agent will not represent the Buyer or anything else you desire to say.  It’s good to put this upfront so you won’t have to deal with it when an offer comes in.  The Seller has the most to lose, IMO, as the Buyer looking for a dual agency has the expectation that the Listing Agent will give them information that gets them a better deal. And if you’re interviewing agents to list your home, ask the question “How many homes have you double-ended?”.   If they have, they’ll probably get a proud look on their face and tell you the number. That’s because in real estate offices where greed is king, it’s a feather in an agent’s cap to double-end a listing.  What I would do at that point, is just show the agent the door.

Written by Keith Byrd - Go to Keith's Website/Profile