Many buyers think they can buy a house without a Realtor because they think it is better to work directly with the listing agent (seller’s representative) when buying a home.
What is Dual Agency?
When a broker represents both seller and buyer in a home purchase it is called Dual Agency. You might assume this means a single person representing both sides, but in California dual agency is when the same brokerage represents both parties. Most people are comfortable with two different people within the same brokerage (for example, Coldwell Banker is a brokerage), but when only one person is involved it is less clear. For purposes of this article, we assume the same person is representing buyer and seller.
There are many reasons people prefer buying a house without a real estate agent.
When you buy a home without a real estate agent you are working with the listing agent. In California, a buyer can not buy a home without representation. If a buyer does not have their own agent the listing, or seller’s agent is automatically a dual agent.
Dual agency has direct communication with the seller will get better results. Some buyers distrust the idea of intermediaries. They believe everyone would be happier if all parties sat down to “talk turkey”.
The agent will negotiate a lower price. The buyer believes the agent will convince the seller to sell the home for a lower price in order to make a larger commission.
The agent will rebate a part of their commission. The buyer believes the agent will do a “volume discount” if they represent both sides. They assume there is little extra work in dual representation.
The agent will give them a competitive edge. Multiple offer situations are very stressful. The buyer believes the seller’s agent will give them exclusive “inside information” that will help them beat out the competition.
Much of the above is true.
There are a LOT of starving real estate agents. Is it too crazy to imagine some of them might cut a few corners in order to make a buck?
But- are you completely sure this will always be in your favor?
Dual Agency Myths – BUSTED
You might make the mistake of thinking a home purchase is no different from buying a car. You find a home with the right features, get a loan from the bank, fill out some legal documents and boom – new home.
However, unless you buy a home in a new development, there is very little that is consistent in each home sale. A home could have severe hidden defects or a homeowner might suffer from the beginnings of dementia.
A dual agent who is motivated by extra money isn’t representing the buyer OR the seller. They are representing their own selfish interests.
What does Representation Mean?
In California, every Realtor has a fiduciary relationship with the party they represent. Fiduciary relationship means that the agent must represent their client’s interests as if they were their own.
A Buyer’s Agent owes a fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Buyer.
A Seller’s Agent (Listing Agent) owes a fiduciary duty of utmost care, integrity, honesty and loyalty in dealings with the Seller.
A dual agency represents both buyer and seller they can’t disclose anything that might hurt the interests of either party.
ex. Let’s say an agent finds out the seller might be willing to accept a low price on the house. A dual agent can’t disclose this to the buyer but an agent representing the buyer exclusively must disclose this to the buyer.
See the difference?
How Dual Agency Is A Mistake
You will not get a “better deal” with a commission rebate. A commission rebate is a relatively small amount of money compared to the money saved during a skilled negotiation. Skilled negotiators will negotiate for themselves, unskilled negotiators give rebates.
Why would you trust an agent who sells the seller down the river? It is rare, but possible, for a dual agent to manipulate a lower price for their own buyer. This is straight up evil, and you can’t trust an agent like that. You should not assume you can protect yourself during that transaction.
You are not in control of the negotiation. Written offers and counteroffers are a small fraction of all the negotiations that happen during a home sale. There are numerous conversations outside of your hearing during a home sale process. Each of those conversations can have a huge effect on your outcome.
The “secret listing” is a come on. It is true that top agents are always getting a few homes ready to go on the market. But why would a seller lose the opportunity of selling on the open market? It only makes sense if the agent thinks you will pay more than the market price or there is something wrong with the home.
The “deal” is more important than you. Dual agency means the agent loses a lot of money if you don’t buy this home. This means they have a big incentive to withhold information, shade the facts, or out and out lie to make sure you buy this home and no other.
You won’t get the whole scoop. A dual agent is legally prevented from telling you everything they might know. So – all that information you need to find negotiation leverage? You are not going to get it.
Who has the stronger relationship? A listing agent has probably know their seller for a lot longer than they have known you. Chances are high that the seller has already referred friends and family to that listing agent. Is it crazy to think the agent has an unconscious bias toward the seller’s best interests and not yours?
Find out what a great buyer’s agent can do for you or just contact us directly – 818-482-1885 direct or text 818-946-0106. We always promise straight talk, no sales talk.