Last time we covered Real Estate Myth 1, explaining how a Buyer’s Agent does not cost a buyer any additional money. This week we are going to cover another popular myth that ‘smart’ buyers swear by:
Real Estate Myth 2 – I will get a better deal or have a better chance if I go directly to the Listing Agent
Buyers who have been in the real estate game for some time may be familiar with the idea of going to the Listing Agent directly in order to ‘secure’ the sale. The idea here is that since one agent will handle the transaction for both parties, the commission can be reduced. How awesome would it be for you as a buyer to go directly to the Listing Agent and negotiate a lower price, in the form of a reduced commission, resulting in lower costs to both you (the buyer) and the seller as well as more in total profit for the agent? Sounds like a great idea, right? Win-win? Heck, while we’re at it, lets suggest that criminals be represented by the same DA that is prosecuting against them. Doesn’t that sound like a great way to save money? Uh… no, not really!
Having one agent represent both buyer and seller is known as Dual Agency. It is perfectly legal and happens all the time in real estate. However, it is a tight rope for all parties involved to navigate with no guarantee of monetary savings. One slip and it could all come crashing down in catastrophic fashion. When push comes to shove, whose side will the agent take? I know of a hand-full of agents who have been sued due to the fact that one party felt they were not represented adequately. Although you might save some money, you will be giving up something much more valuable, Fiduciary Duty.
Your agent is supposed to protect you legally and work for your interests during a transaction. This is also known as fiduciary duties: As a fiduciary, a real estate broker/agent will be held under the law to owe certain specific duties to his principal (buyer and/or seller), in addition to any duties or obligations set forth in a listing/purchase agreement or other contract of employment. These specific fiduciary duties include: Loyalty, Confidentiality, Disclosure, Obedience, Reasonable care and diligence, and Accounting.
Like in my previous example, a lawyer can’t prosecute and defend at the same time. Although Dual Agency is perfectly legal, it can easily be labeled as conflict of interest for obvious reasons. This post is not meant to discourage buyers from working with a Listing Agent. There are many agents that successfully navigate transactions while working both sides of the deal. My goal here is to simply EDUCATE you on the implications these transactions carry and how much value a Buyer’s Agent can bring to the table. As a buyer, you open yourself up to unnecessary risks when working with a Listing Agent in order to save yourself a few dollars because at the end of the day, they represent the seller first and the buyer second.