The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Holyoak on April 19, 2015, 05:56:01 PM
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There is an home I like, where the agent claims himself the listing/selling and buying agent? I can see both ways how this could work, or could not, depending on the agents integrity, and the law. What do you all think, what has been your experience, and how should I proceed? I do not have buying agent of my own, FWIW.
Thank you.
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What area of the country are you in? Practices/laws vary greatly by state.
This is allowed in my state but not many agents practice dual agency because of its inherent conflict of interest (how can you have one party's "best interests" at heart when you have the other's?). What I do (and many others I know) is if I'm listing a home and a buyer approaches me without an agent, I typically refer them to another buyer agent within the same firm (this is called designated dual agency, as in this case the brokerage firm would be acting as the "dual" agent with the individual agents as sub-agents).
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I think it's fine as long as you are an educated buyer and understand that the agent isn't working for you. Do your homework and when you offer a price below asking, ask the agent to reduce the fee because there is no buying agent to split the commission with
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I bought my first house this way when I was 22 and naive.. I didn't have an agent and went to an open house so he played the buying & selling agent. There were multiple offers so since he gave them a discount as buying & selling agent I won the bid.
Seller had some health problems so they delayed the closing by a month which was a inconvenience to me (I had already lined up moving help, was about to vacate my apartment) Since the agent was directly paid by them, they tried not to give me anything so I had a lawyer send a letter and I was able to have expenses covered for the delay.
Can't you just get an agent so you have some protection?
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Bought my first house (in FL) at 29 and listing agent served as my agent. Not the way to go. Agent was a complete scumbag.
In Florida, they have a "transition to transaction broker" process, which might make it look official, but still smells fishy. This was one of several things I found so frustrating about buying a home that a couple of years later I took a real estate course and got licensed. When we got to the "transition to transaction broker" portion of the program, I raised some serious objections -- the same reasonable questions you and others would raise -- and the teacher, a longtime broker, blew me off, very patronizing.
To which I could have argued, "Yeah, dude, but in two weeks I've become licensed to do what you've been doing all these years and I'll do it in a more ethical manner."
I never intended to sell real estate - and never have - but it was good for my real estate education and I've dutifully renewed it every two years since 2001.
Always have your own agent.
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The first home I put an offer on (and was under contract for) was with an agent that I found through an open house. When I started to get serious about an offer, he started talking about not needing an inspection, since the home already had one from a previous failed contract. That didn't sit well with me, so I found an independent agent, and made my offer with her. He was NOT happy about losing the double commission. Negotiations were horrible, but we finally came to an agreement. When the inspection came back, we found that NONE of the previous findings were actually fixed, and the inspector found that the carport was in the process of collapsing; all of the support beams had rusted through and falling over an inch. Findings were estimated in excess of $10,000. When we went to negotiate a fix, he said, in law-ese, that since the contract stated inspection findings exceeding $3,000, they would give us that money off the purchase price and no other negotiations would occur. My agent was smarter than that and got me out of the contract with my earnest money (returned 5 WEEKS later). That guy was a jerk.
This was an extreme case, especially since the broker was a friend of the seller, but I came out of it with a hard and fast rule: Never go with the same person on both sides.
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I have not worked w/ a realtor under these conditions - and I would not do it. There is no reason you can't get your own realtor (from another company) to represent you in a purchase. Since the seller pays both realtors, you have no cost to you for using your own realtor.
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The listing agent works for the seller. In a typical sale, a 6% commission funded by the seller is split 3% each to the buyer and the seller agent. A motivated listing agent will try to bring buyers to the table, which is his job as the listing agent. He's trying to take both sides of the deal, because he brought the buyer (you) to the table.
There is nothing inherently risky or wrong about this - someone wants to sell you something, and you want to buy it. The agent is handling the sale and busting his butt to run open houses and find buyers (you). Normally, you would hire an agent of your own (a buyer's agent) to help you find a house. That buyer's agent would then get 3% of the deal in exchange for finding a buyer for the deal. Open houses are one of the best tools listing agents have to find buyers, not just for the house you looked at, but other ones, too.
You obviously should not ask his advice on "how low the seller will go" or "are there any other interested buyers?" because you will not get a truthful response. The relationship and incentives in dual agency really do not permit that. But if you're comfortable that the house is reasonably priced, you can move forward with the purchase. Just understand that the agent works for the seller, not for you.
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Pretty much all agents work for the seller anyway. Doesn't matter if you have your own. Proceed accordingly.
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That's generally true in practice, since unless a sale happens, nobody gets paid. However, legally speaking, it is not true that all agents work for the seller. A buyer's agent has a fiduciary responsibility to you, the buyer. A dual agent has a very murky fiduciary responsibility, and I will admit that I do not fully understand how someone can have a fiduciary responsibility to both parties on the same transaction and fully discharge their responsibilities. (This is why other posters were warning the OP against accepting dual agency.)
I have met very ethical real estate agents, who take these duties very seriously, but a shockingly large number of agents do real estate as a side hustle or retirement job where they do not take it very seriously, and many more still who play fast and loose with the ethics, knowing that oversight and penalties are very rare.
If you are interested in reading more on this, http://www.realtor.org/sites/default/files/handouts-and-brochures/2014/nar-fiduciary-duty-032213.pdf