When looking to purchase real estate, some home shoppers will call the listing agent who posted the property for sale. This could prove to be a costly mistake for the potential home buyer since their objective will be to pay as little as possible and the listing agent was previously hired by the existing homeowners to sell the property at top dollar.
The 3 Types of Realtor Representation
A Realtor may represent a client in one of three ways, as a buyer’s agent, a seller’s agent, or a disclosed dual agent. If the realtor represents only the buyers then they are the buyer’s agent and if they represent only the sellers then they are the seller’s agent. If they represent both buyer and seller they are the disclosed dual agent. Buyers and sellers agents are cut and dry, but the disclosed dual agency can get a bit tricky with its pros and cons.
How a Dual Disclosed Agency Occurs
If a potential home buyer doesn’t hire their own buyer’s agent and uses the sellers listing agent to purchase the property, the realtor becomes a disclosed dual agent and now works for both buyer and seller. The realtor has a moral obligation to do what’s best for each client; however, it’s “First Come First Serve” and they have a fiduciary responsibility to work towards the best interest of the client that hired them first, which most often will be the home seller.
Some Pros
- One realtor representing both parties in the transaction can make it go smoother and quicker.
- In a seller’s market a dual agency can give the buyer an advantage over buyers being represented by outside buyer’s agents.
- The seller obtains an opportunity to reduce the commission if necessary since it’s no longer going to be split with another agency.
Some Cons
- Realtors acting as disclosed dual agents are not allowed to release confidential information about the buyer to the seller and vice versa.
- They may not inform the buyer about home defects or other things that might steer the buyer away.
- They may not inform the buyer about a better house down the street that’s for sale for less money since their primary objective is to sell the house they listed.
There are many other pros and cons in a dual agency, some are advantageous yet others seem borderline unethical, but never the less, it's always more beneficial to the buyer to hire their own real estate agent before they even start looking at property. Not only is it more beneficial, it’s also free to hire a buyer’s agent. That's right, free! The realtor is paid at closing from the proceeds of the sale; therefore, nothing actually comes out of the buyer's pocket to pay for the realtor and their invaluable expertise.
Read the 2010 Real Estate Outlook to see where home values are headed.
Read about the Current Prime Rate and find out where interest rates headed.
If now is not the time to buy then read How to Find Real Estate for Rent.
Jerry Barker - Jerry Barker is a real estate agent and lending professional in New Jersey. He began purchasing properties for investment in 2002 and ...
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