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If you are a prospective homebuyer, you need to understand the difference between seller, buyer, and dual realtors. Using the wrong type of agent could affect the financial terms of the deal and have significant legal implications. Read on to arm yourself with an understanding of the difference and how to use it to your advantage when buying a home.
There has been a lot of talk in recent years about buyer’s agents and sellers’ agents. Real estate law has evolved to require an agent to list who they represent. This is typically done early in the process through a disclosure document that you sign that clarifies whether the agent is working for the buyer or the seller. A seller’s agents represent the seller. Most real estate agents who show and market homes are sellers’ agents. They may be friendly to you as a potential buyer, show you around several homes, and help you through the offer process. However, they usually work for the seller and look out for the seller’s interests. Rather, buyer’s agents actually work for the buyer and have a fiduciary responsibility to look out for the buyer’s interests. There are also dual agents, but we’ll get back to that in a bit.
Normally this has nothing to do with who actually pays the agent. So why does it matter? If you are the buyer, it is important that you use a buyer’s agent because of the financial, legal, and ethical implications. A seller’s agent has a fiduciary responsibility to the seller, not to you as a buyer. This means that during negotiations the seller’s agent will look out for the seller’s interests. Here’s a real life example to help clarify. Suppose an agent discovers that the seller must move for a new job, has become highly motivated, and is now willing to accept $15,000 below the listed price. If the agent is a buyer’s agent, working for you, they will be obligated and probably excited to provide you with this information. However, if the agent is the seller’s agent, working for the seller, they do not have to disclose this information to you and may initially withhold the information in an effort to obtain the highest offer from you.
So what is a dual agent? Occasionally you’ll find an agent who says they’re playing a dual role; which means they are acting as a buyer and seller agent. Be careful in this situation. As a buyer, you may want to avoid a dual agent. Realistically, the dual agent cannot fully represent the interests of the buyer without negatively affecting the seller and vice versa. There are some excellent agents who can operate effectively in the dual role. However, as a buyer, you must be aware of the potential conflict. If you want the lowest price on a home, find a good buyer’s agent whose loyalties are aligned solely with you.
You may be wondering who really pays for a buyer’s agent. Typically, the listing agent lists the property on the MLS (“multiple listing service”) and agrees to split the commission with the agent bringing the buyer. In this scenario, the seller’s agent and the buyer’s agent split the real estate commission 50/50. This means that even though the buyer’s agent is working for you, the seller is actually paying for the buyer’s agent. Occasionally you may come across a listing where the listing agent will not agree to split the commission with the agent bringing in the buyer and in that case you will have to negotiate who will pay for the buyer’s agent.
Understanding the financial, legal, and ethical implications of buyer, seller, and dual agents is important to you as a homebuyer. Before you start looking for a new home, find a good buyer’s agent with at least 10 years of experience in your market. They will be aligned with your interests and have the experience to help you negotiate the lowest price for the house.