Tips for home buyers
Here's an all to common scenario...
On a Saturday afternoon, a young couple (Mark and Cheryl) decided to walk into a open house and ended up falling absolutely in love with the property. Since they haven't been working with any real estate agents. The couple ask Jim (the listing agent) if he could present an offer for them, since they didn't want to lose their dream home to another buyer.
Unwittingly, Mark & Cheryl just made a HUGE HUGE MISTAKE!
Here's why...
Now that Jim the listing agent is in the position of representing both the buyer and the seller, he has two choices.
1) Ask both the seller and the buyers to sign a Dual Agency Agreement, or...
2) Leave his agreement with his client (The home seller) unchanged, and inform buyers Mark & Cheryl that he will enter into a customer service agreement with them.
Neither one of these scenario's will be advantegeous for Mark & Cheryl. In fact both scenario's create a huge disadvantage for the two of them.
Scenario 1 - Dual Agency
Under this scenario, Jim will not be able to advise either party (Buyer or seller) on negotiations. To Mark & Cheryl, that means Jim will not be able to advise them what amount he believes the home is worth, or what amount his client will accept, or what amount they should offer. Nor can Jim negotiate on behalf of Mark & Cheryl once their offer is submitted.
If Mark & Cheryl don’t have all the facts (Which they likely don't) including the sales history of the property and the recent sales history of other similar property in the area. They are buying blind, and could pay significantly far to much for the property, especially if it was overpriced to start with.
Scenario 2 - Customer agreement
Under this scenario Jim needs to maintain undivided loyalty and fiduciary duty to his client the seller. That means his client's interest come first, not Mark & Cheryl's. As part of his legal duty. Jim is obligated to convey all known information to his client.
If Mark & Cheryl in conversation accidentally disclosed to Jim how much they would be willing to pay for the property, as well as their need to vacate their rental property in 60 days. Jim must pass that information on to his client the seller, which would provide the seller a significant advantage during negotiations.
As you can see either scenario is a losing situation for Mark & Cheryl!
To avoid being in the same prediciment as Mark & Cheryl. Create a short list of agents you would be willing to work with under a buyer agency relationship and keep their numbers handy. That way if the need arises! You can quickly have a professional in your corner working for you to protect your interests, as well as negotiate the lowest possible price and best terms on your behalf.
Working with a buyer agent is cost free (Or in my case, you actually get paid to buy a home with me) so it just doesn't make any sense to go it alone!
Useful links
Article - Real life example of a dual agency arrangement seriously harming a buyer.
Document - Working with a Realtor - The agency relationship brochure (PDF)
Posted: February 10, 2015
