The dangers of dual agency real estate transactions, and using the same real estate agent to buy your home that is also selling the home is a little more troubling than most home buyers are aware.
It’s common to walk into an Open House, look around, and start talking to the real estate agent listing the home. If you don’t already have your own agent, but love the home, you may be tempted to just use the agent selling the house. While completely legal, and while it may seem OK on the surface, it is wrought with possible issues.
The first thing to know is that real estate agents commonly refer to this situation as a ‘hogger’. This simply means they get to keep all of the commission the seller is paying for themselves when they represent both the seller and the buyer. Typically when there is a separate buying and selling agent they split the commissions. On a pretty standard 6% listing fee, the listing agent would keep 3.3% of the commission, and pay 2.7% to the buyers agent. If they can double their pay, an agent might be over incentivized to close a deal no matter what.
Many buyer think that a dual agent will reduce their commissions, saving them money. While they can do this, it rarely even happens.
But the bigger concern element is that the duty of the agent in this situation is to the seller. They have no duty to the buyer. An example would be that the agent knows the seller is willing to take $10,000 less on the house, but the agent has no duty whatsoever to tell share this confidential information with you just because you are using the same agent.
Also, without your own agent, you have no one advising you if the listing price is even reasonable. If you have your own agent, your agent will generally review similar properties to tell you if this one is priced low, about right, or high. The listing agent will likely defend the listing price as it, meaning you could easily over pay for the home.
TIP: Although you may feel like you have to make the decision whether to accept a dual agent on short notice, don’t be tempted. It’s possible to find a buyer’s agent to step into the transaction and assist you in a matter of hours. Best to always have your own buying agent. Someone fighting for YOU!
If I’ve pre-approved you for your mortgage loan, I’ve worked with hundreds of good real estate agents in the Minneapolis / St Paul area, and can easily get a great one to call you right away.
PROHIBITED BY LAW
A much lesser known, but to me more troubling issue is that when you hire a real estate agent to list your home, and the same company represents the buyer, your agent is prohibited by law to negotiate on your behalf?
Yes, its true. It is because of a Minnesota law called ‘Dual Agency’, and companies with hundreds or even thousands of real estate agents end up having many ‘in-house’ transactions. This forces sellers to sacrifice their exclusive representation because even though you have two different agents, they work for the same company.
Before entering into any of these types of dual agency agreements, however, you want to understand the legal implications and how it might affect your ability to get the best possible deal in buying or selling a home. You’ll see dual agency notifications in the piles of paperwork you sign when making an offer, but virtually no one buying a home understands what it means.