Below is a conversation I wrote down shortly after it took place (as best as I can remember it) because it is a good example of how working with an agent who is representing both you as the home buyer and also the seller (called dual agent/agency) is usually not a good idea. Here in the Silicon Valley I've seen many transactions go down this way, many of those with some, so called reputable, top producer real estate agents.
Below is my take on the situation. You're not gonna hear anyone else in the industry explain it to you as honestly and simply like me.
So why is dual agency not a good idea you ask? Because think about it; if you're selling your home, your agent has an obligation to you to sell your home for the most money possible, BUT if that same agent is represent both you and buyer there is a conflict of interest. The conflict comes from the fact that an agent representing the buyer also has an obligation to the buyer to sell the home for as little money as possible!
So what's an agent to do? Well, you got to remember that real estate agents get paid on commission which is a percentage of the sales price. So the more money the home sells for, the more money we make.
As the home buyers, how can you get hurt? Well, because the agents gets paid on commission and that means that a higher sales price means more money for her/him. That agent who you think is looking out for your best interest may not be telling you the whole story. He might tell you to make a counter offer for more money because there are supposedly competing offers when there are not, and he's not gonna tell you the seller is OK with taking a lessor price. Remember, a higher sales price means more money - your bargain on the property be dammed.
As a seller, how can you get burned? As you will see from my conversation below with my client, one way a home seller can get burned from having their agent represent them and the buyer is when you have multiple offers an all of those buyers have their own agent excepts for one buyer who is willing to work with your agent directly to buy your property. These other offers might be a little higher, or those buyers might be willing to counter offer for more money, but your agent is only going to care about having you accept the offer from the buyer who she represents - because she will make TWO COMMISSIONS! Think about it. . .
Anyhow, below is my conversation take took place with my client (whose name was changed to protect her identity) and you can read for yourself how she got burned by her agent who was only looking out for wallet first and not client.
My client, Sandy, found me from the flier that I gave her husband at my open house on the weekend
of May 22 &23.
Mimi: Are you working
with any agents right now? If you are, I cannot help you.
Sandy: I am, but I don’t
want him to help us to buy the house.
Mimi: Why?
Sandy: He is our listing
agent for my condo right now. We will close the transaction soon. I don’t
like him. He told me when we met that my condo looks better than the
other condo that he sold for $425K, and I can get more money. My husband
and I trusted him and listed the property with him. After the open house,
he said we only got two offers. One of the offers is one in which he represents
the buyer and the other is from another agent for little lower. He wanted
us to sign the offer. I asked him why he didn’t ask for more money. He said his
buyer offer is higher than other offer, and we should take it. I said to
him that you told me my condo is better than other and that we should get more
money. He said $425K is good offer. I don’t trust him because he is
representing us as the sellers and the buyer. He should work his best for
me to get more money, but he didn’t.
Mimi: Did you tell him?
Sandy: I did, but he
said it is the best offer and wanted us to sign. I am not happy, but we
signed.
Mimi: Oh! Why you didn’t
use him to help you to purchase the house on 805 N. Main Street?
Sandy: We asked him to
show us the property. My husband went to your open house, but we wanted to view
one more time. He said he wanted to schedule with other property (younger
street) so we can view two together. It was on Monday and Tuesday.
He didn’t help. I asked my husband to call you, but he is kind of
reluctance and didn’t want to, so I called you.
Mimi: Did you sign any
buyer agreement or any documents? If you did, I would get in trouble.
Sandy: NO. I didn’t sign
any documents and don’t want him to represent us anymore. All he thinks of
is his commission check and how to make more money for himself, regardless if
it doesn’t help us.
Mimi: I can only help
you and your husband if you want to work with me and didn’t sign any agreement
with your agent.
Sandy: NO. We didn’t
sign any papers. We don’t want to use him. He only thought about what benefits him in order to make more money from
my condo even though it was not in our best interest. If he had done the
counter offer like we asked, we would have got $5 or $10 thousands more.
I am not happy with his service. I really don’t trust him with helping us.
Mimi: OK. I closed one
transaction with him 5 years ago. I know him. Well, I will try my best to
help you. This property already went in contract on Thursday morning.
We can only submit a purchase offer as a backup offer.
Sandy: OK, we’ll go to
meet my husband to sign the offer.
Mimi: Thank you so much.
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