If you are thinking of buying a new home, you must be aware of the difference between seller agent, buyer agent and dual real estate agents. Using the wrong kind of agent could affect the financial wording of the deal and have material 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.
Real estate law has evolved to require that an agent list who they are representing. This is normally done in you first meeting with the agent through a formal disclosure document that you must sign that identifies whether the agent is representing the buyer or seller. A seller's agents represent the seller. Most real estate agents believe it or not are seller's agents. They may be friendly to you as a potential buyer, escort you around town to show you multiple homes and help you prepare an offer on a home. However, the agent is working for the seller and looking out for the interests of the seller. And vice versa, buyer's real estate agent actually works for the buyer and have a fiduciary responsibility to look out for the interests of the buyer. There are also dual agents, but we'll come back to that in a moment.
More often than not, this has nothing to do with who actually pays the agent. Why is this important? If you are the buyer, you should seek a good buyer agent because of the financial, legal and ethical implications. A seller's agent has a fiduciary responsibility to the seller not to you as the buyer. This means during the negotiations a seller's agent will be working for the seller. Here's a real life case in point to help clarify. Suppose an agent discovers that the seller must relocate for a new job, has become highly motivated and is now willing to accept $25,000 under the listed price. If the agent is a buyer's agent he/she will be obligated and very likely excited to tell you this message. However, if the agent is the seller's agent working for the seller - he/she does not have to convey this message to you and may not give away the data initially in an effort to get the higher offer from you.
Now, back to dual agents. Periodically your will find an agent that says they are operating in a dual role; meaning they are functioning as a buyer and seller agent. Be careful in this situation. As a buyer you may want to stay clear of a dual agent. Realistically, the dual agent is unable to fully negotiate the buyer's interests without adversely affecting the seller and visa versa. There are some outstanding agents that can operate effectively in the dual role. However, as a buyer, you should understand the potential conflict. If you want the lowest price on a home, seek a outstanding buyer's agent whose loyalties are aligned exclusively with you. You may be wondering who ultimately pays for a buyer's agent. Normally the selling agent lists the property in the MLS ("multiple listing service") and shares the commission with the agent who brings the buyer. Generally, the seller's agent and the buyer's agent split the real estate commission with fifty percent going to each agent. This means that although the buyer's agent is working for you, the seller is funding the commissions to the buyer's agent. At various times you may find a listing where the selling agent does not agree to share the commission with the agent who brings the buyer and in that case you would have to settle on who will pay for the buyer's agent. Recognizing the financial, legal and ethical implications of buyer, seller and dual agents is important to you as a home purchaser. Prior to engaging in any real estate transaction as the home buyer, find yourself a good buyer's agent with at least 10 years of experience in your market. They will have a fiduciary responisibility to act in your best interest and have the experience to help you negotiate the lowest price for the home.
