Can I buy the other home my real estate agent is selling? Asking them to act as a dual agent may cause more confusion than you’d expect.

Q: Should I buy a house that my real estate agent is also selling? Is there a conflict of interest?

Thank you, and I’m loving Ilyce’s book for first-time homebuyers.

A: Thanks for buying and reading Ilyce’s book titled 100 Questions Every First-Time Home Buyer Should Ask. Ilyce’s first edition of this book came out in the early 1990s before the internet and before people really talked about dual agency – which is what your question is actually about. The book is in it’s 4th edition and has been updated extensively on issues relating to shopping online and dual agency questions.

What Happens if You Buy the Other Home Your Real Estate Agent is Selling?

Dual agency generally refers to a situation where the person representing you is also representing the seller. In your situation, your real estate agent is the listing agent and is also your buyer’s agent. In this case, your agent is considered to be a dual agent and instead because an agent can’t hold a fiduciary duty to you and the seller in the same transaction, your agent’s role in the transaction is diminished.

It’s difficult and confusing to have an agent suddenly become the gatekeeper on the other side of a transaction and there have been cases argued in the courts about where the agent’s loyalties should lie in this situation. Some customers feel that their broker should have a duty of loyalty only to them, especially if the home buyer or seller has worked with a broker or real estate salesperson for quite some time.

Over time, real estate agents learn a lot about the likes, dislikes, personal information and even financial ability of their customers. They often know what is the maximum price they can afford, and what tradeoffs they’ll make for their new home.

With all that information, you might say it’s hard for the real estate agent to stay neutral when faced with a dual agency situation. And, we agree. Neutrality (what the National Association of Realtors calls “nonagency”) is an illusion. In the best case scenario, the dual agent doesn’t divulge any personal information about the buyer to the seller and doesn’t truly assist or help you in the purchase of a home that the broker has as a listing.

Isn’t there a remaining conflict of interest? A lot of people agree. In a dual agency situation, your buyer broker can’t give you the advice he would have otherwise provided if he wasn’t the listing broker. He might not even be able to say to you that the house is wrong for you. He can’t tell you that the house is priced too high and he can’t give you the advice you might have become accustomed to in other offers you might have placed.

So, if you can’t get the advice you need, what are you getting? Well, in dual agency situations, you get a facilitator or middle person that won’t give you help or advice in your purchase. Most frequently, we see real estate agents refer the buyers to a different broker or salesperson. This way, the buyers have a broker or salesperson looking out for the buyer and the owner of the home has a listing agent watching out for the seller.

And, for this you’ll pay the full commission.

Dual Agency Causes Frustration and Confusion

Unfortunately, frequently buyers and sellers are left with a bad taste when they have worked with a broker for a long time only to be left to be helped by someone new right when they need their trusted broker the most. Many brokers have their buyers and sellers agree to a dual agency situation early on in their documentation, but when the dual agency actually arises, it seems that neither the seller or the buyer are prepared for what comes next. Sellers don’t like knowing that the listing broker that’s handled their transaction suddenly stops giving advice and buyers don’t like being left alone to figure out what to do when negotiating the offer to purchase.

And while conflicts remain, it doesn’t mean you won’t buy the right house or sell for the same amount of cash you would’ve otherwise received. Dual agency doesn’t mean everything gets blows up – it just means that there are new complexities.

So, deal with them upfront. Before hiring your agent or listing broker, understand what the broker or salesperson will do for you if you find yourself in a dual agency situation. Talk with the agent about what rejecting dual agency would mean, and your expectations for the agent to continue to represent you in the transaction.

If you’re buying, the agent can find a different agent in the office to represent the seller. If the agent is unwilling to do that (maybe he or she has an even longer term relationship with the seller), then require the agent to find you another agent to help you close the deal. A final option is to simply take a pass on the home (easier said than done in tight markets, we know).

Finally, if you decide to proceed in a dual agency situation, get yourself some backup. Hire a real estate attorney to look out for your best interests, and, if you live in an area where real estate attorneys are not used for residential deals, you should find someone knowledgeable about the market to help you out. Otherwise, you have to think about this home as if you were buying it on your own without any help from an agent or broker.

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