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What buyers should know about dual agency

Posted by Mastura Zaini-Roberts on Monday, November 6th, 2017 at 7:33am.

The fallacies and problems of working with only one agent

  • Many of today’s buyers think that having the listing agent represent them on a transaction will save them money and fail to consider the importance of having their interests represented exclusively.

When buyers have the option of working with a buyer’s agent who will represent their interests exclusively or working with the listing agent who has a fiduciary duty to the seller, an increasing number of buyers are choosing the listing agent, especially in overheated markets.

Recently, I had an interesting conversation about open houses with Kendyl Young, the broker-owner of Diggs.

Young tracks her agents’ open house activity. Based upon current open house activity in her market area, open houses for newly listed properties are generating 20-30 visitors, while repeat opens only generate an average of eight visitors.

Young also confirmed something I’ve been hearing about sporadically for the past couple of years: when buyers visit an open house that doesn’t fit their criteria and the agent offers to help them find a different property, many buyers are now saying: “No thanks. We’ll contact the listing agent directly.”

Agents are bumping into this on sign calls, cold calls and with multiple offers as well.

Dual agency issues

The most important issue here is dual agency. It’s one thing when the same brokerage represents both sides, but when the same salesperson represents both sides, it can be a lawsuit waiting to happen.

That creates an interesting dilemma for the listing salesperson, especially when there are one or more buyers who are clamoring for the listing agent to represent them on the buy side

Flaws in the buyer’s thinking

The difficulty here springs from a common buyer misconception:

If I make an offer through the listing agent, then I will be able to negotiate a reduced commission because the agent has both sides of the deal.

Many agents and buyers are unaware of this important MLS/board of Realtors rule: if a listing agent will reduce his or her commission when that agent has both sides of the transaction, the agent must publish his or her “unfair advantage” in the MLS listing remarks.

Violation of this rule can result in disciplinary action and can even lead to the loss of the agent’s license.

This rule dates back decades, and the reasons for its existence are obvious: reduction in arbitrations over procuring cause, protection of the buyer’s agency relationship and removal of the incentive for the listing agent to make a special deal with the buyer.

This MLS rule also helps listing agents to avoid another very sticky situation. To illustrate how this works, if the buyer wants a commission reduction, he or she wants to keep that money for themselves.

Buyers often press for this money as a cash credit at closing or to reduce their down payment.

Agents can counter this request by explaining what this process actually entails.

First, the seller must be advised in writing that the buyer is receiving a credit and that the agent is taking the credit from his or her commission. Clearly, many sellers will want that reduction for themselves because they’re the ones paying the commission, not the buyer.

Second, even if the seller is willing to agree to the credit, it still must be correctly reported on the closing statement. When lenders see an item like this, they almost always take it as a reduction in the down payment rather than a reduction in the loan amount.

Any reduction in the down payment amount can jeopardize the deal. To illustrate this point, if the buyer is putting down 20 percent, the credit would result in a down payment less than 20 percent.

This may mean that the buyer will no longer be able to obtain an 80-20 loan. Loans with less than 20 percent down typically require pay private mortgage insurance (PMI).

If the buyer asks the agent not to disclose the credit, hiding it from the lender is fraud. At that point, everyone has a problem.

If it’s the seller asking for the commission reduction when the agent has both sides, the agent must advise the seller of the unfair advantage rule and that to use it, he or she had to publish it in the MLS at the time of taking the listing.

Furthermore, because the listing belongs to the brokerage, only the managing broker has the right to approve or disapprove of this credit.

The multiple offer fallacy

Although there is no shortage of shenanigans that go on during multiple offers, agents who are following the NAR Code of Ethics will adhere to being fair to all parties.

They will avoid steering the seller toward an offer that benefits the agent as opposed to the offer that will be most likely to close and to provide the greatest value to the seller.

In the case where there are multiple offers, a best practice is to always have the supervising broker involved in the negotiation.

If the listing agent is representing one or more of the buyers, the supervising broker steps in to represent the seller while the listing agent represents the buyers.

‘I only want the listing agent!’ — not a great choice

Many of today’s buyers are convinced that having the listing agent represent them on a transaction is a wise course of action.

This flawed thinking fails to take into consideration the clear benefits of having an agent who represents the buyers’ interests exclusively as well as the ways that asking for a commission reduction can jeopardize the closing of their transaction.






Mastura Roberts
(702) 710-3330

Team Leader, The Tonnesen Team
Berkshire Hathaway HomeServices, Nevada
3185 St Rose Pkwy #100 Henderson, NV 89052

With over 30 years of experience helping families call Las Vegas "home!"

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