Are there any secrets left in real estate? Have we bared our soul and our selling secrets so often the mysterious sauce is available to all? Have we shared every last tidbit of knowledge we've garnered from our years on the front line and in the trenches? Are consumers now privy to so much real estate knowledge they are eligible for honorary real estate licenses? I hope that last line made you laugh, because although much is now public information, there still are a few deep, dark crevices of the inner workings of real estate upon which consumers rarely tread.
I support the demystification of real estate. I remember my first real estate purchase, but I remember very little about what happened between signing on the dotted line and receiving the keys to the house. There were lots of papers to sign from agent and lender. The agent made frequent house calls to drop and pick up documents. She never stayed long, she never sat down and she never explained. To this day I refer to her as the Faceless Agent, because not only do I not remember her name, I have no memory of what she looked liked.
One of the remaining secrets still lurking in the dark shadows of the real estate business is the buyer's misconceptions of the benefit of purchasing a property with the listing agent representing them as well as the seller. In law, this would present a visible and strong conflict of interest. In California real estate it is an accepted practice. Not only accepted, but often sought out by buyers as the preferred method to get the best price.
Okay, let's say you walk into an open house you found online, you love it and want to submit an offer. The listing agent agrees to write the offer and thereby act as your agent as well as the seller's agent. You are now a party to dual agency. However, the agent's pre-established duty, per the listing contract, is to the seller. Now, the listing agent must represent the seller in obtaining the highest price the market will bear, and the buyer in obtaining the lowest price the market will bear. Tough job.
The listing agent may be able to dangle a carrot with an offer to adjust the commission previously agreed upon with the seller, but will that small reduction make up for what another agent, not in a contractual agreement with the seller, would be able to negotiate on your behalf? You will never know.
Some homes sell at asking price; others sell above or below. The recent sales in the neighborhood, condition and location determine where the value needle will point. Can an agent tweak these comps? You bet. The omission of a few "low" sales and concentration of "high" sales will have an impact that can easily outweigh any benefit gained by toying with the commission structure.
The negotiations are not over once price is established. Inspection discoveries may necessitate repairs or a credit. Again, it can be challenging for an agent to move from side to side of the negotiation table. Can it be done? Yes, but in this agent's opinion, it should be done with great care and transparency.
If a consumer decides to purchase a property through the listing agent, it is extremely advisable to keep the appraisal as a contingency of sale. This applies ever if the buyer is paying cash. The appraisal serves as a safety net to keep buyers from overpaying for a property. If the appraisal comes in lower than the agreed upon purchase price it's back to the negotiation table. The dual agent will need wheels on his chair and extra minutes on his smart phone as he jumps from side to side to acheive an agreeable settlement.
Is it a conflict of interest to represent both the buyer and seller in a real estate transaction? It is legal, but is it ethical? Perhaps even more important, does it serve the best interest of buyers to work with an agent who has already sworn legal allegiance to the seller?
In a tight market, buyers often think they have the inside track if they write their offer with the listing agent. The offer in hand from the listing agent presents a unique problem for the seller as well. Is the listing agent evaluating the buyer's offer with the seller's best interest in mind, or is self-interest, via a bigger payday for the agent, creeping into the picture.
Dual agency complicates the transaction from the agent's perspective, as well as from the buyer's and seller's financial viewpoint. I've never understood why divorcing couples agree to use the same attorney when divvying up their assets. Likewise, I question the wisdom of a buyer sharing an agent with the seller when purchasing a large asset that belongs to the seller.
If a buyer elects to go down the dual agency path, every effort should be made to protect his rights by using the most ethical agent he can find. Unfortunately, the property being purchased comes with an agent in place. The buyer's choice is eliminated. I hope the seller chose well.
I'm aware of a lawsuit pending where the seller's agent held offers and stalled until his buyer was approved. The buyer was obviously "coached" regarding the terms and price of the other offers. The sale of the subject property is dangling in limbo due to the disgruntled seller until the matter is settled in court. It's the perfect example of duel agency gone wrong.
Recently, another seller mentioned his house sold $50,000 below market value years ago due to dual agency. He's still upset and he's still talking about the loss. Welcome to the inner sanctum of selling and buying real estate. If you decide to purchase a property from the listing agent make sure you have a clear understanding of dual agency before you sign on the dotted line.
The agent you decide to work with is a personal decision; make sure he or she is the right one for you whether that agent comes with the house as the listing agent, from your research, past experiences or a referral. The agent you work with will determine whether the real estate experience and the final outcome represented your interests.
Sell Smart, Buy Wise and Live Well
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South Bay Los Angeles cities I sell real estate, property, houses and homes in: Palos Verdes Estates, Rolling Hills, Rolling Hills Estates, Rancho Palos Verdes, San Pedro, Long Beach, Torrance, Lomita, Redondo Beach, Hermosa Beach and Manhattan Beach. Based on information from the Association of REALTORS®/Multiple Listing as of the initial date of this article/blog publication and /or other sources. Display of MLS data is deemed reliable but is not guaranteed accurate by the MLS. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent.
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