I was in HomeSmart’s office in Mesa last week with a couple of clients from Canada after a day of home shopping. We were back in the conference room looking at the MLS on the huge flat screen monitor on the wall, checking out the comps to their favorite homes.
Their favorite home had five excellent and recent comparable solds. Three were priced very closely together on a cost per square foot basis. One home, however, was low priced and another was very high priced.
My clients were very curious about the very high priced home so we started looking at the differences between the homes. Nothing jumped out at me. Then it hit me and I said, “I think I got it.”
I checked and sure enough it turned out the same real estate agent represented both the buyer and the seller. I find that explains a lot of over-priced sales.
I imagine the unrepresented buyer walked into an open house, loved the home and wanted to make an offer. The seller’s agent may have even offered the buyer some money from his commission if she used him as her agent too.
The seller’s agent - who was now also the buyer’s agent - could not tell the poor buyer that the place was way over-priced because that would have betrayed his responsibility to the seller.
If that buyer had her own agent, I’m sure her agent would have been able to advise her on pricing and she could have paid $10,000’s less.
To this day, the buyer may still think she made a few thousand dollars and was very clever to use the seller’s agent to represent her. In fact, I believe she lost tens of thousands of dollars by using an agent that could not advise her on pricing.
TIP: When you see an home where you can’t explain a high sales price, check and see if the same agent represented both the buyer and the seller.
TIP: Most buyers should use their own real estate agent and not the seller’s real estate agent.
5 responses so far ↓
1 Sam Chapman // Apr 17, 2008 at 2:18 pm
The dual agency thing is something I avoid. I really want to represent my sellers. Situations like that you described are also potential lawsuits just waiting to happen.
2 Cbass // Apr 18, 2008 at 8:24 am
How would a Realtor fufill their fiduciary duty to both the seller and the buyer? This is clearly a conflict of interest in my opinion and should not be allowed. That would be like the prosecuting attorney representing the defendent at trial. I am usually not in favor of legislation being added to the books but in this case I would definitely support putting something in place.
I hate to say this John but it seems many Realtors have no morals or ethics. I don’t believe you fit in this catagory as I have been following your blog for a long time but Realtors are right up there with a car salesman.
3 John Wake - Real Estate // Apr 18, 2008 at 3:12 pm
Cbass,
The can do it but they can’t give either party advice that would hurt the other party.
That’s why I said, “… an agent that could not advise her on pricing” because a dual agent can’t say it’s too expensive.
And really, isn’t pricing the most important piece of advice a Realtor gives a client? What good is a Realtor who can’t advise on price?
Unless a buyer is dead certain about the value of a home, using a dual agent isn’t a good idea in my opinion.
4 Matt Fox // Apr 18, 2008 at 3:28 pm
There’s an E&O nightmare waiting to happen. I beleive dual agency is one of the biggest legal issues for Realtors. You can not represent both parties.
5 Shailesh Ghimire // Apr 18, 2008 at 3:55 pm
As a buyer, there is no reason to not have your agent. It really doesn’t cost you anything. But the bigger reason is you certainly want your own rep working for you!
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