Buyers should beware using seller’s agent

Buyers should beware using  seller’s agent

By Michael  Estrin • Bankrate.com

There’s an adage that says you get what you pay for. The warning is  especially relevant for homebuyers who work  with the listing agent in a so-called single-agent transaction. “I’ve heard too many war stories about buyers who think they’ll get a better  deal by going directly to the listing agent of the property,” says Bill Golden,  a Re/Max agent in Atlanta. “Most often, they do not get a better deal, and they  end up not being represented properly in the negotiations.” In fact, buyers who use the listing agent aren’t represented at all, which is  why single-agent transactions seem abhorrent to many real-estate  professionals. “If you were being sued by someone, would you use the same attorney as the  person suing you? Of course not,” says Deb Tomaro, a Re/Max agent in  Bloomington, Ind. But data from the National Association of Realtors seems to  suggest that as many as 10 percent of residential transactions could be  single-agent deals. (The trade group doesn’t have direct figures on buyers using  listing agents, but instead relies on member surveys, which track real estate  firms, not individual agents.) Confusingly, the terms “dual agency” and “single-agent” transaction mean the  same thing, with the difference being that of perspective: The agent sees his or  her role as that of a dual agent because the agent represents both parties,  whereas a buyer would view a deal with only one agent as a single-agent  transaction.

 Why do buyers work with the listing agent?

Typically, buyers who choose to work with the listing agent say they do so  because they think they’re getting a better deal. But agents like Jon Sterling  of Chase International in Tahoe City, Calif., have doubts. “The idea that buyers can negotiate to get the listing agent to give up part  of their commission because the buyers are unrepresented is a myth,” he says.  “Sure, some people have been successful doing that. It’s the exception, not the  rule.” It also doesn’t make much sense when you consider that sellers, not buyers,  typically pay commissions, according to associate professor Eric Chen, who  teaches business at the University of Saint Joseph in West Hartford, Conn. “If the buyer is working with the listing agent, be aware of the conflict of  interest problem that exists,” says Chen. “Remember that the listing agent is  interested in getting a deal done, and the higher the purchase price, the bigger  the commission to the agent.”

Do buyers actually pay more?

Data are mixed on whether buyers in single-agent transactions end up paying  more, according to Bennie Waller, a finance and real estate professor at  Longwood University in Farmville, Va., who has co-authored two papers on the  topic. But the reason for the mixed results, says Waller, most likely has to do  with the time the property is on the market. Single-agent deals that happen  within 30 days of listing typically sell for a 10 to 18 percent premium. But  when the property sells within the last 30 days of the listing contract, the  price actually drops by 5 to 6 percent.

What’s the harm?

The problem with the single-agent deal is that it makes it impossible for the  agent to fulfill a fiduciary duty to both parties. “The agent has an inherent conflict of interest when working with the buyer,”  says John O’Brien, a Chicago attorney who handles real estate transactions. “It  is very difficult for the agent to keep his knowledge of the buyer’s negotiating  points, including their best price, from becoming known to the seller, either  directly or through the agent’s advice to the seller regarding  counter-offers.”

  Beyond price, buyers should understand that a single-agent deal creates the  opportunity for a problem on virtually every deal point, says Chen. “Because of the conflict of interest, there is a real chance that the agent  doesn’t have the buyer’s best interests in mind,” Chen says. “It doesn’t  necessarily happen every time. However, the pressure, opportunity and  rationalization are all there for the seller’s agent to act in their own  client’s interest and against the interests of the seller.” Not everyone sees an automatic conflict of interest. “There are some who feel that it is an automatic conflict to represent both  parties,” says Sterling Watkins, a broker-owner with Help-U-Sell of Folsom,  Calif. “I happen to disagree. If no confidences are violated, each party has a  chance to make a decision at every turn in the road.” Although Watkins certainly has the minority opinion on the matter, it’s worth  pointing out that most real estate firm contracts do contemplate the possibility  of a single-agent deal. But, as Chen says, “that language usually looks an awful  lot like a waiver.”

Read more:  http://www.bankrate.com/finance/real-estate/buyers-using-sellers-agent.aspx#ixzz2lVB78tLJ

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