23

My wife and I have been looking for houses for a few months through an agent who was recommended by a friend. We've mostly found houses by ourselves and Zillow and had him organize walk-throughs, although they've suggested a couple houses to us. So far they've been great to work with and have given us a lot of help in evaluating the houses and walking us through getting a loan. Recently, we found a house through Zillow that, as it turns out, our agent is selling. This house seems to fit our needs and we are considering putting an offer on it. The house is rather new and has had a lot of showings in a short time, which makes me think there might not be too much wiggle room on the price.

How should we handle this? Do we need to find another agent to help us with the negotiation? This seems unfair to our agent who has spent many hours with us. What would be the disadvantages of moving into the negotiation with our current agent? We trust our current agent, but is there anything we should look out for?

WaterMolecule
  • 333
  • 1
  • 2
  • 6

6 Answers6

25

I'd go ahead and use your agent for both sides if you trust them to look out for your interests and I feel that you do. At a superficial level a buyer's agent has the same motivation as a seller's agent. That is get you, the buyer, to pay as much as you are willing to for a home. On a superficial level both sides are benefited from you spending more, not getting a good deal.

Anecdotally, I have had agent, that were supposed to be working for me, not look out for my interests.

So, really, the important thing is to find an agent you trust to work in your best interests. And you can verify these things through your own research. Zillow and other online sites are a great resource for understanding the current market price of a home.

You seem to be interested in getting a good value. You may have to pay more than asking price for a nice home, in a hot market, in a desirable neighborhood. Price and value are independent of one another.

Pete B.
  • 80,097
  • 16
  • 174
  • 245
11

If you trust your agent, I would stick with him. It turns out your agent actually has more motivation to sell to you, then to anyone else, because with you he will get the full commission rather than having to split it with another agent. (Though you could argue that he'll still get the same commission if you buy another house with him as your agent, but that's still twice as much work from his point of view, and also not guaranteed.) Yes, there is a conflict of interest since he knows your hard limits price-wise, but the extra money he would get from the double commission would dwarf the extra commission he gets from dickering on price a few thousand. He'd still be far better off selling it to you for less than selling it to anyone else (unless they're also his client). The seller actually has more to worry about in this situation than you do, for that very reason.

TTT
  • 47,380
  • 7
  • 101
  • 152
7

An agent has to disclose who they are working for.

The situation you are in where the agent represents both parties is called a dual agent. The problem for you is that they know exactly how much you can afford and how close that house matches your dream house. For the seller knowing those things about you makes negotiations easier because they know the maximum you can pay. Of course you can also know the absolute minimum they can accept, and how desperate they are to sell.

Most buyers and sellers want to stay away from this situation. The dual agent is supposed to be neutral, but they have too much inside knowledge of both parties.

Personally I would avoid this situation, and move on to another house.

Example:

  • House listed for $100K, seller needs $92K or they can't do the deal.

  • The buyer can pay $95K max, and opens the bidding at $90K.

  • If the negotiation is fair, they meet somewhere between $92K and $95K.

  • But the agent knows the numbers for both sides, they might drive the negotiation to $95K, to maximize their commission and because they know the buyer can afford it.

mhoran_psprep
  • 148,961
  • 16
  • 203
  • 418
2

I'm not sure what commission structure your agent is using, but I've experienced a situation where the agent lowers their commission if they are taking both sides of the transaction. Example, agent takes 4% commission (2% for buying agent and 2% for selling agent), but if they represent both sides, they take 3%. The only exception to this is if there are multiple offers. In that case, they take the full 4% (to prevent conflict of interest/skew towards higher commission)

devin
  • 21
  • 1
2

So in business school a professor teaching business law talked a little bit about real estate.

A buyer's agent is technically a sub-agent of the of the seller's agent. Their commission is based on purchase price, so neither the buyer's agent nor seller's agent have an incentive, nor a duty to, to provide you with the lowest cost or help you negotiate the lowest cost.

In this case, with the buyer's agent and seller's agent being the same person, this person is going to want to help facilitate a meeting of the minds, particularly since the person gets both halves of the commission from the property sale.

Since neither agent normally is trying to get the lowest price, there is likely not a significant drawback to working with them on handling both sides of the transaction, but be sure that the contract represents your interests (i.e. contract stops if you can't get financing, the appraisal comes in low, home inspector finds significant issues, your current property [if applicable] doesn't sell, etc.).

Mike Burr
  • 21
  • 1
2

I had a similar situation, except that in my case the seller did not have an agent, and decided during the process that it would be beneficial to have an agent handling the paperwork for him. Our agent agreed that it made sense to cut the commissions to bring the asking and offering prices close together (basically the selling side was almost no work for them... just some paperwork, so it was very cheap for them to do so).

Our agent made it very clear that it was our choice whether this was an acceptable arrangement or not. The explained that, should we accept this arrangement, conflict of interest would limit their ability to really push for us to eek every last bit of margin out of the process. In exchange, it was easier for them to facilitate meeting in the middle arrangements.

Cort Ammon
  • 1,009
  • 6
  • 9