A buyer contacts us about a property that we have listed for sale. It’s pretty clear that the buyer loves the property and wants to make the seller an offer. The seller is motivated to sell but not desperate. It’s pretty obvious to us that the buyer’s understanding of real estate is greater than the seller. The buyer makes an offer with some terms and conditions that are defintely disadvantagous to the seller. If you were us (licensed REALTOR and all), what would you do?
- Raise your concerns about the offer to the seller and advise them on potential changes , options and possible consequences.
- Present the offer and let the chips fall where they may.
- Don’t bother the seller and deal with the offer the way you think it should be handled.
- Find a happy place and suggest to the buyer the offer is unreasonable and recommend changes that would be more fair.
- Don’t represent the buyer.
- Tell them they’re crazy to try that crap on your watch.
The scenario above is an oft told and oft repeated scenario in real estate. Ask yourself this: can you serve two masters and be fair to both? In the above scenario it’s assumed that you are in a dual agency situation and that means the REALTOR involved would owe the same fiduciary duties to both the buyer and the seller. A recap on the duties owed are: Undivided loyalty, Confidentiality, Full disclosure, Obedience, Full Accounting and Reasonable care and skill. Right of the bat the first three duties are in conflict in dual agency situations.
Why do I bring this up you ask? Simple. A large percent of people contact the seller’s representative directly which can often times lead to dual agency situations. There are many scenarios that can lead up to what is called dual agency including using the REALTOR you’ve always dealt while the other party uses a REALTOR from the same brokerage.
Back to our scenario…The correct answer is that you are required to present the offer and let the chips fall where they may. As a seller or buyer this could be disadvantagous to you.
How do we prevent the above crap from falling on our client’s lap? Often we don’t take on both sides of the transaction, or the buyer consents to being a customer and not our client. This frees us up to fully and diligently fullfill all of our agency obligations to the original party.
It does still occassionally happen where we end up representing both parties, so its important for you to know
- what are your options?
- how does this affect you?
Don’t be afraid to ask if you don’t understand!
You should also know that if both parties consent to dual agency it should be in writing prior to the presentation of any offers.
I have been the buyer twice in this situation and was satisfied with the realtor in both instances- you can use this as leverage with the realtor to drop a portion of the buyer’s commission- they don’t really deserve double commission if you just call them up because of their listing.
That said, it can work out well but hoenstly the answer SHOULD be “a realtor ethically cannot fairly represent both parties in this transaction- find another realtor.” I would be curious to see if the opposite position can be ethically debated- I don’t see how it can.
The “realtor” industry has a bad reputation (some deserved some completely undeserved) and this is one facet that could lead to abuse and bad reputations.
I have heard many realtors say “don’t use the lawyer provided by home-builders” and I agree with this.
Same applies to realtors.
Sorry this is off topic but I do not think there will be price correction after all. Check out this story, “CMHC eases down payment rules for properties”. Here is the link: http://www.canada.com/nationalpost/financialpost/story.html?id=88d4e421-e4ed-4a25-a361-51f1318cf0bb
I don’t see the conflict here at all. When performing functions for the buyer advise them as you would any other buyer. The best realtors (and many other professionals who end up in similar situations) know how to get their own agendas out of a situation like this. Of course you would advise and give your opinion, but whether or not you think the offer is unreasonable is irrelevant (at least it would be to me if I was the buyer or seller in this case). Does the deal work for both parties at the time is the only worthwhile question?
In my opinion real estate agents have a mistaken belief (and it drives me crazy) that they need to somehow influence the decision that a buyer or seller makes. Present your professional knowledge based on the facts and give the buyer/seller the space to find out for themselves whether the deal is right or not.
“Sorry this is off topic but I do not think there will be price correction after all. Check out this story, “CMHC eases down payment rules for properties”. Here is the link: http://www.canada.com/nationalpost/financialpost/story.html?id=88d4e421-e4ed-4a25-a361-51f1318cf0bb”
The bottom line is this. There will be a correction in the marketplace. What the CHMC is going is postponing it. Their new program will pretty much lead to whats happening in the US. It’s just common sense.
“an offer with some terms and conditions that are definitely disadvantageous to the seller”
Like what?
If you were solely representing the seller and were presented the same offer, would your response be scenario 2 as well or scenario 1? If your response has to change in a dual agency situation then you’re in a conflict of interest situation.
How exactly can Full Disclosure and Confidentiality be maintained in Dual Agency? One has to give.
The article is intended to inform. People should be aware when there are conflicts. The majority of REALTORS do a very good job of this hence the tens of thousands of transactions annually with people who are satisfied. I personally prefer to represent one party and we do everything possible to maintain that however it does work out where we end up in that situation and as long as everyone is aware of what is going on and how it affects them and they are informed of this before its too late then everything usually turns out fine.
People are free to choose to deal how they want but they should be warned that making assumptions about the other persons ability being equal to theirs in terms of negotiating is usually a bad assumption.
Thanks for bringing this point up. I am finding that, more often than not in the last 2 weeks, my realtor is being approached directly by the buyer rather than by a buyer’s agent (3:1). All of these people are looking to knock half of the commission off of the selling price. Is this the future of real estate? No buyer’s agents? What happens next? When the listing expires, are these people going to contact me directly looking to save ALL the commission and will I have to pay the realtor anyway?
On a positive note, there are finally people looking at my condo! After a dismal summer and September, to have multiple showings over the past 2 weeks has been heartening to say the least. And if any of them wants to save a few shekels by dealing with my realtor, then it is up to me to understand the transaction and make sure that my interests are represented.