Real estate is a complicated industry and real estate agents are overly competitive. It is one of the only industries in which an agent can work for both buyer and seller. Sound like a conflict of interest? It can be. Whether you’re the buyer or the seller, a real estate agent really only works for one person: Himself. It’s all about the commission he gets when the house sells, and if he works for both buyer and seller, he gets a 6% commission rather than just 3%. This is an obvious benefit to working both sides of a real estate transaction.
Legally speaking, a real estate agent is supposed to represent the buyer and get the best deal possible for the home he is selling. But what happens when he sees an opportunity to make more off of his commission? When your real estate agent works for both buyer and seller, it isn’t common for both sides to lose monetarily, so make sure you’ve got an airtight contract that protects your interests.
Hiding Offers
What often happens when a real estate agent works for both buyer and seller is he will hide low offers from the seller in order to beef up his commission. For example, let’s say that your asking price is $300,000 for your home. Your agent has been talking to buyers and one offers $225,000. Perhaps you would take the offer because you’re trying to make a quick sale so that you can relocate your family, but the agent doesn’t want you to take that offer because it lowers his commission. Unless the subject of offers is addressed in your contract, you may never hear of this offer and you won’t have the opportunity to decide for yourself.
To protect yourself against this ploy, make sure that your real estate agent is required to inform you of all offers in your contract. If it doesn’t exist, insist that it be written in before you sign it. After all, your objective is to sell your home, and you don’t want to miss out on an offer just because your agent doesn’t want to low-ball his commission.
Selling You Out
On the flip side of the coin, you might run into the risk of cheating yourself out of a great deal because your real estate agent works for both buyer and seller. For example, let’s say that you’ve seen a beautiful house in the next town over. You call the real estate agent for the home and ask to see it. The agent picks you up, makes small talk on the way, and generally pretends to be your best friend. You see the house, you really like it and you can’t stop thinking about it all the way home. Since the agent seems like such a nice guy, you say something along the lines of: “I really like the house, so let’s go ahead and make an offer for $275,000, but I’d go to $300,000 if the seller doesn’t accept.”
In that situation, you’ve just talked yourself out of a $275,000 house. You have to remember that when a real estate agent works for both buyer and seller, he or she is legally obligated to act on behalf of the seller. He’ll go home and give the seller a call, repeating exactly what you said in the car. Do you really think that the seller is going to take $275,000 when he knows he can get $25,000 more? To remedy this, make sure you keep a tight lip about the offered price. Don’t adjust your offer until the seller has rejected the first one.
Getting Pre-approved
The final pitfall you might experience when your real estate agent works for both buyer and seller is the pre-approved issue. Most agents and brokers will encourage buyers to get pre-approved so that their transactions go more smoothly and they don’t have problems with lenders. This might seem like a great idea, but it can actually create problems. If the agent has gotten you pre-apprived, he knows how much you can afford to spend on a house. Knowing this, he’ll show you only houses that fall around that number to increase his commission. Further, he can tell a seller to hold out for a higher price if he knows that you can afford to pay more.
Avoid this is a little bit trickier, and the best way to get around it is to work with an agent who is representing the buyer only. For example, the National Association of Exclusive Buyer Agents can find you exactly what you need. Visit them at www.naeba.com.
