So, Who Really Does Represent the Client in a Real Estate Transaction?
We know many of our Solutions clients are tech savvy, and they’ve become familiar with such websites as Zillow, Trulia, Realtor.com and others when they’re either looking to purchase or sell a home.
But, did you know that Realtor.com, Zillow, Trulia, and even our Local MLS’ website, promote something called “Dual Agency”, and that this is a very serious problem for most Buyers and Sellers in Virginia?
What is “dual agency”?
Dual agency is where a single agent represents both parties in a transaction. Think of it this way, the person representing both parties is actually just a facilitator.
As the client, you may very well ask, “How can one person represent the best interests of both parties?” Another very good question to consider is, “Would you have an attorney represent both sides of a legal transaction?”
If you answered “No,” to this last question then you should understand that dual agency is virtually the same thing.
How are these sites promoting dual agency?
The sites mentioned above are promoting “dual agency” by prominently advertising the listing agent with homes for sale (these sites sell this service to the listing agent/firm). This entices a Buyer to contact the listing agent for information as it is readily and easily available.
Most Buyers naturally feel that contacting the listing agent is in their best interest. This couldn’t be further from the truth as the listing agent is contractually bound by his/her listing agreement to represent the best interests of the Seller.
Why is dual agency such a problem?
Because Virginia is a “caveat emptor” state and most new Buyers don’t understand what this means. Don’t worry, even seasoned Buyers may not understand.
A “caveat emptor” – or “Buyer beware” – state refers to an area in which the Buyer has to do all of their homework and carefully vet a house through tax records, research of the home through foundation, radon, lead based paint, etc., inspections in order to find out everything there is to know about a house as a Seller is not required to divulge more than is required by law.
Why would an Agent want to do “Dual Agency”?
It is all about the money…. Let me explain with a hypothetical example. When a home is listed for sale there is a listing agreement, typically with a percentage of the sale price going to the listing agent (let’s use 6% for this example). The listing agent is then authorized to pay a portion of the 6% to a buyers agent (let’s use 3% for this example) and this is offered in the MLS, called cooperative brokerage.
NOTE: It is very important to understand that the listing agreement and any future purchase agreement are two separate legal documents.
With our hypothetical example above, lets say that a buyer goes directly to the listing agent. Does this save any money for the buyer or seller? The answer is no, with this example, the listing agent (who we are now calling a facilitator) is paid the full listing agreement amount, again from our example this is 6% of the sales price. Interesting…. less work for more money…
Another interesting fact is that most agents will admit that being a dual agent is more stressful because they can not legally divulge pertinent information to either the seller or the buyer.
Is dual agency good for Sellers?
No, Sellers should have proper representation in a contract. This means having an agent who fully represents just their interests. There are going to be inspections and negotiations that require the assistance of a qualified, and many times aggressive, real estate agent to help the Seller get the best deal out of the transaction.
Is dual agency good for Buyers?
No, in almost every case a Buyer is better off being represented by an agent who is only looking out for their interests.
A Buyer has several steps to go through in the purchase of a home. They have to get proper financing, negotiate a contract, do proper inspections on the home and dozens of other steps along the way to a successful closing.
So what’s the right answer?
Sellers should use a listing agent to list and market their home … period.
Buyers should locate a Buyers Agent who can properly represent their interest in the transaction. This starts at the point that a Buyer is simply looking for a home.
In addition, in Virginia all agents are required to have a prospective client acknowledge in writing – before being shown a house – that they have been informed and agree to the laws of Buyer Agency. The agreement can be for a single house, for a given day, or you can opt for non-representation.
Here is the link to our website that can explain it better:
If you want to see a house and your agent doesn’t ask you to sign a Buyer Agency Agreement, or give you this information before going inside, they’re not following the law (they are risking losing their license).
Using a firm like Charlottesville Solutions is a critical first step in anyone’s home purchase, and we’re happy to help answer any questions you may have about this and other issues.