Buying a House from the Listing Agent:
Explaining Limited Dual Agency
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
If you want a realtor to represent YOUR best interest & not the seller’s, call me today!
If you’re looking to purchase a home, you’ve probably come across the thought of finding a realtor. In recent real estate news, the Supintendent of Real Estate has announced that the council will ban limited dual agency in British Columbia. The only exemption to this ban is for under-served, remote communities with few licensees.
This news comes after a recent trend in the past few years in which buyers want to buy with a Listing agent (the agent who represents the Seller) instead of having their own agent (the Buyer’s Agent). These Buyers are often tech-savvy buyers who are well accustomed to searching for properties on the MLS, have experience working the open house circuits, and have the time to make appointments for the properties they want to see directly with the Listing Agents. While there are some buyers that may see benefit to working with the listing agent, it’s important that you understand the risks when buying a house from the listing agent before you sign anything.
What is Limited Dual Agency? (aka ‘Double ending’)
Limited Dual Agency can be described as a licensee representing more than one party in a real estate transaction. Although legal in some areas, with the consent of both the seller and the buyer, dual agency becomes a conflict of interest as it’s nearly impossible to fully exercise full fiduciary duty and represent two opposing clients with different motives. The seller is trying to get the most amount of money for the home, and the buyer is trying to get the least… how can you possibly represent both while fulfilling your duty to both clients entirely?
The Basics: Representation & Client vs Customer Relationships
The Listing Agent is the person who represents the Seller. The agent’s responsibilities to the Seller include:
- Promoting the best interests of the Seller (ie, negotiate price and terms favourable to the Seller)
- Telling the Seller anything they know about the Buyer (eg the Buyer’s circumstances, their willingness to pay more than they’ve offered, etc)
- Keeping confidential anything the Seller shares (eg. why they are selling, the price they are willing to accept, etc.)
The Buyer’s Agent is the person who represents the Buyer. It is important that as a buyer you are fully aware of what type of representation that you and the realtor that you are working with have. To ensure that you are protected, you want to ensure that your agent is promoting your best interests at all times, and keeping confidential anything that you share with your agent. (eg. Your ceiling price)
How do Listing Agent’s Get Around Limited Dual Agency?
There are 2 ways an Agent can work with a Buyer:
- By having the Buyer sign a Customer Service Agreement, making them a Customer. When you’re a Customer, the agent does NOT work solely in your best interest and provides restricted services. The agent’s obligations are:
- Fairness, honesty and integrity to everybody
- Conscientious and competent service
- Only disclose to you the material facts that he or she already knows or ought to know – they aren’t required to take any further investigative steps.
- Limited privacy obligations
- By having the Buyer sign a Buyer’s Representation Agreement and treating you like a Client. The obligations to a Client are:
- Fiduciary: the agent must promote and protect your best interests at all times
- Negotiate favourable terms for the Buyer
- Maintain confidentiality
- They must take reasonable steps to determine and then disclose to you all material facts about the property.
See the difference? It is quite clear that all buyers want a client relationship, and rightfully should have a client relationship!
The Risks of Buying a Home With The Listing Agent
While the Listing Agent does probably know the house better than any other agent, you probably won’t get the full story.
You shouldn’t count on the listing agent to volunteer information about the lawsuit against the condo, excessive moisture issues, the ‘soon-to-be-divorced’ screaming neighbours, or the pot smoking 19 year old next door. When you buy with the listing agent, it is their job (and also to their benefit) to emphasize all the great things about the property and avoid all of the not so great things. Alternatively, if you work with an experienced buyers agent, it’s their job to represent you and only you. They will know what questions to ask, where to research, and how to get the scoop on the house and the neighbourhood.
Side note: A lot of listing agents in Greater Vancouver do little to no research when it comes to finding out details of the house and the neighbourhood, and it’s highly likely that an experienced buyer’s agent already knows more about the place than they do. Don’t even get me started on that one…
The realtor will have motives of their own, and their goal isn’t to find you the RIGHT house it’s to sell you THIS house.
There are motives for the realtor to convince (more like pressure) you to buy the house that they are listing, as by eliminating the buyer’s agent he or she will obtain the full commission originally offered by the seller. It is oftentimes that neither the buyer or the seller’s best interests are at heart, but rather the realtor’s own pockets. More and more buyers hire a buyer’s agent, because having your own agent means that they are fully motivated to find you the PERFECT house in the RIGHT neighbourhood no matter how long it takes.
People that purchase directly with the Listing Agent almost always reveal their motivation and position, which will hurt your negotiation power.
At some point when working with the listing agent you’re very likely to spill the beans and let them know that you need to buy a house in the next 30 days because you already sold yours and you’re freaking out that you’re going to be homeless. You will likely reveal your budget, and even worse, your ceiling price. The more you tell them, the more the seller will know, and you’ll likely be paying for that in the purchase price. The buyer’s agent keeps all of that information confidential so it can’t be used against you during the negotiation process.
One of the most important qualities you need in an agent is negotiating skills.
Not everyone is a born negotiator – buyers and realtors included! As a buyer, you want someone who is a tactical negotiator that can work on your behalf… and that’s not really possible under dual agency.
If the listing agent tricks you in to a customer relationship (believe me, it’s happened way more than once) the agent does NOT work solely in your best interest and provides restricted services.
To avoid being in a ‘client relationship’ for both the seller and the buyer, and thus limited dual agency, the listing agent will often have the buyer sign off as a ‘customer relationship’ in which they are not obligated to promote and protect the buyers best interests at all times. As a buyer in a customer relationship, your realtor lacks a fiduciary duty to you and unfortunately a lot of details end up being left out. With Customers, their duties are to the Seller so sharing historical comparable sales that don’t support the Seller’s price, for example, wouldn’t be working in the Seller’s best interests.
Top Two Dual Agency Myths Explained
Myth #1: Buying a house from the listing agent will guarantee that I’ll win in a multiple offer scenario.
Despite popular opinion, working with the Listing Agent won’t actually guarantee you’ll win the bidding war. True, the Listing Agent will see all of the offers and could, in theory, tell you how much to bid to win it, but that is 100% against the real estate code of ethics. Any agent who tells you’ll have an edge when you work with them is unethical and risks losing their real estate license.
Myth #2: It’s cheaper to buy with the listing agent since I’ll get a kickback on the commission.
Generally, it’s not actually cheaper to buy with the Listing Agent. Some people believe that if they embark on buying a house from the listing agent that they’ll save money because the agent is going to make extra commission, so they’ll get part of that commission. [aka a kickback] Truth: the Seller pays the commission so Buyers can’t actually negotiate the commission with the Listing Agent – that conversation took place long ago between the Seller and the Listing Agent and has nothing to do with you, the Buyer. While the Seller may save some money if the Listing Agent brings a Buyer themselves, that’s cash in the Seller’s pocket, not yours.
#1 Mistake Home Buyers Make: Not using a buyer’s agent.
I cannot say it enough times – USE A BUYER’S AGENT! First of all, it’s free. Secondly, this is probably the biggest transaction of your life – you’re probably going to want the help of an expert. Real estate is complicated, the contracts are complicated, the subject removal process is complicated. I once heard of a lady that didn’t use a buyer’s agent, assumed that the stove/fridge/microwave/washer/dryer/window drapes/blinds, etc. were all included and didn’t realize she needed to put it in the contract. She ended up having to buy everything new and lost thousands of dollars because the homeowner and his REALTOR took advantage of her not having any real estate contract experience. So… if you’re thinking of going rogue or using the listing agent as your realtor to “save a couple bucks” think again.
If you’re looking to learn more about the buyer’s agent and how hiring one can help you, read our article on the role of the buyer’s agent.
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Are you thinking about purchasing in the near future? If you’re wondering “What does a realtor do when buying a house?” then give us a call at 604-765-0376 and we can show you what we do to help our buyers save more money with us than with other agents. Prefer text? 604-319-0200. or email [email protected]
