Buying a Home Through a Seller’s Agent – Pros and Cons
For home buyers in a competitive market, using a seller's agent can seem like a smart way to win a bid on a house.
Buyers can catch a break on Realtor commissions if both sides are using the same agent. The biggest advantage may not be saving money, but the possibility of having a leg up on other buyers by having the seller's agent know what the other offers are and helping you make the best offer.
Some unscrupulous agents may do that, but legally they represent both sides and must be fair to both sides.
It can be a difficult line to walk in trying to get the best deal for the seller, while still trying to help the buyer get the lowest price and get the house, says Brian Horan, a real estate broker in Redondo Beach, CA.
"It's a tricky balance," Horan says of the constant negotiating in a "dual agency" that can make a deal contentious.
Horan has only done two such deals as a seller's agent for both sides, though he's been approached often in the past year. He says he mostly turns them down because he has a fiduciary duty to both sides that can be difficult to maintain.
"They tend to feel that their offer is going to be the best because they have the inside offer," he says of buyers working through a seller's agent, also called a listing agent. "But that's not necessarily the case because there could be lawsuits."
To cover himself legally, he'll keep notes of what he tells each side, and legally follows his obligation to tell both sides about any problems a house has.
Benefits for buyers
The biggest motivator for a buyer to use a seller's agent is when the housing market is tight, Horan says.
The buyer may think they'll have a better shot at having the best bid because the agent will make more money and will have more of an incentive to get the buyer the house, he says.
A lower commission for a listing agent representing both the buyer and seller can be an incentive, say dropping it from 6% to 5%, says Jeff Phillips, co-owner and vice president of HP Investments, Inc., a mortgage loan originator and real estate company based in Rohnert Park, CA. For a $750,000 purchase price, that reduction equates to $7,500 less, allowing the buyer to have a slightly lower offer price, Phillips says.
Communication can be more efficient through one agent. "The agent's got to be an excellent communicator to do it without getting into trouble," Horan says.
Drawbacks for buyers
Even when the listing agent has the same fiduciary responsibility to both sides, having a dual agent can lead to distrust. "Since the buyer was not the listing agent's original client we still sense some distrust from both parties when representing both parties," Phillips says.
"We try and create as much transparency as possible to mitigate this," but it can still be a drawback for both sides, he says.
Since a seller's agent is trying to get the best price and terms for the seller, if that agent it working for both parties, they could disclose anything the buyer tells them to the seller, says Cheryl Eidinger Taylor, chief operating officer at ERA Key Realty Services in Whitinsville, Mass. That could include information about the motivation for buying or what they're really willing to pay, says Taylor, who recommends that a buyer get their own agent.
A dual agent, she says, will ultimately be working for a seller and while they'll provide material facts about the property, they won't disclose the seller's motivation.
"The seller's agent cannot help the buyer assess whether the home is priced fairly and will only provide pricing information that supports the seller's listing price," Taylor says.
The listing agent is focused on the seller's property and it isn't their job to find the buyer the best property that fit his or her needs, she says.
A seller's agent may seem anxious to help a buyer as a customer, especially since they're collecting both sides of a commission, says Bruce Taylor, president of ERA Key Realty Services.
"The only possible advantage is that in talking directly to the seller's agent, the buyer might learn something that a buyer's agent might not know," he says. "That is doubtful, though, since a buyer's agent knows the questions to ask better than a buyer does. The seller's agent is only interested in selling one home - his listing."
Another downside for buyers is that they have only one broker office to turn to if a lawsuit needs to be filed, Phillips says. When each side has its own agent, each would have their own insurance policies and two pockets to pay out of if a payout is required, he says.
For Phillips, the pros outweigh the cons for buyers, who have more negotiating power at the table with a dual agent. An agent representing both sides, he says, tries "harder to be very transparent and create two clients for life."
In his second time as a dual agent in 12 years, Horan is currently working on a deal for a buyer as the listing agent because the buyer had the best offer, he says.
Such working relationships can be difficult when the buyer approaches an agent because the agent doesn't know them as well as they do the seller, says Horan, who adds that he'd be a dual agent again if the circumstances were right.
"I'll do it again," he says. "I do it cautiously or I do it with a lot of documentation."