Great question! This scenario (known as dual agency) is dependent on each state.
In Michigan it IS legal, but it can be problematic (I’ll explain later)
In States like Alaska,
Colorado, Florida, Kansas, Maryland, Texas, Vermont, and Wyoming it’s directly outlawed.
Both the buyer AND the seller need to understand that if you’re being represented by the same agent…..BOTH are giving up some protection.
LETS DIVE IN
Real estate agents (called REALTORS if they are registered with the NAR and comply with additional code of ethics) have a fiduciary duty to every client.
Just like your financial advisor, we cannot act in what’s in our best interest…..we must act in what is best for the client.
(Now….as a small business owner this is just common practice for me. I firmly believe in you get what you give, not all people are wired this way and they need external enforcement.)
But I digress.
LOSS OF LEVERAGE AND NEGOTIATING POWER
It is virtually IMPOSSIBLE to fully represent both buyers simultaneously in a transaction because there is an obvious conflict of interest.
Easy Example:
Seller: Wants to get top dollar for the home.
Buyer: Wants to pay as little as possible for the home. (And have several repairs made).
How is the agent supposed to represent both fully?
By aggressively representing one, you’re harming the other.
Easy. You can’t!
And this is SO obvious that in the State of Michigan, anytime you enter into dual agency with an REALTOR you are required to sign a paper stating that you are aware you are losing some of your representation by doing such.
LACK OF FULL DISCLOSURE
Another example, is in order to ethically maintain neutral in dual agency REALTORS may not be able to offer full disclosure.
If they buyer is willing to pay more, they’re not allowed to inform the seller.
If they seller is willing to accept less, they’re not allowed to inform the buyer.
PRESSURING THE AGENT
When we hire somebody to work for us, especially on such a large purchase, we expect them to go above and beyond. Answering all questions promptly and fully.
Imagine asking several questions of your REALTOR only for the them to reply: “I’m sorry I’m not at liberty to say.”
That would get annoying REAL fast and could lead to a breakdown of trust.
SHOULD I AVOID DUAL AGENCY?
That depends on each situation.
If you find a home that is priced competitively, in your budget, and passes a professional home inspection (always, always, get an inspection)…the MAJORITY of the time you’ll be okay using a the listing agent as your “Buyer's Agent” (also known as the selling agent…..don't ask me why).
Just understand there is some leveraging power you are giving up.
It’s best to discuss these concerns ahead of time with the agent before sign over any liability.
Want to talk more about buying/selling?
I'd be happy to discuss your options.
David Fox
The Black Belt REALTOR
fox@blackbeltagent.com
734-679-0174