Most of the time home buyers and sellers have different agents, but not always. About 10% to 20% of the time, they both use the same agent. This arrangement called dual agency – when a buyer and a seller both have the same agent – is known as “intermediary” in Texas as dual agency in Texas is illegal. While some may think there may be advantages to dual or intermediary, but there are also some definite downsides and those definite downsides are very important. Whether you’re a buyer or seller, you need to know about both in order to make the best agent decision. To help you out, then, we offer these pros and cons of dual or intermediary agency for Floresville buyers and sellers.
As this is discussed, please realize that Dual Agency is not used in Texas but intermediary is very similar. While single agent intermediary is not advised, brokerage intermediary is not as big a mine field. In offices with a large number of agents many of the agents do not know each other. So having 2 agents from the same brokerage as agents means that the broker is the intermediary and will be the go to person for the agents if they have questions but the agents themselves will work the same as if they were agents from a different brokerage. So both agents can do their fiduciary duty to their clients with full advice. Whereas a single agent who does intermediary cannot give their advice to either the buyer or seller. They must treat each fairly and with facts, not opinions or advice. It is also a requirement that the agent explain representation to you at first meeting. That includes all types of agency.
Overview of Dual or Intermediary Agency
Single agency, which is what most people are familiar with, occurs when one agent represents only one party in a real estate transaction. Typically, an agent from one company represents the buyer, and another agent from another company represents the seller. The main benefit here is that the agent can act in her client’s best interests without any conflict of interest.
Dual agency, or intermediary on the other hand, “is when a single real estate agent represents both the buyer and the seller in a real estate transaction. It can also occur when an agent represents both the landlord and the tenant, or when the same real estate company represents both parties in a purchase and sale or rental transaction.”
When it comes to the exact mechanism of how dual agency or intermediary works, here’s what we find. “When someone hires a real estate agent, they have the opportunity to decide whether they want to work with a dual agent, and they should fully understand the trade-offs of doing so. The agent asks any client who says they’re fine with dual agency to sign an official disclosure from the state department of real estate.” That document is acknowledging that you understand agency in the state of Texas. It does not mean you are doing intermediary agency. That fact will come into play if both parties have the same brokerage be it one agent or two agents represent them in the same transaction. Then both parties have to sign that they agree to intermediary representation.
Because of the cons associated with dual agency, it is prohibited in some states and heavily restricted in others. You can find out more about dual agency or intermediary by contacting a Floresville agent at (210) 216-7722.
Dual Agency or Intermediary Agent Pros
There are some notable pros of dual agency for Floresville buyers and sellers. Chief among these are . . .
FASTER COMMUNICATION AND TRANSACTION SPEED
“When one agent represents both sides of a real estate transaction, there can be less of a delay in price negotiations or getting the answer to a question. The agent still may not get a timely response from their buyer or seller. However, because there aren’t two agents, there’s one fewer party that could hold things up.” While this sounds good, it probably isn’t an advantage that really makes a difference.
In addition, with only one agent involved and handling all the details, the whole transaction is speeded up. “One agent passing paperwork between the buyer and seller speeds up the entire process and leads to the possibility of a quick closing. This of course depends on if both parties can come to an agreement on pricing and contingencies.”
POTENTIAL SAVINGS
Many people think they can get a “better deal” if they call the listing agent and use them to buy. That is a total mistake. Some will say this potential savings comes from:
With dual agency or intermediary, the seller, who typically pays the agents’ commissions, stands to save some money. A dual agent will typically earn a nearly double commission for assuming both agent roles. And that means the agent may be willing to accept a lower commission because it will not be split with another agent. While this might be the ONLY advantage for the seller, does it mean that you as the seller got the best sales price or the best representation on repairs or any other point of negotiation? It can be akin to the old saying that a For Sale By Owner doesn’t save money on commissions because they typically sell at a lower price.
This may also result in savings for the buyer as well. If the dual or intermediary agent reduces her commission, the seller may accept a lower price owing to the reduced commission. Why would you as a seller take a lower price because the agent took a lower commission? Would you as a seller be better off with a lower price because the agent reduced their commission? The net may not be any different.
Because the seller is the first person that a listing agent had contact with they have already built a relationship with that seller. The seller rightfully so expects loyalty to themselves from that listing agent. An agent is not necessarily going to just decide to switch their “loyalty” to a person who calls them on the sign to look at a house, even if that person decides to buy that house. By law, the agent as an intermediary has to treat all fairly without opinion.
MORE PROPERTY KNOWLEDGE
When one agent is handling both sides of the transaction, you can often get more information about a property because the agent knows more about it. “From a buyer’s or tenant’s perspective, using the seller’s or landlord’s agent could mean gaining access to more information about the home.” And that means that the listing agent whose first duty is to their seller knows the potential buyers’ secrets such as loan approval amount and their true desire for the home. A good listing agent will present all information about a property so they are highlighting the sellers property in the best light to all interested parties.
Dual Agency or Intermediary Cons
And now we come to cons of dual agency . . . .
POTENTIAL CONFLICT OF INTEREST
This is probably the biggest drawback of dual agency and the reason for its prohibition in some states. With one agent assuming both roles, that agent may be tempted to pursue personal gain over her clients’ best interests. “Human nature and financial incentives can make it hard for an agent to be neutral when representing both the buyer and seller.”
INCREASED CLIENT RESPONSIBILITY
A related con of intermediary is that the agent’s clients may have to look out for their own best interests. Even if this is completely ethical, it will be next to impossible for an agent to “represent the best interests of two parties with different [and usually competing] goals.”
“That means an intermediary agent acting ethically can’t do more than facilitate the transaction. For example, the buyer will have to come up with the price they want to offer and decide whether to counteroffer without their agent’s input.” That is the REQUIREMENT in Texas when an agent acts as an intermediary.
DIFFICULTY WITH NEGOTIATIONS
When an agent represents both parties in a real estate transaction, that agent will have difficulty advocating successfully for either one of them.
“If,” for example, “a dual agent suggests the buyer makes a purchase offer below list price, the agent is going against the seller’s best interest. Similarly, if that dual agent tells the seller not to accept an offer below the list price, they go against the buyer’s best interest.” In Texas as a intermediary the agent is to give facts, not advice or opinion. That means the seller or buyers have to draw their own conclusions.
When to Consider Dual Agency
So when should Floresville buyers and sellers consider going the dual agency route?
Some industry insiders say they should never consider it. “They question whether a dual agent can truly be neutral when facilitating a transaction where they represent both the buyer and the seller. That’s mainly because the seller will want to sell their home for the highest price possible while the buyer will want to pay the lowest price.” Others maintain that the risk isn’t that great and that dual agency can benefit both buyers and sellers “by speeding up communications and helping the transaction close faster.”
The other point to consider is after the home inspection. Negotiating repairs may not be an issue but it could be a minefield. What if either party has an issue with the repairs? If the repair request is a bit unreasonable to the seller, the agent is going to have to resolve that issue. And that is not to say that the same situation can occur between a buyer and seller with different agents but that is an easier resolution as neither party thinks you are favoring the other party as they could if the agent has both sides of the transaction..
If, then, you’re a Floresville buyer or seller, contact us today at (210) 216-7722 to make the right decision.