Who Do Real Estate Agents Really Represent?
Who does ‘your’ real estate agent really represent?
Unfortunately, many homebuyers, sellers, and even new real estate investors don’t understand what the term ‘agency’ really means. They don’t really have a handle on the different types and roles of real estate agents out there. So what are they? Who do Realtors really represent? How does that affect the transaction and terms of the deal? Do they still offer enough value to even consider using them?
‘An Impossible Situation’
Types of Realtors can vary by specialty, and also by what their brokerages and local laws permit. What has become the most common in many areas is ‘dual agency,’ or transactional agents. In the paperwork, they reveal and are supposed to disclose that they are only there to facilitate the transaction and do not truly represent either party. Sometimes this can be changed during the process. In a recent court case, dual agency was called “an impossible situation.”
On one hand, many see it as a necessity. Others see it as being contradictory to everything that Realtors should stand for. Technically, you could say that transactional or dual agency is ‘commission check’ agency. It results in agents only caring about facilitating the earning of a commission check on the closing of a transaction. That obviously contrasts with many ethics. It is clear to see how that has infected the industry over the last couple of decades.
That doesn’t mean that dual agency can’t be good for buyers, sellers, and real estate investors. In some cases, it can help them save money if a Realtor is willing to discount the commission involved as they are earning both sides. Of course, many real estate agents like it because they get to earn far more from each deal. It is double dipping.
So what other types of real estate agents are out there?
A buyer’s agent is a Realtor that specializes in working with buyers. They may simply elect this status, or they may invest in additional real estate education and training in this area, and may be more experienced in working on the buyer’s end. They are still licensed to do any type of real estate business that other agents are. They may even have their own listings. They just choose this focus. In theory, this provides property buyers with a dedicated and skilled professional representative. While some try skipping this to work right with the seller or their agent, which can be counterproductive, it can pay to have your own professional rep that provides a buffer from liabilities. Their help is often underestimated, but so are the consequences of going it alone. A buyer’s agent will help connect you to professionals like mortgage loan officers and title companies, show you property, assist in making offers and writing contracts, negotiation, arranging inspections, and managing the transaction through to closing.
A seller’s real estate agent specializes in listing properties for sale. Again, they may simply elect this status, or invest in extra designations and training. They can also work with buyers, or manage the transaction under dual agency. A seller’s agent focuses on finding sellers, listing homes on the MLS, marketing properties, and then representing the seller through to closing. Many choose this status as they believe if they have the inventory everyone else if going to have to come to them. They will market for listings, provide comps and pricing advice, market those properties, show properties, advise the seller in contract negotiations, and strive to get them the best deal, while protecting their interests until closing. When buyers skip having their own agent they are then often working with the seller’s agent. They underestimate the responsibility of the agent to the seller. This agent is not on your side as a buyer. In fact, they are on the opposite side.
Do You Even Need an Agent?
No. Home buyers, seller, and real estate investors can work without an agent. They shouldn’t completely rule it out. That is just being ignorant, and it is self-sabotaging. Many homebuyers overlook the fact that the seller technically pays for the buyer to have their own professional representation. If not used, that money often goes to pay the seller’s agent. Don’t leave tens of thousands on the table.
On the other side, some real estate sellers may find that professional representation can help them sell homes for more, while keeping them protected from some lawsuits. Any savings will get offset by real estate commissions.
Agents still offer a lot of value, but there are circumstances and markets in which homebuyers, sellers and investors can benefit from operating alone. If you know what you are doing, if you have the time, and the skill, and especially if you need to sell instantly and net as much as possible, there are great arguments for going it alone.