Here’s a question that I see consistently popping up on real estate forums, my email inbox and in conversations on the telephone:
I really like this house, do I have to use the agent that listed it to… [insert one or more of these here: show me the home, represent me as my agent, write the offer].
The short answer is no, you do not have to use the listing agent for anything.
The long answer is you don’t want to use the listing agent. Here is why…
Showing Homes
Any licensed real estate agent can show any home listed for sale in the Multiple Listing Service (MLS). Just because the for sale sign says, “Century 21”, “RE/MAX”, “Thompson’s Realty” or “Joe’s Generic Real Estate Company” doesn’t mean only those agents can show you the home. Most homes for sale in the Phoenix real estate market are in the MLS, and most have a lock box that allows any agent access to the home (well, any agent that pays for a lockbox key or access to the combination for agents who still use combo boxes from the dark ages).
In fact, if you use the listing agent to show you the home, you likely have just taken the first step toward enabling a confusing (and potentially expensive) agency relationship issue in what the real estate industry calls “Procuring Cause”.
The “book definition” of procuring cause is, “the uninterrupted series of causal events which results in the successful transaction”. Real estate agents get paid their commission if they are considered the procuring cause of the sale. Erroneously, many agents think simply showing a home entitles them to be deemed the procuring cause in a sale. That is not really the case, but having a listing agent show you a home can (and usually does) start the ugly spiral toward a procuring cause claim. And there are certain scenarios where a buyer (that’s you) might have to fork over a payment for commission that normally the seller would be paying for.
Don’t muck up the procuring cause. Use YOUR agent to show you homes. Don’t call listing agents, don’t go to open houses on your own, and don’t step into a new home builder showroom without first consulting with YOUR agent.
Representation / Writing Offers
The listing agent represents the SELLER. They have a contractual and fiduciary duty to the SELLER, not to you the BUYER. What do sellers want? They want the most money for their home with the least amount of pain. Fundamentally, the listing agent’s job is to get the seller the most money. If they are working for the seller, trying to get them the most money they can, how can they possibly represent you – you who wants to pay the least amount possible for a home.
They can’t.
Oh, some will claim they can fairly represent both sides of the transaction. Many agents like representing both parties in a transaction because then they get both sides of the commission – a double payday if you will.
Dual agency – where one agent represents both the buyer and a seller in a real estate transaction – is legal in Arizona (and many other states). But just because something is legal doesn’t mean it is right, or a good idea. Here’s an often used analogy – if you were being sued in court by someone, would you use the same attorney that the guy who is suing you is using?
Of course you wouldn’t. And you shouldn’t use the same agent to help you buy a home that represents the person you’re trying to buy it from.
(Of note, dual agency – in Arizona – also technically occurs when the sellers agent and buyers agent work in the same real estate brokerage. This is often unavoidable, and is not as problematic as using a single agent for both parties.)
So, what is a homebuyer to do?
Find YOUR agent BEFORE you go out looking at homes. Secure your representation first, and you won’t have to concern yourself with accidently winding up being represented by a listing agent.
How do you find an agent?
In the Phoenix metro area you literally have tens of thousands of licensed agents to chose from. Many are absolutely brilliant and will represent you competently and efficiently. But let’s be realistic… with the absurdly low barrier to entry to get a real estate license and given the shear number of licensed agents in these parts there are plenty that aren’t so swift.
Ask your friends for recommendations. Look around on the Internet. Read agents blogs and websites to get a feel of who they are and what they know. Pick three or four agents and interview them. Ask them about their philosophy toward clients, ask them for references from past clients. Trust your gut. Most people have pretty finely tuned BS meters and you’ll know when you’re being fed a line. Pick an agent that you feel comfortable with and let them help you.
Any agent can show any home. Any agent can write an offer on any home. Chose YOUR agent up front and let YOUR agent show you homes, mine the data, and contact the listing agent. That’s what we do. Why use someone else’s agent, especially the agent representing the person who owns the home you want?
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Jay,
Someday, we’ll all look back and say, “Was dual agency ever actually legal? What in the heck were we thinking?”
Thanks again for hitting yet another nail directly on the head.
Best,
Michael
One can only hope, but there are some heavyweights out there that will fight hard to keep dual agency legal….
Great information for buyers! So important especially when buyers just go “looking around” at open houses or model homes. If you MUST do this make it very clear you are already working with an agent that you are happy with (if in fact you are). As Jay pointed out it will not only protect the agent, but potentially the buyer as well. I know some people have this overwhelming aversion to real estate agents but most of us are really there for our clients’ best interest.
I personally L-O-V-E your analogy about using the same lawyer as the person who is suing you. Some people just don’t get that there is no way for a listing agent to 100% represent the best interests of a buyer at the same time they represent the seller.
I use the analogy of using the same attorney in court all the time too. It works really well to make a point. I actually like the comment about having a finely tuned BS meter. This is also true. The only thing is that we don’t always listen to it. Buyers reading this should probably take heed of your words and simply stop for a second and digest what you’re saying. Chances are if something doesn’t feel right, then it just ain’t right!
I think the problem for buyers is they are so caught up with the process, (that’s somewhat complicated for the uninitiated), that they get distracted from that itsy bitsy detail of which agent to work with. What they don’t realize is that the agent they decide to work with will make all the difference in the world to their buying experience as you once again so succinctly point out.
The problem once again here is that the consumer is not appropriately educated. Remember all those people who blame mortgage brokers and Realtors for buying homes at the top of the bubble? They didn’t read the fine print (or the writing on the wall) then, and aren’t likely to figure out that it is not in their interest now, to use the listing agent as a buyer’s agent. Hopefully enough people will read articles like this one and the word will spread . . . not likely, IMO.
Jay, great post. Unfortunately, it comes to the lack of understanding by the average consumer of the fiduciary duties of the listing agent to the seller. With more and more consumers coming from a tech-savvy generation and gathering their information online, it will hopefully result in better educated clients.
What a great post. It is important that potential clients understand the benefits of a buyer’s agent, a sellers agent and/or the roles of a dual agent.
The future of real estate both in the Edmonton Real Estate market and North America is going to be the ability to educate the clients on the merits and advantages Real Estate professionals can bring to their home home buying or selling experience.
Edmonton Real Estate – Realty Executives Polaris
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Great post Jay. Single agent dual agency makes zero sense. How can they represent you as a buyer and the seller at the same time? They can’t. A slight conflict of interest…..personally I think its unethical to represent both.
Some buyers have the mentality it will save them a bit more by eliminating the buyers agent commission! Of course the sellers agent will tell you they can save you that 2-4% but the seller really has no more room to move. Well, they represent the seller. They can tell you what they like. They do not have a contract with you. And guess what? That sellers agent will still be taking the full commission now instead of splitting it with someone whose sole purpose is to make sure you are taken care of.
It’s amazing to me how any of these horrible notions get started. “You’ll get a better deal buying straight from the seller, you’ll get those commissions back in your purchase price, that agent will have more drive to get the deal done since they’re getting paid more.” I could go on and on, but hopefully someday people will realize how this buying a house thing should work…
Great post, as usual. Lots of mis-information out there in the buyer community. Had one recently that wanted to know if I would “rebate” 1.5 to 2% of the commission back on their purchase. We’re not going to be working together to find them a property!
Great information, your post will help home seekers to save some money which they might pay to the listing agent in the form of commission.
nice post, in scotland everyone uses a listing agent as its just far too hard to do it alone
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