Real estate brokerage commissions are one of the most mysterious aspects of buying a home. Yet it’s nonetheless important for prospective buyers to try to make sense of the commission system and understand the pros and cons of various scenarios.
One potential scenario is a dual agency, which occurs when one brokerage company represents both you and the seller of the house you want to buy. For example, a dual agency might be created if you toured an open house and agreed (either on the spot or later) to allow the listing agent to write an offer for you to purchase it.
A dual agency could exist even if two different agents who both worked for the same brokerage company represented you and the seller. And that would be the case even if the two agents didn’t work in the same office. Dual agency is legal in most states, though it may be subject to special real estate laws and regulations, and requirements of industry ethics codes.
Possible benefit of dual agency
A dual agency could present an opportunity for the seller to negotiate a reduction in the broker’s commission since the commission wouldn’t be shared with another broker. That opportunity might be even better if you and the seller were represented by the same agent as well as the same broker.
Possible drawback to dual agency
On the other hand, a dual agency could hurt your negotiating position with respect to the seller since the listing agent might be privy to more information about your needs, wants and ability to purchase the home.
Whether a dual agency makes sense depends on your personal priorities and the dynamics of the local housing market. If the market were characterized by high demand among buyers relative to a limited supply of for-sale homes, a dual agency could help you compete against other buyers’ offers. But if the market conditions were reversed, you might want to think harder before you agreed to a dual agency. Don’t make a hasty decision if you can take some time to weigh the pros and cons and consider other options.
If the listing broker won’t reduce the contracted commission, the cooperating broker or agent might offer you other concessions to help you to buy the home. Concessions might include paid closing costs, a repair allowance or a rebate, among other possibilities. Buyer rebates are legal in most, but not all states.
Don’t disclose personal or financial information to an agent until you decide you want him or her to help you purchase a home. You might need to discuss your needs in a general way when you interview agents, but be cautious. If any of those agents later represented the seller of a home you wanted to purchase, information such as how quickly you wanted to move or the top-dollar you could afford to spend could be used to your disadvantage in those negotiations.
