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The reason has to be money. He feels he can drive a better deal. He may be astute enough to know that the agent becomes neutral and cannot negotiate for, nor advocate for the seller so it gives this savvy buyer, who may be a strong negotiator, a distinct advantage.
Many buyers feel that a buyers agent will not work to get a lower price because they will not make as much commission. So if he represents himself then he can make a low ball offer that a buyers agent probably would not make.
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They are also going to want the commission that would be paid to the buyer.
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Regarding dual agency:
The seller hires a listing agent to work on his behalf, and among other things, to negotiate the best price and terms for them.
Because the dual agent will represent both buyer and seller, she agrees to a reduced commission. For example sake, let's say she has charged a commission rate of 7%, with 4% going to the buyers agent. And if she acts as a dual agent, she will get a total of 4%. The seller saves 3%.
That is good for the agent, she is making 1% more for acting as a dual agent.
On a $500k home, the seller sees he is saving $15k in commission by accepting dual agency.
Everyone's happy so far.
What the Seller does not realize is that by saving the $15k, his representation has been seriously diluted. Now the dual agent must be "loyal" to both parties. How can she do that? She can't. She must be "neutral". The Limited Consent form told the seller that there is a conflict in the "loyalty" duty, but he did not understand that. He still thought the agent would negotiate in his best interest.
If a listing agent learns that the buyer (who offered $475k for the house), but is willing to pay $550 as a top number, the listing agent would normally be obligated to disclose that to the seller.
But hold on. Now the agent is a dual agent and owes "confidentiality" to both buyer and seller. This listing agent cannot inform the seller that they buyer is willing to pay $550. (If he does, then he is being unethical and violated the Consent to Limited Dual Agency agreement.)
She can only be a paper processor. She cannot advocate for either party.
Is this what the seller envisioned when the agent sold him on saving $15,000 by allowing her to be a dual agent? I doubt it.
Let's assume the seller countered (without any guidance from the listing agent, because it is not allowed) with $475k. The buyer countered with $470k and the seller accepted.
Now, as you said, the house sold, so both buyer and seller go away happy, and the dual agent makes an extra $4,750, and didn't even have to do any negotiating. Good deal right?
Wrong, the seller got hosed.
The listing agent knew the buyer would pay $550, but could not disclose that to the seller, who is paying her. The seller only got $470. That is $80k difference. But wait, he did save about $15k on commission, which made him very happy. so the loss he had was only $65k. But since he does not know that, he's happy.
I'm not afraid of Dual Agency. I just think it's very unfair to the seller, and it's probably why many states have made it illegal.
If all agents would thoroughly explain the pitfalls to a seller, I doubt if one of them would accept dual agency.
I refuse to be a dual agent. I will only work for one client, and will continue to place their interest above mine.
Interesting situation. Again, that is why I would make sure to the best of my ability that they understood going in and sign something to that affect. You do have to be more neutral in dual agency, so explain it and disclose it in writing.
I think another way to see this is that maybe it wouldn't sell to this buyer at all if you won't do it and that is also the seller getting hosed. When will there be another buyer, who knows?
I think there are risks to this job we have and that is why it pays very well for what it is. You might end up in court someday, but you can't let fear of that keep you from doing the job.
Interesting situation. Again, that is why I would make sure to the best of my ability that they understood going in and sign something to that affect. You do have to be more neutral in dual agency, so explain it and disclose it in writing.
I think another way to see this is that maybe it wouldn't sell to this buyer at all if you won't do it and that is also the seller getting hosed. When will there be another buyer, who knows?
If this buyer doesn't buy it, because he refuses to use an agent, then he is probably not serious about buying it. I explain how I operate to the few sellers I work with, and they understand.
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quote=Nocontengencies: I think there are risks to this job we have and that is why it pays very well for what it is.
I have to disagree. I get paid for representing my client and keeping his interest above mine. (But not including taking legal risks.) I have to work to keep my seller, or buyer, and my company out of legal trouble.
We are paid a commission, which some people feel is too high, because we work on contingency. If there is no transaction, there is no pay.
If we were to work for pay by hour, or by activity, then we would make a lower hourly wage, but it would be consistent.
I do not get paid for taking legal risks. Especially risks that would be determined by my E&O insurer to be negligent.
If I had co-owners or shareholders in my company, they would take a dim view of me taking legal risks.
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quote=Nocontengencies: You might end up in court someday, but you can't let fear of that keep you from doing the job.
I do my job and do it well, but I'm not going to take unnecessary risks by working with an unrepresented buyer.
I can't think or operate that way because I know that if I end up in court that I can expect a minimum legal bill of $100,000; plus any judgement the court awards against me.
I had to sue someone in 1980 and my bill was $50,000 and it was settled just before going to court. I ended up getting paid what the defendant owed me, but I didn't get my attorney fees paid.
You can take your risks of going to court if you wish. I'm not going to tell you how to run your business. But there are so many other ways that we can be sued, I'm not going to add another one that could be considered negligent. I want my E&O to cover me if I get sued, so I don't take risks.
I think my position and reasoning on this subject has been thoroughly explained. Some will agree with me, and others will disagree. Let's just agree to disagree on this subject, and expend our energy on something that will be more productive.
If this buyer doesn't buy it, because he refuses to use an agent, then he is probably not serious about buying it. I explain how I operate to the few sellers I work with, and they understand.
I have to disagree. I get paid for representing my client and keeping his interest above mine. (But not including taking legal risks.) I have to work to keep my seller, or buyer, and my company out of legal trouble.
We are paid a commission, which some people feel is too high, because we work on contingency. If there is no transaction, there is no pay.
If we were to work for pay by hour, or by activity, then we would make a lower hourly wage, but it would be consistent.
I do not get paid for taking legal risks. Especially risks that would be determined by my E&O insurer to be negligent.
If I had co-owners or shareholders in my company, they would take a dim view of me taking legal risks.
I do my job and do it well, but I'm not going to take unnecessary risks by working with an unrepresented buyer.
I can't think or operate that way because I know that if I end up in court that I can expect a minimum legal bill of $100,000; plus any judgement the court awards against me.
I had to sue someone in 1980 and my bill was $50,000 and it was settled just before going to court. I ended up getting paid what the defendant owed me, but I didn't get my attorney fees paid.
You can take your risks of going to court if you wish. I'm not going to tell you how to run your business. But there are so many other ways that we can be sued, I'm not going to add another one that could be considered negligent. I want my E&O to cover me if I get sued, so I don't take risks.
I think my position and reasoning on this subject has been thoroughly explained. Some will agree with me, and others will disagree. Let's just agree to disagree on this subject, and expend our energy on something that will be more productive.
I said risks, not legal risks. You don't have to do something illegal for someone to sue you and take you to court. It can happen with anything you do.
I said risks, not legal risks. You don't have to do something illegal for someone to sue you and take you to court. It can happen with anything you do.
We were only discussing unrepresented buyers and implied agency, which is a legal risk. When one works with an unrepresented buyer, or an unrepresented seller there is a legal risk that the agent may accidentally create an implied agency with that unrepresented person.
Acting as a dual agent with the Consent signed is legal, but it is also a legal risk. That's because one or both parties may not fully understand the implications, even though they may say they understand when they signed the agreement.
I understand there are many other risks, such as not being paid, transactions falling through, accident while driving a client in our car, getting bit by an over protective "friendly" pet, encountering a squatter in vacant homes, and so on. We're aware of all those risks, and many of us take precautions to mitigate those risks in order to protect our income and our lives.
So why should I not also do what I can to mitigate the legal risks inherent in this business?
We were only discussing unrepresented buyers and implied agency, which is a legal risk. When one works with an unrepresented buyer, or an unrepresented seller there is a legal risk that the agent may accidentally create an implied agency with that unrepresented person.
Acting as a dual agent with the Consent signed is legal, but it is also a legal risk. That's because one or both parties may not fully understand the implications, even though they may say they understand when they signed the agreement.
I understand there are many other risks, such as not being paid, transactions falling through, accident while driving a client in our car, getting bit by an over protective "friendly" pet, encountering a squatter in vacant homes, and so on. We're aware of all those risks, and many of us take precautions to mitigate those risks in order to protect our income and our lives.
So why should I not also do what I can to mitigate the legal risks inherent in this business?
I think the difficulty with dual agency or an unrepresented buyer is that not only do things have to be legal, but also ethical. It is possible for the actions of the agent to be one and not the other. I would do it, but very carefully. I don't want to send a buyer on their way, just because things are now more difficult. I think it is part of the job if it is legal in the state you practice. If you go into a deal with no representation on one side and think you owe them nothing you are mistaken. I would be careful of doing anything that might look unethical though it is legal.
I think the difficulty with dual agency or an unrepresented buyer is that not only do things have to be legal, but also ethical. It is possible for the actions of the agent to be one and not the other. I would do it, but very carefully. I don't want to send a buyer on their way, just because things are now more difficult. I think it is part of the job if it is legal in the state you practice. If you go into a deal with no representation on one side and think you owe them nothing you are mistaken. I would be careful of doing anything that might look unethical though it is legal.
Being a dual agent, or working with an unrepresented seller/buyer is not part of the job. It is a choice. There is nothing that requires an agent to work in that capacity.
Agents are not required to work with sellers as a listing agent. They are not required to work with buyers as a buyers agent.
All agents are free to specialize and to determine in their business model who and how they will work.
In AZ, an agent owes Fiduciary Duties to the "client"
Anyone who is not a client is a "customer"
The agent owes the duty of "honesty and fair dealing" to "customers". That is all an agent owes to a customer (unrepresented buyer or seller)
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