If you are getting ready to enter the real estate market, you might not realize there are differences between real estate agents. Agents help buyers and sellers through a home transaction, but what are the different real estate agents, and what do they do?
We look at buyer’s agents, seller’s agents, and dual agents. Those in the industry refer to it as agency in real estate or who represents whom.
What is a buyer’s agent?
A buyer’s agent helps a homebuyer find and buy their perfect home. They will try to help the buyer find a home that has the features they want, is in the right location, and is within their budget.
What does a buyer’s agent do?
The buyer’s agent will deal with the paperwork required, create and advise the buyer when they want to make an offer and help the negotiations with the seller.
They can advise on contingencies to add to the contract, which allows the buyer to back out of the deal if certain things go wrong. They will help coordinate closing and deal with any problems during the process.
While you don’t have to hire a buyer’s agent, doing so is in your best interests. You won’t usually have to pay their commission as a buyer. The seller normally pays the real estate commission when the transaction is completed, with the commission being around 5-6% of the price.
What is a seller’s agent?
If you are ready to move out of your home, a seller’s agent or listing agent is the real estate professional you need. They work in the best interests of the seller representing them during the selling process.
What does a seller’s agent do?
They can advise the seller on the right time to sell and what can be done to maximize the price. They can help advise about staging the home and will list the property on the multiple listing services.
Pricing your home can be difficult, but a seller’s agent will understand the local market and can carry out market analysis to advise on the right price. They will market the home, show it to potential buyers, and possibly organize an open house event.
When a buyer makes an offer, they can advise the seller of their options. They will deal with negotiations, acting as a go-between with the buyer and their agent. They will create the purchase agreement and help close the transaction when the offer is accepted.
What is a dual agent?
While the buyer’s agent looks after the buyer’s best interests, and the seller’s agent does the same for the homeowner, a dual agent works for both parties.
It can happen when the same brokerage is used by both the buyer and seller or when the buyer contacts the seller’s agent directly. However, using a dual agency in real estate can create problems.
With a real estate agent working for both sides of the transaction, what happens if there is a conflict of interest? For this reason, dual agency arrangements aren’t allowed in every state, but they could still be worth considering when buying or selling.
The risks of using a dual agent
For this arrangement to happen, the buyer and the seller must agree, but both can lose out because of conflicts of interest. For example, the agent can’t advise the buyer of how much to offer for the home as this could harm the seller’s interests. The agent can also be incentivized to favor the seller since the more the home sells for, the higher their commission.
If you don’t mind receiving less advice from your real estate agent or the feeling that they might favor the other party, there are also some advantages.
Since only one agent is involved, there is less back and forth, and things can progress faster. It can also mean that the seller pays less commission. Since the same agent is working for both, the seller could negotiate a discount with them, and they might even offer a reduction in the first place.
Despite the benefits, using a dual agency in real estate isn’t usually recommended. You should be able to trust your real estate agent, and a dual agent could be too much of a compromise with the amount of money involved in home transactions.
Real estate agents cannot counsel or advise either party in a dual agency arrangement, making it illegal in several states. The only party that benefits is the agent.
Buyers and sellers should have a firm grasp of how real estate agents work in a transaction. It is easy to make mistakes or find yourself in a difficult situation where your finances could be negatively impacted.
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 35 years.