Dual Agent , fiduciary duty and commission

Multi-Family and Apartment Investing
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Dual Agent , fiduciary duty and commission

Nikki O.
Member since 2018 · 7 posts · 0 votes

I am about to put together a competitive offer for a multifamily around $400k in college town with over 9% cap rate, however so far I do not have a buyer's agent at this point. 

The agent admitted that she gets 6 for representing both sides. That's $24000, as opposed to $12000 at 3%, a significant difference in most people's mind.

She has other offers coming from parties she also dual represents, so if I come in with my own agent my offer will mean her commission will be reduced to half. Even if my offer might come in higher than other offers I am worried that she is going to present more favorably offers that give her 6% over mine that will give her 3%, not only that I would be better informed.

Thanks and Merry Xmas. 

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  • Charlie MacPherson
    China, ME · Member since 2014 · 3k+ posts · 4k+ votes
    7y

    @Nikki O.  If the agent is ethical, she will submit all offers to the seller.  Most likely, she is required by law to do so.

    Not presenting an offer is very risky business.  If you were to find out that the property sold with an inferior offer, you could lodge a complaint with the state regulatory board.  That could result in anything from fines to license revocation.

    Unless you've signed a buyer's broker agreement, that listing agent doesn't represent you.  If you have, she has to execute a "disclosed dual agency" agreement with you and the seller.  In a dual agency situation, the agent has to serve as a neutral party, and owes a duty of confidentiality to both sides.  

    If the seller has told her that we'll list at $100,000, but I'd take $75,000, she cannot share that information with you.  Likewise, if you told her "I'd pay $85,000, she cannot share that with her seller.  

    This is why dual agency situations are so sticky.  As either a buyer or seller, I'd never accept that, because my agent cannot properly represent me.

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  • Taylar Caraway
    Realtor · Marietta, GA · Member since 2018 · 50 posts · 23 votes
    7y

    Great question Nikki.

    I'm not sure what state you're in, but in GA dual agency is illegal unless written consent is given by both parties (as I think is also the case in most states). Dual agency is a very risky way to run her business and this agent is really opening herself up to some ethical issues... any ethical agent would have a real problem doing business this way (in my opinion).

    In dual agency, the agent is not allowed to negotiate for the seller or the buyer. She has to remain neutral, and thus it's virtually impossible to have any negotiations. I'm not sure why anyone would ever agree to this unless it was a unique situation (for example, familial transaction). But otherwise, it doesn't seem to make sense for anyone.

    If you aren't using a buyers agent, it's important to remember that this agent is representing the SELLER and will have a fiduciary duty to represent the SELLERS best interest, not yours. To her, you are just a customer and she has no loyalty to you.

    I strongly recommend signing a buyer brokerage agreement with a buyers agent so you have someone in your corner to negotiate for you. There's really no reason not to do this considering that using a buyers agent is free for you (the seller usually pays all the commissions, although this can be negotiated).

    Also, she has a legal duty to present all offers to her seller. She cannot legally exclude offers that give her 3% versus 6%. The seller is still paying the same 6% either way so this doesn't affect his/her net at the end of the day... so this shouldn't even be brought up by the agent when the offers are presented.

    Hope this helps!

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  • Joe Norman
    Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    Taylor and Charlie are correct in saying that 1) the listing agent represents the seller exlclusively, so anything you tell her about your motivation or negotiation position is NOT confidential, 2) that single agent dual agency is illegal in most states (here in Maryland the Broker is required to appoint a neutral intra-company agent), and that 3) the listing agent has a duty to present all offers to the seller regardless of her commission income.

    To that 3rd point though, do you trust her to not be biased towards the offers that will net her more commission?  If the answer is Yes, I trust her, then you have no reason not to hire a buyers agent to fight for your best interest.  If the answer is No, I don't trust her, then you absolutely should hire a buyers agent to fight for your best interest.

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  • Hai Loc
    Specialist · Toronto, Ontario · Member since 2012 · 2k+ posts · 891 votes
    7y
    Always a fine line when double ending. Usually would refer the buyer out to another agent and get a 25% referral fee.
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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    Understanding how to make competitive offers is important. Having a dual agent is something that is EASILY overcome.  Price and terms will easily overcome that. Overcoming a higher price or better terms, now that is HARD. Depending on how hot the property is....all cash, no contingencies, at the highest price will beat out the other offers.

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