Buyer Beware: It’s NOT in your best interest to buy a house from the listing agent
The stats for October are in and the fall market in the GTA remains tight. In the “trenches” we’ve seen a fickle market that at times has been difficult to predict. Some properties get tonnes of offers. Some receive none. Those that we imagine will sell in seconds sometimes do and sometimes don’t. It’s even been hard to gauge market values. A couple times we’ve seen sellers take offers for significantly less than we predicted they would. That being said, for the most part it’s still tricky to buy a house (or condo) in Toronto. The homes or condos priced for less than a million in the city (and are close to transit) remain a super competitive marketplace. You will need every edge you can get if you want to “win” them. Which leads into the subject matter for this blog. I’m amazed how many buyers I meet who are under the impression that there is a big advantage to working with the listing agent to buy a house. Why exactly is this misconception so prevalent?
You Want A Deal. You Figure The Selling Agent Does Too.
I believe part of the allure and logic is that people want a deal when they buy a house. I can relate to that sentiment as much as you. Real estate is probably your biggest purchase and why wouldn’t you want to get the best possible price on whatever you buy? I also completely understand that it seems that the easiest way for you to get this deal is to work with the agent representing the home or condo your interested in. In practice however, this isn’t likely. The listing agent can’t provide you with advice on what to offer (they can send you recent comps to help make your decision but you can do that on your own these days now that sales info is public). They can’t tell you how the offer strategy should be adjusted based on the number of offers, the home inspection, the days on market, the info they’ve gathered about the Seller’s position and on and on. And finally they can’t properly protect or inform you about the home you’re about to sink your savings into.
Real Estate Verbiage: “Double-Ending”
“Double-ending” or multiple resprensentattion are the terms for this kind of transaction (where listing agent represents both buyer AND seller) and it remains a hot topic in Toronto real estate. In my experience, the Buyers who are under the impression that double-ending will help them buy a house tend to be well educated and high achieving professionals. This leads me to think that perhaps behind this belief there is a heavy reliance on logic . Of course it seems logical that someone with inside information on their listing would be able to share this with you as the Buyer. It’s also logical that this same person would have the Seller’s ear and would be able to increase the likelihood of you getting that house or condo. The problem is as is the case with so many things, logic and theory fall apart in the face of practical experience. The reason the listing agent is so lovely and open to representing you is because THEY WILL GET PAID DOUBLE.
Multiple Representation: Client Vs Customer Relationships Amid This Representation
When the listing agent is representing you as a Buyer there are a few ways to make this happen. The listing agent can do this by representing you as a Buyer Client or Buyer Customer. Representing you as a Buyer Customer allows them to bring your offer to the Seller without requiring them to provide certain services to you. They must treat you with fairness, honesty and integrity as well as provide you with conscientious and competent service. They are however under no obligation to negotiate the most favourable term for YOU. No obligation to go above and beyond to discover and disclose information to you that impacts the property and the negotiations (they are only required to disclose what they already know and what they ought to know). Finally no obligation to provide confidentiality (during and after the transaction).
The second option for you as a Buyer is to be represented as a Client. This means you are owed fiduciary duties by your agent: (obedience, loyalty, disclosure, confidentiality, accounting and reasonable skill/care (include link)) including the specifics that are not included above ie. negotiate favourable terms, protect you and your interests among others. The big question remains: How can someone simultaneously deal with 2 competing parties and sets of interests at the same time?
How Can An Agent Offer Full Client Care To Two Parties? The Short Answer Is: THEY CAN’T.
How could they possibly? The easy answer you’ll often hear from the eager listing agent is: they can represent you as a customer. But why would you want want to sacrifice the level of service you are being provided with in ways that can directly impact what you pay for your home but also knowing exactly what you are paying for? The Buyer benefitting from the double-ending situation is rare and unlikely. For this exact reason the double ending and multiple representation as a practice is under review and might be eliminated completely. The real advantage to the double-ending, if there is one, is to the Seller. Some agents will cut their commission if they represent the Buyer and the Seller saves the difference. Remember it’s the Seller, not the Buyer who pays the commission. Does the Buyer have a greater chance of getting the home if represented by the listing agent? Possibly, but you sacrifice a lot in the process and have to decide if it’s worth it.
The Bottom Line
Bottom line, the listing agent is not able to solely represent your interests and no matter how you spin it has it’s consequences. My advice? Buyers beware and get representation to protect and serve you. If the listing agent is doing their job ethically and according the code they aren’t able to get you an advantage. The numbers should speak for themselves and the highest should win. And if you’re new to the buying game, a gentle reminder that Buyer’s Agents Get Paid By The Sellers (so it really, really is in your best interest to get your own lady-agent to represent you).