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My wife and I have been looking for houses for a few months through an agent who was recommended by a friend. We've mostly found houses by ourselves and Zillow and had him organize walk-throughs, although they've suggested a couple houses to us. So far they've been great to work with and have given us a lot of help in evaluating the houses and walking us through getting a loan. Recently, we found a house through Zillow that, as it turns out, our agent is selling. This house seems to fit our needs and we are considering putting an offer on it. The house is rather new and has had a lot of showings in a short time, which makes me think there might not be too much wiggle room on the price.

How should we handle this? Do we need to find another agent to help us with the negotiation? This seems unfair to our agent who has spent many hours with us. What would be the disadvantages of moving into the negotiation with our current agent? We trust our current agent, but is there anything we should look out for?

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    Do you have something you signed with your buyers agent regulating what you are and aren't supposed to do? – Michael Jan 20 at 18:35
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    Bottom line, agents look out for themselves, so he will do all he can to facilitate the sale so that he gets a commission. – blacksmith37 Jan 20 at 22:32
  • @Michael Nothing has been signed. – WaterMolecule Jan 21 at 14:57
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    Google "dual agency" and you'll get plenty of reading and lots of opinions about your situation. – dwizum Jan 21 at 15:56
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    Last time I worked with a realtor, there was a clause outlining exactly what would happen in a "dual agency" scenario in the exclusivity agreement I had to sign to work with them. Have they not presented you with one yet? – Seth R Jan 21 at 17:41
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If you trust your agent, I would stick with him. It turns out your agent actually has more motivation to sell to you, then to anyone else, because with you he will get the full commission rather than having to split it with another agent. (Though you could argue that he'll still get the same commission if you buy another house with him as your agent, but that's still twice as much work from his point of view, and also not guaranteed.) Yes, there is a conflict of interest since he knows your hard limits price-wise, but the extra money he would get from the double commission would dwarf the extra commission he gets from dickering on price a few thousand. He'd still be far better off selling it to you for less than selling it to anyone else (unless they're also his client). The seller actually has more to worry about in this situation than you do, for that very reason.

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I'd go ahead and use your agent for both sides if you trust them to look out for your interests and I feel that you do. At a superficial level a buyer's agent has the same motivation as a seller's agent. That is get you, the buyer, to pay as much as you are willing to for a home. On a superficial level both sides are benefited from you spending more, not getting a good deal.

Anecdotally, I have had agent, that were supposed to be working for me, not look out for my interests.

So, really, the important thing is to find an agent you trust to work in your best interests. And you can verify these things through your own research. Zillow and other online sites are a great resource for understanding the current market price of a home.

You seem to be interested in getting a good value. You may have to pay more than asking price for a nice home, in a hot market, in a desirable neighborhood. Price and value are independent of one another.

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    +1 That's my big issue with agents, you don't really know if your agent is effective at looking out for your interests unless you're doing your own research, so you have to do your own research anyway. – Hart CO Jan 20 at 19:56
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    Your anecdote is pretty much the rule in many countries. There's simply no reason for them not to be greedy and selfish. – Eric Duminil Jan 21 at 10:25
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    To “get you to pay as much as you are willing to” is NOT the appropriate motivation for a buyer’s agent. If he/she isn’t trying to find me what I want for the best price, he/she is working for someone other than me. – WGroleau Jan 21 at 15:49
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    @WGroleau how is that behavior incentivized? While it may not be appropriate, superficially, the buyer's agent makes more when the buyer pays more for a home. – Pete B. Jan 21 at 17:30
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    @WGroleau and that's exactly what happens in practice. A so-called buyer's agent doesn't get paid anything if a deal doesn't go through, so they are incentivized to do whatever is needed to make the sale go through. E.g. convincing the buyer to increase their offer, telling them to skip an inspection or ignore or minimize things found during the inspection, whatever it takes. Secondarily they get paid more the more the buyer pays. So they are doubly incentivized to convince the buyer to pay more (as long as they don't push so hard that the buyer decides they can't afford it.) – stannius Jan 21 at 18:42
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An agent has to disclose who they are working for.

The situation you are in where the agent represents both parties is called a dual agent. The problem for you is that they know exactly how much you can afford and how close that house matches your dream house. For the seller knowing those things about you makes negotiations easier because they know the maximum you can pay. Of course you can also know the absolute minimum they can accept, and how desperate they are to sell.

Most buyers and sellers want to stay away from this situation. The dual agent is supposed to be neutral, but they have too much inside knowledge of both parties.

Personally I would avoid this situation, and move on to another house.

Example:

  • House listed for $100K, seller needs $92K or they can't do the deal.
  • The buyer can pay $95K max, and opens the bidding at $90K.

  • If the negotiation is fair, they meet somewhere between $92K and $95K.

  • But the agent knows the numbers for both sides, they might drive the negotiation to $95K, to maximize their commission and because they know the buyer can afford it.

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    Why move on to another house and not just another agent? – Hart CO Jan 20 at 18:50
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    The sellers agent still knows everything about you. – mhoran_psprep Jan 20 at 19:14
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    @WaterMolecule Pre-approval doesn't mean much of anything. The point is, if you like the house, put in an offer for what you're willing to pay and see how things shake out, the agent's knowledge doesn't have much impact on that. – Hart CO Jan 20 at 19:52
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    @WaterMolecule - Just FYI, I wouldn't recommend spending the full amount you're pre-approved for. – TTT Jan 20 at 19:58
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    One point, the agent does not really care about a 5k-10k swing in the price on your end, that only results in a single digit differences on their commission. They really are interested in getting you closing as fast as possible to move on to the next person. – Ukko Jan 21 at 15:05
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I'm not sure what commission structure your agent is using, but I've experienced a situation where the agent lowers their commission if they are taking both sides of the transaction. Example, agent takes 4% commission (2% for buying agent and 2% for selling agent), but if they represent both sides, they take 3%. The only exception to this is if there are multiple offers. In that case, they take the full 4% (to prevent conflict of interest/skew towards higher commission)

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So in business school a professor teaching business law talked a little bit about real estate.

A buyer's agent is technically a sub-agent of the of the seller's agent. Their commission is based on purchase price, so neither the buyer's agent nor seller's agent have an incentive, nor a duty to, to provide you with the lowest cost or help you negotiate the lowest cost.

In this case, with the buyer's agent and seller's agent being the same person, this person is going to want to help facilitate a meeting of the minds, particularly since the person gets both halves of the commission from the property sale.

Since neither agent normally is trying to get the lowest price, there is likely not a significant drawback to working with them on handling both sides of the transaction, but be sure that the contract represents your interests (i.e. contract stops if you can't get financing, the appraisal comes in low, home inspector finds significant issues, your current property [if applicable] doesn't sell, etc.).

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I had a similar situation, except that in my case the seller did not have an agent, and decided during the process that it would be beneficial to have an agent handling the paperwork for him. Our agent agreed that it made sense to cut the commissions to bring the asking and offering prices close together (basically the selling side was almost no work for them... just some paperwork, so it was very cheap for them to do so).

Our agent made it very clear that it was our choice whether this was an acceptable arrangement or not. The explained that, should we accept this arrangement, conflict of interest would limit their ability to really push for us to eek every last bit of margin out of the process. In exchange, it was easier for them to facilitate meeting in the middle arrangements.

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