Why it’s not the advantage you think.
Buyers and Sellers of real estate are often confused when I bring up the concept of “Agency Relationship.” In a nutshell, agency relationship refers to the relationship between client and brokerage and establishes the responsibility that each party has. This post will go over the different agency relationships that are available here in Hawaii and will cover some of the pros and cons of each.
This is the most common agency relationship found in Hawaii and refers to a Buyer and Seller being represented by different brokerages. Each brokerage (and their agent) is responsible for their respective clients, negotiating on their behalf, protecting their interests, and offering opinions. In legal terms, this is called a fiduciary responsibility to the client, and is the best way for clients to be represented in a real estate transaction.
This form of agency relationship refers to the Buyer and Seller being represented by the same brokerage. In this case, the brokerage (and its agent) is responsible for both parties but will have to remain neutral. This can often happen at some of the larger brokerages, in instances where one agent has a listing and another has a buyer. Other times, the Buyer and the Seller are represented by the same agent. Whatever the case, the dual agent cannot advise on terms or advance the interest of one party over another.
The Biggest Myth About Dual Agency
Some buyers believe that working directly with the listing agent, creating a dual agency relationship, is to their advantage because they know the agent will receive both the listing commission and the buyer’s commission. They think that will put them at an advantage because the listing agent will push to accept that offer or negotiate the commission into the offer price. In actuality, a true Dual Agent is not allowed to play favorites or negotiate on behalf of either side, especially since that opens them up to litigation by either clients.
Why We Avoid Dual Agency
Dual Agency is outlawed at my brokerage for the mere fact that we don’t believe we can best represent either clients in that format. Even if the dual agency is between two different agents at the same brokerage, it’s still a very complicated situation and very tricky to navigate. Instead, we always recommend that you should have your own representation and someone who will negotiate and advise on your behalf. We may miss out on the commission opportunity, but it’s worth the fiduciary responsibility we take seriously.
So, what happens if a buyer still wants to work with a listing agent?
To avoid dual agency, a buyer may be helped by the listing agent as Customer. As a customer, the listing agent can help assist in writing up an offer, present the offer to the Seller, and report back any updates. They can provide any information that is readily available, like comparable listings, but they cannot give advice or negotiate on the buyers behalf.
A good parallel to this relationship is when you go to a store to buy clothes. The employee rings you up and helps you complete the transaction, but doesn’t negotiate prices on your behalf with the store. In a real estate transaction, the real estate agent is the store employee, helping you (the buyer) complete the transaction without negotiating or advising on your behalf.