I've often stated in the past that when buying real estate, it's in the best interest of the buyer to use a dedicated buyer's agent. After a conversation a while back with someone who has taught me a lot about real estate, and subsequent self deliberation and research, I've changed my mind.
Dual agency is the way to go for me.
Here's what the BCREA has to say about dual agency (warning PDF):
Dual agency occurs when a Brokerage is representing both the buyer and the seller in the same transaction. Since the Brokerage has promised a duty of confidentiality, loyalty and full disclosure to both parties simultaneously, it is necessary to limit these duties in this situation, if both parties consent.Sure, you need to get consent. But what agent out there isn't going to try to double-end a potential deal? Which brokerage isn't going to encourage their agents to attempt this? And how many sellers will object to seeing an offer? I'm guessing few.
Here's why I'm leaning towards dual agency buying deals:
Average single family home price is currently $565K. Average commissions are 6% on first $100,000 and 3% on the rest ($6000 + $13,950 = $19,950). If you use a buyer's agent, the deal is usually split 50/50. So each agent walks away from the deal with almost $10,000 that they then in turn split with their brokerages.
I'm not sure how many agents get to double end deals or how often they do, but I'm guessing it's not a common occurrence. I'm also thinking it's a mighty big carrot to get a deal done. And those "bonus bucks" present some wiggle room for everyone involved in making the deal happen.
Let's say I pop into an open house, like what I see, and decide to make an offer. I call the listing agent, let them know I'm pre-approved, and I'm ready to make an offer with few subjects.
The listing agent will have to do two things, get me to sign a dual agency agreement, and then get the seller to do the same--all before any offer is presented. This triggers two events: 1) the agent knows they have an opportunity to get a deal done and 2) the seller gets excited that an offer is coming in and their house may sell.
I've already decided what I'm willing to pay for the home. Let's say the list price is $565K. My price on the home is $545K. I know the place has been on the market for a month and that no previous offers have been presented. I offer $530K subject to inspection (I have my own inspector, not the inspector referred by the agent). The dual agency agent must present this offer to their seller as they are now equally representing me and the seller.
The seller is likely initially disappointed by what they would consider a low-ball offer given the current market. The agent though is also representing me now too and has a duty to try to get the seller to counter to keep the negotiations open (and a financial incentive to get a deal done for themselves).
The agent brings the seller's counter offer back to me: $557K. The negotiation has started and everyone is invested in getting the deal done (at least they think I'm invested, but I'm an unemotional party to the deal who will walk before paying more than I'm willing to).
I give the agent my counter, and tell them to instruct the seller that this is my final offer and set a time limit to respond (4 hours) as there are other homes I am interested in: $545K subject to inspection, flexible on the possession date but not shorter than 15 days and not longer than 75 days.
Negotiating the deal now falls completely to the seller and the dual agency agent. The seller has an offer, but it falls short of their expectations and they know they need to pay commission too. They also know that the agent stands to gain substantially more than if there were two involved.
They were prepared to pay almost $20K in commission, and they priced that into the price of their home. They expected to walk away from the sale with somewhere in the neighbourhood of $535K to $545K. They would have liked to have seen a sale price of $550-$555K, a difference of only about $5K-$10K from the current offer; coincidentally, just about the amount of the "bonus bucks" the agent is set to earn.
Selling houses costs money. It costs money to the seller, but smart sellers price the commission into the sale price of the home. But selling houses also costs a lot of money to the agents. Having that house sit on the market longer means more dollars spent advertising, more time spent marketing, more time spent in open houses and less time spent selling other homes or with loved ones.
Do you think making that sale is worth meeting the seller somewhere in the middle to that agent?
"Tell you what, let's get this deal done. I'll drop my commission from you to $16K even. You'll get very close to your price and everyone will be happy. OK?"
I think this gets the deal done--I could be wrong.
Of course, there are a handful of variables that will influence this scenario, including the state of the market and the buyer's, the agent's and seller's abilities to negotiate. But considering the complications of the alternative, I think my money will be on handling my own negotiation when I find the right time to buy because there is more money in play and therefore more negotiation room.
Please remember, I'm not an agent, I've made some assumptions about dual agency that some posters may be able to clarify/correct in comments, I'm not currently negotiating deals and I won't buy when everyone else is nor will I engage in multiple offer scenarios so I've ruled them out of this hypothetical situation.
Please tell me your thoughts in comments, I'll be interested in hearing the discussion.