Beware of selling agents wearing two hats!
If your selling agent offers to act as your “buyers agent” for the search for your next house, be very aware of the potential conflicts of interest here that may arise. Traditionally real estate agents work for vendors, marketing and selling homes for a commission fee. Though exclusive buyers’ agents also require a real estate licence to act for buyers, also for a fee, we do so without also listing property for sale. Our job is to search, locate, assess and negotiate the very best properties that match a buyer’s particular budget and brief.
By law in NSW, and under Section 48 (Part 3) of the Property Stock and Business Agents Act 2002 (PSBAA) a real estate agent cannot ” act for both buyer and seller of land at the same time” however there is currently nothing in the Act or Regulation that prevents selling agents also acting for buyers, for a fee. I believe this is misleading practice, wrong and needs to change, as wearing two hats (representing and working for both buyers and sellers in the purchasing process within the same office) is fraught with conflict and has the potential to compromise both the ethics and motivation of the agency, as well as potentially being grossly unfair to buyers. Just because something isn’t legislated in regulation doesn’t make it right or ethical when it comes to practice.
Consider this situation: Downsizer John Smith sells his house via Agency ABC and then hires the same agency to act on his behalf for a search and property acquisition in the same area. John is after a 2 bed unit with parking that’s walking distance to the beach. Budget $800K. Assuring John that the “buying division” of Agency ABC will look after him in excellent fashion, without trying to sell him any of their own stock (as that would be illegal- taking fees from two parties for the same transaction) Agency ABC set about searching for a suitable property on John’s behalf. During the subsequent 2-3 months, when the search is dragging on with little success (few listings, challenging budget) one of Agency ABC agents receives a hot lead from a vendor wanting to sell- a new listing for… a 2 bed unit, walking distance to the beach and a likely sale price of high $700K’s. So, what does the agent do?
1. Say: Thanks Mr Vendor we’ll look after you for this sale, and I just happen to have a buyer in our “buying division” who would be the perfect purchaser for your property! (Conflict of interest obvious here, though technically Agency ABC could graciously “waive” the buyers agent fee in this case, or terminate the contract with the buyer, seeing as they’re being paid by the vendor…hmmm)
2. Say: Thanks Mr Vendor we’ll look after you for this sale, and I just happen to have a buyer in our “buying division” who would be the perfect purchaser but alas we’re unable to introduce him to your property as that would be breaking the law. Never mind, we’ll find another buyer as it’s a quality property! (too bad if John loved the property…)
3. Say: Thanks Mr Vendor we’d love to do business and sell your property but alas we’re unable to take on your listing as it clashes with a brief of one of our buyers from our “Buying Division”. However, what we can offer is a quick private sale if you’re interested in negotiating with our agent representing our buyer? (takes off one hat and dons another)
4. Say: Thanks Mr Vendor we’d love to do business and sell your property but alas we’re unable to take on your listing as it clashes with a brief of one of our buyers from our “Buying Division”. However, what we can offer is a recommendation to a colleague agency down the road if you’d prefer? They’re a great agency and I’m sure could sell your unit in no time at all. (most unlikely outcome, in my experience…)
In my opinion, if you’re going to search for a property and are looking to outsource the task, why muddy the waters and risk conflict by getting a selling agent posing as “double agent” to do the job? Most stick to their area of specialisation ie: selling, however we are finding a few operators who are hoping to “expand” their agencies by offering “independent buyers agency” services. Not only are the inherent conflicts of interest obvious and should clearly sound warnings to buyers, the practice smacks of lack of ethics and chinese walls to me. Exclusive buyers’ agents are just that- exclusive to buyers. Make sure that you hire the right person for the appropriate job, whatever field it may be in. In this case, two hats are not better than one!