Traditionally, a real estate transaction involves four major parties:
- The Property Seller
- The Seller’s Real Estate Agent
- The Property Buyer
- The Buyer’s Real Estate Agent
These four parties work in concert with one another, the seller supplying the home to purchase, the buyer providing the money in exchange for the home, and the agents guiding, advocating, and negotiating on behalf of their clients to get the best price possible for the buyer or seller.
But, this isn’t always the way it works. Sometimes, the buyer and the seller are represented by the same real estate agent, an instance we refer to as “dual agency”.
So, what do Coronavirus, an uncertain economy (both nationally and locally), and shrinking housing inventory has to do with dual agency? How could these factors possibly affect a buyer’s choice to forgo exclusive representation? Let’s find out.
The Relationship Between Coronavirus and Dual Agency
Though there are a lot of unknowns when it comes to the ways that Coronavirus is affecting the way we operate in the real estate business, one thing is clear; we’re doing more of our business virtually than ever before. Buyers are doing more of their research independently, seeking out advice from their community of friends and family earlier and more often, and generally becoming more self-reliant as a real estate actor.
What happens when a buyer becomes aware that many of the answers to their questions are available by picking up the phone? Rather than dialing the number for a buyer’s agent, buyers are calling listing agents directly to get the answers to their questions. This is an economy of motion that makes sense; a buyer’s agent would most likely have to call the listing agent to get answers to specific questions anyway, so why not cut out the middleman and call the listing agent directly?
In this and many other ways, Coronavirus has been an accelerant in our business; consumers are becoming aware of the sort of information and power they have at their fingertips. The behaviors that were at first a necessity thanks to changes in our lives brought on by 2020 are now becoming the logical first choices.
The Relationship Between an Uncertain Economy and Dual Agency
In the state of Michigan (and just about any other state that allows dual agency), there is a disclosure that needs to be signed by all parties before a real estate agent can enter into dual agency. This disclosure acknowledges that an agent will be privy to confidential information on both sides of the transaction, and as such, will be limited in the ways they can advise their clients.
This sounds like a bad thing, but the trade-off is often a reduction in the overall commission for a transaction. This isn’t always the case, but it isn’t uncommon to see clauses built into listing agreements that say something to the effect of, “The total commission for this transaction will by 6%, or 4.5% if the listing agent also represents the buyer.”
In a boom-time, a 1.5% difference in commission rates wouldn’t register more than a blip on most home sellers’ financial radars. But right now, when the future of employment is uncertain, as well as the immediate future of the national economy as a whole, changing your net proceeds by 1.5% could make a big difference, especially if the seller happens to be downsizing and plans on taking some of their sale proceeds as cash to reinforce their safety net.
Does this mean that more sellers are agreeing to dual agency than would otherwise? The jury is still out on this, but the evidence is certainly there to make this a compelling case.
The Relationship Between Shrinking Real Estate Inventory and Dual Agency
Here at Brick & Corbett, we’re feeling the first two effects in their own ways, but our personal experience evidence is pretty clear; the tighter inventory gets, the more dual agency we see.
Here’s why we think that:
When inventory is tight, we often see homes go under contract in a matter of hours, not a matter of days. There is a perception amongst real estate buyers that going straight to the listing agent will cut down on the distance an offer has to travel before it reaches the hands of the seller, thereby making it more competitive.
Is that true? Hard to say exactly.
We take ALL offers on our listings very seriously, whether they come from a buyer represented by another agent or from our own buyers. It is unethical to steer our sellers towards offers from buyers based on who is representing them, and we would never do that.
That being said, the pressure to make every action count when you’re a real estate buyer manifests itself in other ways too. We are humbled by the fact that we list and sell more property than anyone else in our area, with more than $85 million dollars in volume last year alone. This reputation in our community is reason enough for many buyers, especially those looking for unique or luxury properties, to reach out to us directly so that we can keep an eye on opportunities coming to the market and let them know when things are hitting that might be of interest.
Also, since we specialize in hosting great events for our listings, we’ll often see a large volume of attendees at open houses, many of whom are motivated to make offers when the right property comes along. It isn’t uncommon for a buyer to come through an open house who isn’t represented by a buyer’s agent and want to make an offer on a property, thus resulting in a dual agency situation.
How Brick & Corbett Can Help in Buyers and Sellers
Whether you’re buying or selling a property, the Brick & Corbett team can help. Our team of seasoned professionals, anchored by industry stalwart Bob Brick, a RE/MAX hall of fame member and once named Michigan’s #1 Realtor, has an incredible amount of combined experience, including in all situations involving dual agency. Our high ethical standards and fair play fundamentals ensure that all parties are treated with respect.
If you list your home with Brick & Corbett and we bring an interested buyer to the table, and you’re more comfortable working with an exclusive real estate agent rather than a dual agent, we have the resources to assign representation for that buyer to another member of our team, thus separating the transaction into two different sides and assuring your best interests will always be put first.
If you’re a buyer in need of a home, the Brick & Corbett Team is ready to assist you, whether that’s with one of our listings or something else on the market. Reach out today to find out what we can do for you.