The stats for October are in and the fall market in the GTA remains tight. On the ground we’ve seen that it’s been a fickle market. That being said, for the most part it’s still tricky to be a buyer in a lot of GTA markets. Homes or condos less than $1 million close to transit are super competitive. You need every edge you can get. Still, I’m always surprised how many people believe that there is a big advantage to working with the listing agent when buying real estate. Lately I’ve been wondering why exactly this misconception is so prevalent?
WHO DOESN’T WANT A DEAL?
I believe part of the allure and logic is that people want a deal. Of course we can all relate to that sentiment. Real estate is probably your biggest purchase, so why wouldn’t you want to get the best possible price? I can see how it seems that the agent representing the home or condo that you’re interested in has the best deal. In practice however, this isn’t likely. The listing agent can’t provide advice on what to offer. They can send you recent comps to help make your decision, but that’s not adding a ton of value. They can’t tell you how the offer strategy should be adjusted based on the data. No advice on how value is impacted by info they’ve gathered about the seller’s position, relevant comps, and on and on. And finally, they can’t properly protect or inform you about the home you’re about to sink your savings into.
WHAT IS DOUBLE ENDING?
Double ending or multiple representation are the terms for this kind of transaction. It remains a hot topic in real estate. Buyers who are under the impression that double ending will help them tend to be well educated and high achieving professionals. This leads me to think that behind this belief there is a heavy reliance on logic . Of course it seems logical that someone with inside information on their listing would be able to share this with you as the buyer. It’s also logical that this same person would be able to increase the likelihood of getting that house or condo. The problem is that the theory doesn’t hold up in practice.
REPRESENTATION 101
When the listing agent is representing you as a buyer, there are a few ways to make this happen. The listing agent can do this by representing you as a Buyer Client or Buyer Customer. Representing you as a Buyer Customer allows them to bring your offer to the Seller without requiring them to provide certain services to you. They must treat you with fairness, honesty, and integrity. They must also provide you with conscientious and competent service. They are, however, under no obligation to negotiate the most favourable term for YOU. There is no obligation to go above and beyond to discover and disclose information to you. This means not bringing you information that impacts the property and the negotiations. Finally, there’s no obligation to provide confidentiality (during and after the transaction).
The second option for you as a buyer is to be represented as a client. This means you are owed fiduciary duties by your agent: obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill/care – check out more here. This also includes negotiating favourable terms, protecting you and your interests among others. The big question is how can someone simultaneously do this with two competing parties at the same time?
WHO SHOULD BE YOUR REP
The short answer is they can’t. How could they possibly? The easy answer you’ll often hear from the eager listing agent is: they can represent you as a customer. But why would you want want to sacrifice the level of service you are being provided with? Especially in ways that can directly impact what you pay for your home and knowing exactly what you are paying for. The buyer benefiting from the double ending situation is rare and unlikely. For this exact reason, the double ending and multiple representation might be eliminated completely. The real advantage to the double ending, if there is one, is to the seller. Some agents will cut their commission if they represent the buyer, and the seller saves the difference. Remember it’s usually the seller, not the buyer who pays the commission. Does the buyer have a greater chance of getting the home if represented by the listing agent? Possibly, but you sacrifice a lot in the process and have to decide if it’s worth it.
Bottom line, the listing agent is not able to represent both your interests. No matter how you spin it, there are consequences. My advice? Buyers beware and get representation to protect and serve you. If the listing agent is doing their job ethically and according the code, there’s no advantage. To get the most out of your purchase, do your due diligence and hire your own agent. For more on how strategy and representation impact your bottom line, check this out.
