Do You Know WHY The Listing Agent Wants you To Call Them Directly About The Home They Are Selling?

Why would a listing agent want you to call them directly about purchasing a home they have listed for sale instead of using your own agent?

It's actually quite simple.

1) In most cases, if you buy it from the listing agent directly, without your own agent, they get double the commission (because they get the commission that would have been otherwise paid out to the buyer's agent).

2) If you don't buy that house they have listed they have the opportunity to sell you a different one.

3) Bragging rights to the seller that they found a buyer... even if you really found the house by driving past the sign - and any agent can put a sign in the yard.

Heck, all those things sound great to me as the listing agent!

So why does that matter to you as the buyer and how does that affect you?

Well, in Minnesota, we have  disclosure call AGENCY RELATIONSHIPS IN REAL ESTATE TRANSACTIONS that explains how you can choose to be represented in a real estate transaction. Under Minnesota law this form must be presented at first substantive contact to a buyer or seller in any real estate transaction. 

This form explains four relationships stated below and has you sign to acknowledge that you have been given the options and understand that you are not represented until you choose an agency agreement and will simply be treated as a customer. It goes on to say that dual agency requires written consent.

1. Seller’s/Landlord’s Broker (Owes their client Fiduciary Duties)
2. Buyer’s/Tenant’s Broker (Owes their client Fiduciary Duties)
3. Dual Agency - Broker Representing both Seller/Landlord and Buyer/Tenant 
4. Facilitator 

So, let's think about how these relationships apply to calling the listing broker/agent directly. Because that agent is already representing the seller under #1, the Seller's Broker, that only leaves you withe #3 and #4 as options.

#3 is Dual Agency.
This role limits the level of representation the broker/agent can provide, and prohibits them from acting exclusively for either party. 
In a dual agency, confidential information about price, terms and motivation for pursuing a transaction will be kept confidential unless one party instructs the broker or salesperson in writing to disclose specific information about him or her. Other information will be shared. Dual agents may not advocate for one party within the limitations described above, dual agents owe to both Seller/Landlord and Buyer/Tenant the fiduciary duties described below.(2) Dual agents must disclose to Buyers material facts as defined in MN Statute 82.68, Subd. 3, of which the broker is aware that could adversely and significantly affect the Buyer’s use or enjoyment of the property. (MN Statute 82.68, Subd. 3 does not apply to rental/lease transactions.)

SO... BOTH PARTIES LOSE THE BENEFIT OF HAVING AN AGENT NEGOTIATE ON THEIR BEHALF.  Often, informed sellers will not agree to this since they have often hired the agent to get the best terms and price for their home.

If the seller doesn't agree to the dual agency, you as the buyer are left with only one option for help, having the Listing Broker/Agent be a facilitator on your behalf... and that means they are only helping you with paperwork and it is still their job to negotiate against you, the buyer.

The disclosure is very clear: "THE FACILITATOR BROKER OR SALESPERSON DOES NOT OWE ANY PARTY ANY OF THE FIDUCIARY DUTIES LISTED BELOW, EXCEPT CONFIDENTIALITY, UNLESS THOSE DUTIES ARE INCLUDED IN A  WRITTEN FACILITATOR SERVICES AGREEMENT. " View the form to see this statement

So, let's circle back to having your own agent representing you; choosing a Buyer’s/Tenant’s Broker agreement.

In this case, you are represented by an agent whose job it is to work on YOUR BEHALF in the transaction.  They have fiduciary duties TO YOU: Loyalty, Obedience, Disclosure, Confidentiality, Reasonable Care, Accounting. 

Sounds good but expensive right?  Wrong!  Buyer's agent are most commonly paid by the seller! WHAT?  WHY would the seller pay for someone to negotiate against them? In the listing agreement, a portion of the listing fee is designated to pay a buyer's agent (cooperating broker).  This is done to encourage the entire state of licensed agents to bring buyers to listing that are not their own increasing the exposure for the seller and allowing the seller to decline dual agency and still get a buyer.

It may still sound a bit complicated but the disclosure was designed to protect the consumer and let them know their rights.  If you would like to discuss it further, please call me!

Need more answers? Read these articles:
Simplified Real Estate Glossary for Home Buyers and Sellers
Learn the Lingo: Real Estate Vocabulary 101
twin-cities-houses.com - Virtual Home Tours
Home Selling Help

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