One of my favorite movies from when I was growing up is “The Karate Kid”. And my favorite scene is when Mr. Miyagi says to Daniel-san:
Walk on road, hm?
Walk left side, safe.
Walk right side, safe.
Walk middle, sooner or later [makes squish gesture] get squish just like grape.
When you want to buy a home, you have a couple of choices: you can have your own Buyer Agent working on your side (safe); or you can fend for yourself while the agent works against you (not so safe)… or something in between (squish like grape).
But before we get into the details, let’s figure out what does “Agency Representation” mean.
Representation is about protecting your interests
In this case, it’s about protecting your interests as a buyer. As a buyer, what kind of interests might you have? For example, your interests as a buyer are usually along these lines:
- Not overpay for the property
- Not lose your $5000 deposit
- Not lose the house to a higher bidder
- Not overpay for services related to buying the property
- Not miss out on repairs which could be done by the seller
- Not have the seller change his mind in the middle of the transaction and leave you homeless
- Having the most “outs” on the contract in case you change your mind
- Settle when its most convenient for your schedule (and not a month or two after you moved out of your previous home!).
These are a few of the things that your Buyer Agent is there to help you protect.
Basically, your Buyer Agent’s duty is to protect you during the transaction
Whether it is to help you keep the transaction on track so that you don’t end up homeless, to keeping an eye out for any contract loopholes that could benefit you (so that you may change your mind up until the last minute), to ensuring that you don’t lose your deposit; your Buyer Agent is there as an “active” insurance policy against any potential problems.
Plus, your Buyer Agent must keep your information confidential
For example – if you share with your Buyer Agent that you can afford to spend up to “x”, your Buyer Agent won’t go telling the seller to push for a higher price during the negotiation just because you are capable of paying it.
This element of confidentiality brings us to other kinds of representation (or lack thereof).
When you don’t have a Buyer Agent working for you, you are unrepresented
When you are unrepresented, but there is an agent (or two) involved in the transaction, those agents are NOT looking after your interests. Rather, those agents are most likely looking after the interests of the seller.
But what does being unrepresented mean to you?
Being unrepresented means that the agent’s duty is to tell the seller anything and everything about you that might help him/her with getting better terms on the transaction. The seller’s agent can’t advise you on how much to pay, or how to protect your deposit, or how to get out of the contract if you change your mind.
On the contrary, the seller’s agent will be doing his best to take your deposit if you cancel the contract, to pay as much as possible for the property, and to allow the seller to change his mind and sell the property to someone else – even after you thought you had a solid contract.
As you can see, being unrepresented is not a safe choice. So if having a Buyer Agent is safe, what other options are “squish like grape”? Those would be Dual and Designated Representation.
What is Dual Representation?
With Dual Representation you (and the seller) must agree -in writing- to this kind of agency. In this case, the agent representing the seller (i.e. the listing agent) also agrees to represent you.
In this case, there really is no representation going on, since both parties’ interests are at odds with each other. So, the agent lets each of you figure out how to protect your own interests. On the plus side, the agent won’t be spilling the beans about your financial (or personal) situation to the other party.
On the flip side, you won’t get any help on protecting your deposit, on canceling the contract without penalty, or on avoiding overpaying.
A slightly different version of Dual Representation is Designated Representation.
What is Designated Representation?
In many cases, either the listing agent or the seller don’t feel comfortable getting into a Dual Representation type of agency. So, once it’s agreed in writing, the Broker designates a different agent within the same brokerage to represent you. This is called Designated Representation.
This type of representation helps each party to the transaction keep their information confidential and to get some level of guidance and protection within the transaction.
The issue is when either agent needs guidance from the Broker to resolve a problem – and the Broker can’t get involved because, essentially, the Broker is a Dual Agent.
Buyer Agent, safe.
Dual or Designated representation, “squish like grape”.
If you want to be safe during your transaction, we can help. Call (703) 480-6575 to reserve your spot ASAP (we can’t work with more than a few clients at a time).
We look forward to hearing from you.
Image by jofo2005 on flickr
Thanks for sharing this. The Karate Kid was one of my favorite movies growing up too, and I like the analogy you made. I think, for me, the idea is that an Agent should always represent the best interests of the buyer OR the seller; but never both. Duel Representation with only one agent rarely works out well. Thanks for sharing the example. I think I’m gonna go look for that clip now.
P.S. I found the clip on Youtube:
Good to see you around these parts. And thank you for finding the clip, it is always a treat to watch Mr. Miyagi – a classic!
Feel free to share the link to this article with your potential clients if it helps you with your Agency discussions.