Buyer Agents and For Sale By Owner: How Does This Work?

What if I am working with a buyer’s agent and I find a home listed as For Sale By Owner (FSBO)? Sometimes homeowners choose to sell their home without the services of a listing agent. Despite headlines you may have seen to the contrary, this has always been an option for homeowners. While there are huge benefits to hiring a listing agent, utilizing the services of a real estate agent is not required. (For more on this topic, check out this article ,”Selling FSBO vs Using an Agent”)

When considering a property listed privately by owner, clear communication is key to success. Sometimes homeowners selling FSBO state right upfront that they are willing to work with buyer agents – usually this means they are open to paying the buyer’s agent’s compensation, and in that case the amount is specifically defined and written into any offer contract the buyer may like to submit. If a seller refuses to pay a buyer’s agent’s compensation, then the buyer is responsible for paying their agent outside of the transaction. The buyer and buyer’s agent should have a conversation outlining the services the buyer’s agent will provide, the amount of agreed upon compensation that will be paid to the agent, and how the agent will be paid at the beginning of the working relationship, and this should all be documented in writing.

Buyer Agency, Seller Agency, and Dual Agency

Let’s assume that in the above situation the buyer and seller come to an agreement and go under contract together. It is important to note that while the agent will be facilitating the activities necessary to get the deal to closing and communicating with both buyer and seller, the agent works for the buyer. The agent has a fiduciary duty – a financial responsibility – to look out for their buyer’s best interests above the interests of all other parties (including their own). Conversely, when a buyer wants to purchase a home without their own agent representation, the listing agent has a duty to protect the seller’s interests before all other parties’ interests. You can probably see where there is risk for the unrepresented party in these situations, yes?

While in most cases it is ideal to have a good buyer’s agent representing the buyer side and a good seller’s agent representing the seller’s side, sometimes it is convenient for both buyer and seller to be represented by the same agent. When both parties agree to use the same agent to represent both sides, this is called “dual agency.” Dual agency can be a bit tricky to navigate and some states don’t even allow it. (Dual agency is allowed in Nebraska and Iowa and depending on the situation, I am willing act as a dual agent). Again, communication is paramount here. If the agent is going to represent a previously unrepresented party, then the agent and that party will need to discuss and agree on an amount of compensation and how that will be paid. Also, both the buyer, seller, and agent must sign an agreement specifically outlining how and what sort of information the agent is and is not allowed to share with each party. For example, as a dual agent I would not be allowed to tell a seller that I know the buyer is willing to pay $X amount more, nor would I be allowed to tell a buyer that a seller would be willing to accept $X amount less.

Dual agency itself bears some risks, which is why it is important to use an agent you trust. Agents who belong to the National Association of Realtors® (NAR) are bound to abide by a strict Code of Ethics which holds them to a higher standard of professionalism than what is otherwise required to merely hold a real estate license. You can find a copy of the NAR Code of Ethics here.

Key Takeaways

Key points to remember:

Using the services of real estate agents protect the interests of both buyers and sellers.
Buyer agents have a legal responsibility to consider the buyer’s interests above all other parties’ interests in the transaction.
Seller agents have a legal responsibility to consider the seller’s interests above all other parties’ interests in the transaction.
Unrepresented parties can be at risk when working without their own agent representation.
Depending on the laws of the state, an agent may act as a dual agent, representing both buyer and seller in a transaction so long as all parties communicate and agree to the terms in writing.

Feel free to ask questions or leave comments in the section below. Thanks for keeping it real with me!

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