A buyer’s agent has a fiduciary duty to and represents the home buyer while a seller’s agent has a fiduciary duty to and represents the home seller. A buyer’s agent will typically work with a seller’s agent on behalf of their respective clients to negotiate and work out a deal. A seller’s agent can also be the buyer’s agent under dual agency, where one agent represents both parties.
We’ll explain the differences between a buyer’s agent vs seller’s agent in detail in the following article.
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A buyer’s agent in NYC represents and advises a home buyer throughout the search, offer and closing process. Interestingly enough, home buyers in NYC are generally not bound to a specific agent as Exclusive Right To Represent Buyer Agreements are exceedingly rare. As a result, not only are the services of a buyer’s agent free, there typically isn’t any sort of agreement binding the home buyer to work exclusively with the buyer’s agent.
What Does a Buyer’s Agent Do?
With that said, exclusive buyers agents do exist.
However, they are very rare and typically limited to those buying property in New York City as a foreigner who are heavily dependent on their buyer’s agent as their sole eyes and ears on the ground in NYC.
Typical buyer’s agent duties in NYC include searching for listings that fit the buyer’s criteria, scheduling showings, coordinating property tours, doing pricing analysis, submitting and negotiating offers, offering referrals and generally guiding the home buyer throughout the purchase process.
A home buyer never pays the buyer’s agent directly.
Instead, the buyer’s agent is typically paid via a split of the listing broker’s commission. Sellers pay a typical real estate commission in NYC of 6%, half of which is automatically split with a buyer’s agent unless the seller’s agent is able to find a direct buyer.
Keep in mind that a buyer’s agent will typically have to split some portion of the commission with his or her brokerage. For example, say a listing has a 6% commission structure, and a buyer’s agent is split 3% for closing a deal. The typical commission split between a brokerage and its agents is 50%, so the buyer’s agent would only get to keep 1.5% in commission pre-tax!
The payout for a buyer’s agent can be reduced further if he or she is offering a commission rebate or other incentive. For example, let’s say that the buyer’s agent offers 1/3 of the commission he or she earns back to the buyer as a home buyer closing credit or gift. Assuming the buyer agent commission was 3%, the brokerage would be left with only 2% net.
Assuming a 50% commission split within the brokerage, the buyer’s agent would only be left with 1% in commission pre-tax.
A seller’s agent represents and advises a home seller throughout the sale process.
A seller’s agent is often referred to as a listing agent because he or she is the primary contact for a property listing. A seller’s agent markets the seller’s property, shows the property, negotiates with buyers and buyers’ agents and generally guides the seller throughout the process all the way to closing.
The Seller’s Representative
A seller’s agent is critical for sellers who are based out of town or even out of the country. When this is the case, the seller’s agent may be the owner’s sole representative on the ground.
As a result, a seller’s agent has a tremendous fiduciary duty to the seller to look out for the seller’s best interests. Unlike a buyer’s agent, a seller’s agent only begins marketing a property once there is a signed Exclusive Right to Sell Listing Agreement. Unlike the buy side, sellers typically cannot avoid exclusive agreements and freely switch agents.
One of the reasons this is the case is because the REBNY RLS and even certain property search websites will only allow exclusive listings. The benefit of each property only being exclusively listed by one broker is less confusion on who is the actual representative for a property.
It is the seller’s agent who secures a commission for both buyers’ agents and sellers’ agents.
As we’ve previously discussed, a seller’s agent will typically get an owner to sign an exclusive listing agreement whereby the owner agrees to pay 6% in commission if a ready, willing and able buyer is found. The listing agreement will also inform the seller that the listing agent will co-broke, or split the commission with buyers’ agents in their local MLS or RLS database.
Interestingly enough, it is the local MLS that enforces the splitting of commission between a seller’s agent and a buyer’s agent. For example, the REBNY RLS requires a split of at least 50% of the total commission to the buyer’s agent. This also means that a listing broker technically does not need to split commission with a buyer’s agent unless there is a prior agreement in place, such as a MLS co-brokerage agreement.
Yes, a seller’s agent can also be a buyer’s agent under dual agency in NYC. Dual agency simply means that the seller’s agent will have fiduciary duty to and represent both the buyer and the seller. This happens when a seller’s agent finds a direct buyer for a listing, and both the buyer and the seller agree to dual agency.
Who Does the Agent Represent?
A seller will typically see this form much earlier, typically when they are presented with a listing agreement to sign. A seller may give advanced consent to dual agency upfront to save time for the seller’s agent.
Dual agency in NYC can present many conflicts of interest. For starters, how can a dual agent remain completely neutral while serving both the seller and the buyer in a real estate transaction?
How can a dual agent share information and negotiate for both the seller and the buyer while staying totally impartial? It’s actually impossible to do so unless the dual agent doesn’t say anything at all or sticks to relaying simple facts in the plainest language.
Who’s Paying the Bill?
As a buyer, dual agency is dangerous because the seller is the one who is tied to the dual agent through an exclusive listing contract and the seller is the one paying the commission.
As a result, it may be tough for the dual agent to not favor the seller because if the deal falls through, the seller will still be there even though the buyer may not. Furthermore, properties are typically sold “as is” in New York and the principle of caveat emptor (“buyer beware”) is in play.
This means it’s up to the buyer, the buyer’s agent and the buyer’s attorney to conduct due diligence and decide for themselves whether the property in its current state is worth the contemplated offer price. As a result, it may not be wise for a dual agent to hasten the due diligence process along because of the magnified incentive of double commission for finding a direct buyer.
Dual agency may not be wise for sellers either.
That’s because a seller’s agent will typically get to keep all 6% of the commission for finding a direct buyer. As a result, a seller’s agent may be incentivized to ignore buyers’ agents and focus on trying to find a direct buyer, even if that means missing out on higher potential offers from represented buyers.
Fortunately for buyers and their agents, listing agents are required to respond to buyers’ agents within one business day per REBNY rules and most real estate agents are cooperative. That’s because listing agents for the most part understand that they will be a buyer’s agent and in the reverse situation on the next deal, and they need the cooperation of other real estate agents to succeed.
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 148 Lafayette Street, New York, NY 10013.