You have found your dream home on Redfin or Zillow and you are thinking about what to do next to look at the house and hopefully make an offer that will be accepted. Maybe call your friend the realtor? Talk to the neighborhood agent who leaves flyers on your doorstep ever week? Traditional advice is to find a buyer’s agent that knows the area where the home is located and will work solely in your best interest to negotiate the home purchase. If you take this advice you will have the following layer of communication:
You (Potential Buyer) – Buyer’s Agent – Seller’s Agent – Seller
If you go this route you as the Potential Buyer will never have direct discussions with Seller or Seller’s Agent and if you make an offer you will never really know how negotiations are going or whether your offer has a chance to succeed. Instead, you will receive your advice from your agent (the Buyer’s Agent) but the Buyer’s Agent is one layer removed from the Seller and does not always get all of the information you would want to know before making an offer. This is especially the case if the home you want to buy is receiving multiple offers.
I believe there are two parties you need to get on your side –Seller and the Seller’s Agent – when you negotiate to buy a home you want. Here are the two steps I recommend you take to get these two parties on your side:
Step 1: Don’t hire your own buyer’s agent but instead use the seller’s agent as your agent.
Technically, this relationship is called a dual agency and many states require the agent who represents both a buyer and seller to disclose and obtain consent from both parties. You should expect to sign some kind of dual agency disclosure (Seller would need to sign it, too). A dual agent should work in each party’s best interest and exercise reasonable care and skill in making this happen. I have worked with dual agents multiple times and I have always felt they have done a good job managing this relationship. I have also seen some additional benefits from having a dual agent represent me, including:
- The dual agent increases his/her commission by representing both parties. It motivates the agent to have a successful transaction close between you (Potential Buyer) and Seller. You can always try to negotiate a lower commission with the dual agent since he is representing two parties but I would not recommend doing so because the commission cost is paid by Seller and the higher commission incentivizes the agent to work hard on your behalf.
- The dual agent knows Seller, the reasons Seller is selling, and the details about any competing offers. This will be helpful to you as you (Potential Buyer) construct your offer and any counter-offers. A dual agent will guide you during this process and help you prepare an offer that has a better chance of succeeding.
- You can inform the dual agent of your limits in terms of price and other offer conditions and you can also provide the dual agent the reasons you are such a good buyer – he/she will give you invaluable feedback and be your advocate to Seller. A dual agent can directly communicate the reasons to Seller why Seller should select your offer over other competitive offers.
I’ve used a dual agent two times in very competitive property sales (five or more offers on a property) and both times my offers were accepted and I closed on both of these transactions. I felt my goals were aligned with the dual agent and I was able to get two properties I don’t think I would have otherwise been able to purchase. In one example, the property was a bank-owned property and the agent was very helpful in customizing my offer to meet the requirements of the bank. In the second situation, I was living in a different part of the country at the time and I made an offer without ever seeing the property because I was well informed by the agent that submitting an offer soon was important because Seller had already received multiple offers. After the multiple offers were winnowed to three final potential buyers on the house, the dual agent gave me a call and said I really needed to make a trip to see the home and meet Seller if I wanted to have my offer accepted (Seller was wary of accepting an offer from someone that had not seen the home in-person). I hopped on a plane that day, saw the home, met Seller with some of my family, and my offer was accepted later that week.
Step 2: Take the extra steps to convince the seller you are the right buyer for the home.
By having a dual agent I believe you will have the best chance to understand Seller, his/her/their motivations, and why Seller is selling the property. Based on this information, I suggest spending some time writing a genuine letter to Seller that touches on Seller’s motivations and background. For example, our current home is in a very family-oriented community. Seller had become friends with many of the families in the neighborhood and it was important for Seller to sell their home to someone that would add to this environment. Information like this helped me craft a letter describing how my family would be such a great fit for this home and neighborhood. I’m not suggesting you make things up in your letter to Seller but you can prioritize what areas you discuss in your letter by having additional information on Seller’s motivations and priorities.
I also recommend meeting Seller if possible unless you and your agent believe there is no upside to doing so. The dual agent can usually make this in-person meeting possible. With our current home, the dual agent set-up a brief introduction and my family and I spent thirty minutes with Seller talking about the neighborhood and petting their dog while we looked at the house. I believe it worked in my favor because Seller had a personal and favorable image of my family that Seller could associate with our offer.
Some final thoughts
Make sure the agent you work with as a dual agent is competent and follows the proper steps to disclose his/her relationship to you and Seller.
Also, every transaction is different and if the market is a buyer’s market you may not need to worry about getting the edge in negotiations through a dual agent. However, in a seller’s market, or if there is significant interest in a property, I believe these two steps will increase the chances of getting the property.