When a buyer purchases a home directly through the listing agent, rather than through their own buyer\u2019s agent, they enter into an arrangement known in the industry as “double-ending.\u201d \u00a0The term refers to the fact that there are two \u201cends\u201d or halves of a commission on a real estate deal.\u00a0 One end normally goes to the listing agent and the other to the buyer’s agent. \u00a0But if there isn’t a buyer\u2019s agent involved both ends simply go to the listing agent. \u00a0This is good for the listing agent because they get twice as much pay for the same amount of work, but it is often bad for buyers. \u00a0By agreeing to this arrangement, a buyer is agreeing to be unrepresented in the transaction. \u00a0In other words, while the seller can count on a professional advisor to look out for their best interests, the buyer cannot.\u00a0 The buyer is on their own.\u00a0 It\u2019s easy to see how this can turn out badly.<\/p>\n
Buyers have the choice of having their own representative and, given this, people often ask me why anyone would choose not to work with one.\u00a0 Why would a buyer agree to agent double-ending? \u00a0There are five main reasons, and all of them are potentially problematic.<\/p>\n
#1 – They May Not Know They Have the Option of Buyer Representation<\/strong><\/p>\n Although it is against the rules, an unscrupulous listing agent might “forget” to inform a buyer that they have the option of working with their own representative (for free, no less) until the negotiation is more or less over, by which time a buyer\u2019s agent usually can\u2019t protect the buyer\u2019s best interests. \u00a0This was a big problem in the 1990s, and it\u2019s why the Canadian Real Estate Association created a rule stating that representation options must be explained to buyers at the earliest possible opportunity.<\/p>\n #2 – They May Think They Are Saving Money<\/strong><\/p>\n Sometimes a listing agent will offer to reduce the commission as long as the buyer chooses to not involve a buyer\u2019s agent. \u00a0This is a serious violation of the real estate listing contract and will land the agent in hot water if their real estate board finds out about it, but the other reason it\u2019s problematic is that the buyer is giving up the benefits of representation for a very small reduction in sale price. \u00a0They don\u2019t consider the possibility that they may have agreed to pay too much for the home in the first place, regardless of commission amounts, because they didn\u2019t have a knowledgeable agent negotiating on their behalf. \u00a0They also don\u2019t consider costs that can arise after the sale price is agreed to – if issues arise as a result of the home inspection or other closing procedures, the agent will have no choice but to fight to get the best deal for the seller, and costs to the buyer could pile up quickly.<\/p>\n #3 – The “Guilt Trip\u201d\u00a0<\/strong><\/p>\n It is not unheard of for an unethical listing agent to make a buyer feel like they are doing something wrong or unfair by choosing to work with a buyer\u2019s agent.\u00a0 The listing agent might argue that they have put in a lot of work – showing the home, hosting open houses, etc. – and therefore they deserve to earn both ends.\u00a0 But these actions are not favours to the buyer, they are duties owed to the seller, so they should not be the basis for a guilt trip.\u00a0 But with a little bit of pressure, a kind-hearted buyer might be persuaded to forego representation.\u00a0 In so doing they are making a choice that is better for the listing agent and far worse for themselves. This goes back to problem #1 – buyers know less about these matters than the agents with whom they are working.\u00a0 They don’t know their rights, so they can often be convinced that what is normal and fair is abnormal and unfair.\u00a0 And in the end the unethical agent gets double the pay.<\/p>\n \u00a0<\/strong>#4 – They May Prefer Being Unrepresented to Working with a New Agent<\/strong><\/p>\n Sometimes a buyer has been working with a buyer’s agent for a very long time, and they have built up a very strong comfort level and mutual familiarity with that agent. \u00a0If they decide they want to buy a home that happens to be listed by their own agent, this immediately creates a conflict of interest for the agent, so the buyer has to choose between working with another agent or being unrepresented in the transaction*. \u00a0In these situations, our team members go to great lengths to encourage the buyer to work with another agent, but sometimes the buyer simply can\u2019t be persuaded. \u00a0At the end of the day, as long as the agent has ensured that the buyer understands their options and the possible downsides of being unrepresented, but has chosen to proceed without representation regardless, agents can proceed with the arrangement with the knowledge that they have acted ethically.<\/p>\n #5 – They May Truly Have No Better Option<\/strong><\/p>\n In smaller communities, or in a case where the real estate involved is very specialized, there might only be one licensed agent who is qualified to be involved in the transaction.\u00a0 In these cases, our Century 21 Prospect Realty team members strongly encourage buyers to seek representation from a lawyer, and we go to great lengths to explain to them the services that we can and cannot offer them. \u00a0For example, a listing agent in this situation cannot offer loyalty, confidentiality and full disclosure of all relevant facts to the buyer, because they have already made these same commitments to the seller.<\/p>\n Scenarios 1 through 3 above above are made worse by both the private nature of real estate transactions and the fact that most people don’t buy homes frequently enough to become experts at it. \u00a0If there is no other agent involved in the transaction and the listing agent chooses to act unscrupulously, it is very unlikely that anyone will ever find out, including the buyer.\u00a0 And that’s exactly why regulation is so important in the real estate industry – both by governments and by trade associations like the Canadian Real Estate Association. \u00a0There too though, we are at a disadvantage in the Northwest Territories.\u00a0 Our government guidelines date from three decades ago and the members of our profession are not subject to auditing or even simple monitoring to ensure ethical behaviour. \u00a0And as for the Canadian Real Estate Association, the professional association to which most but not all NWT real estate agents belong, until very recently they did not provide a practical manner for smaller boards like the Yellowknife Real Estate Board to police their own members’ behaviour. \u00a0There is a change that is being rolled out nationwide this summer that will hopefully change things, and that will be the subject of a future blog post.<\/p>\n In the absence of adequate regulation, we at Century 21 Prospect Realty fall back on two things; as Broker of Record for our company I write blog posts like this to try and educate the public about buyer agency and the dangers of double-ending, so that fewer people can be taken advantage of, and as a team we work together to monitor our own behaviour to ensure that we hold ourselves to a higher standard than the ones imposed upon us by the Government of the Northwest Territories and the Canadian Real Estate Association. \u00a0Ethical conduct is hardwired into our corporate culture – into our company\u2019s DNA.<\/p>\n