What is limited agency?

Most people understand that a buyers agent is the agent representing buyer through a real estate transaction and the seller agent represents the Seller during the transaction. Buyers often don’t understand exactly what”limited agency” (sometimes referred to as dual agency) and how it will affect your sale or purchase. In Utah, the exact definition of limited agency taken directly from a Utah Association of REALTORS® limited agency consent agreement reads:

“A limited agent represents both the seller and the buyer in the same transaction and works to help negotiate a mutually agreeable transaction. A limited agent has fiduciary duties to both the seller and the buyer. However, those duties are “limited.” because the agent cannot provide the undivided loyalty of both parties, complete confidentiality, and full disclosure of all information known to the agent.For this reason, a limited agent must remain neutral in representing both a seller and a buyer, and cannot disclose to neither party information that may weaken the other’s negotiating position, such as the higher price the buyer will pay or the lower price the seller will accept However, a limited agent must disclose to both parties known material information by the limited agent with respect to a defect in property and/or the ability of each party to perform the agreed obligations, and must disclose the information provided to the limited agent in confidence, by either party, if the lack of disclosure would be a material misrepresentation with respect to the Property.”

In Utah, it is is legal to act as a limited agent, but is it in the best interest of the buyer or seller? allow a limited agency? If you work exclusively with a buyer’s agent, that agent should be working to locate your home and negotiate the best offer on your behalf. They should be aware of your financial situation and how much you plan to ultimately spend on the purchase of a new home. The sellers agent is hired by a seller to market the property with the intention of producing a buyer. This agent usually knows where the sellers stand and how much they would be willing to accept for the property.

This is where the conflict can arise. If the Agent represents both the buyer and the seller in the same transaction, he is bound by fiduciary duties to both clients. It would be impossible to get best deal whether the representative should remain neutral. The negotiation will only result in a mutual “acceptable” deal. This may or may not be the “best deal.”

A buyer’s agent, representing a client’s interest, may share relevant information that they learn that may result in a lower offer than the client may have initially submitted. Alternatively, a sellers agent may discover that the buyer will likely agree to a counterattack that results in a higher net for the seller. Information learned can be shared during exclusive agency, however, when limited agency is a factor, this information cannot be shared. In Utah, each client has the option to decline or accept limited (or dual) agency. The Exclusive Buyer Broker Agreement has a designated section that fully explains (and requires a signature to accept) Limited Agency. Also, if the Limited Agency situation did arise, the client will again have to sign an agreement for this. Each party (buyer or seller) has the right to obtain an independent agent.

Many clients often point to the fact that the Agent will earn double the commission. This should not be a consideration for any of the parties involved in the Limited Agency. You need to remember that this agent will take a commission on your listing no matter WHO is selling it, and if the Agent is already working with the buyer, anything the buyer buys, the Agent will take a commission on that as well. Essentially, any deal could be a “double commission” when an agent works with buyers and sellers independently. Therefore, it is unfair to make the Agents’ commission a factor or a bargaining tool for either party.

Limited agency… should you participate? I guess it depends on how well you know your Agent. Will you get the best deal? Possibly. You may need to rely on some of your own instincts and research to determine what the best deal will be, since you won’t have the full disclosure and advice of your limited agency real estate professional.