The Risks & Benefits of Working with a Designated Real Estate Agency

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|10 min read

If you’re unfamiliar with the term “designated agency,” it is when the buyer and seller of a home are each represented by separate real estate agents who belong to the same brokerage. The agents agree to cooperate with each other and share any commissions that may result from the sale.

This is different from working with a dual agent, in which one agent represents both the buyer and the seller. While this may seem like it would be easier (and cheaper) for the consumer, there are actually a number of risks involved.

In this article, we’ll touch on the differences between dual and designated agencies in a real estate transaction, and explain the risks and benefits associated with using a designated agency.

What is Dual Agency?

In a dual agency situation, one real estate agent represents both the buyer and the seller in a transaction. This can be advantageous for the consumer because it means only having to work with one agent, and potentially saving on commissions.

However, there are a number of risks associated with dual agency. Because the agent is representing both parties, they are legally obligated to treat both equally. This includes sharing all relevant information with both parties, and not revealing anything that could give either party an advantage.

Furthermore, the agent cannot provide either party with advice or guidance, as this would be considered offering “undue influence.” Essentially, the agent’s role is limited to that of a facilitator, and they are very restricted in assisting either party in negotiation or decision-making.

While a dual agency is legal in most states, it’s important to be aware of the risks before entering into a transaction.

What is Designated Agency?

In a designated agency situation, the buyer and seller are each represented by separate agents who belong to the same brokerage. The agents agree to cooperate with each other and share any commissions that may result from the sale.

How Does Designated Agency Happen?

Most often, a buyer who is not represented by an agent will contact a listing agent to inquire about a property. The listing agent will then reach out to their own brokerage to see if there is an agent who can represent the buyer.

If there is an available agent, the two agents will enter into a designated agency agreement. This agreement stipulates that the agents will cooperate with each other and share any commissions that result from the sale.

In some cases, a buyer may already have an agent who ends up finding a suitable property for their client within their own brokerage. In this case, the buyer’s agent and the listing agent would simply agree to enter into a designated agency relationship.

It’s important to note that a designated agency is different from a dual agency in a few key ways:

  • The agents do not represent both parties but instead represent each party individually. This allows them to provide advice and guidance to their respective clients.
  • The agents are still legally obligated to keep information confidential and cannot share anything that would give either party an advantage.
  • The agents agree to cooperate with each other and split any commissions that result from the sale.

What are the Benefits of Using a Designated Agency?

There are a number of benefits to using a designated agency, both for the buyer and the seller.

For the buyer, having their own agent means having someone who is solely focused on their best interests. The agent can provide guidance and advice throughout the process, and help them negotiate the best possible price for the home.

The seller also benefits from having their own representation. Their agent can help price the home appropriately, market it effectively, and negotiate on their behalf.

Another advantage of using a designated agency is that it allows for a more efficient transaction overall. Because each party has its own dedicated agent, there is less potential for miscommunication or confusion. This can often help to avoid delays or problems down the road.

At the end of the day, using a designated agency is often the best way to ensure that both the buyer and the seller are fully represented throughout the transaction.

What are the Risks of Using a Designated Agency?

There are a few potential risks to be aware of when using a designated agency.

First, it’s important to make sure that both the buyer and the seller are comfortable with the arrangement. In some cases, one party may feel like they are not getting the full attention of their agent.

It’s also essential to make sure that both agents are on the same page in terms of communication and expectations. If there is any miscommunication, it could cause delays or problems down the road.

Finally, it’s worth noting that smaller brokerages may only have a few agents and the skill levels among the agents may vary drastically. This could be an issue if one party is represented by a very experienced agent while the other party is represented by a less experienced agent.

The Bottom Line

Overall, using a designated agency can be a great way to ensure that both the buyer and the seller are fully represented throughout the transaction. However, it’s important to be aware of the potential risks and make sure that everyone is on the same page before proceeding.

Real Estate Experts

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