Understanding Real Estate Property Brokers' Commission Fees and avoiding the pitfalls of Dual Agency

 

Commission Fees

The Real Estate Agent's, (both the Listing Agent's and the Buyer Agent's), Brokerage Commission Fees are typically paid by the Seller. This in effect makes real estate brokerage services given to you (the Buyer), by the Buyer's Agent, "free" to you (the Buyer).  

Real Estate transactions involve 2 Brokers:  the Broker who represents the Buyer (the Buyer's Agent), and the Broker who represents the Seller (the Listing Agent).  The commission, initially determined between the Listing Agent's Broker and the Seller, is usually split 50-50 between the two Brokerage Offices.  Even though the Broker of the Buyer Agent's commission is paid by the Seller, the Buyer Broker, including the Buyer's Agent works exclusively for you (the Buyer), not for the Seller.  The Listing Agent cannot also be the Buyer Agent, since, obviously, the Listing Agent's fiduciary responsibility is primarily to the Seller - only.  The Buyer Agent's fiduciary responsibility is exclusive to you (the Buyer) - only.  Therefore, it is in the best interest for the Buyer not to directly communicate with the Listing Agent and to utilize the exclusive services of a separate and distinct Buyer Agent, whose services, nonetheless are provided to you (the Buyer) for "free".  

Dual Agency

In competitive seller's markets such as the Washington DC Metropolitan area (including Suburban Maryland and Northern Virginia), a Buyer should most certainly engage a a Buyer Broker's Buyer's Agent (remember, they are "free" in a sense, since they are paid by the Seller through the cooperative brokerage agreement).  In such a circumstance, the Buyer would want to avoid what is termed a "Dual Agency" whereas a single Brokerage firm has a Dual Agency, with 2 distinctly different roles of two of its Agents as it nevertheless comes with an inherent conflict of interest since the Brokerage cannot fairly exercise fiduciary duty by representing two opposing clients irrespective of the fact that the Broker or Brokerage holds the Dual Agency (thus collecting full commission), and an Agent cannot.