When You Buy Property Through the Listing Brokerage – Be Aware

Posted by Jim Kimmons, Broker/Owner • July 30, 2009 • Printer-friendly

Human nature plays a part in all of our life activities, including our business dealings. Even the most ethical of real estate professionals can be placed under a great deal of pressure in working with a buyer when their brokerage, or even the agent working with the buyer, also have the property listing. First, the brokerage is doubling their commission income in this situation, as they are no longer splitting the commission with an outside brokerage.

Even more of a possible conflict of interest is present when the agent you're working with as a buyer is negotiating on your behalf to purchase their own listing. New Mexico law requires that they provide disclosures to both you, the buyer, and their seller that they're working now only as a "middleman," or a transaction facilitator. In other words, they now don't aggressively represent either you as a buyer, or their seller. They merely take care of the details, move the paperwork, and try to stay neutral as far as influence and strategic help in the negotiation.

This is in itself a problem, even if they manage to stay neutral and as fair as possible to both sides. Neither side is then receiving the representation they really need, with no aggressive investigation of true value for the buyer, or hard bargaining for the seller. Even more of a possible perceived conflict of interest is the double commission situation. It's really heavy pressure to keep a deal on track, with neither buyer nor seller encouraged to take tough negotiation positions for fear of losing the deal entirely.

It's been rough going in the Taos real estate market for a year or so. However, the last normal year I had, I advised two out of three of my buyers to leave deals due to unfavorable terms, pricing, or property situations with easements or septic issues. Some ended up buying other properties, and others decided to buy in Santa Fe and other areas. It was lost income to me, but they appreciated the help in avoiding situations they could have regretted later.

Now, as a buyer brokerage, Gallery Realty of Taos has no listings, and thus can never be in a situation that creates any possible perception of a conflict of interest in representing both sides in a deal. I'm free to be a buyer advocate in the very best way.