Buyer Agency Types: Represented, Unrepresented, Dual Agency, Designated Agency, Etc.

There are a variety of options for how you could go about an offer:

1. The typical approach, which around 86% of buyers opt for, is to make an offer with an agent. There are different approaches to that:

1. Using an Agent Outside of the Listing Agent's Firm (Best for Most)

If going this route, which is probably the most typical in SE VA, there is more than one option:

A. Pick your own agent (Recommended)

Some buyers may have misgivings about working with an agent referred to them by the listing agent. There are some valid reasons why they might want to avoid the listing agent's referral recommendations. A referral from the listing agent is going to be more likely to want to "play ball" with the listing agent, and not play "hard ball". If I was a buyer & not an agent myself, I wouldn't want a referral from the listing agent's firm. There's nothing locking you into getting a referral from the listing agent.

Related:

What to Look for in a Buyer's Agent for Your Home or Other Real Estate

B. Seek a referral from the listing agent outside of their firm:

Some buyers may have misgivings about working with an agent at the listing agent's firm, but would still like somewhat of an edge on the competition by at least getting a referral from the listing agent to another firm. Listing agents who have been around know plenty of agents, and it's possible that they've worked together before even if they are no longer at the same firm.

2. Designated Agency: Listing Agent Represents Seller & An Agent from the Same Firm Represents Buyer

Even within this category, there is more than one option:

1. If you're not already working with an agent at the listing agent's firm, & don't have an existing exclusive buyer brokerage agreement with another agent going, you can reach out to the listing agent for a referral to another agent. By reaching out directly to the listing agent, you can have a higher likelihood of the listing agent connecting you with an agent that they are comfortable with and that they have worked with in the past. Keep in mind what I shared above in section 1B.

"There is an inherent bias whenever you are getting a referral from a listing agent. For instance, be sure to be mindful of whether or not the agent that is referred to you points out negative qualities of the home. Since they were referred by the agent, they are less likely to want to do that. Not getting you to make an offer, or you making a low offer, means that they are less likely to get a future referral from the listing agent."

2. If you're already working with an agent at the listing agent's firm other than the listing agent, you'll be involved in an offer where if you get under contract, a designated agency would be involved. If you aren't working with an agent at the listing agent's firm already, while reaching out to an agent at the same firm is better than nothing, at an agency like mine where >100 agents are present, some agents are a lot better than others, & I have much better relationships with some agents vs others.

3. If you're not already working with an agent at the listing agent's firm, & don't have an existing exclusive buyer brokerage agreement with another agent going, you can reach out directly to another agent at the listing agent's firm.

3. Dual Agency: Listing Agent Represents Buyer & Seller

Have the listing agent attempt to represent the buyer while also representing the seller. This practice, dual agency, is so fraught with problems that it's illegal in some states (though legal in VA) and prohibited at Garrett Realty Partners (though at GRP, sometimes exceptions are granted, such as if the buyer and seller know each other and are working with an experienced agent, though I've never requested an exception). That said, it can work out in some scenarios, i.e. if a buyer and seller know each other well.

• How A Referral From the Listing Agent Can Help

Most of the time that homes are purchased in SE VA, it's not with 2 agents at the same firm. When you're unrepresented, you have the flexibility to go that route though if you should choose to do so.

There are many non-numerical factors related to an offer's success, and something like that can matter, especially in a multiple-offer scenario where the 2 offers are very similar.

• How A Referral From the Listing Agent Can Hurt: Buyer's Remorse & Bias

There is an inherent bias whenever you are getting a referral from a listing agent. For instance, be sure to be mindful of whether or not the agent that is referred to you points out negative qualities of the home. Since they were referred by the agent, they are less likely to want to do that. Not getting you to make an offer, or you making a low offer, means that they are less likely to get a future referral from the listing agent.

It's important to be very cautious about the ethics of any agent that has been referred to you by the listing agent. The more questionable the ethics of the agent, the more likely that they will be less apt to point out negatives and tell you what you want to hear in order to get a sale, increasing the probability of buyer's remorse.

• What if I Have an Buyer Brokerage Agreement with an Agent or have been Working with an Agent?

Do you already have a great agent that you trust, with experience, knowledge, & plenty of physical & digital resources at their disposal? If so, the grass likely won't be greener on the other side, & it's unlikely that you'll be able to develop the same level of trust quickly with another agent from the listing agent's firm. That's true whether you have no written buyer brokerage agreement, an exclusive agreement, or a non-exclusive agreement.

If you have plenty of reasons not to trust their competence or their motives, you should seek to get released from any buyer brokerage agreement that you have with them. There's no reason to continue working with them on this property or others in the future & even if you don't win an offer on this property, you shouldn't reach out to them in the future regarding showings/offers. You shouldn't try to get out of your buyer brokerage agreement just to get a potential edge on the competition for an offer. The ethics on that are lacking and you're too likely to have it backfire with buyer's remorse.

If I'm the listing agent, it's not uncommon for me to ask an unrepresented buyer to see if they are working with an agent. If they have been working with an agent, especially if they have done showings with them, even if they haven't signed a buyer brokerage agreement, I like to see something in writing from that agent stating that they have no agency relationship with them. If I failed to do that, the agent could seek a commission later on via "implied agency", especially if that agent previously showed the buyer the property.

2. Unrepresented Buyer (No Agent Representation)

Your Chances of Making a Very Costly Mistake Introduction

Your Chances of Making a Very Costly Mistake Introduction

If you go this route, you have the highest risk of making a mistake, especially if you haven't purchased many homes in Virginia before. Virginia is one of 6 buyer beware (caveat emptor) states, and if you make mistakes, it's on you. Because VA is a buyer beware state, it's one of the worst states in the United States to purchase unrepresented. If you fail to uncover issues in your lot finding and lot transaction process within the scope of contingencies and find out too late that you won't be able to do what you intend to do on a lot, there's not much you can do.

The listing agent should be honest, but it would be against their duties to the seller to point out any negatives about the home that you didn't ask about & which were not legally required disclosures for listing agents (which are more narrow than legally required disclosures for buyer's agents).

When a buyer becomes in breach of contract, and tries to stop the sale when they don't have the contractual right to, some pretty bad things can happen to the buyer, especially if not using a contract that limits their liability to the earnest money deposit (SE VA contracts typically don't include a provision like that by default, while certain other contracts in certain other areas do by default). If the buyer gets in breach of contract in that scenario, and is forced to walk or tries to walk, they could be out of their earnest money deposit, & in some cases, the seller/listing agent can go after more than the earnest money deposit. For instance, if a listing agent is getting a 6% commission, where they didn't reduce their commission, they could sometimes pursue that 6% commission from the buyer, plus any attorney's fees, plus the difference in contract price vs the next contract (that price difference can be more than 5% in some scenarios). All in, for a worst case scenario, a buyer could owe more than 10% of the contract price, even if their initial earnest money deposit was under 1%.

Your Chances of Making a Very Costly Mistake Examples

Here are some examples where ignorance as an unrepresented buyer could cost you in VA:

1. A buyer uses a Virginia Association of Realtors offer. The listing agent neglects to mention that if the buyer's conventional loan they are using doesn't appraise to at or above list price, the buyer will need to pay out of pocket for the difference. Without a buyer's agent that's knowledgeable about that element of the contract, that's exactly what happens when the appraisal comes in $20k below asking price.

2. A buyer makes an offer on a home that was listed 3 days ago in June. After the home inspection contingency period is over, when they are getting insurance before closing, they find out that the home requires a few thousand dollars per year in flood insurance. Because they can afford it, and because they are beyond the home inspection contingency period, with the flood zone beyond the scope of the home inspector, they have little recourse to walk, and close. The new payment doesn't fit their budget, so rather than going into further and further debt month after month, they cut their losses and decide to try to sue the seller or the listing agent. They quickly find out that they signed the Consumer Disclosure Information Form, that states on page 2, section 7 B that "The owner makes no representations with respect to whether the property is located in one or more special flood hazard areas and purchasers are advised to exercise whatever due diligence they deem necessary". They try to sell for the same price they purchased it for. Many buyers working with agents are dissuaded from looking at the home due to the agents checking the flood zone of the home, and they sell for less in January than what they purchased it for 6 months prior after 4 months of price reductions on the market.

3. A buyer makes an offer on a home, gets under contract, gets a massive stack of paperwork on the association that they don't read thoroughly or know what to look for in, and closes. After the fact, they discover that the association is requiring that they do work to the house that would cost them thousands of dollars that they didn't notice that were not required by the association prior to sale are now required. These aren't even improvements, but changes requested to abide by the association rules.

4. "A buyer makes an offer on a home, gets under contract, gets a massive stack of paperwork on the association that they don't read thoroughly or know what to look for in, and closes." Soon before closing, they discover that the association is requiring that they pay a $20k "buy in fee" for the association. They don't have the money for it, and try to walk, but the listing agent & sellers try to go after more than the earnest money deposit in response.

5. The buyer notices the dozens of pages of paperwork being provided to them, and doesn't read them all, especially the pages that simply require initials/signatures without filling anything else in. He gets the home inspected with a typical home inspection, without any add-ons that aren't required to save money. After the property closes, the buyer has the home for 15 years. He starts having health problems, and develops lung cancer. He's never smoked a day in his life, so he's baffled. With medical bills piling up, he goes to sell. The buyer has a home inspector come, who also performs a radon test. The radon inspection finds major issues that would require thousands to repair, and walks. The seller looks up radon, and finds out that it's the number 2 cause of lung cancer under smoking, and that his county is rated the worst out of the 3 potential zones for counties in the state.

6. A buyer purchases a tenant occupied home in cash for retirement with the intent to live in it. After closing, they find out that the tenants lease doesn't expire until a year from the closing date & that there is little that they can legally do to get them out before then. The tenants haven't paid the former seller in months, and hasn't started any foreclosure proceedings. The tenants drag the foreclosure process out as long as they can, then take anything that they think that they can get away with from the house out of spite, in addition to trashing the house before going to prison for something unrelated. The attorney tells the new owner that there the likelihood of them getting anything from the former tenants is slim.

7. A buyer gets a home inspection, and focuses only on the summary pages rather than reading the full report. After closing, that winter, their pipes burst. They get 10's of thousands of dollars worth of damage, and find out that the pipes are polybutylene, with the plumber recommending that they all be replaced. The buyer tries to sue the seller, but they are quickly pointed to the fact that they signed the Consumer Disclosure Information Form, that states on page 5, section 13 that polybutylene pipes are a serious issue. They go after the home inspector, but he points out that it was in the 80 page inspection and that they should have read all of it.

8. A buyer that has worked with the REIN Standard Purchase Agreement before for a home in Newport News wants to purchase in King & Queen County. She notices that there is extensive moisture damage that she expects that the termite/moisture inspector will catch. She makes an offer that includes a home inspection, but doesn't notice that the Virginia Association of Realtors offer, which is different, doesn't include a moisture inspection by default, only a termite inspection. Having already passed the home inspection period & appraisal, she's left to pay thousands of dollars to get the work corrected after closing.

9. A buyer makes an offer not contingent on survey, without 1st checking the property lines. They close. A year later, their next door neighbor acquires a survey. He asks that they move their garage, which is halfway encroaching on the neighbor's land. They're unwilling to compromise, since they want to do something themselves that isn't possible until that move occurs. The buyer spends over $10k moving the large brick garage.

10. A buyer finds out that they are in an 8 offer scenario. They really want the house, and make an offer far above asking price with a VAR contract and a conventional loan. They don't have a special provision added in regarding the appraisal. They win, and find out that they need to come out of pocket for the amount between the contract price and the appraisal. They are able to pay the $30k difference. They overhear after the fact that their offer was $20k above the next highest offer, and that they were the only ones who did not use an escalation clause out of the 8 offers, and that if they had, they could gotten the home for at least $15k less than their contract price.

Increased Risk for the Seller

Unrepresented buyers tend to be more volatile than ones that are represented by agents, unless the agent is known to be unusually volatile. Sellers should know that. I inform my sellers of that. Higher-risk buyers are worse than buyers with the exact same offer/net who are not high risk. There's a lot more to an offer than all the numbers involved, and risk can contribute highly to the success of an offer because it impacts those potential numbers for the seller.

Reduce Commissions for Sellers (Maybe)

While not always the case with listing agents, with some agents, including myself, you may be able to have the listing agent reduce their commission to account for no commission for the buyer's agent. Often it's not a completely free ride though, & it never is with me. The listing agent will need to spend the extra time for duties to help facilitate an offer and other elements of a transaction with a buyer. Also, keep in mind that in terms of risks vs rewards, I wouldn't buy unrepresented if I knew I could find a great agent who would educate me well on pros and cons of each considered home. The costs of purchase/sale are significantly more than any savings you'll typically get, so if you end up with buyer's remorse, which isn't unusual with unrepresented buyers, you may wish you had used a buyer's agent.

Related:

What to Look for in a Buyer's Agent for Your Home or Other Real Estate

How to Better Your Chances if Buying Unrepresented

If going this route, and you've purchased a number of homes, and especially if you've passed the real estate exam or even just taken the class, be sure to inform the listing agent of that. Give positive details if known (i.e. I passed the real estate exam last month, even though I'm not an agent; I've purchased 10 homes before and sold 5 in the past 10 years). If you have related experience, such as if you're a contractor or lender, be sure to let the listing agent know.

Offer Template

Reach out to the listing agent for a pre-populated offer form that already includes information specific to the transaction in the event that you want to make an offer without representation. That's not difficult for them to do. From there, you can decide what you want to put into it.

Here is a list of the most important items that the seller is considering if I am representing the seller (note the importance column). Here is an example of a competing offer scenario.

Related:

• Why Hire a Buyer's Agent? What do They Do?

• What to Look for in a Buyer's Agent for Your Home or Other Real Estate

• House Buyer Guide

• What Adam Offers Buyers