Buyer Representation Gone Awry

In this market, it is great to represent serious buyers, but I have recently been contemplating a lose-lose situation for a buyer’s agent. Though the market is good in the League City and Friendswood areas, buyers are waiting like vultures for foreclosures in some of the area’s nicer neighborhoods. When houses around here go into foreclosure there can be bidding wars by people trying to get a bargain. (I guess this is similar to the way it was a couple of years ago in areas that experienced the bulk of the housing “bubble.”)

I recently had a buyer interested in getting into one of these bidding wars, and was concerned that one of my other buyers might want it too. Ultimately, none of my buyers were interested in the property, but it raised an interesting dilemma:

What if an agent represents two buyers who want to bid on the same property? I have never had this happen, but it has to have come up before!

It seems to me that once an agent knows that he represents two (or more) buyers seriously interested in the same property, he cannot ethically represent either one. The confidentiality he owes one buyer will make him unable to effectively advocate for and represent the other buyer.

For example, he would know how much both parties are willing to pay, how good the credit of each buyer is, etc. Of course, he wouldn’t be able to share any of this with the other buyer. Even hypothetical speculation about the motivations and plans of other buyers would be tainted by the information he already knows. If the agent tried to refrain from speculation, he would become paralyzed to the point of ineffectiveness. In my opinion, the only ethical thing to do is to refer both buyers to other agents, and take a reduced referral commission—a tough pill to swallow for an agent who has worked hard on two buyers’ behalves. To only take referral fees is like making just about nothing.... and avoiding these referrals could lead to legal nightmares

If you've dealt with this before, please share your nightmares and happy endings!

© 2009 Brian Worrell, Realtor in League City, TX. All Rights Reserved.