The Ethical and Practical Reasoning Behind Real Estate Agents’ Behavior in Property Transactions

Introduction

Real estate transactions are often complex, involving a delicate balance of ethical considerations and practical actions. This article explores the reasoning behind a real estate agent sometimes making a deal with a buyer that involves providing them with knowledge about the actual price the seller would agree to, which is much lower than the listed price. The primary motivations include increasing the likelihood of a successful sale and maximizing commission. However, there are significant drawbacks and ethical implications to consider.

Why Real Estate Agents Sometimes Provide Lower Seller Ask Prices to Buyers

There are several reasons why a smart, or sometimes corrupt, real estate agent might disclose the actual price a seller is willing to accept:

1. Increasing the Chances of a Quick Sale

One primary reason is that the agent believes that revealing the lower ask price to the buyer will prompt a faster sale. In many cases, buyers are more likely to submit an offer when they know the seller is willing to accept a lower price. This can save valuable time and ensure the property is sold more quickly.

2. Maximizing Commission

Another key motivation is the commission structure. Real estate agents typically receive a percentage of the final sale price. By revealing a lower acceptable price, the agent might be able to secure a higher commission, as the final price might be closer to the lower ask price.

The Risks and Responsibilities of Agent Behavior

However, revealing a lower acceptable price to a buyer can expose the agent to significant risks and ethical dilemmas. Agents must adhere to fiduciary duties and confidentiality obligations, which often conflict with such disclosures.

1. Fiduciary Duty

Agents owe a fiduciary duty to their clients, the sellers, which means they must act in the best interests of the seller. Disclosing a lower acceptable price can be seen as a breach of this duty, as it may not serve the seller's interests.

2. Confidentiality Obligations

Agents are also bound by confidentiality, ensuring that sensitive information about the seller is not shared with third parties unless explicitly authorized. Violating this rule can lead to legal and ethical repercussions.

Agent Diligence and Ethical Practices

Given these risks, understanding the responsibilities and behaviors of real estate agents is crucial:

1. Dual Agency Risks

Agents sometimes act as the sole representative for both the buyer and seller in a transaction, known as dual agency. This can be risky as it blurs ethical lines and can lead to conflicts of interest. Brokers usually advise against this practice.

2. Buyer’s Rights to an Independent Agent

The best practice is for buyers to have their own independent agent to protect their interests. Agents acting in the buyer's best interest can provide unbiased advice and help navigate the transaction process more effectively.

Conclusion

While it may seem tempting for an agent to provide a buyer with the seller's lower acceptable price, the ethical and practical implications can be severe. Agents must prioritize their fiduciary duties and maintain client confidentiality to ensure they act ethically. Buyers should always seek an independent agent to safeguard their interests during the transaction process.