"Who Wins on Double-Ended Broker Deals?"
Commercial real estate transactions involve multiple parties, including buyers, sellers, and real estate agents. While most people are aware of the role of real estate agents in the buying and selling process, many may not be aware of the concept of a transaction broker, or double-ended deals. Double-ended deals refer to transactions in which a single agent represents both the buyer and seller.
Double-ended deals can have both advantages and disadvantages. However, it is important to understand the potential pitfalls of these arrangements before entering into a real estate transaction.
At Sperry we focus on leveraging the entire brokerage community (“Co-Broker”) to deliver the highest and best price to my clients. I represent my clients on one end of the deal, and co-broker, 95% of the time, either as a Seller’s Agent or Buyer’s Agent.
Why? I work solely on behalf of my client to promote the interests of my client with the utmost good faith, loyalty and fidelity. I prefer negotiating on behalf of client and acting as an advocate for my client. Our culture of high integrity and proactively seeking and working with outside brokers delivers results locally and nationwide
Story: I made an offer for a client on a building in Colorado. The broker said they were moving forward with another offer. After the building closed we noticed our offer was $150,000.00 higher than the close price. My client called the Seller and the Seller said he never saw our offer. The broker double ended the deal and the Seller lost $150,000.00.
Advantages of Double-ended deals
One advantage of double-ended deals is that it can simplify the transaction process. With a single agent representing both parties, communication can be streamlined, and negotiations can be expedited. Additionally, the agent can help both parties come to an agreement more quickly, potentially reducing the time and cost associated with the transaction.
Another advantage of double-ended deals is that the agent acts as more of a mediator and this works for more sophisticated commercial real estate investors. For example, if a seller wants to have more confidentiality in the sale, they may be more comfortable not having the asset go to market and quietly work with an agent they already know and trust.
Disadvantages of Double-ended deals
One major disadvantage of double-ended deals is that it can create a conflict of interest for the agent.
An agent representing both the buyer and seller may be incentivized to make a deal quickly, even if it is not in the best interest of one of the parties.
They may also encourage a Buyer to purchase a property at a higher price because they are trying to please the Seller.
Or, similar to my story, the double-ended agent does not show the Seller offers from co-brokers so they make a larger commission.
All of these can lead to the agent prioritizing their own interests over those of their clients.
Another disadvantage of double-ended deals is the loss of confidentiality. When a real estate agent represents both the buyer and seller, they are privy to confidential information from both parties. This information may include the seller's bottom line, the buyer's budget, or the negotiating strategy. The agent's duty is to keep this information confidential, but it can be challenging to maintain confidentiality when representing both parties. The loss of confidentiality can be damaging to the parties' negotiating power and can put them at a disadvantage.
Additionally, double-ended deals can limit the buyer's access to information. Real estate agents have access to a wealth of information that can be beneficial to the buyer, including market trends, property history, and neighborhood information. However, when a buyer works with a double-ended agent, the agent may not provide all the information that would be available if they represented only the buyer. This situation can result in the buyer not having all the information they need to make an informed decision.
In conclusion, while double-ended deals may seem like a convenient way to complete a real estate transaction, it comes with several disadvantages. The potential conflict of interest, loss of confidentiality, and limited access to information are just a few of the issues that can arise. Therefore, it is essential to weigh the pros and cons of double-ended deals and consider hiring separate agents to represent the buyer and seller.