Dual agency, the practice of the same agent / brokerage representing both the buyer and seller in the same real estate transaction, has long been the subject of debate.
Every few months, some real estate agent will get all spooled up about dual agency.
Now it’s my turn.
Prompted (this time) by discussions on several posts and comments at Inman News, I find myself scratching my head. It puzzles me that some real estate agents and brokers see nothing wrong with representing both the buyer and seller in the same transaction.
Let me be clear. Dual Agency is perfectly legal in Arizona (and in many other states). But, just because something is legal doesn’t make it right or what is best for all parties involved.
In particular, my beef is with single agent dual agency. Where ONE person represents both a buyer and a seller for the same piece of real estate. Dual agency also applies if any two agents within a real estate brokerage represent both the buyer and seller. With “mega brokerages” having hundreds (sometimes thousands) of agents, intra-brokerage dual agency is sometimes impossible to avoid. That’s a whole ”˜nuther article. For the record though, personally my angst with single agent dual agency diminishes when we’re talking intra-brokerage dual agency. My wife and I are both agents, and I can assure you that if Francy represents the seller and I represent the buyer, neither one of us is going to even remotely consider compromising our clients interests. I adore her, but when it comes to business, we’re both completely committed to doing what is best for our clients.
What’s Wrong with Single Agent Dual Agency?
Ask any seller of real estate what their primary goal is. I’ll bet you a commission check they say, “Getting as much money as possible for my property”. Ask any real estate buyer what their primary goal is and I’ll throw in a first-born child if they don’t say, “To buy a home at the lowest price possible”.
How then can the same agent facilitate reaching both of these conflicting goals?
I don’t care how much experience you have, I don’t care how fair you are, I don’t care if you can walk on water. One agent can not get the seller the most money and save the buyer the most money in the same transaction. Period.
Single agent dual agency is a stunningly obvious conflict of interest.
Michelle Lind, Esq., general Counsel to the Arizona Association of Realtors says this about dual agency (source ”“ AAR members only):
A dual agent must not advocate or negotiate on behalf of either the buyer or the seller.
And this:
Q: May a dual agent aggressively work to secure the best possible price for one party?
A: No. A dual agent can do nothing to advance the interests of one party over the other.
You can’t advocate for your clients, you can’t negotiate, you can do nothing to advance the interests of your client.
And this is OK???
The Argument for Dual Agency
Follow any dual agency debate and you will see references along the lines of, “as long as it’s disclosed, there is nothing wrong with dual agency”. Let’s take a look at the Arizona dual agency disclosure form that is required to be signed by the parties involved in a dual agency situation.
Here’s the header of the document that makes dual agency perfectly acceptable to many real estate agents and brokers:
Consent to. . . LIMITED Representation.
Yessir. If you want the same agent working for both the buyer and the seller in the same transaction, you have to consent to ”“ let’s all say it together ”“ LIMITED representation.
Here’s some of the disclosure verbiage (my emphasis in bold):
Line 12: The Licensee or each Licensee represents both the Buyer and Seller with limitations of the duties owed to the Buyer and the Seller.
Line 16: There will be conflicts in the duties of loyalty, obedience, disclosure and confidentiality.
The freaking form itself, the very form that many cite as making dual agency OK, is telling you that the agent’s duties will be limited and there will be conflicts!
Someone out there right now is rolling their eyes, saying out loud, “I’m a kick ass agent. I can fairly represent both parties in the same transaction”.
Of course you can be fair. But can you really get the best for BOTH clients? I don’t sell real estate with the goal of “being fair” to my clients. I take my fiduciary responsibility seriously. I want the absolute BEST deal for my clients. Not just what’s “fair”. You can’t get what’s best for both buyer and seller at the same time. THERE WILL BE CONFLICTS in your duties ”“ it says so right in the precious disclosure form.
So Why Would an Agent Practice Dual Agency?
Beats the hell out of me.
Could it be for the windfall payday it can produce?
I won’t say this is why all the agents who practice dual agency do it, but it’s important for the home buyer and seller to be aware of.
When a home is listed for sale, there is a commission that is negotiated. That commission is split (usually evenly, though it doesn’t have to be) between the listing (sellers) agent and the buyers agent. Well, technically it’s split between the listing and buyers brokerages, which then farms it out to the agents. But for simplicity sake, we’ll say it’s split between agents.
Let’s say, for example only, the commission is a total of 6% of the sales price and evenly split. So when the transaction closes, the seller’s agent gets a check for 3% of the sales price, and the buyer’s agent gets a check for 3% of the sales price.
In a dual agency situation, the sellers agent is also the buyers agent. So guess what? That person gets the entire 6% commission.
It’s called “double siding” or “double ending” or “double dipping” the transaction.
I have witnessed brokers and agents whooping and hollering and high fiving when they close a double-sided deal. Are they carrying on because both of their clients were fully served and represented? No, they are acting like they just scored a game winning touchdown because they just got a big fat paycheck.
It makes me want to puke.
Someone tell me how the CLIENTS benefit from dual agency?
Please. Just one example of how a buyer and seller both have a more fruitful, beneficial experience. Tell me not how YOU benefit, but how the CLIENTS benefit from dual agency.
Someone is going to say, “One agent can pull together a deal better and faster than two agents”. Faster, eh maybe. But I want DETAILS as to how it’s “better”.
Someone is going to say, “There are lots of lousy agents out there. If I represent both parties, I don’t have to worry about a bad agent blowing the deal.” What a load of crap. Yes, there are lousy agents out there. I can’t tell you how many times I’ve done almost all the legwork on both sides to get a transaction to the closing table. I do both jobs to hold the deal together. That’s what any good agent does. I’m not going to let incompetence on the other side blow the transaction. That doesn’t mean I have to represent both parties.
“But sometimes dual agency can’t be avoided!”
Why not? If you have a listing, and a potential buyer calls that isn’t represented, you say, “I represent the seller and their interests. You should have you own representation that will represent your interests.” Then give them some instruction on how to find an agent, or give them some names to chose from of agents you respect that you know will represent them well. How hard is that? No one HAS to conduct dual agency. Sure, you’ll make less money. Maybe significantly so. But you’ll be doing what is best for YOUR client.
What if the buyer says, “I don’t need representation, can’t you just fill out the forms?”. That’s a really bad idea, but if that’s what they want fine. But they’re going to sign the Real Estate Agency Disclosure and Election form and put a check box where it says I represent the seller as the seller’s broker before anything else is even discussed.
Dual agency can’t be avoided? That’s a bunch of hooey.
Here are a couple of defensive nuggets straight from the Inman comments:
"It may be in the best interest of both buyer and seller to work with an agent who is motivated by a full commission."
Oh for the love of Pete. You know what motivates me? Getting the best deal for my client. That makes a happy client. You know what happy clients do? They tell their friends and family how amazing you are. It’s called word of mouth marketing. It’s called superior customer service. It’s called value added. All that will generate far more income over the life of your business than double dipping a deal and representing people in a limited fashion. Folks, if your agent is only motivated by a “full commission” do yourself a huge favor ”“ find a new agent.
"Bottomline: Dual agency is doable and really represents an advanced level of real estate brokerage practice."
Huh? Sure it’s “doable”. It’s usually easier to do a LIMITED job as opposed to a thorough job. How dual agency represents an “advanced level of real estate brokerage practice” is beyond my comprehension.
Seriously, I would love to hear one compelling argument for how the clients benefit from a dual agency relationship. Please, leave a comment if you’ve got one.
So, what can be done to stop single agent dual agency?
Ultimately, nothing. About all that can be done is to try to educate the general population about the pitfalls of dual agency. Oh I suppose in theory it could be made illegal. Good luck getting that past the big brokerages and real estate lobbyists. There are far too many brokers and agents out there that see nothing wrong with limited representation. And with some brokerages having thousands of agents, intra-brokerage dual agency probably couldn’t be eliminated even if everyone wanted it to.
If an agent wants to practice dual agency, the law won’t stop them. If you are a real estate buyer or seller though, you should give serious thought as to whether you really wanted limited representation in what is most likely the single largest financial transaction you’ll ever make.
Think about it. . .
Photo credit: Looking Glass, Creative Commons license
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Jay,As usual you are on the mark here.I've heard all kinds of stories about how dual agency is fine as long as…blah, blah, blah…But I'm still waiting to hear how it benefits the consumer.
Jay-I'm involved in a transaction right now, in which the seller's property has been under my property management services for the last 4 years and the buyer is an out-of-state investor client of mine for over 1 year. A few weeks ago, the seller announced he was considering selling the property. He contacted me, not to list the home, but because I was the property manager, and he knew the tenant needed to be treated carefully. He wanted to know if she might be willing (or able) to buy the home. She wasn't able to buy it, but in the discussion I mentioned that I may know a buyer that might be interested…an investor buyer that would like to have the tenant happy and in place. I asked if he'd give me time to shop the property around. Unfortunately, my client was in China, and we couldn't get our signals crossed in time. Sunday, he listed the home with a different agent. Monday, my investor client contacted me. Today, I sent over the offer from my investor client. An offer that had the price and terms the seller wanted, and that my investor client agreed to.In this case, I know for a fact, dual-agency would have saved my buyer client money. The seller raised his price to cover the higher commission costs as a result of the other agent involved. So what's the argument for dual-agency: It should be LOWER commissions. If an agent is offering limited services, they should be doing so at a reduced price. That's what I do. It's written into my listing agreements every time. Those lower commissions should result in either a) the buyer getting a lower price, or b) the seller getting a fatter reward, or c) both buyer and seller splitting the commission difference in some way (ideally, but not always possible, as was the case this time).FYI, in my scenario above, I'm making the same amount of commission money either way, whether I was a dual-agent or in this case, just representing the buyer. A concern for which the buyer noted when she learned I wasn't going to be a dual-agent: "I fell bad, you will make less now", she said. I assured her my financial standing wasn't an issue, and that in this case, I'm being paid the same either way.Also, let's think about this deal for a minute that I'm working on right now. What value is the listing agent really adding here? Think about it carefully. I know as much or more about the property than the owner does, having been the manager. In fact, he called me today, asking for copies of the repair history. I know his current financial status, his selling motivations, well…nearly everything that would probably be considered material to this deal.And the seller couldn't be happier! And neither could the buyer. Oh, and let's not forget the tenant. She's tickled pink she doesn't have to move, and that her rent isn't going up.I'll repeat…the lack of dual agency in this deal is COSTING the buyer money. And the buyer isn't getting anything significant of value for that. Neither is the seller, and neither is the tenant. A listing agent is making money however….hmmm.
I agree with you wholeheartedly, Jay. I've been a broker since 1971, and even though I have completed any number of "double-dip" transactions down through the years, I have advocated that real estate agents should NOT represent both parties in a real estate transaction. Like you say, it is impossible to represent the best interests of both parties. In fact, I just closed a transaction in which the buyer and seller was referred to me by the same person. So, yes, I double dipped yet again.But, alas, the big mucky-mucks up at NAR sink those thoughts every time. In fact, they don't allow the subject to breathe air, letting it be born dead. One thing for sure, it would mean a much lower membership of Realtors as many licensees look for more fruitful forms of income. That means the income of the leaders would be limited just as the income of the agents would be cut. They talk about representing their clients like attorneys, but they chicken out when it comes down to their commission checks.Just one more thing, Jay: I am sure you meant to say "INTRA-agency" rather than inter-agency. That is if you are referring to an agent within one company suggests an agent from within the same company handle a transaction together. I wish you well.
Steve – Thank you for providing the first (for me) reasonable scenario where dual agency may make sense. I'm sure there are others. I don't have the data to know for fact, but I strongly suspect the scenario you outline is, by far, the exception not the rule.I've been involved in one "double dip" and I also lowered the total commission, and both the buyer and seller saw some benefit from that. However, for me, the whole process was very uncomfortable as the entire time I felt like I wasn't able to provide optimal service to either client. They were both thrilled, but it just didn't sit right with me. Your scenario is one reason dual agency shouldn't be forbidden. (Setting aside the fact that I don't think a movement to eliminate it could gain any traction.) I'm still not, and never will be, a fan of dual agency and will do everything I can to avoid it. That there are agents and brokers with the polar opposite view — they do whatever they can to maximize the opportunity to double dip — frightens me.
"I am sure you meant to say "INTRA-agency" rather than inter-agency. "Yep. Thanks, and post corrected!
I haven't done dual agency for years. Once I realized what it meant (as described by your eloquent post) I came to the same conclusions as you have.If a buyer wishes me to write an offer for them on one of my listings I have them sign a non-agency form and make it clear that I represent the seller only. I give them the option of finding alternate representation. If they wish to proceed, I let them know that because I don't represent them don't mean that I'm out to cheat them … Just that they better not tell me anything that they don't want the seller to know to tip their position.It is still a fine line at times, but more workable for all than dual agency.
Hi Jay,I think you are right on track with your thinking on this subject. I too have been amazed for years at Brokers who thought it was optimal to promote selling the brokerage listings within their own office. And then to find agents that REALLY wanted to sell their own listing, without having another agent involved, I continued to shake my head. When agents were questioned why, the first answer almost universally was so they could get both sides of the commission! They never thought about the risks involved or the realities if/when something went wrong. DON'T THEY GET IT …… COMPENSATION AND REPRESENTATION ARE NOT TIED TOGETER!When I was a large Broker, with over 1800 agents working for me, I banned single agent dual agency in our office. When the situation arose where a listing agent was approached by an unrepresented buyer, or when an agent represented a buyer who want to purchase a home from an unrepresented seller (FSBO), agents were to trained and instructed to verbally tell the unrepresented party that neither the agent nor the firm represent their interests, that the agent and firm have a duty to treat the unrepresented party fairly and honestly, but we do not represent their interests. If the unrepresented party wanted someone to represent their interests, then they are advised to seek the services of a licensed real estate brokerage or an attorney.If the unrepresented party consented to this statement (and the vast majority did) then the unrepresented party was given a form to sign, acknowledging their understanding and agreement to not be represented by the agent or firm.Think about it, why is a person (either a buyer or a seller) in the real estate market without representation?What it usually came down to was money, in my humble opinion. The unrepresented party, whether a buyer or a seller, wanted to save the fees that would be charged if they hired someone to represent them, and they thought they were capable of handling their side of the transaction by themselves.I always wondered if the unrepresented party REALLY understood what they were giving up by agreeing to represent themselves, rather than have someone trained in the real estate industry to advocate/negotiate on their behalf.
First of all, thanks for clarifying between single agent and brokerage dual agency. I have had conversations with sellers and brokers about the difference, but I never see it mentioned on the big REBlogs. Anyway, the ONLY argument I have seen FOR single agent dual agency that makes (some) sense is in the case of a short sale. In that instance, the best interest for the seller is to get the house sold as quickly as possible with the least amount of damage done to their creadit and tax obligations. For the buyer it is, obviously, to get the lowest price and quick(er) close. If the negotiations are done right, the seller can have little to no tax obligation and the buyer can get a low price and everyone has had their best interest served.
Jay -This is a "hot topic" for me and I agree with you. I remember when I first started real estate, the broker/manager was talking about all the "deals" he double-ended. Back then, I thought nothing of it. I assumed it was the ultimate goal for all Realtors. At the end of my first year in real estate, I completed a transaction – double ended- with an attorney on the other side – as the buyer. That was a whole lot more stress than I ever wanted to encounter again. Enough to make me spend the next few months in classes all over Southern California earning designations, but more importantly – an education I did not receive in Real Estate Principles. That was the only class required back then. In Indiana, it is not Limited Agency, unless one agent represents both parties or the broker is representing one of the parties. Recently I had someone call on my listing and set an appointment. I handed it to an associate agent who actually sold them the home next door. They listed their home with her and she had a buyer call. She referred them to me and they bought the house she had listed. I never met the sellers until closing – didn't know anything about them and felt my clients were fully represented. More importantly, both clients were very appreciative, because we explained up front why they were referred and why we felt it was in their best interest. It always amazes me when buyers go directly to the listing agent because they believe they will get a better deal.I do agree the only argument for limited agency is lower commissions, but also believe I can easily justify and prove I have saved my buyers and sellers more than the few % dollars they would have saved by agreeing to limited agency. You know what I find interesting – In my recent battle with my board – it was implied that the intent of the existing language was for the benefit of the listing agent, which I find disgusting. As long as that mentality exists, the debate about Limited/Dual Agency will continue.
Well said, Jay. I'm a listing agent…period. I don't work with buyers and when they contact me about my listings I refer them to a kick butt buyer's agent. Part of my listing presentation is that the sellers will always have me as an advocate for them – not part of me, not me serving as a go-between…me giving them the full representation that they are already paying for. The fact that I have to split commission with another agent should not matter one iota – I'm being paid to market and sell a home at the highest price possible and in my opinion that is not possible while I'm sitting on a fence.
Man… I hate that when I post comments before I was finished writing! To finish up my thoughts:Most agents, and many Brokers for that matter, have a very hard time wrapping their noodles around agency. And I have to admit, it is a subject that can get confusing. But dual agency seems like a no brainer to me, especially single agent dual agency! IMHO, don't ever do single agency dual agency, under any circumstance. The risk when something goes bad is just not worth the reward.There is nothing that will teach you faster the perils of dual agency than to get involved in litigation as a defendant, where it is alleged a breach of fiduciary obligation, negligent misrepresentation etc, and then on top of all those allegations, be a dual agent. I always said, if you are in litigation as a dual agent, it is not if you (or your insurance carrier) are going to write a check, it is, how big a check are you going to write! And until you have been there. it is just hard to understand.I believe most real estate attorney's will tell you that when a real estate transaction goes bad, and you and your firm are sued, and you are a dual agent, that is one of the most difficult law suits for them to defend. So why go there. Why assume the risk? Let that unrepresented party represent themselves, get that fact well documented and you represent your client. At the very least, if the transaction goes bad, (and thankfully most do not go bad) not being a dual agent will give your attorney a much stronger position to defend you from.
Hi Jay,Food for thought: The Consent to Limited Representation reads the same if you fill it out with one agent or two. The terms are exactly the same. As you wrote: A dual agent must not advocate or negotiate on behalf of either the buyer or the seller.
Here's how my sellers and I solve this issue. We put X% into the offer price to pay for the buyer's agent. Then if the buyer has no agent when they express an interest in buying the house, we offer to write the contract for free for them as dictated by them. No advices. Then we give them the x% to buy an agent or not…their choice. If they don't buy an agent with the x%, they sign a form indicating they understand that no one represents them and I represent the seller.As long as the seller or the seller's agent cannot gain from the buyer's lack of separate and sole representation, you remove the conflict of interest. The buyer has the money to buy an agent…or not. Buyer's Choice.
1) There is a huge difference between dual agency and dual agent. People confuse the two all the time. I don't mind dual agency. I won't do dual agent.2) In my email publication of homes sold, I occasionally get questions from readers about homes that sold for unusually high prices. When I used to research such things and the problem wasn't a typo, it seemed about half the time it turned out the buyer was represented by the seller's agent. I can only imagine an unrepresented buyer walking into an open house, loving the home, and the seller's agent pitching a 1% to the buyer at closing if the buyer used the seller's agent. (I got a call one time from a scared and ticked off buyer in this situation who wanted my price opinion on the home she was buying (yeah, right) because her dual agent wouldn't give her any guidance at all on the most important part of the transaction, the price of the home. She didn't understand that her dual agent wouldn't be able to advise her on price.)
Jay-
What are your thoughts about a short sale realtor negotiating a short sale who also represents the buyer?
In this scenario, the bank is negotiating the price and not the seller.
Great post.
Jay, While I agree that less representation isn't the best thing in the world for clients, I have another example that I hope you will find expectable. I live and work in a small town (we're talking 500 people) and my real estate company (myself, broker, and one other agent) list about half of the property that is for for sale. I'm sure you would agree that if I work hard to bring in a buyer than I should get the opportunity to help them purchase any property they want to see, right? I try to lessen the impact that the dual agency will play by explaining to them that chances are pretty good that they may want to make an offer on a home that is listed by my company. I let them know what kind of things I can and can't tell them about the house and that we'll have to sign another document down the road if that happens (as is the law in SC). We never have a problem and our clients receive the best possible service. We know we're walking on shaky ground and therefore make sure that we cross every “t” and and dot every “i”. The only other solution would be for us to give away our clients to our (less qualified 😛 ) competition. We often reduce our commission in cases or same agent dual agencies because we aren't assisting on the negotiations, but we're certainly earning our keep and if all parties involved are satisfied I don't see a problem.
Jay, you're an upright guy. No one should ever question your ethics. But, maybe you are making more out of this than there is. Are we now claiming to be “consumer advocates” like the new sprung business of “public adjuster” for the insurance agencies? I sell homes. I don't build them and I am not a licensed inspector. During the marketing or listing of a home I have met a few sellers that want me to pull the wool over someone's eyes. And, I am sure (positive) that there are agents who will try to work that angle. I have also met some buyers who want me to help them “steal” homes from unsuspecting owners. Again, I know there are agents out there who almost enjoy that type of transaction. I pity them. Can I work for both parties – yes. I don't feel I need to tell each party everything the other side said. I am almost the buffer for them to declare their emotions during a very trying time in their lives. Most of the time when I get to close on the settlement it is me who is mentally exhusted and the two parties are friends sharing their most intimate secrets. Just imagine how they would feel about each other if I blabbed everything they had said during the negotiations.
The problem in real estate is BROKERS. Clean up the top and the agents will follow. You can make someone ethical just because there is a “code”.
Given that a short sale seller can't walk away from closing with a dime, dual agency in this case doesn't seem like it would make much difference… And one could argue a short sale is the one type of transaction where having one agent on both sides might really facilitate a closing.
Sort of makes sense in a small town situation. And largely unavoidable I'd think.
Phoenix has upwards of 30,000 agents, so clearly single agent dual agency is avoidable.
Selling real estate for over 30 years, a lot of real estate, I found dual agency a farse also. It is rediculous to solve goals for your seller in the best manner you can within being fair. I think that the old way of seller representation, even for your own buyers were more realistic if it was your own listing. Atleast the buyer knows where they stand. The notion that you can separate from one representation to another based on who is seeing the property is stupid. I think a fair beginning is to allow agency to be based on the individual agent, not the office. This way both parties can be represented in a intra office or company transaction.
We call that Intermediary in Texas and I won't touch it. If I have a client, I want to actually provide a service. If another agent under my broker represents one side and I have the other, we are still technically in an Intermediary situation, but both sides have true representation.
Daniel -I've heard this argument before and my question is – why do you have to represent both parties? Why not have the buyer be unrepresented? No on says you have to concede your commission, particularly in this world where the seller pays the full commission …
"The problem in real estate is BROKERS."Not all brokers… but certainly a significant portion."But, maybe you are making more out of this than there is."I don't think limited representation is good. Period. I don't let me agents practice single-agent dual agency. It's asking for trouble in my opinion.I don't know that I'd call myself a "consumer advocate", but I certainly think of myself as a client advocate. And if you're trying to double-side a transaction, you're not an advocate for either side.
Hi JayFirst time on the site… Impressive. I agree with what you are saying. The one place where I see dual agency being the least toxic is when listing a short sale. The seller usually has little left to loose and the buyer can't cut the pie much deeper in most situations. Once the price battle is over, if there is one, there is often very little left to do but to work together to get deal to settlement. Again, not perfect but the least toxic in my opinion.
Great post, I really like the examples and details you put into it. My friend is buying a home right now, and she just dropped her agent because he was trying to nudge her toward a particular house. Come to find out, he discloses (later than he should have) that he owned the home. He was not just selling the home for someone, he actually owned the home and was trying to convince her that it was a good deal. Honestly, I told her that the house was not a good deal, and that her financing would not cover that home anyway. She saw him for what he was trying to pull, and now she has found a new agent.-Tyler
Your simplistic view that agents only exsist to get the lowest/highest price is pathetic. There are other factors of dual agency to consider:1) The goals for most professional agents are actually a more realistic hybrid of "Getting the fairest deal and delivering a stress-free, smooth, and quick transaction". A real estate transaction is not about hammering one of the parties out of the last $95 in price. When both parties agree to the terms proposed and the above goals are met – There is no issue with dual agency.2) Many times a commission discount or rebate is offered in dual agency transactions. This saves the clients hard earned savings and/or preserves equity and assets. (Many listing contracts are written as follows: 3% to listing agent / 2.5% to outside buyers agent. If buyer is found by listing agent or another company agent – 4% total commission.) This is the most common benefit to dual agency for the client.3) Even though you have discounted the "communication break-down/weak agent"reason – It is still valid. Common sense tells you if there are less parties invovled the agent has more control of the process. More control leads to the stress-free, smooth, and quick transactions referred to earlier.Your comment of "If you have a listing, and a potential buyer calls that isn’t represented, you say, “I represent the seller and their interests. You should have you own representation that will represent your interests.” – Is absolutely false and borders on insanity.Picture this sceanrio: You are standing on the front lawn with your clients – When an SUV pulls up. A couple with two young children walk up the driveway and say "We looked at this home during the open house last Saturday and we LOVE IT !! We'd like to make an offer right now!!"Your clients are excited but you tell them that you were afraid this would happen. They look confused as you approach the couple and say "Great – Here are a few ways to find an agent who can handle submitting your offer. We hope to hear from you soon and good luck."What reaction do you think your clients would have? Would they be happy you let a highly motivated buyer leave without preparing their offer? I'd have to believe your clients would fire you on the spot – If they knew you DIDNT accept an offer on their home – And sent the potential buyer off to find another agent. (Did it ever occur to you the next agent may show-and-sell a different homes?)You are placing your own personal business beliefs above the needs of your clients. And that is worse than any issue dual-agency could ever cause.In theory your claims might hold merit – But this is the real world….
Danny – Take a deep breath. No need to get personal with words like "pathetic", "absolutely false", and "insanity".I can't go into every possible scenario in a blog post. I can assure you that I'm not going to sacrifice my sellers goal (getting their home sold) in the name of my personal business beliefs (that single agent dual agency is bad). In the scenario you describe, I have dozens of agents that could be referred to, including my own, before these buyers even got out of the car.Yes, I've written countless listing agreements with a variable commission structure. I'm pretty well versed in the real world too and never meant to imply that the only thing that matter is price. There is far more to representation than "hammering one of the parties out of the last $95". Enter into a single agent dual agency situation and I think the client will swiftly see just how much they are losing in addition to price.I'm all for stress free, smooth and quick transactions. I've said exactly that on this blog and my traditional site many times. But I also take my fiduciary responsibility to my clients seriously, as well as all my other responsibilities. Hence the reason I'm not keen, at all, on limited representation — which is exactly what single agent dual agency is.Thanks for the comments!
Welcome Jonathan, and thanks for stopping by. Hope you decide to visit often!Yep, short sales are a good point. See the comment up above from "Arizona Short Sale". I agree this is the least toxic situation. And quite possibly a good reason for dual agency.
Jay – It wasnt my intention for those comments to be direct to you personally – Just to your position in the article.That said – I stand by what I posted. In every industry there are professionals and morons. Professionals can and do perform as dual-agents. Morons screw up in single and dual representations.We can always agree to disagree.I'll buy you a Johnnie Walk Blue at the next Barret-Jackson – And we can debate some more. (Bring a few cigars…)Thanx, Danny
No disagreement needed when it comes to pros and morons…."I'll buy you a Johnnie Walk Blue at the next Barret-Jackson – And we can debate some more. (Bring a few cigars…)"I've got that in print, and I'm going to hold you to it! 😉
The buyers I work with want to be represented, price negotiations are such a small part of the real estate transaction as a whole. My typical situation is to represent a buyer on a sale where another person in my office represents the seller, so what advantage would it be to the buyer if I wasn't involved…besides if I don't get paid and can't pay my electric bill, how will I bug Jay?
There may be SOME situations where Dual Agency MAY work and MAY be beneficial to both parties. But those transactions probably make up less than 1 percent of all dual agency transactions and don't make up for the other 99 percent that are getting screwed.It makes no sense to me either. It's like being the defendant and asking the plaintiff's lawyer to represent you as well. What person in their right mind would do that? Yet, some of those same people consent to Dual Agency. WTH?!
Jay, My choice is no dual agency in my Company only Single Agency – I will represent a Seller or a Buyer, but never both in the same transaction. Because I am a small brokerage the choice is easy for me and I truly feel that most times dual agency is not good for the consumer. If a listing has a problem with that they can certainly option the fast talking agent and hope they can catch that poor buyer walking up the lawn.Of course your readers comments bring up all of the classic reasons that the big brokers have used for years to champion dual agency. My big issue with dual agency is the legal understanding of the issue and the downplay it gets with most real estate agents with the consumer. Secondly the disclosure and conversation needs to happen early in the relationship.For those instances where the consumer is savvy I would suggest using a Buyer or Seller Non-Agency agreement. For those consumers that are first time buyer's or not particularly familiar with real estate transactions, they would be better served with their own representation, not dual agency. This solves the cost of commission issue, and frees up the agent to focus fiduciary duty on one party, and deal fairly and honestly with the other.Too many times I have seen a listing agent oversell a home and not provide the Buyer will full disclosures, a reasonable visual inspection, and sound advice what they should be looking for. How many listing agents would provide a buyer with a list of foreclosure properties in the neighborhood, or council the buyer's to check Megan's Law, or investigate a musty order in the home? Many listing agents in California are found of writing "buyer to investigate condition of home prior to close of escrow" rather than do their legal obligation of a diligent investigation for "red flags". You will be hard to find a Broker in California that does not use the Consent for Dual Agency form which picks up where our Disclosure of Real Estate Agency leave off. I have written a blog post at the following link:http://www.sandiegolifestyle.info/2009/05/dual-…..Will Dual Agency go away, I really doubt that the large brokers of the country will let that happen. But these are the same companies that want their consumers to use affiliated Title & Escrow Companies, get kickbacks from Natural Hazards Disclosure Companies like Property ID, and charge consumers transaction fees above the commission. Let us do a better job of explaining dual agency and disclosing it properly at the start of the relationship. Not send out the agency disclosures and dual agency consent far after the contract has been written from a Transaction Coordinator. The consumer can them make an informed decision what is right for them – it is about choice and options.Thanks for your post, I am glad to see more discussion on this important issue, it needs to be out in the light and discussed, and explained to the consumer. Please excuse any inconsistency with Agency laws in other states. I am only licensed in California and don't pretend to understand other states agency laws, and my response is based on California Agency law.
"what advantage would it be to the buyer if I wasn't involved … " No one is suggesting you not be involved, but can you effectively represent both parties? There's always so much more than price … could you do what you do by representing only one side and doing the paperwork, etc for the other?
Excellent post. So well done. We feel like we are the only ones who thinks this way, sometimes! Yet, when we explain it to customers (soon to be clients), they sure don't agree with dual agency (single-agent, same transaction)! What don't people understand about "conflict of interest"?
I love that you went into so much depth on this article about Dual Agency. I could not agree with you more. I don't practice Dual Agency. As much as I would like to make more money, I too have my client's best interests at heart. I am a firm believer in 100% representation of the client. It has helped me to build a Team. If I have a buyer for one of my listings, my Buyer Agent will represent that client, we will refer that client to another agent in our office or the buyer can find another agent. We establish this fact with our buyers at first point of contact.
Agreed.I am a buyer. I saw a house for short sale at a decent price (little less than fair market value).. I contacted my agent (buyers agent) and asked him to send an offer. He warned me that it is a short sale, there are other offers on the property bla bla. I told him I dont mind offering at list price… Basically he did not wanted to send an offer. I contacted an other agent… he was also not keen on sending an offer. Finally I decided to call the listing agent myself.Guess what, Listing agent was really excited to know that i am interested in the house. he showed me the house personally.. He also told that there are several other offers on the house and he will be making a decision soon. I asked him to take my offer. I decided to offer little less than listing price after all the analysis. But listing agent confirmed that there is already an offer and he told me that if I am going to match that offer he will send my offer to bank. I matched the other offer.. and deal done. Next day he sent me a signed contract.. Seller also was motivated. I saw the house status from active to contingent…Now, If I was always prepared to pay the listing price dual agent or single agent. If I had gone with single agent, I am sure my offer would not have been sent to bank. Since I chose dual agent, my offer was selected and also the agent is very keen to get the closing done ASAP as he gets double commission. everybody wins in this case.but every case is different.
I guess since it's such an advanced level of real estate guys like you and I just don't get it Jay. We're not nearly smart/skilled enough to understand.Are you serious? Advanced? Limited representation requires "limited" work – there is no advanced in there. Advanced is when you have to work hard for your client and make sure a transaction happens (and like you mentioned keep it all together) and they get the best representation you can possibly give. Dual agency is nothing more than a way to get paid the big bucks. It's legal, but it's not right in my book.
I guess since it's such an advanced level of real estate guys like you and I just don't get it Jay. We're not nearly smart/skilled enough to understand.Are you serious? Advanced? Limited representation requires "limited" work – there is no advanced in there. Advanced is when you have to work hard for your client and make sure a transaction happens (and like you mentioned keep it all together) and they get the best representation you can possibly give. Dual agency is nothing more than a way to get paid the big bucks. It's legal, but it's not right in my book.
There is always going to be a conflicting interest when a transaction has a duel agency agreement. The agent needs to stay neutral and support both sides equally. Most agent find this hard and unknowingly lend to a side. There is definitely something too be said about it. Great post.
There is always going to be a conflicting interest when a transaction has a duel agency agreement. The agent needs to stay neutral and support both sides equally. Most agent find this hard and unknowingly lend to a side. There is definitely something too be said about it. Great post.
Consider this case. Say I knew the agreed upon commission is 6%. So sellers agent gets 3% and buyers agent gets 3%. I know the price I want to offer on a property. So i know how much is 6% of that. Now if the dual agent agrees to pay his part of the 3% when the deal is falling apart (since I am not budging and the selling is not budging from the said price), is it still a bad deal?
Real estate agents owe certain duties to their clients, I cannot see how can they meet those if with dual agency.