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
I'm Jay Thompson, and I have a little blogging problem... Welcome to The Phoenix Real Estate Guy, or "TPREG" as I fondly refer to it.
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