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Dual agency benefits neither buyer nor seller

Quote: “Double-dipping isn’t very far from double-dealing, and dual agency has always been the Achilles’ heel of the real estate industry.” That’s me in today’s Arizona Republic. Here’s a more permanent link. And here is the BloodhoundRealty.com policy on dual agency. The topic is important enough to us that I want to quote the entire article here.

Dual agency benefits neither buyer nor seller

Imagine you’re in a lawsuit. You’re representing yourself, but, as the suit progresses, you realize your opponent’s attorney is particularly good – thoughtful, incisive, attentive to detail.

At an appropriate moment, you say, “You’re doing such a good job representing his interests, I know you could do just as well representing mine too.”

You now understand what’s wrong with dual agency in real estate.

Dual agency is the fanciful idea that, at the same time that I am zealously and faithfully representing all of your interests as the seller, I can perform the exact same services for the buyer of your home.

In fact, if I am acting as a dual agent – fully disclosed and consented to by both parties – I can’t provide zealous representation to either party.

Instead, I become a facilitator, a go-between, a messenger. I can’t advise one client in a way that would hurt the other. I owe the same, insanely limited duties to both parties.

This applies even if two different agents from the same brokerage are involved. The contracts are with the broker, not the agents. The broker represents both parties.

The individual agents should act as facilitators. In reality, each will act as an advocate, actively betraying the interests of the broker’s other client.

So how much will the broker get paid for this farce of his fiduciary duties?

Double.

All of this predates the idea of buyer’s agency altogether. When brokers represented only the seller, the buyer was never represented. If the listing broker could scare up a buyer on his own, he didn’t have to split the sales commission with a cooperating broker.

Double-dipping isn’t very far from double-dealing, and this has always been the Achilles’ heel of the real estate industry.

So, even now, when buyers have full representation, brokers are still trying to cling to this antique idea in order to cling to the double commissions.

Eventually, dual agency will be outlawed. It’s unethical in principle, impossible in practice. Until then, you should deal only with brokerages with a firm and fast policy against dual agency.

11 comments

11 Comments so far

  1. Ardell DellaLoggia July 14th, 2006 10:59 am

    Greg,

    I respond to your “call”, but you are talking Greek when it comes to the consumer. We inside the industry have been playing this game for many years. Truth is, if you follow consumer trends, this argument becomes academic, and of interest only to insiders and those who fine tune Agency Laws around the country.

    The simple truth is that the Buyer Consumer says “Agency BE Damned”, as they often will call the listing agent direct. The actions of the consumer therefore belie our chest pounding agency assertions.

    Being one of the only agents in the Country who has represented people in a Fiduciary Capacity for 35 years and who has “been there done that” in five states up and down both Coasts, this argument about Dual Agency IMNSHO is fairly moot at this point.

    I was licensed in FL when they “Outlawed Dual Agency” (didn’t work BTW) and the most common, national response is Designated Agency. Purists will say this is simply Dual Agency by another name. For large firms it works; for small firms it’s semantics.

    But, and MOST IMPORTANTLY, outlawing Dual Agency allows only for a throwback to buyers being unrepresented, and none of us really want to go back there.

    Due to the internet access of homes for sale, the trend is UP and not DOWN with regard to buyers calling listing agents direct vs. seeking separate and distinct representation. When the Buyer Consumer chooses to call the listing agent, if you outlaw Dual Agency, you leave them with NO representation at all.

    It sounds good to say “outlaw Dual Agency”, but it leaves the Buyer Consumer back where they started, if and when they call the listing agent direct, with NOrepresentation whatsoever.

    So think like a consumer, and not like an agent, when looking for the best possible answer to Dual Agency. Designated Agency is the best the industry can offer and that does not cover the situation when the buyer insists on dealing with the listing agent direct…which they sometimes do.

    What do you propose I do when a buyer insists on making an offer through me personally as the listing agent? Or when I reperesent a buyer in a FSBO transaction? Personally I find that Dual Agency fits better, in my actual scenarios, than one consumer being left with NO representation whatsoever.

    Looking at Dual Agency under a microscope will always point to the answer you have come up with…OUTLAW IT! Truth is, there is no actual total replacement of it that works in practice.

    Transaction Brokerage failed miserably, by leaving the agent with their thumb up their butt. Designated Agency only worked when the consumer agreed to be flipped over to a different agent in the office, which they often will not agree to do. Nationally, the most common answer is to represent one party and leave the other totally unrepresented, usually the buyer, and that is just plain old, back to square one. Do you really want to go back there?

    Prove my point, Greg. Buyer calls you on your listing and only wants to deal with you personally when making an offer on your listing. Where do you go with that scenario if Dual Agency is “outlawed”, without leaving the buyer high and dry with regard to representation in the transaction at hand?

  2. […] * As I was researching another post, I came across this post on Dual Agency. I read just the headline before writing this post, as I didn’t want to be influenced. It’s good to see others talking about this issue. After finishing my post, I revisited his site and was compelled to add this: So why does Dual Agency even exist? Because brokers want to double-dip on their own listings. In the bad old days, the buyer was not represented at all. “Your” agent would act like your champion, but he was always the sub-agent of the listing broker, even if he worked for another brokerage. Every agent was working for the seller, and nobody was working for the buyer. It made no difference to the buyer who sold the home. The buyer was without representation anyway. […]

  3. […] Bloodhound Blog – With a very interesting comment by Ardell DellaLoggia […]

  4. […] I may have stirred up a hornet’s nest on the subject of No Dual Agency. Jim Duncan at Real Central VA posted his thoughts, and the sellsius° real estate blog posted a round-up, asking Are Buyers Customers or Clients? From Arizona, taking a trip Back East is also taking a trip back in time: Agency as it is understood in New York has been absent from this remote cultural backwater for at least 15 years. […]

  5. […] But wait. There’s more. I first mentioned our No Dual Agency policy in BloodhoundBlog on June 29, but the first time I weblogged it as its own topic was on July 14 — Bastille Day. […]

  6. […] I’m certainly of the opinion that blogging is perfectly suited for real estate professionals. It gives them an opportunity to demonstrate their knowledge of both real estate and their local community to potential clients (as well as rant on the perceived injustices in the world). Conversely, blogs allow potential clients to better judge the abilities of a given agent and provide them with a greater understanding of who that agent is (on a professional and personal level) and if he/she is the right fit for the client. […]

  7. […] So why does Dual Agency even exist? For the benefit of the real estate broker, of course. This answer comes from my Arizona Republic column: So how much will the broker get paid for this farce of his fiduciary duties? […]

  8. […] This is not Real Estate for Dummies.  But, it probably should be.  The basic definition of dual agency is “The same real estate agent is representing both buyer and seller in the same transaction”.  Dual agency is the single worst issue involved in real estate.  The average “Joe” out of the street easily understands that dual agency is WRONG.   This seems like common sense to the regular guy.  So, why can’t the politicians and many real estate agents & brokers understand this simple terrible concept?  The main reason why dual agency exists is because of the glorious MOOLAH.  Real estate brokers and agents have a huge financial incentive to be involved in a dual agency transaction at the detriment of their buyer or seller.  Dual agency has no benefits to protect the consumer (buyer or seller).  One of the simplest and best examples that I’ve ever read about the problems of dual agency actually came from a traditional real estate agent (Matt Difanis) in Illinois and not an Exclusive Buyer Agent.  A few years back, Matt had a sent this letter to the Realtor Magazine. […]

  9. Blogger Spotlight; Greg Swann January 18th, 2008 4:31 am

    […] often aware of it as a secondary consequence. As an example, very early in the history of the blog, I was writing about Dual Agency, and Jim Duncan at Real Central VA picked up on it. In consequence, we both ended up on the first […]

  10. billy joe bob February 15th, 2008 9:29 pm

    Hi there! there are plenty of arguements that can be made both for and against dual agency. Here in New Hampshire both designated and dual agency are permitted. While it is true that a under dual agency a brokerage can’t fully represent their principal, it does often turn what would be an otherwise dead lead into a live one. Nowadays most of the times by the time you finish telling someone “you need another agent” they are gone! I don’t think this is at all that loyal to the seller. But this is something that would be discussed with the seller before hand anyways. If a seller does not consent to a dual agency then I don’t consent to one. I also strongly advise my clients not to give me any unnecessary confidential information and ask me if it is necessary before giving me the details. For example don’t tell me what the lowest offer you will take for your house is as I will have to give any offers to you anyways. On the other side of things I would ask that a buyer not disclose the most they would be willing to pay for a home to me unless they were offering it right at that moment. I do my best to educate my clients and make them better at what they are doing, regardless of what it is they are trying to do. When you do this you will learn that representing both sides will present no problems. It helps to be a good honest agent.

  11. Sue June 8th, 2008 7:59 am

    We support dual agents in New Jersey. Many buyers actually seek out and specifically want to work with the listing agent feeling that they will have a financial advantage. If the listing agent does a good job in advertising their listings, they will likely get calls on it. My sellers want me to be able to sell their home. I am a dual agent many times and a very honest agent. I would never compromise either of my clients. Having an attorney here is standard, so that protects both parties as well. As far as double dipping, well, if you’re doing both sides of the transaction and all the work its my feeling that you deserve all the commission.