The Age Old Dual Agency in Real Estate Debate

What Dan Connolly said + welcome to AG Patrick!

I agree with Dan Connolly too…. No reason to “give up” your half to a possibly unknowing agent and wind up with more of a mess than the one you may be trying to avoid!

Thank you all for your spirited responses and your strong positions on this hot topic. I guess the Dual Agency issue stems from my very first deal 13 years ago when I made the mistake of writing up one of my listings. I had zero idea what was going on…I even tried to convince the buyer to waive her inspection, it’s nothing short of a miracle I’m still here!
As for Jonathan and Hal, the same applies in Washington and as the Designated Broker, I have been a Dual Agent (by default) several times and have always made it a point to be extra vigilant on those transactions.
As for John’s comment…that is also available to agents in Washington and done properly, is a great solution to avoiding any issues…as long as the buyer signs a “No Agency” Addendum.
Also, Toni, Dan C, Dan T, Howard, Fred, Russell and Dean…I appreciate your comments. This what I love about this forum!
Again, thank you for welcoming me to AG…I plan on posting more thought provoking articles so stay tuned!

I am with Dan on this one. I do try to avoid dual agency simply because I prefer to work one side than 2. However, it is legal in PA if both sides agree and it is disclosed, and I have closed transactions as a dual agent. You must take special care with it, and be super diligent in your documentation to be able to prove you have not favored one side or the other. But the times I have done it, it has NOT been adversarial or like a divorce situation at all! I agree with the statement that ethical, professional agents can handle this situation well. An unethical, unprofessional agent — well that is a nightmare. But then again when is it NOT a nightmare with an unethical/unprofessional agent in any situation?

Over the last 51 years, Dad (rest his crusty soul) and I have closed in excess of 5,000 dual agency transactions. Mine have been, for the most part at the behest of at least one of the principals involved. Furthermore, the do so knowing most of the time they’ll net less if they’re sellers.

Guess that makes us bona find spawn of Satan. 🙂

Dual agency goes wrong due to either incompetence, unethical behavior, or both. It’s been my experience those against DA deals believe incompetence, bad ethics, etc., don’t exist when all principals are separately represented.

Those self proclaimed guardians of all that is holy, can take a pause for the cause and read my mind. 🙂

Incompetents/unethicals are problems when they have 1 side of the transaction. When they have 2 sides, they are 4x the problem. We should work on weeding THOSE GUYS out of the business before you accuse competent professionals of something that is NOT illegal in many states.

I try to avoid it but I do practice dual agency when I must. When “must” I?

Last month a buyer called in off one of my signs. I am broker at a small agency. I tried to refer him to another agent, who would show him the property. Not a single agent was available to take his appointment. I called every one in my office and not one could do it at his desired timeframe. The buyer was agitated by this. I explained I was the listing agent and trying to find him someone to work with him as a buyer’s agent. He replied “Just show me the place yourself.” I explained dual agency and he didn’t care.

I rearranged my schedule, met him at the place, and he wanted to make an offer. I again explained I was a dual agent. He didn’t care. I took his offer, and presented it to the sellers. They didn’t care I was a dual agent. They just wanted an offer!

In the end, he didn’t get the house. But this is how dual agency can happen, even when your personal policy is to refer buyers out.

@Renee – Just like you, this is only my opinion, but you are completely off your rocker with the accusations you’re throwing at Jeff, aka BawldGuy. How can you judge his work or the quality of his representation unless you’ve had first-hand experience working with him or his clients?

If you practice dual agency the right way, it is entirely ethical and effective for all parties involved. You’ve either had a bad experience (or no experience), or just don’t know what you’re talking about. I’d rather be a buyer or seller in a dual agency transaction with Jeff than a transaction where you are representing one of the clients any day. Particularly if it’s common for you to jump to this sort of non-supported accusation in other situations. I can’t imagine what agents go through on the other side of your deals!

Dan — It is interesting that you ask Renee where she gets her facts and then re-phrase that as coming down to laws she should be able to quote. Lemme ‘splain — the “law of agency” is really like the “law of gravity” — an irrefutable operational dynamic long before it evolved into an unavoidable axiom of the Common Law predating recent (not “age-old”) and corrupt cartel-serving real estate statutes. Ya can’t serve two masters. Now, you can broker a deal between two parties who are not clients and therefore you are not an agent. If you make one or both think he/she is a client and that you are an “agent” dual or otherwise — you just are not telling the truth. Understand this too — “agency” is not a real estate concept. It is way bigger than real estate and people go to jail in other business sectors for making the kind of representations dual agents make in real estate following laws written by lawmakers bought and paid for with RE PAC money. I wrote a whole book on it and many articles — all easy to google. Need a “modified rule”? Yeah, watching the Olympics I saw a couple of crashing downhill skiers wishing someone would modify the rule of gravity for them.

Philip, you wrote, “Ray, There is nothing adverse about people’s interests when they want to do business together”. Here’s the definition of “adverse interests” from the book, BOUGHT, NOT SOLD:

“adverse interests: mutually opposing interests where a gain for one interest is necessarily a loss to the other.”

Maybe you should contact the author of that book and explain the real meaning. OH! I forgot… that would be ME! Thanks for your insight…..

Folks, be careful about what you claim or see as measures of performance. Happiness at the close of a transaction means nothing. People almost always are happy at the close of a transaction. Bunco artists specialize in getting victims to happily part with their money. The seller walks away and never rechecks whether the sale price was the best obtainable price, or whether the agent fee was fair or even necessary. The buyer has yet to live in the house, or experience the neighbors…. What’s more, agency responsibilities, promises, deceptions are not limited to the process of “THE transaction”, but begin the moment a buyer or seller begins the walk to the agent’s door or dials his/her phone number. Once more — this whole dual agency debate IS NOT “AGE-OLD”. It all evolved after the FTC 1983 Report on the Residential Real Estate Industry led to the evolution of legitimate buyer agency. Prior to that, dual agency had long been condemned by NAR officially and by all agents universally. When listing agents then started losing business to these new upstart buyer agents, they and NAR suddenly changed positions and poured PAC money into the campaigns of friendly lawmakers, and in 1997, outright bought a buyer agent training certification peddler — REBAC — and with it, REBAC’s history in the buyer agency business which NAR NEVER HAD. Folk’s the truth is in my book, and the FTC Investigator for that 1983 FTC Report is on the book’s cover as one of its endorsers. This is not a commercial plug for the book which is now a bit dated, though it is still on amazon.com. Any of you who has participated above can have a free copy. Just email me with your address, and I will see that you get one.

Uh-oh … Looks like the structure here eliminates email addresses, cuz I did include Eleanor Proctors at CognaBooks. She is the contact for any of you at the publisher. My apologies to Agent Genius if I broke any rule … but the proper intention should be obvious.

Real Estate is not war and until our industry gets that through their stinking head then we will continue a decline in professionalism and customer satisfaction. Did I really just type that?

Ethics? While trying to stay on point, I think it is unethical for someone to use “Barbra Corcoran” as a tag on their blog in order to get better search engine results. Barbra was a pioneer and has earned her reputation and you try and steal some of that reputation under the auspices of SEO. Shame on you. You see when someone says “I am ethical” or “I’m a great negotiator” red flags go off in my head. Ethical people don’t have to talk or write about it. They just are.

My father always said that “lying takes work. If you don’t lie, you’ll never have to remember what you said!” It took me years to understand this and to get it right but it wasn’t easy.

Our industry is certainly divided on this issue as are state laws. However this doesn’t mean someone can’t operate ethically and represent both sides. And yes I do understand the meaning of represent.

I like to keep things simple. Let’s look at the PA Consumer Notice. It must be presented in the beginning. When you meet the buyer. Not when they want to write a contract.

(This is taken directly from the PA Consumer Notice)

Dual Agency:
Dual agency is a relationship where the licensee acts as the agent for both the seller/landlord and the buyer/tenant in the same transaction with the written consent of all parties. Dual agents owe the additional duties of:
-Taking no action that is adverse or detrimental to either party’s interest in the transaction.
-Unless otherwise agreed to in writing, making a continous and good faith effort to find a buyer for the property and a property for the buyer, unless either are subject to an existing contract.
-Confidentiality, exept that a licensee is required to disclose known material defects about the property.

Does anything say fraud? Is it impossible to perform these duties and still be ethical? In my opinion I think you can fulfill these duties with a benefit to both parties. It’s just my opinion. Here’s a thought. If you don’t like dual don’t practice it but don’t consider yourself a legal expert or an expert on ethics and cast aspersions at those that do practice it. You are doing a disservice to yourself and this industry by being a blowhard.

Negotiating comments are fraudulent as well. Sorry folks we don’t negotiate. We are just the conduit of information between parties. We can advise our clients on how to negotiate. Our clients can give us the power to negotiate and this is completely different. We can try and present alternatives to clients but we cannot negotiate unless we are in the position to make the decision. If they give us this right then we can negotiate. Being convincing or counseling another agent on what to say to their client is not negotiating. It’s what a good agent does but it is not negotiating.

In the bubble of real estate we have a tendency to look at worst case scenarios. What if a buyer sees a listing that they love? They always wanted a certain type of house in a certain type of neighborhood. The home has no flaws and passes a home inspection with zero issues. The price is right. Why wouldn’t dual work? What negotiating needs to be done? Take out one of the egos and it could certainly go a lot smoother.

What if the listing agent gives a discount to the sellers’? A reduced commission if they take both sides of a deal? Does this eliminates the ethical money issue?

Here is my suggestion. If the market is going to take us seriously then we need to operate in a manner that is professional. Any post that goes after someone personally to make a point isn’t professional. I know I posted about the Barbara Corcran thing but that agent has the right to remove those tags and mend his/her errant ways. We are entitled to an opinion. We should use it to the best of our ability.

For all that is wrong with our industry there is a ton that is right. Helping people fulfill their dreams of home ownership or helping those families in trouble get out of trouble is a valuable proposition and makes us significant.

Dual agency is a part of my presentations. Both Listing and buyers. It is a part of it because it is my duty to educate them on exactly what it is and how it can help or hurt them.

What if you had a listing that was perfect for your best friend or family member? Are you telling me the client would be better served if you introduced a 4th party into the transaction?

In closing there is a time and place where dual can benefit a transaction. However it takes an agent that understands ethics, human nature, real estate and civics. If you find yourself troubled by it then just refer the client out and take a fee. Where I grew up they call that double dipping and that could get you thrown out of a party.

Let the flaming begin.

Dual agency is non-agency, and should not be permitted in any state. It is self-serving and contradicts the very meaning and essence of a true agent and agency relationship- to place the interests and goals of the client above the agent’s (“company”) and anyone else in the transaction at all times. Dual agency exists to double the income and benefit the listing company by keeping an in-house transaction in-house, where the best interests of the real estate company are now represented and protected instead of the buyer and seller. It is the ultimate ‘bait and switch’. The National Association of Realtors, prior to the advent of buyer agency, said that dual agency is a legal and ethical grey area that should be avoided. Attorneys receive much more training in conflict resolution than real estate agents, and most avoid dual representation of both parties with adverse interests in the same firm. (Note- adverse in real estate means “opposite” and does not have the same meaning as “adversarial”. Most real estate transactions are not adversarial, but buyers and sellers have adverse interests. The seller wants to sell at the highest possible price at the best terms, and the buyer wants to purchase at the lowest possible price at the best terms). In fact, many attorneys in conversation over the years have told me that they consider this to be an illegal practice in law. Only when the real estate industry recognizes that dual agency is limiting our industry perception to the general public as a self-serving vocation, and not as a true profession, is when the public will recognize and demand our specialized services as true and valued professionals providing 100% representation and advocacy 100% of the time with undivided loyalty and full disclosure.

What do I mean by this? By having principal brokers, agents, and companies that are only either licensed as Exclusive Sellers’ Agencies, or as Exclusive Buyers’ Agencies, with specialized courses and training geared for each type of agent, and state licensing to reflect this. In this way the general public will recognize the worth of the real estate industry and agents as a true profession, not a self-serving vocation, and create future demand for our specialized services in protecting their best interests throughout the entire transaction.

Eliminate the possibility of dual agency and the conflicts and limitations of divided loyalty with limited fiduciary duties and obligations. How about starting a movement in your state with your state and local Realtor associations advocating for the removal of dual agency? In the world of computers and the Internet, more people are taking advantage of these tools for both home sale and purchase, and are attempting to bypass the real estate agent whenever possible.

Specializing in this way will make our services as true professionals considerably more valuable to the real property consumer, whether a prospective buyer or seller during the purchase or sale of their most costly and valuable asset in a competitive and changing market environment.

RAY–Did you see my message above? Would love to read your book…

RAY–got you. Thanks. I look forward to reading the book. This dialog is fascinating.

You can find me at the email above, website move2pennsylvania dot com

Dual agents offer a different service than I do. That doesn’t make them worse people or worse real estate brokers than me, it only distinguishes the quality of representation offered by them vs. by me. Note that I didn’t say it distinguishes the quality of service offered. A dual agent can offer a very high quality of service, while offering a reduced quality of representation. For some clients, benefits offered by the dual agent in exchange for the lower quality of representation may make for a good tradeoff, provided that the client is fully informed. My high quality service includes high quality representation, and a dual agent may offer high quality service that includes low quality representation, but something else that I cannot or choose not to offer. That’s why capitalism and free markets are wonderful. There are always choices because the same formula doesn’t fit every prospect.

There are reasons why I am no dual agent, and here are a couple of them. I’ll admit, they’re basically selfish:

I close more deal sides with clients gained by telling them up front that I am no dual agent under any circumstances, than I walk away from by practicing my no dual agent policy.

My job satisfaction, and a higher than usual referral rate, come from far exceeding clients’ expectations. I reject the notion that a fair deal is in the middle between what the buyer and seller want. For my clients, a fair deal is one in which my client gets all or very nearly all of what they want, and the counter-party gets enough of what they want to close the deal. It’s not inherently adversarial, but it’s well-negotiated, usually to the advantage of my client. It almost never ends up in the middle, not just in terms of price, but in terms of timelines, risks, and all other terms and conditions. It makes me sleep easy at night, and as a bonus, I get lots of referrals. Dual agents can never average anything other than 50-50 compromises. Any time they do better for one client, they automatically do worse for another client. That is satisfying for some, but not me.