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A portrait of the dual agency in real estate debate, 2011 style

Back in the day…

Back in the day, when interest rates were 18%, and the MLS consisted of a huge 3-ring binder, agents and brokers mostly represented sellers, but the public didn’t exactly understand this. They would call up an office, or a listing agent to see a home, write an offer, and assume that whoever wrote that offer, was representing them. They had no clue that the listing company and agent were actually representing the seller!

Over the years, and many lawsuits later, the evolution of agency has emerged. And to be honest, the public still doesn’t get it, and neither do many agents.  The National Association of Realtors has released their Bi-Annual Legal Scan, and while agency in and of itself isn’t the leading cause of disputes, dual agency came out as a high ranking issue.

Ah, agency, the thing we love to hate.

 
It can be confusing to everyone involved in a transaction, as the types of agency that a company or state allows us to practice may differ. Many places will allow all types of agency, where Realtors are able to represent sellers, buyers, or disclosed dual agency, when we represent both the buyer and seller as clients. We can also still double side a transaction, but not represent both parties, with one being a client, and the other being a customer, again as long as it’s disclosed.

Representing one party, either the buyer or seller, is fairly straight forward. Their best interests are kept in mind. Confidential information is to be kept, well, confidential. We don’t, or shouldn’t give out a buyer’s purchasing power, credit scores, reasons why they are buying, or what they may be willing to give up in order to own a home, such as repairs, or closing costs. 

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In working for a seller, we shouldn’t be telling others why they’re moving, what their bottom line is, if they may be willing to contribute closing costs, if they have to bring money to close, or if they are willing to negotiate certain real property. Although, any of these things may be alright to talk about, if the clients give their permission, and if they do, it’s best to get it in writing.

Difficulty in disclosing dual agency

All of the above applies to disclosed dual agency as well, although this may be more difficult to accomplish. It’s much easier not tell something to another agent than to your own clients. Our clients will know we have the scoop, the dish, the down & dirty, but when acting as a dual agent, we must zip it. 

Clients, too, must understand that when one agent is representing both parties as a dual agent, we can still advise, yes, but we are limited in what information we can share. In short, we owe them honesty, loyalty & a fiduciary duty to both clients when acting as dual agents. Can that even be done fairly?

In Ohio, we also have the option of double siding a transaction, while not representing both parties. One person would be the client, the other the customer. With clients, we owe loyalty and a fiduciary duty to, customers, we still owe honesty to, but no loyalty, or a fiduciary duty. Our agency form specifically says that any confidential information may be disclosed to our client, and that the customer is representing their own best interest. 

This can useful in a FSBO situation, or when dealing with a buyer that may not want representation.  When explained thoroughly that the customer will not be represented, and whatever information is given over may be divulged, this can be an okay way to proceed with a transaction, as long as all parties agree to move forward. 

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Some cases are not dual agency

This can be confused with dual agency, and often is, but as both parties are not represented, there is no dual agency.  Some people may not need to have representation. If we think of the experienced investor, the lawyer selling a FSBO that only needs their house in the MLS but is fine to handle negotiating, the contracts, and closing, or possibly the buyer who has purchased before, and feels comfortable enough buy without the use of a buyer’s agent, but wishes that the agent coordinates the closing details.

Dual agency and the MLB trading

As July’s trade deadline has come to a close and Augusts’ is fast approaching in MLB, we’re going to use players, agents, and owners as an analogy here, for why I am not a fan of dual agency.

Players have agents who represent them in negotiating contracts, extensions, trades, bonuses, who will be picking up the remainder of the player’s contract, where they play, and often include no-trade clauses – meaning what teams a player won’t play for. 

The agents deal with owners, and the MLB who have to approve trades, and players usually have to pass physicals upon being traded.  Imagine if a player’s agent also represented a ballclub- when negotiating a trade, who would that agent really be working for? Would they be working with the ballcub or the player’s best interests in mind? A player’s agent knows everything there is to know about a player, the injuries, the STATs, where he wants to play, or doesn’t. 

In theory the agent would also know how much money a club would be willing to spend on a given player, what they needed & wanted in their line-up, what their farm system was like, and who they were willing to trade. They would know what was negotiable and what wasn’t for both the player and ballclub. (Does any of this sound familiar?)  Would that play agent be able to keep it zipped? Or would they be using known information to make the best deal for one of their clients, and who would it be?

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An unpopular point of view – let’s make less money

It isn’t a popular viewpoint, to say that we, as agents should take less money, or do fewer transactions, especially when the law says it is legal to do so, not when many of us have taken a hit in the wallet in the last few years. But I believe that clients should, when they want representation, have quality representation when buying and selling. It’s one of the biggest choices our clients will ever make.

Our clients should know we have one person with only their best interests at heart, not someone else’s. Of course, as long as the law of the land is the dual agency is alright, companies, brokers, and agents will continue to practice it. Do agents and their brokers always know who and how they are representing someone in a transaction? Do their clients or customers? Does anyone know the difference?

Written By

Katie Cosner, occasionally known as Kathleen, or KT, is a Realtor® with Cutler Real Estate and is active in her local Board of Realtors® on the Equal Opportunity & Professional Development Committee. She has been floating around online for a number of years, and is on facebook as well as twitter. While Katie has a few hardcore beliefs, three in the Real Estate World to live and die by are; education, ethics, and the law - insert random quote from “A Few Good Men” here. Katie is also an avid Cleveland Indians fan, which really explains quite a bit of her… quirks.

56 Comments

56 Comments

  1. Jim Duncan

    August 2, 2011 at 7:17 am

    Well said, Kathleen. How much buy-in do you get from your colleagues in your market? How many others publicly advocate for not doing single agent dual agency?

    My clients and potential clients know my stance on single agent dual agency, but I'm not sure that many others do.

    • Kathleen Cosner

      August 2, 2011 at 7:50 am

      Jim, most in this market are very in favor of being able to double side a transaction, as long as they and their clients/customers know what they are getting into, and the law allows it, that's the way it is. I think that the explanation to the public may not be as detailed as it should be, because agents may not understand it very well. I've probably done a handfull of double-sided transactions, and don't think any were a dual agent, would have to check, mostly because representaion was not wanted. I really don't like being in that position, and norm ref out to someone else.

  2. Fred Glick

    August 2, 2011 at 7:31 am

    1000% behind the banning of dual agency.

    We never did it, don't do it, never will.

    • Kathleen Cosner

      August 2, 2011 at 7:52 am

      Agree, Fred. Just don't think it puts the client first. Do you have the option of still doing both sides, but not repping both parties where you are located?

      • Fred Glick

        August 2, 2011 at 9:27 am

        The way we do it is to do designated agency. I take over for one of people's clients (usually the buyer that they just met).

        I have actually had deep disagreements on rentals! It works. And I have never had an E and O claim!

        • Fred Glick

          August 2, 2011 at 9:44 am

          BTW, you should (proudly) display the fact that you won't do dual agency on your website! I do usspaces.com

  3. Michael McClure

    August 2, 2011 at 7:37 am

    Katie,

    Very nice post. Your heart – and your head – is/are in EXACTLY the right place.

    As an industry, we should be focused on ONE THING: providing the best, most comprehensive, most focused CLIENT SERVICE humanly possible. Yes, that is more important than how much money we make. If anyone disagrees with that overarching thought, then they don't qualify as a "professional" as I define it.

    Someday, we'll all look back and ask, "Was single agent dual agency ever really legal?" Because it makes no sense from the clients' perspective. None.

    Best,
    Michael

    • Kathleen Cosner

      August 2, 2011 at 7:56 am

      Thanks Michael! Sometimes we forget that this is a customer service business first and foremost. Of course we are doing this to make money, who doesn't work to make money, right? But the client does come first. It's very hard to put two clients' interests ahead of each other, no?

      • Michael McClure

        August 2, 2011 at 11:17 am

        Katie,

        We have a set of Mission Statements and Core Values at the company that I founded. One of those items says this: "The client's interests supersede our own." If any of my agents don't live by that, I fire them (and I have fired many).

        You cannot serve two masters in a real estate deal. Period. I don't care what the law allows, or what the Code of Ethics allows, I know what common sense is, and common sense say this: the minute you agree to represent both parties, you actually represent neither.

        Also, for the record, I have done MANY deals as a Dual Agent in my career (I've sold a TON of real estate). And every time I did it, I felt 'wrong.' And, also for the record, I've never had a problem on any of those deals. But it DOESN'T MATTER. I know what's right in my heart and in my gut. And Single Agent Dual Agency is wrong. Period.

        Keep writing,
        Michael

        • Kathleen Cosner

          August 2, 2011 at 3:04 pm

          Pretty cool mission statement, Michael! And agree, if you're acting as a true dual agent, it does feel weird, and you aren't the broker or a management level licensee. It's really a lot like walking on egg shells with both clients.

  4. Matthew

    August 2, 2011 at 10:03 am

    You aren't technically describing dual agency. The agency lies with the broker of record, not the salesperson. A situation where two salespersons from the same company represent the buyer and seller independently is dual agency. Situations where one salesperson represents both sides is also dual agency but only because the same broker is representing both sides – the broker is the only agent in any transaction

    The fact that most salespersons have no clue how this even works is why consumers are so confused by this and think it's a slimy thing. It is much worse for an individual salesperson to represent both sides than for their to be dul agency. I don't agree with double ending the transaction.

    Dual agency is allowed so that brokers can increase the opportunity for their salespersons to close deals and for consumers to have choice on which salesperson they choose. Without it all salespersons would have to be independent brokers (paying e&o, business tax, etc) in order to have the same flexibility.

    • Fred Glick

      August 2, 2011 at 10:05 am

      MAtthew, what you are describing is designated agency.

      Dual agency is and always will be the same agent representing both the buyer and seller.

    • Kathleen Cosner

      August 2, 2011 at 2:24 pm

      Matthew, here, in Ohio, and different places may use different terms for the same thing, two agents in the same office repping a buyer and a seller in the same transaction, the broker and/or management level licensee would be the dual agent, yes.

      This is kind of explained on our Consumer Guide to Agency form, which is given out at the first substantial contact with ANY client OR customer, excluding Opens.

      On our Agency Disclosure form, which is completely different, and not given out until a buyer writes an offer, it explains that ONE agent (and broker) may rep two people with both being clients, thus being a true dual agent, or rep one as a client, and the other being only a customer, and owing no loyalty, fiduciary duty, etc to. This is where people end up getting confused, I think.

    • Liz Benitez

      August 2, 2011 at 3:19 pm

      Matthew, you just said what I was thinking. We have a form "Consent for Dual Agency" Which basically says the brokerage can represent both parties but that separate real estate agents must be assigned to each party. I see no problem with this, but what seems to be considered dual agency in this article is shady. One real estate agent can not represent both party and not have a conflict of interest.

      • Kathleen Cosner

        August 2, 2011 at 4:20 pm

        Liz, one would think that, right? That one agent can't rep 2 people fairly. But that is exactly what happens in a true DA situation in many states.

    • Jim Duncan

      August 4, 2011 at 5:53 am

      Matthew –

      This is why I clarified a few years ago that I am opposed to <em>single agent</em> dual agency.

  5. sfvrealestate

    August 2, 2011 at 10:45 am

    Here in CA, this is getting stickier and stickier. I'm finding that many buyer clients WANT dual agency because they think the agent will always cut a commission — and therefore the seller will be "incentivized" to lower the price — to make the deal. Some buyer clients also seem to expect a major contribution from the dual agent to their closing costs, if not an out-and-out cash kickback after closing. Ugh.

    • Kathleen Cosner

      August 2, 2011 at 2:32 pm

      UGH! Have seen agents do this, and maybe it provides some kind of incentive, but… I would really like to believe we are worth paychecks! How often do we see hourly or salaried people giving back part of their weekly pay or bonuses? that would last about 2 seconds! Why should we devalue ourselves by knocking any % off the commish?

  6. Billy Jalbert

    August 2, 2011 at 12:32 pm

    This is yet another area where NAR has failed to lead and independent brokerages are blazing the trail. My goal as a Broker / Owner and agent is to change people's perceptions of Realtors where I have the most control; one transaction at a time. Dual agency makes it a challenge. Quite frankly, I am still struggling with how to handle it since Hawaii still allows Dual Agency. I too have had many happy Dual Agency transactions and in some cases, believe it is the only way that extremely tricky transactions have been solved. @Michael, it sounds like you allow Designated Agency within your office, is that correct? I would love to hear more about how you are doing this. @Jim Duncan, what about you?

    • Kathleen Cosner

      August 2, 2011 at 2:37 pm

      Billy, it sounds as though you are doing right, by educating, agents, and the public. That is really the key to the entire thing. As long as DA is allowed, knowing what our duties are, and what the public should expect, is what matters.

      • Billy Jalbert

        August 2, 2011 at 3:55 pm

        Thanks Katie. I just have this nagging feeling that there is a better way. Excellent post for discussion…

  7. Greg Cook

    August 3, 2011 at 4:02 pm

    And yet buyers are still required to cross qualify with the lender selected by the listing agent (or bank seller)?
    Releasing buyer's financial information to the seller or an agent of the seller puts the buyer in a disadvantageous position.

    • Kathleen Cosner

      August 3, 2011 at 7:40 pm

      I *really* don't like this. As a REO listing agent, a POF dated w/in the last 30 days can be verified, as can a Pre-app dated w/in the last 60-90 days by a reputable bank. It doesn't have to be done by the seller's bank at all, that's hogwash.

  8. BawldGuy

    August 3, 2011 at 11:39 pm

    An interesting and very informative discussion. It's one I've observed for over 40 years. For those save 40+ years, the silence of the public concerning their indignant wrath over dual agency has been, um, deafening.

  9. Ben

    August 10, 2011 at 3:58 pm

    Is it just here in Upstate NY, or do agents always take on a dual agency when representing a rental property? Every single rental listing in our local MLS has the listing agent offering some crazy low referral fee, or no commission split at all! In effect, these agents are forcing a dual agency situation on the property owner they are representing.

    I recently had a client who wanted an apartment. When I called on an apartment represented by the area's largest rental agent, he told me that he does not cooperate with agents. By refusing, he is basically sitting on the listing until he brings his own renter and gets the full month's rent.

    How is this legal? Why is this never brought up? It's clearly violating the agent's responsibility to the property owner.

    • Kathleen Cosner

      August 10, 2011 at 5:29 pm

      Could be mistaken, but somewhere, recently, (AG???) there was an article on NY and the way the MLS, or non-MLS or whatever it you guys have over there is, and how it works, or, well, doesn't. I mean, the whole point of the MLS when it began, was for brokers to co-operate, imagine that, with other brokers and share/annouce the co-op fee. It really wasn't about this R.com or Trulia and giving public access stuff. It's certainly evolved over time, which is a good thing, but whatever happened in NY, doesn't seem as though it's for the better.

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