Please welcome AG’s newest writer, Patrick Flynn who has been a practicing real estate professional for 13 years and a Designated Broker for going on seven of those years. Patrick is a Certified Real Estate Instructor who has coached many agents in their business and joins us to talk about a variety of real estate topics, starting today with the divisive dual agency debate. Please welcome Patrick in the comments!
As a 13 year veteran of the real estate fray (7 of those as a Designated Broker), I’m always taken when I speak to a group of my peers about this highly charged subject. I can’t imagine there are many in our profession that will champion the questionable ethics of this practice, but the fact is that Dual Agency is still legal in Washington as in other States in the Union. I know this is an age old debate and it has been hashed out online and off, but there still seems to be a great deal of unrest about the issue AND many people new to real estate blogging haven’t fully considered the debate.
Not to put too fine a point on it, but what other commission based business in the world allows a single agent or Broker to represent two separate parties, both emotionally divided with separate agendas and needs? It just doesn’t happen anywhere else…except in real estate!
The two sides of the argument:
Since Dual Agency is legal, there will always be that sect that thinks it’s acceptable. So, I would submit to you, “Change my mind.” Offer me some logical explanation that Dual Agency is a tolerable practice in our industry. And, no I will no accept the answer, “Because we can make more money.” That’s the real problem with Dual Agency to begin with, isn’t it?
Dual Agency is the ultimate no win Scenario. Even if all parties agree in writing (and if you explained the likely pitfalls and risks to both parties…they never would agree) you simply cannot perform your prescribed duties of agency. Whether your state prescribes to a fiduciary or statutory list of responsibilities to a principle, you immediately violate both once you engage in an agency relationship with separate parties. You simply cannot perform… you can’t! And, when you make this arrangement contractual, you double your risk for lawsuits, forfeiture of your license and most certainly a quick exit out the door! Your prescribed duties, among others, are to be loyal to the seller or buyer by taking no action that is adverse or detrimental to the seller’s or buyer’s interest in a transaction; to timely disclose to the seller and buyer any conflicts of interest and (in a fiduciary agreement) put your client’s interests ahead of all others, including your own. How can you possibly do that ‘faithfully’ for two separate parties? Well…I’m listening!
If it’s so bad, why is still around?
MONEY! Plain and simple. In essence, Dual Agency is a hold over from the days before we had agency laws that protected buyers. I view Dual Agency sorta like your appendix, it no longer has any practical use but for whatever reason, we’ve not evolved enough to purge them from our DNA. And, both can kill you when they go bad!
Despite all the potential damage and irreparable harm that can be done to both your clients and you, every once in a great while, a Dual Agency transaction goes off without a hitch and all of the sudden, common sense and integrity are somehow replaced with that little devil on your shoulder that tells you, “Look at all the money you made!”
In my view, the real tragedy in a Dual Agency transaction is the fact that by supposedly offering to be faithful to both parties, you are withholding vital information if it at all conflicts with the others interests. In essence, stealing from them the one thing they need most…your skill, knowledge and most of all, your professional insight to help them make the best decision.
So, what should I do to avoid Dual Agency?
The first question I would ask as a buyer or seller is, “Do you practice dual agency?” As I said, this may be a mute point to many in our Union because their State has wisely outlawed Dual Agency. But, if you are unsure of your States laws, ASK! The ethical agents out there will avoid Dual Agency like the plague. So, common sense would dictate that if you get a sense of apprehension or evasiveness from your agent or they flat tell you they do practice Dual Agency…you may want to look for a new agent.
Dual Agency is a huge liability for many Brokers and fruitful grounds for lawsuits.
So what should you do? Stick to your guns and insist on working with only agents and Brokers who do not practice Dual Agency and will solemnly commit to referring any buyer to a cooperative Broker who wants to buy your listing and the same for any seller that might want to look at an offer from a buyer you already represent.
Hopefully, states will come around and abolish this archaic business practice but until that time, all I ask is that you only work with principled agents and Brokers that have the integrity to forego the lure of a big paycheck for proper practice of putting the client first!