Editor's note: This article is part of an ongoing series focusing on dual agency and other forms of real estate representation. View a full list of "Beyond Dual Agency" articles. Consumer groups frown on it, calling it, at best, "nonsensical," at worst,
"legalized fraud," but to the real estate industry, the practice of "double-ending" real estate deals, in some states referred to as dual agency, is a more nuanced practice -- one that is fairly common and often acceptable under certain circumstances, though perhaps at times difficult to navigate. Inman News recently conducted an online survey of agents and brokers -- "Real Estate: Behind the Curtain" -- that asked
real estate professionals about the frequency and acceptability of more than three dozen customs and practices, including the practice of agents engaging in dual agency and other forms of "double-ending," or representing both buyer and seller in the same transaction.
Dual agency can carry a different meaning in different states -- it can refer to the practice of a single agent representing both buyer and seller in the same transaction, and it can also refer to the practice of two agents from the same office who separately represent a buyer and seller in the same real estate transaction -- that form of representation is referred to as "designated agency" in states that have implemented rules governing the practice. Nearly 3 out of 4 respondents to the Inman News survey said it's "common" for a listing agent and buyer's agent from the same office to separately represent both the buyer and seller in the same real estate transaction, and 41 percent said the same about individual agents double-ending a deal.
Also, every state allows some form of double-ending, and many states that don't allow dual agency permit "transaction brokerage," in which an individual real estate licensee can work with both buyer and seller in the same transaction in a non-agency capacity. Transaction brokers do not serve in a fiduciary capacity for any party in the transaction and simply work to facilitate the transaction.
Over half (58.3 percent) said it was either unacceptable or "not desirable" for a single agent to represent both sides of the same transaction, though more than 1 in 3 said it was acceptable.
Two-thirds (67.1 percent) said it was acceptable for a listing agent and buyer's agent from the same brokerage to represent buyer and seller in the same transaction, though a quarter said it was either unacceptable (13.9 percent) or not desirable (11.4 percent).
Agents and brokers in states that allow an agent to be the facilitator of a transaction but not an advocate and true representative for either the buyer or seller -- often called transaction brokerage -- generally found little fault in that practice, whether it involved one agent or two.
Dual agency Most real estate professionals contacted by Inman News said it is not possible for one person to act in the best interests of both parties in a transaction because sellers and buyers inherently have conflicting interests: Mainly, buyers hope to pay as little as possible for a home, while sellers hope to sell their home for as much as possible.
"Dual agency is very much like hiring your spouse's attorney to represent you in the divorce proceeding," said Patrick Armbrust, a real estate broker and owner of Armbrust Real Estate Institute in Denver.
"Let's say an agent for both the buyer and seller (in the same transaction) knows the seller would accept less than the listed price.
"Should the broker reveal that fact to the buyer in hopes of remaining loyal to the buyer? If so, does that broker violate his/her agency with the seller? If the broker does not tell the buyer, in hopes of remaining loyal to the seller, would the broker violate agency with the buyer? An interesting conundrum."
"Let's say an agent for both the buyer and seller (in the same transaction) knows the seller would accept less than the listed price.
"Should the broker reveal that fact to the buyer in hopes of remaining loyal to the buyer? If so, does that broker violate his/her agency with the seller? If the broker does not tell the buyer, in hopes of remaining loyal to the seller, would the broker violate agency with the buyer? An interesting conundrum."
The state of Colorado does not allow "dual agency," but "non-agent" transaction brokerage -- which allows a real estate licensee to work with both buyer and seller in the same transaction -- is the default form of real estate representation in the state.
"I believe from a strictly legal standpoint the fiduciary goes out the window with dual agency. It simply is not possible. That does not mean the agent cannot be honest and fair with both parties. They just cannot have undivided loyalty, which is part of the fiduciary duty," said David Welch, a broker at Re/Max 200 Realty in Orlando, Fla.
"I am a transaction broker 100 percent of the time. I have to be honest and fair, account for all funds, use skill, care and diligence in the transaction, disclose anything that may materially effect the value of residential property, and present offers and counteroffers in a timely manner" -- all of those duties are required of transaction brokers under state law.
"I also must keep motivation(s) of buyer and/or seller confidential as well as the price they are willing to pay (or) accept unless in a written counteroffer, and I must keep seller financing terms confidential unless in a written counteroffer."
Some real estate professionals said it would be difficult for an agent not to be biased in favor of the seller in a dual agency transaction involving an individual real estate agent, since typically the agent has signed a listing agreement with the seller before meeting the buyer.
"For me ... I've either sold (the sellers) the house and been in touch for years, they are friends or referrals, or a simple lead that needs to sell. We've typically spent time with them preparing their home for sale, all the while getting to know them," said Debe Maxwell, broker-owner at Savvy Plus Co. Real Estate in Charlotte, N.C.
"A (yard) sign or Internet buyer call is an unknown customer and our 'relationship,' if you want to call it that, has long since been established with the sellers."
Nonprofit consumer advocacy group Consumer Advocates in American Real Estate (CAARE) calls dual agency involving one agent "legalized fraud" and "the ultimate 'bait and switch.' " The group's argument is that when a previously represented buyer becomes interested in a home listed by the same agent, that agent can suddenly cease to be an advocate for the buyer.
"Dual agency is potentially one of the worst 'bait and switches' possible because it involves the 'switch' (abandonment) of a trusted adviser and advocate. Even with disclosures, consumers rarely expect the change in relationship that comes with dual agency and they are almost never prepared for the complete abandonment that defines dual agency," the group said on its website.
Gary Herbst, president and principal broker at Buyer's Edge Realty, a brokerage in Tarrytown, N.Y., that works exclusively with buyers, used similar terms to describe dual agency.
"(Dual agency) is self-serving, it's a conflict of interest, it's legalized fraud ... and it's very unprofessional. (Dual agents are) representing their own interests rather than the interests of their clients, all because of money and transaction control," Herbst said.
"Dual agency ... is a nonsensical concept since there is no way a broker can represent the financial interests of both seller and buyer," the Consumer Federation of America (CFA) said in a June 2006 paper.
Nevertheless, some real estate professionals say dual agency -- of the type in which one agent represents both buyer and seller in the same transaction -- is acceptable when the agent is honest and fair to both buyer and seller. (Izzy) When an agent know to much of both parties they have the advantage to use that information to manipulate the situation to their benefit more commission. It is really interesting how local realtors and brokerage office in the past were trying to keep us quiet about Dual Agency, but now we have brokerage offices talking about and describing dual agency. But they have it wrong and these are brokers that have been in business for a long time and they still do not know the difference in agencies, wow! Dual agency is not only two different agents from the same office, but also the same agent working for the buyer and seller which is 99% practice in South Georgia. Like I said before 99% of all listings sold in Thomas County are sold by the same listing agent, so they may talk about dual agency on their website but they still practice 99% of the time the same agent for seller & buyer mean full commission.
http://www.inman.com/news/2012/02/22/no-consensus-real-estate-dual-agency-double-ending
"At the end of the day, the seller wants to get (the home) sold and the buyer wants a home. If an agent is honest, (that agent) can easily put a deal together that both parties are happy with," said Stephen Long, a broker at Premier Realty, NC, in South Advance, N.C. (Izzy) This comment is not correct because the agent knows everything from both parties and CAN NOT be an advocate for ether side and CAN NOT get the best price for ether parties all he/she is, is a paper pusher. ( in a devoice you would not use the same lawyer)
DisclosuresMost states require brokers to provide buyers and sellers with written disclosures of agency relationships. In Florida, licensees are presumed to be acting as transaction brokers and are not required to provide consumers with agency disclosures unless they are representing clients under a single agency relationship. Limited services
State laws vary on whether and what kinds of dual agency are allowed. And all states that allow dual agency require agents to provide buyers and sellers with disclosure related to dual agency.
Many states require agents to provide buyers and sellers with disclosures regarding agency relationships.
Dual agents are often limited in the services they can provide their clients, especially when it comes to offering advice and negotiating. Disclosures often spell out, both for agents and consumers, what dual agents may or may not do. For example, the Chicago Association of Realtors' exclusive listing agreements and buyer-broker agreements spell out nine services agents can provide during dual representation and five services they cannot provide.
"When representing the seller and the buyer on a transaction, I provide the exact same (comparative market analysis) and give each a copy. I explain to them that I am basically a middleman delivering offers and counteroffers based on the duplicate data each of them have in their possession," said Alexis Eldorrado, managing broker of Eldorrado Chicago Real Estate LLC. She said dual agency is "extremely common" in the Chicago market. (Izzy) The Agent CAN NOT NEGOTIATE!
Some real estate professionals argue that dual agency flies in the face of true real estate representation.
Sam Chapman, an agent at Private Label Realty in Austin, Texas, where an "intermediary" relationship is allowed, said such agents "just hand paperwork back and forth" and consequently "are of little use aside from getting the contract together."
"There is no longer representation for either side. Imagine going to a pharmacy and getting your prescription filled and the pharmacist not giving you any information about side effects, interactions and other cautionary information," Chapman said.
"At the very least, (dual agency doesn't) provide services to consumers that they could easily receive by avoiding a dual agency situation," said Kimberly Kahl, executive director of the National Association of Exclusive Buyer Agents (NAEBA). Dual agency can be risky business
In addition to reduced services to both parties, the pitfalls of dual agency can include a diminished sense of trust between agent and clients and an attendant risk of liability, some agents and brokers say.
"Not having practiced dual agency, it is my belief that an informed consumer would question the loyalty and advocacy of a dual agent. In my opinion, supporting the validity of dual agency as it is typically defined requires some creative mental gymnastics," Armbrust said.
Stephanie Kelley, an agent at Keller Williams, Legacy in San Antonio, Texas, said when buyers and sellers are represented by a lone intermediary in a transaction, "risk is likely to occur when one party to the transaction becomes disgruntled. The client is more likely to seek mediation or sue because (the client doesn't) feel (he or she has) been properly represented. Even if the agent is proven not to be at fault, it can cost valuable time and money."
Property defects can be a particular concern when it comes to liability.
"Something is bound to break after the purchase of a home," Maxwell said. "When the buyer finds the defect, the immediate thought is that '(The agent) tried to pull the wool over (my) eyes!' " (Izzy) And sometimes the agent does so.
The risk of legal repercussions especially apply if a brokerage offers incentives, such as higher commission splits, to agents who sell in-house listings to their buyers.
"My broker doesn't endorse this practice, as it may lead to an agent ignoring the best interests of the client in favor of the best paycheck," said Chris Dowell, an agent at Re/Max Premier Realty in Prairie Village, Kan., a Kansas City, Mo., suburb. Dual agency and several other forms of representation are permitted in Missouri. (Izzy) I could not have said it better.
"There is a large, local brokerage that pays a significant bonus for selling in-brokerage listings, and because of that, faces ... lawsuits, as well as a buying public that is very cynical toward that brokerage's actions." (Izzy) I am sure this happens a lot.
Some agents will agree to take a lower commission when they handle both sides of a transaction -- an approach endorsed by consumer groups. Others say the extra risk involved in double-ending deals merits they take the full commission.
Why it persists
Often buyers will agree to, or even pursue, situations in which one agent works with both buyer and seller in the belief that it will save the buyer's agent portion of the commission paid by the seller, thus reducing the overall cost of the house, agents and brokers say. (Izzy) This will NOT HAPPEN. I have not seen this at all.
"It's all about saving money. Most buyers think they can save on price by asking a dual agent to knock down his or her commission. Most don't understand that commissions are negotiated at the time of the listing," said Stephanie Crawford, an affiliate broker at Zeitlin & Co. Realtors in Nashville, Tenn., a state that allows single agency, dual agency (called "limited agency"), designated agency, and transaction "facilitator" forms of real estate relationships.
"Many people think they are saving money by going directly to the listing agent. A good buyer's agent is worth their weight in gold -- even at today's prices. I don't really think (consumers) understand about the different levels of service or obligations under the varying relationships," Kelley said.
http://www.inman.com/news/2012/02/22/no-consensus-real-estate-dual-agency-double-ending
