Why I Don't Practice Dual Agency

By
Real Estate Agent

by Rich Schiffer, Weichert Realtors

I have a personal policy of never representing both sides of the same transaction. I do not practice dual agency.

Definition: (per Pennsylvania Association of Realtors' Glossary of Real Estate Terms)
Dual Agency: A business relationship where the licensee, with written agreement from both parties, works for both the seller and the buyer in the same transaction. Dual agency will limit some of the duties owed to both parties. Dual agents cannot take any action that is adverse or detrimental to either the buyer or the seller in the transaction. For more details, see the explanation given in the Consumer Notice.

Many realtors ask me why I chose this policy, thereby limiting my income to only one side of the equation.

Here's why:
My job, as I see it, is to represent the interests of the person I am working for throughout all phases of the transaction, especially the negotiation phase. When an agent represents both sides, he has access to confidential information on both sides of the negotiation, and cannot, in my opinion, do a proper job representing the interests of the two parties involved. The agent ends up representing his own interests, in practical terms.

I think of it like a boxing match. Each boxer has a trainer in his corner to guide him between rounds. If each boxer was represented by the same trainer, and he gave advice to each boxer between rounds, which one is getting the best advice? Which one is the trainer really trying to help win? The trainer benefits no matter who wins.  Does he really care if the advice he renders is good advice?

It is for these reasons that I have chosen to not practice dual agency. It may cut down on my income opportunities a bit, but I believe I will make up for it with repeat business from clients that know they got the most honest, dedicated level of service possible.

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Rainer
27,874
Darrel Quebedeaux
Evergreen Realty & Associates Inc. - Newport Coast, CA

Susie, That is an excellent question without an easy answer but one I had to ask of myself. 

If I were to properly represent only a single side of any given transaction; from an ethical and moral perspective, I felt I had to first make another decision to insure there would never be a conflict.  I realized I had to choose to work one side or the other exclusively.  I ultimately chose to become a buyer's agent and as such made a commitment to myself to never take another listing.

This was a difficult choice because it went against the conventional norms of real estate practice in the minds of not only my broker but most practitioners as well.  We have had it drilled into us from the beginning to think listings, listings, listings as the sacred mantra of the business and the only way to survive in it.  For me this was frightening ground. 

I spent days thinking, I decided to narrow my focus and define the parts of the business that I was (a) best at and (b) enjoyed the most.  After lots of soul searching I realized that working with buyers best fit my personality, was more enjoyable and in the end left me feeling more satisfied with the job I was able to perform for them.

That was almost a year ago and even today it is still challenging to look at a potential client wanting me to list their property, especially if they are a friend or a past client and having to say; "I am sorry I can't but I will refer you to someone who I know will do a good job for you."  Most are shocked by my answer but after hearing my reasoning, ask me who I would trust to help them sell and if I would be willing to represent them for their next purchase because they too feel strongly about having unquestioned loyalty through each part of their deal.

This decision effectively removed me from 50% of the potential business out there but I feel I have gained more time to better serve the clients I do work with and the time to work with additional buyers, plus I sleep better knowing that I never have to question to whom I am loyal.

This is not a direct answer to your question Susie but is my way to aviod being placed in the situation you are asking about because I personally believe that you either practice dual agency or you don't, there is no middle ground.

May 23, 2007 07:59 AM #15
Rainer
353,086
Bill Somerset
Re/Max Realty Group - Dover, NH
ABR, e-PRO - Realtor - NH Real Estate Agent
interesting approach.  In PA are you allowed to act as a sellers agent and what we call here a non-agent, or transactional agent for the buyer?
May 23, 2007 08:34 AM #16
Rainer
116,722
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO

Bill -- PA does have transactional agency, but it seems to me like a rare occurence.

Darrel -- I appreciate the commentary, and I am certain that your clients appreciate the quality of representation they get from you. I believe you are more likely to get repeat and referral business from them, because of your unfailing stance for their best interests.

Susie -- As far as real life situations goes, I can tell you about a few intances I have witnessed, but not been actually party to, and I can tell you what I plan to do if the occasion comes up.  There are several agents in my office that will not practice dual agency, for many of the same reasons I listed, I would imagine.  If a buyer they represent wants to see a listing of theirs, they will ask another agent in our office to show it.  If they do decide to write up an offer, the listin agent would release them from their buyers' agency contract, and the buyer would sign a buyers agency contract with the new agent, specific to that property.  The broker is then considered the dual agent, and the listing agent and buyers agent are considered "designated agents"  The original agent may of course request a referral fee, and such arrangements are negotiated on a case by case basis between the agents.  All of the issues surrounding dual agency, and fiduciary duties are made clear to the client from the start, when we go over the consumer notice, and the agency contracts.  They know what to expect, so if it should come up, the "ping pong" reaction is minimized.  Another thing that many sellers agents in our office do to minimize these situations, is to not sit an open house at their own listings.  By building relationships with the other agents in the office, and contributing to the marketing of all our listings, it builds a copperative synergy in the ofice, and makes negotiations much less adversarial when the time comes.  You can read another post of mine on that topic:  Sitting another Agent's Open House -- Professional Courtesy

Tim and Pam -- Websites will definately attact more contacts regarding your listings.  Have you blogged your listings on Active Rain, and Localism?  That will serve to increase your exposure, and drive even more traffic to your site. 

May 23, 2007 12:03 PM #17
Rainer
51,117
Catherine McKendry
Re/Max Connection - Williamstown, NJ
Realtor Associate
Rich this blog is how I feel about Dual agency. I feel that when I am the dual agent I have a rope around my neck.The first person we meet on our journey is the seller to list their home and how we promote fiduciary duty. The buyer comes along and now here we go its all about disclosure !!! Talk about thin ice !! I like doing what I do or I would not be in Real Estate and yes it is a very good income. I am a listing agent and I do prefer it as well.However when I get the call to show my own listings I do not turn it down. Yes the money is good on a dual agency but is it worth the risk that also comes along with it. Sometime it is not all about the money , its the client and the referral you get from the client. Dual agency has cost some agents referral because the seller thinks or the buyer thinks the agent did not represents one or the other fairly. Yes I have given a buyer to another agent , but in my office we do have people who will sell what ever to make that dual agency work, why ? My own interest is not representing my clients clients interest. This has been a big thing for me and I want the business but at what risk is the question. 
Jul 16, 2007 01:02 PM #18
Rainmaker
52,026
Victoria Frieberg
Rush Point Realty LLC, Victoria Frieberg, broker - Rush City, MN
Realtor, Broker/CRS Rush Point Realty LLC
I do many dual agent transactions in my rural area.  I am known as an area specialist, and do a lot of referral business.  I explain that fact, and my percentage of dual agency transactions to my listing clients, disclose agency right away to potential  buyer clients as I present the buyers contract to them.  My sellers know that I will go into "neutral" if a buyer comes under contract..my buyers know that I will not be disclosing more than the seller will allow me to, usually in writing.  I believe my reputation as an ethical  person has helped immensely, with the majority of my clientele referral based.  I find that not having to work with another agent speeds things up, streamlines communication, and just plain makes it easier all around!  I have had only one major problem in the past four years, and was able to represent both parties to a mutally agreed outcome, and garnered referrals from both!  I  am not trying to toot my own horn, but the widely held opinion that it can not be done is not always true...sometimes our role is changed to a negotiator, arbitrator, but as long as the role is defined to all parties, it is acceptable in my book!
Jul 17, 2007 03:39 PM #19
Rainer
116,722
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO

Victoria:

While it is true that in many states Dual Agency is allowed, it must be disclosed to and agreed to both the Buyer and the Seller.

I recognize that for many professionals it works.  I don't want to make it seem like people that do it are doing something untoward.  I simply think that the potential for problems is not worth the risk.  I would rather go to bed at night knowing that I did everything I could to represent my clients needs, rather than having to wonder, "did I say too much to Client A about Client B...?"

Each of us has our own style of practice.  Not every client would agree to your approach, and not every client requires my approach.  It is really a matter of our personal comfort levels.  I am just not comfortable with the risk.

Jul 18, 2007 05:05 AM #20
Rainmaker
52,026
Victoria Frieberg
Rush Point Realty LLC, Victoria Frieberg, broker - Rush City, MN
Realtor, Broker/CRS Rush Point Realty LLC
I can see your point..I have thought it through over the years, and still feel like I can provide  peak service to both clients just by cutting out the endless loops and broken communication that occur sometimes in the two agent transaction.  In my small area, the possibility of saying too much to A or B is ever present..many could be related!  I own other businesses in the same area, which I believe has helped hone the ability to  communicate while holding each parties confidentiality.  It is a role I have been in for so many years I guess it feels comfortable. One of the first pieces of information that I give my sellers is my record of dual agency, and the implications.  Buyers are told immediately that I represent the seller, and if they choose to utilize my services, what they can expect from me in this dual role. My attorney has helped develop  some added forms that I use because of the amount of dual agency transactions I complete, and everyone so far seems happy!  (knock wood!)
Jul 18, 2007 05:45 PM #21
Rainer
8,208
Steve Hermann
Coldwell Banker Heritage REALTORS - Ponca City, OK

State laws take different stances on this subject.  In Oklahoma, we do not practice "agency". We act as either a transaction broker (indifferent middleman) or single party broker(representation).  I know it sounds like semantics, but so far it is working.  Our Office, 99% of the time, uses transaction brokerage as an office policy. When helping customers in transaction brokerage you are simply educating them on all aspects of the real estate transaction from law to contract to negotiating to closing. We educate & give them options to chose, at the same time keeping all of what you discussed with them confidential.  When doing both sides of the transaction, you do not recommend or suggest decisions, we educate them and let them make the decision themselves.  We still need to be very careful in what we say & do, but we always look forward to working with both sides.  When it comes time to getting something done, it's easier to work with yourself.

Nov 12, 2007 03:50 PM #22
Rainmaker
128,343
Perrin Cornell
Century 21 Exclusively, Wenatchee, WA - Wenatchee, WA
Broker, ABR, VAMRES
Ok, I agree about dual agency... not being one. However, you recently blogged about sitting another agents open. So if you are doing an open for someone and a person views the home and wants to write an offer... do you? Sitting the open aren't you really a sub-agent of the listing agent therefore representing the seller..if so,  if you write the contract you have entered into dual agency... just a thought.
Nov 13, 2007 11:57 PM #23
Rainer
116,722
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO

Steve -- I agree with you about the importance of educating consumers.  Once armed with the right information, the educated consumer can make educated decisions.  As long as you provide both sides with the same degree of information, you are providing a valuable service, and in the end, that is what the consumers want, and deserve.

Perrin -- it is a very astute point that you are making, and points to one of the details discussed in the "Consumer Notice"  I am not familiar with the regulations in Washington, where you practice, but in Pennsylvania, the potential conflict of sub-agency has been addressed by the creation of an agency relationship termed "designated agency."  In the situation that you described, where I am sitting another agent's open house, if an unrepresented buyer came to the open house, and wished to engage my services to prepare an offer, I would be representing them as their Buyers Agent.  My Broker would assing me as the "designated agent." for that client.  The Seller's Agent, who invited me to sit the open house, would be the "designated agent" for the Seller.  The Broker, whom each of us work under, would be serving in a Dual Agency role, but the individual licensees, each representing their respective clients, are not privy to the confidential information of the other and are thereby not in the dual role.  It may seem like a matter of semantics, but it does make a difference.  The agents in our office do not discuss confidential client matters with one another, and respect the lines that must be drawn when protecting the interests of our clients.  I hope that clarifies the issue for you.

Nov 14, 2007 04:35 AM #24
Rainmaker
38,679
Jeff and Lisa Sellers
The Sellers Realty Lubbock,TX - Lubbock, TX
What a touchy subject.  Even with full disclosure it can seem abit uncomfortable.  My husband and I are both full time REALTORS usually in an intermediary situation one of us will represent the buyer and the other the seller.  Then we agree not to talk about it except while negotiating. 
Nov 14, 2007 05:03 AM #25
Rainer
116,722
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO
Jeff and Lisa -- wow -- I hope for your sake (and your clients') that you are able to leave work at work and not "bring it home."  I would love to work with my wife, but I don't think I would want to do it across the negotiation table.  It seems like it could create too many opportunities for conflicts of interest, or at least a strong appearance of impropriety.
Nov 18, 2007 03:24 AM #26
Rainer
51,117
Catherine McKendry
Re/Max Connection - Williamstown, NJ
Realtor Associate
Jeff and Lisa I think it is great you both work together !!! Like Rich said not with my husband we would be not talking to each other. At least if it was my husband I could say more to him than to the client Hummmm. I vent with him enough that he want's no part of Real Estate. Talk about dualing agents !!
Nov 28, 2007 12:11 AM #27
Rainmaker
158,195
Rita Gibbons
MacDoc Realty LLC - Fredericksburg, VA
The Gibbons Group

I make it my policy not to do dual representation - and my broker does not permit us to do dual representation.  This is a good policy and I think every real estate agent should practice this.  How can you adaquently represent two sides to a transaction?  You can't!!

I'll refer the other side to another real estate agent and take a referral fee - that way I'm still getting paid something for finding the client - and I'm still representing my client's best interest.

Good post!!

Nov 28, 2007 03:16 AM #28
Rainmaker
183,458
Christina Cavins
Irongate Inc. REALTORS - Centerville, OH
www.BuySellOH.com Search Ohio Homes For Sale

Great post! Please contribute to my post on dual agency here http://www.activerain.com/blogsview/579085/The-True-Test-of

Christina

Jul 04, 2008 05:06 PM #29
Anonymous
NYCoopSeller

What can happen if the seller refuses to sign the Dual Agency agreement?  Does the sale grind to a halt.  What are the possible ramifications?

Sep 16, 2009 05:07 AM #30
Anonymous
Frybreads

We are currently doing a SHORT SALE on our home in PA, our agent found us a buyer, but he is acting as a dual agent.  After reading this post and all of the comments, now I am a little bit worried. However, this house has been on the market for almost 3 years and we are desparate, if the bank will take the offer, is it doing us harm in any other way? I would love some advice.....

Oct 01, 2009 03:51 PM #31
Rainer
116,722
Rich Schiffer
Swarthmore, PA
Referral Agent, e-PRO

Frybreads -- as long as both you and the buyer agree to allow dual agency, there is no direct problem.  I suggest you re-read the Consumer Notice that your agent provided you with, and be clear that there is a difference in how he represents you.  Congratulations on finding a buyer for your home.  In a short sale situation, having your agent act as a dual agent may actually be beneficial, as it will have the bank only need to communicate with one individual, and it may help make an already rocky process go more smoothly.

 

NYCoopSeller -- In PA, Dual Agency is an option included in the Listing Contract.  The Seller has the option to allow dual agency or not.  If a situation arises where the seller does not permit dual agency, the seller's agent must disclose this to any potential buyers that he introduces to the property, and explain to them that for this property, he solely represents the seller.  As buyers, they will need to use their own agent, if they wish agency representation.

Oct 02, 2009 04:55 AM #32
Rainer
10,470
JOHN HOLST
MetroStar® Realtors® Chesterfield Relocation™ - Chesterfield, MO

I am writing a White Paper and a Book on why Dual Agency should be eliminated.  Please provide any lawsuit information or other horror stories on how the clients' best interests were compromised or diluted.

There are multiple forces in the works: 1. In Congress, with fault being discovered that many buyers were not properly represented that added hot sauce to the housing melt-down, 2. With Errors & Omissions insurance carriers seeing that in 50% of all lawsuits agency is brought in as an allegation, see new Standards of Practice coming soon, 3. Well funded consumer advocacy groups (as in the 1993 Edina lawsuit that cost $18 Mil) are preparing to file multiple class action lawsuits in early 2010 against all the major players for inherent conflict of interest on dual agency and double-dipping brokers trying to "represent" both sides of a transaction, 4. The courts are getting tired of issuing warnings, eliminate dual agency or else.

It has been ten years since the real serious shot over the bow from Oklahoma:

In the case of SNIDER v. OKLAHOMA REAL ESTATE COMMISSION, June 1, 1999 the Oklahoma Supreme Court said: "Sellers' agents and dual agents do not and cannot by law give a buyer the same degree of loyalty as an agent who acts on behalf of a buyer. Sellers' agents owe their allegiance to the seller. Dual agency invites a conflict of interest. A buyer who relies on the seller's agent or on dual agency does not receive the same degree of legal protection as that afforded by an agent acting solely on behalf of the buyer".

Professionally, I find the concept of dual agency as completely indefensible and should be eliminated along with the perverse ways to thread the needle with transaction brokerage, designated agents, and disclosed dual agency.

There is no way that you can deliver a true informed consent from a Seller that is no longer going to have full fiduciary level of representation when somebody in the office is now going to be representing the buyer.

Just like the Veterinarian's Office; Cats go in one door and Dogs go in another:

Step 1. Need for only an Exclusive Buyer's Broker to represent the BuyerMake sure that the agent / broker that represents you gives you the highest level of representation possible, full fiduciary duty to only represent your interests as a Buyer and not the Seller. Engage an agent that will pledge in writing to exclusively represent only your interests. Say NO to: dual agents, designated agents, transaction agents and seller's agents. The Seller usually in 95% of the deals will fund the fees (just a normal real estate commission) to pay for this Exclusive Buyer's Broker to only represent the Buyer.

 Step 2. Need for only an Exclusive Seller's Broker to represent the SellerMake sure that the agent / broker that represents you gives you the highest level of representation possible, full fiduciary duty to only represent your interests as a Seller. Engage an agent that will pledge in writing to exclusively represent only your interests.

 PLEASE GIVE ME YOUR BEST VIEWPOINTS AND COMMENTS

Dec 06, 2009 10:26 AM #33
Anonymous
sherman555

I am a land owner and I normally don't like to use Real Estate agent's if I can help it. If I can buy something direct from someone or an organization, then that is the way I prefer to do it. However, this can't always be done. Currently, we are selling property in PA and have a "dual" buyer/seller agent. The process has been friendly, for the most part, and there hasn't been anything that we couldn't work out. However, at closing, we were informed that the entire commission was being charged to us. What benefit is there with having a dual agent, if the costs are not being shared? I am starting to get the idea behind this blog, dual agent should not be allowed, since it only really works in a very small number of situations. Thank you.

Nov 02, 2010 03:57 AM #34
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Rich Schiffer

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