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Disclosing Dual Agency-Why Agree to Limited Services From Your Agent

Last week I received an email from a seller in Westchester County. She was very upset because she found out that the agent she had hired to sell her house brought a buyer and an offer and did not disclose that it was her buyer. The agent did not disclose that she had signed an agreement to sell the buyer's condo either. This seller didn't understand why her agent was always to pushing the needs of the buyer and seemed to favor the buyer's side. This seller had not agreed to a dual agency situation and had not been informed. She wanted to know if the agent was supposed to disclose this to her.

In New York Dual Agency in Real Estate transactions is legal. There are many states where Dual Agency has been outlawed. The public through the internet is more informed about Dual Agency. When I provide full disclosure of a dual agency situation to a buyer or seller I am finding that neither buyer's or seller's are interested in working under a dual agency situation or a designated dual agency situation. I am not sure why some agents would choose to work that way and what it is they are saying that would entice a buyer or seller to agree. Full disclosure requires explaining that the agent is sitting on a fence, walking a very fine line. Full disclosure requires that you explain that when working as a dual agent you can not give full service to either party. You can't provide comparables to a buyer, you can't advice a seller or a buyer during the negotiations. If you give comparables to either party you are providing full disclosure to one over the other. Why would anyone agree to limited services from their agent.

The duties of an agent working as a fiduciary to a buyer or seller are as follows. When you agree to dual agency you forfeit loyalty, obedience and full disclosure.

Reasonable Care

Obedience

Disclosure (full)

Confidentiality

Accounting

Loyalty

An agent can't be 100% loyal to two clients. Think of two children. You love both and owe both 100% loyality, love and support but one child needs more help and support than the other. As a dual agent you can't help the needier child more than the less needy child.

An agent can't be 100% obedient to two clients. If a seller tells you to get them the best price as a dual agent you can't give advice to the buyer to help the seller get their best price. If the buyer wants help offering a lower price as a dual agent you can't be obedient to two parties.

An agent can't give full disclosure to either the buyer or seller when working as a dual agent.

This is a slippery slope. I prefer to not be a dual agent. It is frought with potential problems. Full disclosure is the best way to go.

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Posted by Miriam Bernstein,Westchester County Real Estate on 06/16/2008 10:40 AM

Comments (50)

dual agency, dual agent, new york state

Originally posted at: Westchester Real Estate Talk: Disclosing Dual Agency-Why Agree to Limited Services From Your Agent

This post has been included in New York Information Westchester County, NY Information
Post is included in group: Realtors®

50 Comments on Disclosing Dual Agency-Why Agree to Limited Services From Your Agent

JUN

2008

MB,

That`s a real shocker!

Not disclosing important infor like that is a violation in Florida, as well as in New York..

We dont try to do dual agency often. It can be a real nerve rack er. But if managed properly I really dont see any problems with it. SC allows it with disclosure.

we have to have full disclosure .. and I agree that it can get complicated .. how ever when I work a short sale it is less of an issue.

Laura the problem as I see it is that you are not providing, advising or helping either the buyer or the seller. If the buyer and seller are bth experienced and have bought a number of homes, are experienced negotiators, know the comparables in the marketplace and received the information from somewhere else, know what they want to do with any issues in the house without your advice then great it works. Anything less than this however might require advice and guidance and you can't.

In Virginia non-disclosure would be a violation of ethics. We must fully disclose in writing our relationships with our clients so that there is not question about who were are representing.

I don't perform dual agency and I never have. In Illinois, it is legal with full disclosure. We have a disclosure in our listing contracts (Chicagoland area) and if the seller agrees it needs to be signed at listing. Then, we have a separate disclosure which needs to be signed again by the seller and the buyer. Finally, there is also a clause in our sales contract which needs to be signed by the buyer and the seller. Having all of these written disclosures really helps to make dual agency "FULL DISCLOSURE" and avoids any confusion on who the agent represents.

Hmmm...in this market ANY buyer is most welcome...it is a slippery slope but we have walked in many, many times and have had buyers and sellers become lifelong friends as a result. Disclosure is mandatory of course. Often you would be amazed at sellers who complain that you have not broguht YOUR buyers....and have had other agents show the property. The winning combination is a willing buyer to a willing seller no matter who brings them.

Dual agency is allowed in Georgia but has to be fully with disclosed with both sides agreeing in writing. Sounds like your sellers agent is still working in the 80's.

Do you really think that full disclosure solves the problem of dual agency and makes it ok. There is no fine line. That line doesn't exist. A company that works as a dual agent might be within the confines of the law but they are not the agent of anyone but themselves.

Most consumers are not "educated consumers" in the sense that they can look out for themselves in a real estate transaction. They need an advocate.

Paul Howard

Amen, Miriam- no question but that dual agency is often poorly explained (or not explained) to buyers and sellers- and consumers are too savvy to continue to have this "wool" pulled over their eyes. Great post! And a comment to Cindy- undisclosed dual agency is clearly a violation of ethics, but more to the point, it is a violation of the law- with significant consequences.

Excellent Post Miriam--Dual Agency always seemed risky and somehow unfair. The situation presented itself just a short while ago in my life--I explained that I do not feel as if it is in the best interest for either party and suggested another very capable and professional agent to be the buyers agent in this situation. While it is legal in Pennsylvania; I choose to be able to dedicate 100% to my client 100% of the time. Money isn't always the most important thing, at least from my perspective.

Great post I think that agent should have disclosed it in the begging I dont see a problem wuth a dual agency but I can see where a problem can come in. The best way to solve that probelm is to hire a buyers agent that way you know the clients will be serviced properly with out violating any ethics

In NYS, there are two forms of legal dual agency, 1.) Disclosed dual agency, where an agent handles both sides of a transaction and 2.) Designated dual agency with separate agents in a brokerage handling both sides of a transaction. Undisclosed dual agency is unlawful. If an agent is doing the work correctly, agency is discussed at the first substansive meeting, so both the seller and the buyer can make an informed descision. NYS is also an "attorney state" that requires attorney reviews for both the buyer and the seller of any real estate transaction. Because of this added level of protection for clients, I am comfortable with the legal forms of agency, as long as I have disclosed and fully explained them early in the game. I do not hesitate to mention that if they are not comfortable with the potential arrangement, they do have the right to another agent's participation. It sounds like this agent actually became involved in an Undisclosed Dual Agency, and I would have a serious problem with that. If there was no attorney review, then I'd also have a problem with this.

Miriam.. Knock on wood, I have not had a problem representing both the buyer and seller (dual agency) when this has come around. I do believe that one CAN represent both equally.

In Connecticut it is legal to have dual agency, but a form must be signed by both seller and buyer acknowleding this, other wise the buyer needs to find another realtor or real estate agency.

Interjection (with my apology, Miriam) to Scott: the fact that attorneys are involved in NY speaks volumes about the practices of agents (from a consumer perspective). Perhaps better is for agents to be making these ethical calls themselves, without being reliant that "someone else" will protect the buyers/sellers. This approach works in the majority of the US. Delete if it's too much, Miriam! :)

I agree that it can be done and I have done it many times with no problems. In fact, those are my smoothest transactions! But in Ohio, dual agency must be disclosed and buyer and seller have to sign off on it.

In Arizona duel agency is allowed, but it always must be disclosed. There is a special form for it in Arizona.

I definitely agree that full disclosure is necessary in any contract. However, I disagree with the part of your post that says you cannot provide comps. When you listed the property for sale, you provided the seller comps. You are allowed to give the same information to the buyer which then explains why the property is listed where it is listed. You cannot run new and different numbers unless you give the same information to both parties, but you can definitely do it. You would not be doing your job if you told a buyer to submit an offer without seeing what the comparables were selling for.

I agree that dual agency requires a higher standard of care and MUST be fully disclosed (it's the law in Cali). I strongly disagree that one party is 'giving up' services and that you can't provide comps and that you are forfeiting loyalty and obediance. Obediance is not contained in our contract and it sounds more like a dog than a Realtor, but we provide a fiduciary duty of utmost care, integrity, honesty and loyalty in our dealings with both. If you are uncomfortable with your ability to do that, then you definitely should not. If you disclose it and define it for your clients, it can lead to some of the smoothest transactions you will ever encounter as both parties are fully informed, satisfied and treated in a professional manner.

In NYS, I believe the name of each representing agent has to sign the Purchase Agreement.

The way I see it, if the agent did not disclose, and purposefully omitted her name off the buyer's side of the submitted contract to the Seller, then it is more apparent that the agent was not being forthright.

I believe in a higher standard of care, just like Gene Wunderlich.

Hi Miriam- In Texas it's really not called Dual Agency, its called Intermediary. The listing agreement has a place for the Seller to agree to Intermediary Status (or not) with the Broker making assignments of one agent to the Seller and one to the Buyer. There is a TAR form for both parties to sign agreeing to Intermediary status in a particular transaction.

Otherwise, we just inform the Buyer that we represent the Seller, and cannot advise them on negotiations for the purchase. All we can do is answer their questions in a forthright and honest manner, with full disclosure on what we know about the property itself. If they choose to they can of course go for another representative. Some do and some don't. Very good topic!

Scott

I bring my own buyers to the table more often than not. I offer FULL disclosure and the quite honestly, my sellers feel that I EARNED my commission even more so when I do this. As long as you can be honest and caring, there is not an issue. I have yet to run into a problem. As listing agents, I feel that we advertise for a reason and that is to find our sellers a buyer.

Laurie, I did the same on your post this morning. I appreciate your feedback, always never too longl.

Donna I disagree. When you take a listing and provide comps you are not working as a dual agent and it is perfectly acceptable to provide them. Once you become a dual agent and provide it is an entirely different thing. That is the whole problem with dual agency - you are not doing a job. You are not allowed to advise.

Gene can you be loyal to two people? Comps can be slanted depending on what you are trying to accomplish. You risk favoring one person over the other. You can't advise either party, giving comps crosses that line.

Ruthman you are wrong in New York State we do not sign the contract.

It does, indeed, defy logic. However, since there are agents in NY who don't know that NY permits dual agency, we can't really expect the public to grasp the concept and dangers. I recall a dust-up I had with a NY agent who said the NY doesn't have DA.

This is just so much obfuscation. As long as DA is permitted by law, by any of the names, transaction, etc., agents will walk line with one foot on the buyer and one on the seller.

I much prefer to represent one or the other and let the one who didn't come with an agent, FSBO or unrepresented buy, just be a customer. Even then, we have to tell them 25 times that we represent the "other side" and can't answer that question.

There is a lot of fuzzy logic here.

A dual agent (or intermediary) is not an advocate for anyone but themselves.

A dual agent can not:

Represent

Advocate for

Disclose all to

either side.

You can be 'fair' but all that means is you won't cheat either side. To represent, means to take care of.

Dual agents can get a deal done but it is not to the benefit of either side over the other.

If I have someone represent me I want the best deal. I want to get the lowest price (and everything else I can get) if I am a buyer and I want an agent that will help me accomplish that. DUAL AGENTS simply can't do the job.

Hi Miriam...As Cindy stated, what that NY agent did is against the Code of Ethics.

Hopefully a complaint was brought against this agent. These things should not go unreported.

Kathleen

Sometimes real estate can be a "dirty pool". An agent representing the buyer or seller may have to use their knowledge/ skills to outwit the other side. You can't do that as effectively as you may need to with dual agency. If a buyer or seller knows you are representing them exclusively/ 100%, they will never regret working with you.

Hi again Miriam- I'm the Scott who talked about Texas rules and regs above. The system must have logged me out while I was commenting. I am an agent in Texas. Thank you.

Miriam,

I believe you may have misunderstood me.

Straight to contract - 5 business days for attorney approval. (And any other contingencies)

At the bottom of the Purchase Agreements that I use for NYS and CT, there is a place for the Buyer's Name, and co-buyer's name, and a place for the buyer's agent's name, their broker, and their contact information. Plus, buyer's attorney information. This is what we submit to the Sellers for their review. It is either approved and signed by the Seller, or countered in writing, and signed by the Seller. There is a space for the Seller's signature, their agent, the agent's broker, and their contact information, as well as the Seller's attorney information.

Respectfully,

RK Ruthman

Ruthman we don't use Purchase Agreements in NYS. Are you mostly in CT.

I have practiced dual agence for a number of years without any problems. Disclosure has always been required. when I meet with sellers or buyers I explain agency and my responsibilities to under all forms. I'm not sure what I would do if buyer hired me to fing them a home and they were interested in seeing one of my listings. stop working for one? Not let them see the property? That doesn't seem to work. When working with a buyer we usually show them many homes talking about the value as we go through. This has to provide some form of education. When working for a seller you have sone a market analysis and kept them up to date at least monthly. wouldn't they be somewhat educated? If you are doing your job throughout the process I believe your clients are becoming very educated before the transaction takes plase.

We rarely run into that problem in California. What we seem to encounter are sellers and buyers who don't read what they sign. Our purchase contracts, for example, disclose and authorize agency. So do the buyer broker contracts. I find that nine times out of ten, if people would read what they sign, they would find out that agency was disclosed. By "people," I mean agents and buyers / sellers.

Now, whether an agent makes a grand pronouncement, that's another story. But many times, it's not required if it's already covered in the paperwork.

Nevertheless, should you orally point out the written verbiage. Yes. I believe so.

Whewwww! Glad I'm in Florida where we are considered to be transaction brokers unless another form or representation has been entered into with a client.

I see that I look at things a little differently than many here. Certainly, I don't think real estate is a "dirty pool" or work to "outwit" anyone. If that was the case, I'd be in a different career. Maybe I'm a "PollyAnna," but I work to have happy buyers and sellers . . . that's always my goal. And you know what - it's always worked for me. I'm very often on both sides of the transaction and I can't think of one client who has ever felt shortchanged.

As far as the disclosure issue - shame on the agent you describe. That certainly sounds like an ethics violation at the least . . .

Oh my.. sounds like a case of undisclosed dual agency. not a good thing

I think there are agents that can be scrupulously honest and act as an intermediary. A well prepped client before the deal makes this a possibility. In Texas the listing agreement states that we can run comparables for anyone. Obviously in this case, though, the agent wasn't being honest. Full disclosure is the best and I tend to refer the buyer off if they have any questions. It's best to be able to know that it was a job well done. In general, I don't push my listings with clients. If someone calls about the listing it's one thing. If they are my client then I'm going to do the best job possible, show them all possibilities and then show them my listing with full disclosure on both sides.

I dont like dual agency. I don't plan to do it in real estate purchases. I experienced it once for a rental in the application phase and it wasn't fun...

Great explaination. Dual agency is allowed in Oregon, but my company does not allow it. I don't mind because it does not happen that often.

Miriam,

I have sold in NYS for well over a decade (15 years in business). Our forms must be different than what you use.

---Best wishes, RK Ruthman

JUN

2008

In the Sun Cities communities our office specializes in we do dual agencies all the time. It is fully disclosured and goes very smoothly. My company dominates the market here and we would have a difficult time servicing our clients needs without doing dual agency transactions.

Dual agency goes beyond one agent doing both sides of the transaction. Two agents from the same brokerage in a transaction also constitutes a dual agency.

Kathy, that is what is called double dipping. I worked for a company that controlled the market as well and it was really more about the owners than doing to the right thing about the buyers and sellers. Yes, two agents from the same brokerage can also constitute dual agency - who benefits the most when this happens? The Seller? the buyer? or the broker/owners?

(HAND RAISED- ME! ME!) THE BROKERS are the primary beneficiaries of dual agency, which is why it's been OUTLAWED in so many states. It's the ability of an agent, after working for the seller only, to speak out of the OTHER side of their mouth in order to work with the buyer, as well. How else to get all of the money? And why else engage in it with regularity, as opposed to the rare circumstance in which you have the opportunity force itself? It's a horrible situation for buyers- and most states agree.

Kathy - good point about dual agency meaning not just representation by the same agent but by the same office or brokerage. Ludicrous to presume that I can't represent my client fairly just because another agent from my office - or from the same company in an office across town that I may not even know, represents the other side of the transaction.

Miriam - can I be loyal to 2 clients at once? Absolutely. If you're skewing the comps to favor one side or another, then you're not doing either side any favors regardless of whom you represent. Honest comps are what they are.

If you are fair and honest with both parties, everybody wins - both parties end up at a mutually agreeable price, communication is improved and I don't have to worry about the idiot on the other end screwing the deal up over his ego - I am the idiot on the other end.

So Gene, what do you do when you are working with a client that wants an advocate rather than a customer?

Or don't you do clients?

Miriam we use fill-in-the-blank contracts, which are elementary, and submit these forms to the attorney's involved (as requested, or not) in our fair state.

Gene, can you be absolutely fair? ABSOLUTELY NOT. You're human. That shouldn't be a consumer problem- consumers pay for representation, not "fair" based on your interpretation of "FAIR". Should it be the NY buyers problem to wonder if the listing agent was/is a BLABBERMOUTH? Please. Respect consumers more than that- both sides are entitled to their own representation.

Gene has his own offer, from which he'll make 60k. Gene also has an offer from a buyers agent, from which he'll make 30k. They are really close- but the buyers agent client has a two week early move in date, offering the sellers a break on payments. HMMM. Which will Gene recommend? Don't gamble. It's 60k for a real estate agent vs. the better deal for the seller, and buyer.

JUN

2008

Laurie, thanks for responding to Gene, I agree. Hmmm. Will it ever change?

Miriam, To follow up what Chris [Texas] wrote earlier, Here in Texas, if both buyer and seller want me to help them in the transaction, I prefer dealing with one as my client (fidicuary duties) and one as my customer...(will treat them honestly and fairly). It is a narrow path to walk...

JUN

2008

Miriam, I prefer not to be a dual agent, either. Even if it's allowed, it would be a clear violation not to disclose it to all parties - in writing!

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