Dual Agency - are you an advocate ?

Guys;

So many of us get caught up in the issue of double ending a sale when it comes to dual agency.  In Washington State, if I write up a buyer on my own listing, our Purchase and Sale form has a place where you check a box that says who the selling agent represents (Buyer, Seller, Neither)  - and likewise who the listing agent represents.

If I have a listing agreement with the seller, it's pretty obvious that I represent them.

Just because a buyer comes into the picture, (and I start doing the math) doesn't mean that I should jump ship and suddenly tell my seller that now I don't represent them exclusively!

Of course, I'm not familiar with your state law, but in Washington I can check the box as the selling agent that says I represent the seller, and likewise as the listing agent check that I represent the seller, and spend some time with the buyer explaining what the law of Agency is all about.

The bottom line is, it's virtually impossible to walk a tight rope and not lean to the left or to the right if you're trying to keep your balance, and by doing so, aren't you favoring one side over the other?

That's Dual Agency in a nut-shell.

By the way, as professionals, I'm sure the %'s you used in your question were just for the sake of example.

I am not a fan of dual agency, and in reality, under the definition of "agency" here in GA, one cannot truly be an agent for both buyer and seller, but dual agency is allowed if disclosed. 

I cannot possibly fully advocate for both parties.  I CAN deal fairly with both, but I wouldn't be an agent of one of the parties...  If I have a buyer and a seller under contract, I would likely refer one of them to a fellow agent in the office... or not in the office, depending on the client.

Sometimes what you believe about dual agency is determined by your style and your objective.  Certainly the seller (who wants the MOST for the their home) and the buyer (who wants to pay the LEAST for the home) bring an inherent conflict to the table.  And BOTH THE BUYER AND THE SELLER KNOW THAT!!!  Sometimes, because of particular circumstances or because of personalities, it would be downright irresponsible to consider dual agency.  However, there certainly are times when it serves all parties (buyer and seller both) to consider having the same agent working for them. 

The important thing is that the agent cannot advocate or advise anything to one party that would be to the detriment of the other party.  But not everything in the negotiations puts the parties at odds.  If I know the seller is in financial straits and needs to close ASAP, and in working with the buyer I discover they are interested in a quick close, advising one or the other about what to incude in the controct for closing brings their interests together, and doing so violates no ones' interests.  If,  on the other hand, I know the urgency for the seller, but in this case the buyer would prefer a later close, I would refrain from "advising" either about the closing date, but rather provide both with their options and potential ramifications of each option.  In other words, both would receive the same level of information or guidance, as the situation dictates.

Part of our job is to help bring about a "meeting of the minds".  I've always believed in the win/win approach to negotiating...and most of the time that's been very effective.  But as with virtually everything we do in this business, it's important to disclose, disclose, disclose...particularly if you're tackling a "dual' role.  In that case your agency relationship is "limited", and it's important to be sure that the parties know, not just THAT the relationship is limited, but also WHAT THAT MEANS in terms of how it impacts them.

In my mind I could not serve both parties in one transaction and call that fair practice.  Sure I can pass along lender information, inspector information, repair information but who will negotiate for the party?  ME!  now how can I negotiate fairly to both sides?  I would refer the other side out to an associate for fairness.  Just MHO.

Colorado is a "Transaction Broker" state. Dual agency is illegal here. There is a portion of our contracts that states should we bring the buyer to the deal, we would switch to Transaction Broker (intended to be a neutral party in the deal.... not always the case).

-Brendan Winans

In Ontario, the real estate industry has prevailed and dual agency is permitted.

I practised law for 25 years and thought that dual agency was inappropriate in all circumstances. I have been in the real estate business and have now changed my mind somewhat.

No matter how you look at it "advocacy" will be an issue that can never been reconciled. Just leave that matter for first year philosophy students.

But, who cares about negotiating? Clearly, many of the so-called experts aren't any good at it. So, moving away from advocacy is really no loss in many cases.

 In my law practice, I offered:

 •1)    advocacy,

•2)    arbitration, and

•3)    mediation.

There are special rules that apply to mediation, however, the bottom line is that a number of deals get done that would not have been successfully resolved without a mediator.

Now, the important question is how do I protect myself from all those potential lawsuits? The answer is: a 48 hour cooling off period. Take the mediated agreement to your lawyer and let me know? This way, both parties obtain independent legal advice. They in fact do have their own advocate, and they have the advantage of a mediated agreement.

Brian MadiganLL.B.

Well, I could write what my thoughts are, but I think I already wrote my thoughts rather well :)

Wow, you really got them talking here. I personally have never been a party to a dual agency. I am not sure how I would feel.  Sure, double commission is great but I have really had to go to bat for my buyers and sellers at times and not sure how I would feel if I had to make sure they were both fairly represented.  I just want everyone to be happy all the time and if something went wrong then I would hate to be blamed!

In Arizona we are starting to change the term from "Dual Agency" to "Limited Representation". This new terminology should help those clients that are willing to enter into this type of arrangement to better understand how they will be represented. 

I also want to warn those Realtors who don't believe in dual agency.  If you are setting up your transactions where you are just representing one side of the transaction and the other side is unrepresented...be careful.  Implied agency happens quite a bit without the Realtor even knowing they crossed that line. Should a transaction like that go to court or arbitration, the Realtor who thought they were protected by the checkbox on the Agency Disclosure Form or Purchase Contract where it states agency my not be protected if they had implied agency with the unrepresented party! 

My 2 cents on "Benefit" #3...variable rate commission can be a slippery slope.  Do you advertise the variable rate? Such as "Agent X charges 6% full commission...if Agent X finds the buyer the rate is 4%...if the buyer agent is from Agent X's brokerage the rate is 5%...if seller finds a buyer the rate is 4.5%...if Agent X finds Buyer A and the deal falls apart then Buyer A comes back 30 days later with Agent B what is the rate 4? 6?...

If  brokerage ABC used the 6-5-4% sliding scale and really pushed it in advertising...would that not cause buyers to seek out ABC agents and in particular ABC listing agents knowing that there is a 2% advantage going with dual agency?

The 2% advantage is an illusion.  A good buyer agent should be able to save a buyer several times that over what they would likely pay if using a dual agent.

Yes Paul that is part of the slippery slope I eluded to.  Is the service of the Realtor warrant the 6% to the seller?  If so, what warrants the discount to 4%?  More or less service to seller?  More or less service to the buyer?

Just for discussion purposes what if Dual Agency was illegal everywhere...sellers could only compensate their agent AND THAT AGENT WAS NOT ALLOWED to share/split commissions with anyone.  Buyers would pay for the services of the Buyer agent.

I wasn't signed in I discovered too late when I left the post above.

Paul Howard

Chris & Stephanie I just wanted to say I read another post on AR about Dual Agency and it is not the most common transaction in real estate by agents and one that the majority of agents wouldnt feel comfortable doing! But like anything else, once you do one, experience pays off!

Here's the other AR blog about Dual Agency at http://activerain.com/blogsview/850052/Why-Dual-Agency-Should-be-Rare

Chris & Stephanie - It's a fine line and yet I think it can be accomplished as long as agents/brokers make aware to their prospective clients who works for who! I've know some brokers that completely stay away from it.

I've done it and I feel confident enough in my business practices that I've been able to approach most sensitive subjects direct without jeopardizing my legal obligation or fiduciary responsibilities!   Great article!

You got a lot of response.  

First: I keep hearing about this fine line - it is not a line it is a brick wall and you can't get past it to be an advocate if you are a dual agent.

Your statement:  " When it happens, we enter into it cautiously and state the benefits to both parties.   The bigger picture is that we are an advocate for our clients and feel that this can be accomplished in all of the types of agency that we practice:  seller agency, buyer agency and dual agency."  , does a disservice to your CUSTOMERS.  They are not clients at that point and you can not be an advocate for them in all the areas that are important.  Your responsibility is not to tell them what YOU think are benefits but rather it is to tell them the disadvantages of dual agency and the fact that you CAN NOT act as an advocate when that advocacy is in conflict with the interests of your OTHER CUSTOMER.  

When you fail to do that you break both the letter and the spirit of the law requiring disclosure.

Paul Howard