Dual Agency - What Side of the Fence are You On?

By
Real Estate Agent with Keller Williams Realty

 

McKinney, Texas - overlooking park area

 

When you list homes and work with buyers the opportunity on occasion will present itself, both sides of the transaction.  Such is the case for me, I have a home listed and received a sign call that developed into an interested buyer.  What a fantastic opportunity but one that needed to be treated with caution.

 In the state of Texas we have the ability to work on both sides of the transaction through what is defined as Intermediary Relationship.  There are many responsibilities of this relationship but one clear defining line; you must act as a mediator for both parties, no advice regarding negotiation decisions.  You also cannot share any confidences and you must respect the price the seller has the home listed with no suggestion of the value being less.  All parties must agree to this relationship and advised of their other representation choices (buyer & seller agents).  

This is a very difficult balance responsibility when you are on both sides of the transaction.  As an agent you have a responsibility to self reflect as to your comfort, knowledge level, ability to strictly adhere to the responsibility of this type of agency.  Also this is probably one of the top reasons lawsuits develop over this form of agency and the perception of how the agent professionally handled the transaction. 

Initially when the opportunity knocks you feel a moment of celebration, commission counting in your head, etc.  Step back and reflect ... are you informed and experienced enough to properly handle this type of transaction?  If there is any moment of a deep breath and hesitation then you best refer one of the parties to be independently represented by another agent.  Make sure both the other agent and the party interview each other for comfort and acceptance.  Sometimes that separation of relationships is absolutely the right thing to do.   Also you need to keep your broker in the loop for counseling, appointment of other agents, etc.

 Understand what your state law allows, what your agency stance for what agency types are permitted and become very well informed and comfortable with your professional responsibilities.  This is a very sensitive and debated topic in our state for a good reason ... watching out for the best for our consumers.

What side of the fence do you feel is best or are you in the middle?

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Tony Olmi 04/23/2009 01:18 AM
  2. Bob Travaglione 04/23/2009 02:44 AM
  3. Bill Somerset 04/23/2009 10:57 PM
  4. Cara Caldwell 04/26/2009 06:22 AM
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Rainer
48,073
Paula Burt
REALTOR , SFR, RECS

Okay.  I slept all night and part of the morning, then checked on Abby and the new baby.  All is well.

Here he is...

So I came back here to read thru all these comments.  WOW!  252 so far! 

Anyway, to clear something up about the laws of agency in the state (Commonwealth) of PA, those who say that DUAL AGENCY is at the broker level are right.  But the way the law is written (READ YOUR "CONSUMER NOTICE"!!!), it is at the AGENT LEVEL that is is defined for any particular transaction - and the following are quotes directly from the Consumer Notice that we must present to anyone before having any substantive conversation!

(BOLD PRINT ADDED BY ME TO EMPHASIZE THE DEFINITIONS):

"Dual Agent:  As a dual agent, the licensee works for both the seller/tenant and the buyer/landlord. A dual agent may not take any action that is adverse or detrimental to either party but must disclose known material defects about the property.  A licensee must have the written consent of both parties before acting as a dual agent."


"Designated Agent:  As a designated agent, the broker of the selected real estate company designates certain licensees within the company to act exclusively as the seller/landlord agent and other licensees within the company to act exclusively as the buyer/tenant agent in the transactionBecause the broker supervises all of the licensees, the broker automatically serves as a dual agent. Each of the designated licensees are required to act in the applicable capacity explained previously.  Additionally, the broker has the duty to take reasonable steps to assure that confidential information is not disclosed within the company." 

Applying the above quote from Pennsylvania's Consumer Notice to this quote from James & Amy in comment #249 above:    "We are dual agents on any office listing we write a contract on!!  I see many agents above mentioning that they would refer the client to another agent in their office... In PA, that is still Dual Agency since the listing is under the same Broker as both agents..."

I respectfully disagree with your "interpretation".  I do not believe it is open to interpretation!  The Consumer Notice makes it very clear.

So... James & Amy, in the state of PA, if you sell a listing from within your office that is NOT YOUR LISTING personally, you are acting as a DESIGNATED AGENT for your broker, who is the DUAL AGENT.  If you sell one of your own listings to your own buyer, you are a DUAL AGENT!  If you represent a seller and a licensee from another agency brings the buyer for your listing, you are the seller's agent, and the other licensee is the buyer's agent. If you write an offer for one of your buyers on a listing of a licensee of another agency, you are the buyer's agent, and the other licensee is the seller's agent. There really is no room for any other "interpretation".

Therefore, whenever one of my buyers may wish to write an offer on one of my listings, I will always refer the buyer to another agent within my company to be the buyer's agent, and I will always stay with the seller as the seller's agent, and we will both be DESIGNATED AGENTS, while our broker will be the DUAL AGENT!

As I said before, since I cannot effectively negotiate with myself, and I have a fiduciary obligation to my original client, I will never serve as a DUAL AGENT!!!  Legal or not, I believe Dual Agency at the licensee level is wrong, and in the best interest of no-one other than the licensee who does it!  However, it is definitely not in the best interest of that licensee as far as risk management goes.  Just because you've never had a problem yet doesn't mean one won't come back and bite you in the butt sometime in the future.  We do live in a very litigious society, and you don't have to be at fault to be the victim of a frivolous law suit.  Why on earth would you want to tempt fate?  I certainly do not and will not!!!

Apr 24, 2009 06:13 AM #252
Rainmaker
2,548,190
Charles Stallions
Charles Stallions Real Estate Services - Pensacola, FL
800-309-3414 - Pensacola, Pace or Gulf Breeze, Fl.

I am safest with Transactional Brokerage as I represent the transaction t the detriment of neither party. Of course here in Florida, probably like else where it states that an agent can represent either party without monetary gain.

Apr 24, 2009 08:15 AM #253
Anonymous
Shannon Stanbro

Consumers need to demand that each "side of the fence" be represented separately.

Buyers must have exclusive buyer representation by a true agent working for a brokerage that NEVER takes listings. Sellers must have exclusive seller representation by a true agent working for a brokerage that never works with buyers. No more transaction brokers or designated agents!

Consumers have been exploited and abused by this industry for far too long.

 

Apr 24, 2009 08:46 AM #254
Rainmaker
103,631
Mitch Argon
CalNeva Realty - Minden, NV
Reno-Tahoe Residential Real Estate

I am licensed in NV.  In my opinion, EVERY STATE should make dual agency ILLEGAL (it is legal in NV with signed disclosure documents).  The concept is one of the biggest shams that NAR puts over on consumers - it is NOT in any consumer's best interest.  This is in place ONLY to serve listing agents and brokers.

 

 

 

 

Apr 24, 2009 12:09 PM #255
Rainmaker
3,581,228
Richard Weeks
Dallas, TX
REALTOR®, Broker

Connie,

Well written as usual. 

Intermediary can be such a difficult tight rope to walk.  What is amazing is how many agents and brokers don't really understand intermediary.  Many brokers don't even have a policy that addresses the subject.

Apr 25, 2009 06:18 AM #256
Rainmaker
1,554,516
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

Very interesting discussion. In Ontario it is permitted with proper disclosure and consent.

Initially I was opposed to it completely. The reason is that I practised law for 25 years. Then, several dual agency situations (called multiple representation here) occurred, and I found that it worked out. It was difficult, but it worked.

Properly speaking the role of a mediator, arbitrator, or facilitator is quite different from that of a messenger. Besides, I haven't run into that many great negotiators out there.

There are certainly some problems with dual agency, the most critical of which is the inherent unresolvable conflict of interest. But, even if it cannot be resolved, perhaps a suitable accommodation can be arranged.

Not every agent is a good negotiator, so the mediator role may work to the advantage of some clients. Frequently, both parties want a deal, particularly in a business situation. They want the deal done and here is where an effective mediator will outshine a negotiator any day. The parties are close but often too stubborn to give in, so the deal gets lost. With a good mediator these deals stay alive and get closed. Everyone is happy!

There are two extreme camps when it comes to dual agency:

· Those opposed, in all circumstances

· Those in favour, without serious reservations


Opposed


To those always opposed, I would argue that there are many examples of successful dual agency outcomes. If there weren't, I wouldn't be writing this. The best philosophical argument is offered by those who are strongly opposed. They seem to have a better, moral and ethical foundation for their arguments.

The only problem that I have with that view is the simple, practical list of exceptions....a whole series of cases where BOTH clients were better served by having one agent, in fact, the same agent acting for both of them. The test question is client results and client satisfaction; and not the issue of whether the agent was only motivated because there was more money in the deal. I don't really know that for sure. What I do know, is that BOTH clients were very pleased and happy with the result. There was obviously some merit in the dual agency arrangement. The agent acted as a mediator and got the deal done. The clients wanted RESULTS, not more and more negotiations.

In favour

It's easy to take on this group. There are many reasons why dual agency won't work. Often there is a substantial conflict of interest and this will not go away. Again, just the same as the firmly opposed group, the arguments of this group are just self-serving.

RESOLUTION

Somewhere between the two extreme positions is a middle ground, and this is where I think the issue of dual agency should find resolution.

The consumer must be informed. The concept must be explained. And, as most legislation will require, the written informed consent of both parties should be documented.

In practice, it is the explanation that usually falls short of the mark. This is the area which must be fully explained. Both clients should understand and appreciate what they might be losing and what they might be gaining by adopting the dual agency environment.

Unfortunately, if the realtor wants to represent both parties they will often explain it in such a way that the client feels that it is quite a reasonable alternative. Actually, it can be explained appropriately, and the client may very well give the agent a chance to prove that they are an excellent mediator.

All too often, the client is misinformed on several key points because the agent fears the truth behind the explanation.

So, who is the agent? Right now, it is the brokerage. I would prefer the sales representative to be the agent. That would eliminate all the dual agency issues in the offices of a large, dominant, local brokerage. To some extent, these are technical dual agencies. But, the result is the same and the clients are asked to give up some rights. This doesn't make any sense. The principal-agent relationship should be between the client and the selected sales representative. The firm really has nothing to do with it. This approach would eliminate over 90% of the dual agency situations.

That leaves us with the same agent for both parties. There are two options here:

· Consent and go with dual agency

· Designated agency, and go with an appointed agent


Both of these alternatives represent reasonable options for consideration.

If the same agent acts for the seller and buyer, then the mediator route could work. Naturally, mediation will have to be within the skill set of the agent, and both parties must agree.

However, I do have a problem with two buyers both individually being represented by the same agent. Here we have a multiple offer situation. I think the only reasonable approach is to have one of the two buyers assisted by an agent designated specifically for the purpose of acting for them. This is much too dangerous a situation for the realtor. Simply from a liability perspective, I think the agent should avoid acting for both buyers in competition with one another.

In conclusion, dual agency is a fact of life. There is no firm answer: it is always right or it is always wrong. That is too simplistic!

Each such situation should be considered on its own merits. There should be a bias against dual agency. This acknowledges that there are problems and these problems require resolution.

If a suitable and acceptable accommodation can be made, then it would be appropriate to proceed, with caution.

Brian Madigan

Apr 25, 2009 06:26 AM #257
Rainmaker
242,238
Roger Johnson
Hickory Real Estate Group - Hickory, NC
Realtor - Hickory NC Real Estate

The problem with this discussion is that there isn't a clear, simple, understanding of dual agency because dual agency is determined by state law.  And clearly from the comments here, state laws vary widely on the the subject.

For example, NC has dual agency.  Dual agency is established once ANY agent in the firm (acting as a buyer's agent) shows a house listed by the FIRM (not the individual agent).  As a seller, it's really NOT in your best interest to not allow dual agency, since you effectively shutout the whole listing firm's agents from selling your property (if they are buyer agents).  In a 150 agent office, that's alot of potential buyers missed.

Designated agency is available in NC as well, but by definition, it's still considered dual agency.

I'm not speaking out for or against dual agency here.  My point is that it is next to impossible to have a valid discussion about the pros and cons of it UNLESS everyone is speaking about the same type of dual agency, which we're not.  So, which state are we going to use as our basis?

Apr 26, 2009 04:52 AM #258
Rainer
16,882
Barry Bridges
Barry Bridges Weichert Realtors Bridges & Co. - Smith Mountain Lake, VA
Lake professional

Paula Bert by far has the best answer. She says it all. If you follow her advise you will be doing yourself and your client a BIG favor.

I was very surprised by the answer given by Brian Madigan. I am not versed on Canadian courts so that may be the difference. I can not imagine a US attorney advising that dual agency is ever a good idea as there are alternatives that accomplish the same goal for the client.

There is one point though that I don't agree with regardles of country of origin. I can not see how you can be a good mediator if you are not a good negotiator so that part of the argument is lost on me.

With that said Brian has a very well thought out argument.

Apr 26, 2009 05:04 AM #259
Anonymous
Jerry Hill, Network Real Estate, Inc., Little Rock, AR

Connie,

You obviously like to live dangerously.  Dual Agency is also allowed in Arkansas with full disclosure in a timely manner.  This subject always makes some people nervous.  I think that it is a personal issue that each of us have to address.  If it makes you feel uncomfortable, then don't do it. 

To me, if you fully disclose who you represent and you fully disclose what you can and cannot legally do and you do those things fully and completely in a timely manner and in writing you should be ok.

If you are one of those Agents that can't control what you say or keep a secret, then I think the answer is clear, settle for the listing or try to get a referral fee.

Apr 27, 2009 02:52 AM #260
Anonymous
Dale Terry

I believe at no time should an agent work as a dual agent.  It confuses the participants and can only hurt the industry- we already have enough people thinking we are not as we seem.

Apr 27, 2009 03:08 AM #261
Rainer
65,211
Marguerite Wherry
Associate Broker / Teles Properties, Inc. - Malibu, CA

Connie,

I agree with Rodger Johnson, Dual Agency is determined by State and State laws differ. In California as I stated, a Dual Agency is also when the Selling Agent and the Buying Agent are with the same Broker.  This is a very common situation in our State. There are many large Brokerage firms with hundreds of agents. You must not only DISCLOSE- DISCLOSE- DISCLOSE, but you must also EXPLAIN- EXPLAIN- EXPLAIN.

Apr 27, 2009 03:32 AM #262
Anonymous
David Halgerson

In many of these situations it is good to have a trusted broker to refer the buyer. It can keep you out of trouble!

Apr 27, 2009 05:11 AM #263
Anonymous
David Halgerson

In many of these situations it is good to have a trusted broker to refer the buyer. It can keep you out of trouble!

Apr 27, 2009 05:11 AM #264
Rainmaker
1,554,516
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

Barry

Thanks for your comments.

First, the law generally in Canada is no different here than it is in many of the States. Besides, the law of agency derived from the marketplace in Persia over 5,000 years ago, long before the beginnings of common law. The intention was to prevent the agent from cheating the principal. Today, the laws in common law jurisdictions and others are very much the same.

To be perfectly frank, I'm quite surprised by my own answer. I wrote and published articles against dual agency several years ago. However, at that time, it was based on theory not experience.

But, as time went by several real life situations developed. I found myself on both sides of the same transaction. No wanted to leave. Both the vendor and the purchaser demanded that I remain involved.

So, after a short stint of me sitting on the sidelines with a good philosophical argument, and with both the vendor and the purchaser now represented by their own agents, I received a phone call. To cut to the chase, both parties met with me over lunch and effectively demanded that I do the deal. The instructions from both, in the presence of each were quite simple: "come up with something that is fair, and we'll sign it."

I agreed. There was a condition. I was not the legal agent for either. They would both have a free walk away, if their respective lawyers did not approve the deal. I wrote a long letter to each of their lawyers explaining my role and the very real conflict of interest that it presented. Both parties agreed, and so did their lawyers.

I have acted as an Arbitrator and as a Mediator in many legal cases. Both parties have their own counsel, and agree that I am to come up with a solution. This particular "dual agency" role is really just like non-binding arbitration or a mediated settlement.

Effectively, the vendor's agent wants "A". At the opposite end, the purchaser's agent wants "C". However, what they really know is that they are going to have to meet somewhere in the middle if they truly want a deal. So, I come up with "B". I say "B" is fair to both sides. They agree, and sign. Now, they have a two day cooling off period, to take it to their lawyers.

You also wondered about the mediator and negotiator comment. In fact, I agree with you if you aren't a good negotiator, you won't be a good mediator either.

I suppose, I just don't come across that many good negotiators. They are relatively few and far between. Yet, in many cases they all seem to think of themselves as "wonderful". They advertise this "fact", and then, when the occasion presents itself they bail, become messengers back and forth and ask for double the commission. Now, that's just plain wrong!

I have a number of transactions where I have effectively worked on both sides of a deal. Just think of union and management negotiations. Sometimes I act for a union, in other cases I act for management, and now quite frequently I am approached by both sides to mediate a dispute. Here, I don't think there is that much difference compared with dual agency. It's much the same. Maintain confidences for both sides, don't reveal the other's bottom line and come up with a solution. Get both parties to agree.

There are however several interesting problems:

•1)    real estate agents are not trained as mediators, and

•2)    real estate agents are not trained as arbitrators.

So, if they are not trained and have no experience, the simplest solution to stay out of trouble is "just don't do it".

Brian Madigan

Apr 27, 2009 02:00 PM #265
Ambassador
712,519
Karen Crowson
Coldwell Banker Residential Brokerage - Rancho Bernardo, CA
Your Agent for Change

While I hear a number of agents boasting about double-ending and I'm sure it's been very lucrative, I don't think the long term win is there.  Serving two masters is never easy.  The buyers and sellers I've met who have been unsatisfied with their past real estate experiences have often been involved in dual agency transactions.  This was especially prevalent in the hot market - buyers felt if they didn't buy then and there, they'd lose out all together.  But once the frenzy dies down and there is time to reflect, these buyers feel they weren't well represented.  That may not even be reality, but it is perception.  So there is little chance that the buyer will re-engage the services of that same agent to sell, and perhaps buy another home.  And we all know that buyers and sellers talk about their experiences to anyone who will listen.  So the agent who performs dual agency runs the risk of a tarnished reputation even though they may have handled things appropriately.  I expect that we will see a flurry of lawsuits in the next few years as agents handling both sides of short sales or REO transactions find themselves in the middle of situations gone awry.

Apr 28, 2009 03:36 AM #266
Rainer
478,183
Not a real person
San Diego, CA

I did many a two-sided transaction in Houston but I was never comfortable with them. Still aren't. Out here, though, where prices are so high, it's sooooooooooo difficult to turn them down if they come your way.

I do think it's extremely difficult, if not impossible, for one to accept a listing, basically saying, "Hey, Seller, I'll sell your home for top price as fast as possible." Then, 30 days later, you decide to accept a Buyer as your Client on that same property, basically saying, "Hey, Buyer, I'll help you buy your home for the lowest price possible, even if it means some unnecessarily but legal delays to get a better price from the Sellers."

Can't be done as an individual. At least need an assistant on the team to represent the other side even though you'll get both commissions since you pay your assistant a salary.

Whenever I do a home inspection for a past Client who is not using the same Realtor as last time, I always wonder what happened. Sometimes I find out, and invariably it's because they didn't think the Realtor was working for them in a dual transaction.

In the short term, it's lucrative. In the long term, I don't think it is. However, if you can do enough of them in lots of short terms, then you don't have to really worry about the long term. But as my wise old grandmother said, "It's always easier to keep a Client than it is to find a new Client." I'd rather keep past Clients coming back than to work so hard trying to replace them with new Clients.

Apr 28, 2009 09:45 PM #267
Rainmaker
1,116,658
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

I've only done one dual transaction. It was a condo priced at $495,000. As seems to be the case with most dual transactions out here, this one wound up in Court, albeit small claims court, and not involving me. I actually thought the Buyer, an out-of-area Realtor, had a strong case, but the Judge saw it differently and ruled in favor of the Seller. I'm great friends with both the Buyer and the Seller, but I'm not sure I ever want to go through that again.

May 01, 2009 04:23 AM #268
Rainmaker
362,038
Jeanne Dufort
Coldwell Banker Lake Country - Madison, GA
Madison and Lake Oconee GA

As a matter of policy, neither my broker or I practice dual agency.

About 1/2 my business is as a seller's agent, and 1/2 as a buyer's agent.  Every year, there are a handful of transactions where I represent the seller, and handle the buyer as a customer - always with a signed disclosure and frank discussion about the benefits of having a buyer's agent.  Some deals just don't need much besides ministerial services.

Having said that, I sometimes have felt that a deal would get done if there were another agent in the mix - someone to hold the buyer's hand, help analyze their needs, encourage them to move forward.  These things are hard to do for your "customer" without crossing over into the sticky wicket of implied agency.

I take agency very seriously, and the counsel an agent provides is definitely one of the key benefits of hiring an experienced agent.

Buyer's lack of confidence is one of the main bottlenecks in our market today - more than ever we need buyer's represented by great agents who can help them overcome their feels and proceed with confidence.

I think I am doing a disservice to my sellers when I pass up the opportunity to refer a potential buyer to a colleague who can help bring them to the table.

 

 

May 02, 2009 11:20 AM #269
Rainer
6,657
Mario Jimenez
Russell Cain - Port Lavaca, TX

Very interesting.... Thank you!

May 15, 2009 03:54 AM #270
Anonymous
Charles D'Alessandro

Such a fine line. As a lister I am a sellers agent. As aRealtor we have an obligation to fairness.

Aug 31, 2010 08:55 AM #271
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Rainer
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Connie Goodrich

CRS ABR (McKinney Realtor)Texas
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