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Dual Agency and the Thundering Herd of Conventional Wisdom

By
Real Estate Agent with Homesmart

The La Brea Tar Pits of what is modern day Los Angeles are renowned for their eternal incarceration of prehistoric life.  Think an 18 to life stint in Folsom is a rough hitch?  Try fossilizing yourself in natural asphalt for thousands of years following an untimely demise that accompanied no greater sin than stepping out for a bite to eat.  Several millenia later, they jackhammer your permanently surprised face out of the earth's candy shell for the sole purpose of humiliating your petrified remains in front of busloads of insolent school kids and German tourists.  Many victims were believed to have plummeted into the inky abyss after stopping for a drink from the surface water that obscured the death trap below.  Subsequent predators then eagerly followed the trail of easy prey to a sticky fate of their own.

Which brings me to dual agency.  To hear most Real Estate professionals describe it, the much maligned practice of dual agency is every bit the equal of those gooey pits as a carnivorous devourer of wayward souls.  Why, one would surely toss baby Jessica back down a well teeming with the stuff before subjecting her to the horrors of limited representation.  In the nearly forty thousand years that the tar pits have been open for business, one human being is known to have been swallowed amongst the saber-tooth tigers, woolly mammoths, ground sloths and aspiring B-level actors.  Meanwhile, dual agency has swallowed countless John & Jane Doe's in only two decades of practice in the metro Phoenix market.  In that time, there has arisen a chorus of familiar refrains.

"How can an agent or brokerage adequately represent two parties with competing interests in a single transaction?"

"How can an agent or brokerage remain neutral when I employed him/her to be an advocate?"

"How can my agent possibly bring me the head of Indigo Montoya if he also represents said eleven-fingered abomination who killed my father?"

As attorneys shape our contracts and further mold our practices to mirror their own, the days of the polyester-encased salesman are largely behind us.  That is a good thing.  There are clear delineations in terms of the roles and responsibilities of the agents involved in the transaction, as opposed to the ambiguity that often existed before the advent of buyer agency.  Under the previous doctrine of sub-agency, an agent could show his buyer property over the course of three months, only to morph into a subagent of the seller when negotiations began on a property.  A ludicrous setup if there ever was one.  Thus, the greater transparency in distinguishing where allegiances lie in a Real Estate transaction has been a positive result.  The rise of buyer agency has led to the tandem rise of another apparent conflict of interest in representative terms, however: Dual agency.

Dual agency arises out of transactional occurrences in which the same broker represents both buyer and seller.  Sometimes this entails one agent working on behalf of both parties, but more common, especially in large brokerages, are occasions where an agent from Brokerage A brings a buyer to the listing held by another agent from Brokerage A.  Even though there are two agents involved in the potential sale, all Real Estate business flows through the company's designated broker.  Thus, even though, in practical terms, each side may appear to have the exclusive representation of their chosen agent, the same broker ultimately bears responsibility for both sides of the transaction. 

While I agree that a single agent attempting to wear both hats (or neither if he more or less recuses himself as a mediator between parties in the process) in a transaction is generally marginalizing his service, it is inane to argue that all dual agency eventualities are, and should be, avoidable.  If a buyer wishes to purchase one of my listings without the involvement of another agent, I will certainly oblige, but my loyalty is unmistakable.  I represent the seller exclusively, and the buyer is my customer.  When I take on a buyer client, however, it is ludicrous to suggest that I refrain from showing them certain listings simply because a fellow Realty Executive has it up for sale.  If a property fits the criteria of my client, I don't care if it is listed by Ming the Merciless.  Full disclosure is paramount, but the chest-thumping that often decries all possible manifestations of dual agency is misguided.  Would my seller clients really prefer that I refrained from showing my listings to fellow Realty Executives, drastically reducing their potential buyer pool?  Would my buyers really prefer I exclude the listings from the top selling brokerage in the state when we begin our hunt?  I highly doubt it.  Matter of fact, I have yet to encounter the client that has instructed me to do so after an initial discussion of the limitations in representation that can crop up in such circumstances.  Finding the house or the buyer is first and foremost.  Concerns over representational nuance is secondary.

There can be advantages in addition to the well reported disadvantages with dual agency.  Some principals may find the process less adversarial and more expedient when the variable of a competing agent is removed from the equation.  It can very well be argued that the dynamic lessens the presence of the "telephone game" syndrome and needless acrimony that can accompany the dueling egos of multiple agents.  More to the point, if agents of the same brokerage have a solid working relationship, and work for a reputable organization, there is the added benefit of knowing the transaction will be handled professionally.  Limited representation from a pro is of far more benefit than full representation from a schmuck.  While representation may be limited for a client, it is equally limited on the other side of the table.  The playing field remains level, as it is in cases in which each party has the full, unflinching representation of a brokerage.

Dual agency is one of those topics that causes a fair amount of unease, but it shouldn't be feared by name alone.  You should have full and frank discussions with your chosen agent about the possible ramifications of the various forms of agency floating around out there (preferably at the beginning of your relationship, rather than a forced immersion at the time of a contract submission).  There are circumstances which may call for it, and as long as all parties understand and agree with the terms, can prove beneficial.  Is it ideal?  Far from it.  Then again, neither is passing up the home of your dreams because it has the misfortune of being listed for sale by your agent's brokerage.

Dual Agency:  It's not just for shafting the public anymore!

 

 

 

 

Comments(141)

Mesa, Arizona Real Estate Mesa Arizona Realtor
Homes Arizona Real Estate LLC - Mesa, AZ
AzLadyInRed

Paul - WOW! What a discussion about dual agency. Interesting to say the least; however, these old eyes had trouble weeding or was it reading the entire post. Because YOU were writing it though - I stuck it out and enjoyed myself. I did NOT read all of the commenting however; else, I'd never make it to bed tonight. ;-)

Merry Christmas

Dec 18, 2009 02:37 PM
Todd & Devona Garrigus
Garrigus Real Estate - Beaumont, CA
Broker / REALTORS®

Great post! If you're honest and ethical, it is very possible to represent both sides.

Dec 18, 2009 08:22 PM
Anonymous
Bill Fooks

Lets talk on this same item about how the commissions work. We should have the listing broker negotiate their fee, and separately have the buyer broker submit their agreed compensation with their client in the offer form. I as a listing broker should not determine the buyer brokers compensation. We will then have true buyer broker representation. What do you all think about this? 

    Fooksteam.com

Dec 18, 2009 09:50 PM
#126
Ty Lacroix
Envelope Real Estate Brokerage Inc - London, ON

Dual Agency as by the comments posted has its pros and cons! I explain dual agency (and disclose ) before any offers the pros and cons to clients and I leave it up to them to decide if they would like me to find them another representative or they can find someone to represent them.

Has never been an issue yet if explained up front and disclosed

Ty

Dec 18, 2009 11:12 PM
Dolores "Dee" Mauriello
Keller Willaims - Wayne, NJ
Realtor, Homes For Sale Wayne NJ

It is lawful for a real estate agent to represent both sides buyer and seller if it is disclosed to all parties. In northern New Jersey both parties are also represented by an attorney. This practice is most useful  in these situations to protect the client's interest.

Dec 19, 2009 01:26 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Merry Christmas to you, too, Teri.  Hope you are well, and I look forward to seeing you at the next local function.  Rebarcamp 2, perhaps?

Dec 19, 2009 01:32 AM
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

Well it's still legal in my state and yes the largest part of your E&O insurance because most people don't know what they are doing.  I think that it will come down to personally deciding if you want to do dual agency.  If you don't have the 'stomach' as someone said, then step away.  I think that when inexperience, greed takes over, you're in trouble.

Dec 19, 2009 02:23 AM
Mesa, Arizona Real Estate Mesa Arizona Realtor
Homes Arizona Real Estate LLC - Mesa, AZ
AzLadyInRed

Paul, thanks. Absolutely will be there! Actually already signed up. I'm looking forward to seeing you and the rest of our AR friends! ;-)

Merry Christmas

Dec 19, 2009 02:41 AM
Kate Elim
Dockside Realty - Spotsylvania, VA
Realtor 540-226-1964, Selling Homes & Land a

Thank you, Paul.

Kate

Dec 19, 2009 02:53 AM
Michael O'Donnell
Berkshire Hathaway Home Services Arizona Properties - Scottsdale, AZ
GRI, ePRO, Accessible Homes

Paul,

48 hours later, and the dust settles a little bit.

All of us who have commented should thank you for posting a blog on such an important, albeit contoversial topic.  Each agent, as has been said many times above, needs to find a comfort level for the many options that this career and its diverse situations present us.  That said, agents who disagree with your thesis might chose better arguments than those of moral or professional superiority. My several comments where submitted with that idea in mind.

The only thing missing in this lengthy feedback are comments from Mandy Patinkin and Christopher Guest. Perhaps the next time, Paul.

As a fellow Scottsdale REALTOR, I look forward to meeting you at local events.

(One parting comment...sorry, I couldn't resist. At the end of the day we are agents, and we work at the pleasure of, and for, our principals.  The number of "scalps" someone takes in testosterone-laced, hard-nose negotiations is more about ego, than about service)

Or perhaps some of us just watch the wrong movies...say "Glengarry Glen Ross" instead of "The Princess Bride."

Dec 19, 2009 03:52 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Look forward to meeting you at one of the myriad local functions as well, Michael.  Until then, Happy Festivus!

Dec 19, 2009 08:03 AM
Anonymous
Anonymous

Wow, I just printed this out in its entirety and will set aside time to review.  Obviously a great topic!

Dec 20, 2009 01:03 AM
#135
Bill Saunders, Realtor®
Meyers Realty - Hot Springs, AR
www.BillSellsHotSprings.com

Paul,

Thanks for writing this excellent post. In Arkansas we have a legal responsibility to deal honestly and fairly with the "other side" as well. Our office performs dual agency, and yes it is limiting to an extent, and tightrope walking to a huge extent, but I keep going back to the "shmuck" quote, and find it priceless!

all the best...

Dec 20, 2009 11:30 PM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Paul, WOW! What a boat load of comments! In Florida, Transaction Brokerage nullifies the whole discussion here. I did not relaize one of the nuances of dual agency is that even within the same brokerage, the fiduciary relationship would be nullified. Hadn't thought about that. My sister-in-law in Virginia and her husband won't do 'dual agency' but they mean that they won't represent both sides of a transaction. To me, if it is two separate agents, you have the same represenation as if it were in two different brokerages. That is, unless you are in a small brokerage where the broker is leaning over your shoulder urging the deal to close.

Dec 22, 2009 12:15 PM
Patricia Kennedy
RLAH@properties - Washington, DC
Home in the Capital

Paul, don't know how I missed this great post on my favorite subject. 

Like you, I won't personally represent two sides in one transaction.  And it's intereting to me that attorneys, who as you said shape many of our practices, will not do that - ever!  At least not around here.

Jan 04, 2010 02:16 AM
Anonymous
Bill Kuhlman

Hi, Paul-

I'll agree with your most quotable sound-byte that Limited representation from a pro is of far more benefit than full representation from a schmuck.  You can have bad actors in any system.  But the best scenario---for consumers---is full, undivided, competent representation throughout the transaction for both buyer and seller. 

As the principal broker of a very small company that covers a relatively wide geographical territory in Eastern Massachusetts, I'll admit that it's rare that I run into potential dual agency situations.  Therefore, the practice of single agency---representing either side in a transaction, never both sides---is much easier for someone like me than for someone in an office with 20, 50, or 100 agents, or with 30 or 40 percent of the local market share.

And I would never suggest that the practice of dual agency, where allowed, is, in itself, unethical.  I agree with proponents who say that dual agency can, in the hands of a conscientious and skilled agent, be practiced without harm to either party. 

But the absence of harm should never be the benchmark of service in a fiduciary relationship.  In most real estate transactions, one side or both would benefit from hearing about all opportunities to exploit an advantage at any of a multitude of points of negotiation:  the initial contract, post-inspection issues, or any of the smaller issues leading up to the closing.  In dual agency, however, you cannot recommend or even discuss any course of action that helps one client at the expense of the other.

And no one would suggest that the way to avoid dual agency is to not show your own listings or listings held by other agents in your firm.  That would serve neither the buyer-client nor the seller-client.  As others have suggested, you can refer those showings or at least all negotiations regarding your company's listings to other agents outside your firm.  If you partner with a good agent in another firm to refer your potential conflicts back and forth to each other, each of your clients will have received the full representation they believed they would receive when they hired you.  And, over time, you won't have lost any income.

Several years ago, I heard a great concept at a seminar that has informed many of my decisions on client policies and procedures.  Allen Dalton, then-president of Realtor.com, said that if there were a tool or a procedure that you would want used whenever you buy or sell your own home, you owe it to your clients to use or provide nothing less.

If you were in a legal battle, say, negotiating over the dividing of the interests in your real and personal property in a divorce situation, would you want your lawyer to one day switch from representing your best interests to acting as a neutral mediator?  In many instances, both parties might find this to be the easiest and best situation from an emotional point of view and could easily end up with a fair and equitable resolution.  This is possible even though either party may have come out with a better resolution by having a zealous advocate on their side. 

However, choosing to have mediation is different from having it forced upon by outside forces.  If you were working with your own lawyer who was only on your side of the divorce for weeks or months, and s/he suddenly said one day, "Hey, do you remember when you first contacted me a couple of months ago and we talked about all the things that could happen in this process, I mentioned that it might happen that I would have to become a neutral referee in your divorce?  Well, that has happened, and here we are.  Instead of looking out only for your best interests at every turn, from now through the finalization of your divorce I'll be working with both you and your spouse as a neutral facilitator.  I will no longer be able to make recommendations to you or say anything to your spouse that will cost them a penny."

I doubt that any of us would be happy with this turn of events if it happened to us.  And if you wouldn't want this for yourself, why would you allow it to be forced upon your clients, even though you fully disclosed, at the appropriate time, the possibility that it might happen?

And please don't focus on how a divorce is different from a real estate transaction or how real estate agents are different from lawyers.  The nature of analogies is that they can shed light on one situation by comparing it with another.  They are similar in some ways and different in others.  If they were identical in every way, they would not be analogies, they would merely be the same event.

These situations are similar in that 1. you have two parties with opposing interests in the same property, and 2. you have fiduciary-level representatives who suddenly switch to being neutral facilitators.

To sum up, you can't be the servant of two masters, especially when those masters have diametrically opposed interest in a piece of property.  You can be the referee to two masters and it certainly possible to be a fair, maybe even a great, referee.  However, in states where the consumer-agent relationship is at a fiduciary level, a referee is not what most consumers expect or deserve.

 

Jan 05, 2010 03:55 AM
#139
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

Bill - Very well stated position, and not without merit.  Single agent dual agency is not without its limitations, though I do think there are occasions in which it is of greater potential benefit than harm.  I find little to dispute with your comment, but I will say that working with a buyer for 3 months, educating him on the market, values, etc, only to say, "This is Chuck, he'll be your new agent," if he happens to want to purchase my listing, doesn't strike me as an infallible solution to a potential conflict of interest.  Not only is the buyer handed off to someone with whom no rapport or level of trust been established, but have I not already provided the noose of education by which my seller and I are to be hanged?  "Adversarial" is oft mistaken for "advantageous."  If both parties trust the agent in the middle to act impartially, thus really pitting the principals against each other (or in concert with each other), they are often okay with the practice.  As long as no decided professional advantage is swung to the other side of the table, many have no qualms going mano a mano with the other party on price, terms, etc.  If the agent has done his/her job up to that point, they are both well armed for the process.  The biggest difference is that the agent is not able to seek or exploit weakness.  This is often a more theoretical advantage than practical one.  When I represent one client and another agent represents another, we are very limited in the access to "secret information" that can be exploited for better terms for our clients.  When an agent represents both, he/she has much greater access to confidential info that he/she would not have otherwise had.  Refraining from disclosing information that would have otherwise been inaccessible does not strike me as a representative shortcoming or failing. 

Now that I have played Devil's advocate, I will restate that I avoid single agent dual agency whenever and wherever I can.  Works okay for the "Can't we all just get along" crowd, but not for the "Oh yes, there will be blood" crowd.  Certainly much cleaner and easier to draw battle lines and have at it.

Jan 05, 2010 05:22 AM
Dana Devine
Charles Rutenberg Realty - Apollo Beach, FL

Paul you are correct to apologize for the thesis, an since you like movie metaphors---Flash Gordan---one of my favorites, here is one for Jeff Goldblum and THe Big Chill...http://www.youtube.com/watch?v=MyrQ3YD75NA

Jan 09, 2010 10:01 AM
Paul Slaybaugh
Homesmart - Scottsdale, AZ
Scottsdale, AZ Real Estate

I was born with a disclaimer.  Now, if I can pull myself together, I think I owe Jeff Goldblum an a$$kicking.  Third time this week.

Jan 09, 2010 10:46 AM
Kevin Cottrell
Austin Real Estate Today - Austin, TX

I find it appalling to witness what many St Louis real estate agents do when it comes to dual agency in our market.  I'm fortunate to have some of the best buyer agent/sales partners in my business so I as a matter of course NEVER practice dual agency. Life is simpler and more professional and I have less stress and worry.  Great post and discussion.

Jan 17, 2010 01:19 PM