The Dual Agency Controversy...to have representation or to not?

By
Real Estate Agent with eXp Realty of California Inc. BRE #01743923

My name is Melody Russell and I am constantly taking a stand against what is known as "dual agency" in the real estate industry. I am not referring to when one real estate firm has two different agents represent different sides of a deal. In such a case, I feel that both the buyer and seller can each have their best interests protected by their own Realtor who is representing only one side of the transaction.

What I am passionately against and wish to educate home buyers about is when one Realtor represents both sides of a transaction.  We as agents have a fiduciary responsibility to do what is in the best interest of our client and we have a vow of ethics through NAR to be "loyal" to our clients. The best interest of a buyer and a seller are not one in the same.   They are naturally an opposing force.  The seller has a goal of obtaining the highest price possible with the most favorable terms to the seller. The buyer has the opposite goal of obtaining the lowest price possible and obtaining the best terms in favor of the buyer.  How can one Realtor be loyal to both clients and act in the best interest of each client when the goals are polar opposites? I have heard many justifications over the years but I can, and will, honestly tell you the answer is simple. The agent cannot and in my humble opinion, should not. 

Being one of the top ten producing agents in Santa Cruz County, California, I am faced with the opportunity of acting as a dual agent on a regular basis.  A large portion of my business consists of listings as far North as Los Gatos and as far South as La Selva Beach.  As a result of having much of my business come from listing, marketing and selling homes for my clients, buyers call me or come to my open houses and often want to work with me in order to place an offer on one of my listings. The buyer is often confused when I explain that I am representing the best interests of the seller and they would be better served to have someone watching out over what is best for the buyer in the transaction as opposed to working with the listing agent. 

I don't enjoy turning away business or money but I do it on a regular basis because I understand quite clearly, and without a shadow of a doubt, that it is a conflict of interest for me to represent both sides of a transaction. As required by my fidcuiary obligation as a Realtor and because I know in my heart that the only option for my client's best outcome is for me to work, with a single purpose, until I obtain the best price possible and the best terms that can be negotiated for the client that I am representing. I was excited to learn that there is a percentage of agents who agree and who also never represent both sides.

I have seen many agents who advertise that they will get their client the best price and the best terms and many of these agents jump on dual agency when the opportunity presents itself.  What is wrong with this picture? There is plenty of business to go around with each buyer and seller preserving their right to representation on the purchase of what is most often their largest asset. Why is it even legal? It is not legal in some states and I wish that it were not in California.

Many people will not agree with my stance in regards to dual agency and each person is welcome to their own perception based on their own life experiences which have created thier own reality. From my perspective, buying a home is a huge investment. It is the American Dream and in pursuit of that dream, it is each person's right to have an agent who will represent them (and only them) to the best of the agent's ability while putting all other interests (including the agent's) aside. It is my hope that one day  home buyers understand that they are cutting themselves short by having a listing agent "double end" a deal. Likewise, I hope that agents who represent both sides will stop to consider who they are truly serving when doing so.  

Posted by

 

Melody Russell

831-332-3975

Keller Williams Realty

1414 Soquel Ave. Ste.100, Santa Cruz, CA 95062

www.MelodyRussell.com 

831-471-9129

DRE#01743923

Together we accomplish more.

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Rainmaker
487,214
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

It can be done, but we must walk a fine line to give both sides what they deserve.

Jan 22, 2010 01:12 PM #57
Rainmaker
434,632
Stephen Arnold
HomeSmart Elite Group - Scottsdale, AZ
CRS, GRI, SFR

Hi Melody!   So many people think that they can get a better deal by going to the listing agent directly!  I do my best to educate, but sometimes the consumer just does not get it!  Great topic!!

Jan 22, 2010 01:13 PM #58
Rainer
216,048
Melody Russell
eXp Realty of California Inc. - Scotts Valley, CA
Ranked as 1 of the top selling agents in SC County

Good Evening Bill,

Thank you for your response. As I said in my blog at the top of this thread "Many people will not agree with my stance in regards to dual agency and each person is welcome to their own perception based on their own life experiences which have created thier own reality."  As you know, each person's perspective regarding what is true or correct is simply that... our own perception.

From my viewpoint, having a contract be "smooth" or an "open contract" does not mean that one of  the two parties to the contract could not have obtained a better price or better terms by having their own agent dedicated to the outcome of one side of the transaction.  I'm sure that you are a person who works diligently for your clients, that does not mean that you can simultaneously get the seller the highest price and best terms possible for the given market while also getting the buyer the lowest price and the best terms possible for the given market. Accomplishing both of those outcomes at the same time is not possible no matter how you slice it.

Jan 22, 2010 01:16 PM #59
Rainer
208,325
Sajy Mathew
Coldwell Banker Residential Brokerage - Lancaster, PA
Making your real estate dreams become a reality!

I agree with this!  You are not serving your client if you are involved in this.

Jan 22, 2010 02:11 PM #60
Rainer
18,738
Nick Snow
North Port, FL

"I do believe that an agent can justly represent both parties. If ever for a moment, I thought I was doing it out of greed, I would never assume the role of a dual agent because with all certainty, the truth would come out and trouble would follow. Receiving the commission from both sides. Great. I'm not having a problem with it if I've done my job correctly, ethically and within the law. "

 

You simply cannot represent both parties equally. You can, however, abstain from representing either party.

 

When there are no issues with a transaction, it's all peachy and you can collect an even fatter paycheck and everyone is happy.

However, if there is an issue where both parties cannot come to terms, how can you represent both parties? Are you prepared to be a ruthless stickler to the terms and timelines of the contract? If your buyer wants to walk and keep their earnest money, will you do everything in your power to make sure they get what they want? What if the seller doesn't agree? Are you prepared to take advantage of ambiguous wording in the contract to put the screws to the buyer?

I would wager that the majority of the times when you "represent" both parties, there isn't going to be an issue... but are you ready for the aftermath of that one time where both parties sue eachother and YOU?

You have fiduciary duties to both parties, which is a definite conflict. The only way to carry out dual agency is by abstaining from the very core of your duties - to look out for the best interests of your client.

 

To the Consumer Reader who posted earlier - I'm sure it has been addressed already, but agency law is defined by your state legislation. Here in Washington (state), dual agency is permitted if agreed to in writing by all parties.

That doesn't mean that all real estate agents will abide by the law, or that they won't attempt to coerce sellers into agreeing to dual agency, you just don't know until you're presented with the opportunity to ask the question.

 

I'm going to have to write another article, I don't want to go off on a tangent here.

Jan 22, 2010 02:43 PM #61
Rainer
174,627
Betsy Schuman Dodek
Washington Fine Properties - Washington DC Area Real Estate - Potomac, MD
SearchPotomacHomes.com

Hi Melody,

Great thought evoking post!

Emotions aside, let's be practical. Sometimes, you get a sign call or a buyer walks into your open house and they want to buy the house. You can bring in another agent but that doesn't always work out. Maybe the newly inserted agent isn't a good negotiator or doesn't know how to manage the buyers and the deal falls apart??? If you have a willing seller and a willing buyer that understand the representation laws and issues and still want to proceed, I think you have an obligation to your seller to put the deal together.

Next point that was covered is that there is nothing more ignorant and passe than hearing from buyers that they are going to get a better deal by going straight to the listing agent.

Have a great weekend!

Betsy 

Jan 22, 2010 04:10 PM #62
Rainmaker
413,305
Lisa Heindel
Crescent City Living LLC - New Orleans, LA
New Orleans Real Estate Broker

Thank you, thank you, thank you, Melody.  I feel the same way you do about dual agency (in LA, it's only dual agency if the same agent (not office) represents both buyer and seller in a transaction) and refuse to practice it.  I'm a listing agent and I've never had a buyer say they wanted to give up the opportunity to have their own representation through the purchase just to work with me.  After you've given the "this is why you need your own agent" spiel a few times, you start to hear the feedback from the buyers that they appreciate the fact that someone is in their corner, working for them.  I'm hired by the seller and I'm not going to give up my responsibility to them in order to double dip.

Jan 22, 2010 04:35 PM #63
Rainer
216,048
Melody Russell
eXp Realty of California Inc. - Scotts Valley, CA
Ranked as 1 of the top selling agents in SC County

Dear Betsy - Thanks for response. :) 

Yes, I have buyers who contact me directly via sign calls and open houses and want to buy my listings as you describe. My obligation to the seller is to get them the highest price and the best terms that the market will allow. I educate my sellers as to the risks of dual agency when I list the home and I get my sellers permission at that time to refer buyers to qualified local agents to represent the buyer's side of the deal.  (Someone with a stong local track record if they don't already have someone that they know and trust.)  Before I refer the buyer away, I make sure that my listing is the home they plan to place an offer on. If have not decided for sure, then I have an in-office buyer consult with them to perform a complete Needs Analysis, I then have them get preapproved with a lender from my Circle of Excellence. After they are preapproved, I show them any homes that they were wanting to see prior to making their decision. If my listing turns out to be the best choice then I refer them to a local qualified buyer's agent. If they decide that another home meets their needs better than my listing, then I have them sign an exclusive buyer agreement which graduates them from "lead" to "client." 

Lisa - Thanks for the response. :)  I agree!   I receive many listing referrals each year from my sellers as a thank you for only representing them in the transaction. Sellers are savy these days (at least where I live) and they truly appreciate when you give up an opportunity to make more money in their best interest. Being true to your own personal ethics will always come back to you tenfold. :)

 

 

Jan 22, 2010 05:41 PM #64
Ambassador
772,201
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Melody - As one of the top listing agents in Philly, I understand what you are saying.  Often times, buyers will come directly to us.  More often than not, they will go to our team or someone else in our office if they do not have their own representation.  I am a bit mixed on this debate as it is a good debate for sure.  I still think it depends on the situation and the clients involved.  If I am not comfortable or if my seller is not comfortable with it, well it is a no brainer to refer the buyers somewhere else.  But sometimes one agent handling a tough deal may be better than one incompetent agent handling one side.  Or what about the cash, as-is deals where the deal is straight-forward ?  Is interesting.  Love the conversation here !

 

Jan 22, 2010 10:51 PM #65
Rainmaker
245,267
Norm Werner
Real Estate One - Milford, MI
Helping the first time and every time

Michigan operates under real estate laws that define what is called Designated Agency. That means that two agents opeating under the management of a single broker can represent the two sides of a transaction, with each having full fiduciary responsibility for their client and the broker being the only one in a dual-agency role in the transaction. However, we also have the concept of a single agent acting in a dual role. The Agency Disclosure that we have to use with sellers and buyers defines Dual Agents as follows:

A real estate licence can be the agent of both the seller and the buyer in a transaction, but only with the knowledge and informed consent, in writing of both the seller and the buyer.

In such a  dual agency situation, the licensee will not be able to disclose all known information to either the seller or the buyer. As a dual agent, the the licensee will not be able to provide the full range of fiduciary duties to either the seller or the buyer.

The obligations of a dual agent are subject to any specific provisions set forth in any agreement between the dual agent, the seller and the buyer.

So, legally a single agent can be a dual agent in Michigan. Having said that, my own opinion is closer to yours. Dual agency is a slippery slope, full of many landmines that even the best intentioned agent can step on. I try to avoid it.

Jan 23, 2010 03:14 AM #66
Rainmaker
242,238
Roger Johnson
Hickory Real Estate Group - Hickory, NC
Realtor - Hickory NC Real Estate

I'm posting part of my comment above again, because it still seems that many agents think that simply because a buyer contacted them directly that a buyer's agency relationship exists.  It doesn't.  You can be teh only agent involved in a transaction and STILL be a seller's agent only, folks.

Problem #2, I think many agents think that if a buyer contacts them to see/make an offer on a property that they have listed, that dual agency is automatically created.  It's not.  You have to be a legal buyer's agent for the buyer AND the listing agent (in states where "dual" means agent and not agency) in order for a dual agency to be created.  If you're not a buyer's agent, then the buyer has NO representation.

Jan 23, 2010 05:52 AM #67
Rainer
10,887
Darrel Cook CRS, GRI, Broker
Darrel Cook Real Estate Service - Jonesboro, AR

I love being aduel,,agent and have been doing duel agency before we even had to disclose it. I see no problem in it, If you tell the truth and treat people right, there is no harm, You get the job done, When I act as a buyers agent only, I do not feel like my job is to beat up the seller, it is to close a deal and everone walks away happy. I vote for duel ageensy

Jan 23, 2010 11:27 AM #68
Rainmaker
107,991
Dana Devine
Charles Rutenberg Realty - Apollo Beach, FL

I have a question:

you have a listing and a buyer calls you to see it////they are working just with you(single agent) and now they want to write a contract....what do you do?

  • do you give it away?
Jan 26, 2010 04:24 AM #69
Anonymous
Tony Moore

As a builder in licensed Realtor in Florida and Georgia I have never seen so much corruption in a small town like Thomasville, Ga. 90% of all Realtors are out for themselves. They do not care for the buyer or the seller just the commission. As a state that allows the practice of dual agency is like allowing Hitler to continue in his destruction. This type of practice just makes it hard for ethical good realtors.

Aug 31, 2010 04:54 PM #70
Anonymous
Jeff

Thomasville, GA. is a nice town. All we need to do is have someone create a big roach motel for Realtors and add a few dollars in it and watch the decline of the infestation. "Realtors check in but they can't check out".

Sep 01, 2010 01:19 AM #71
Anonymous
Rahul

Hi Melody,

I just happened to come across this topic coz my advisor wanted me to look up dual agency... anyway i agree with your posting, unless full information disclosure is possible, it is not feasible to represent the best interests of both parties by the same agent.

However, if the agent is neither interested in the buyer or the seller's interest, then dual agency is not a problem. ultimately, it is not neccesarily the case that buyers and sellers are being ethical anyway, so why should the agent be?

Oct 04, 2010 01:56 PM #72
Anonymous
Melody Russell

Rahul,

Interesting comment. It is a Realtor's duty to be ethical at all times. We are representing what is often a client's largest asset and they are putting their faith in us.  If someone cannot be ethical, then they should choose another line of work. When you think about it, being ethical is easy and it's common sense. If you ever have to wonder if something you are considering doing or saying is ethical or not... if you have to question it, then it is not ethical and you should therefore not do it or say it.  In life and in real estate you will succeed if you always do the the right thing and treat others as you would have them treat you.

Oct 04, 2010 02:13 PM #73
Rainmaker
1,506,461
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • Green • GRI • HAFA • PSC Calabasas CA

I'm very much agree with you, Melody.

I love being a listing agent, but recently work with a lot of buyers.

Buyers do think that they will receive better terms and price working directly with a listing agents.

Also, some buyers( believe it or not!) don't know that a buyer agent works for them for no extra cost. They do think that having an agent can be an additional expense. I'm often asked: 'how much is your service?'

I wish we work for a fee:) But we are at the mercy of a listing agent( yes, I will not show the house where is my commission is ridiculous, you know what I mean?)

Oct 28, 2012 05:38 PM #74
Rainer
7,647
Katherine Quesada
Berkshire Hathaway HomeServices - Covina, CA

I whole heartedly agree with you.  Many buyers in my market want to work with the listing agent as they think they have a better shot at getting their offer accepted as well as getting a better deal.  At the end of the day the only person winning is the Agent.

 

I would not be comfortable in this position.

 

 

Apr 12, 2014 03:41 PM #75
Anonymous
Melody Russell
I agree and thank you for your comments. :-d
Apr 13, 2014 03:37 AM #76
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