Dueling with Dual Agency

By
Real Estate Agent with RE/MAX Premier, REALTORS

Dualing

 

I often hear agents talk about how they are representing both the buyer and the seller in a transaction.  This concept is called single-agent Dual Agency and it is legal in the state of Connecticut.  I do not agree with this practice and believe that it is not in the best interest of either the buyer or the seller to work with the same agent during a transaction.

When you have a Real Estate agent represent you in a transaction, they are compensated to represent you and look after your best interests.  If that same agent is also representing your counterpart, then they also have the responsibilty to do what is in the best interest of that person.  Since it's impossible to serve two masters equally, the end result may be that the agent is just trying to get the deal done as quickly and easily as possible, for them.

Consider this example:  The seller is working with Agent Pat and tells Pat that the least they will accept for their house is $250,000.  The house is currently listed at $265,000.  Buyers come to an open house and decide that they like the house and want to put in an offer.  They are not working with an agent at the time.  Agent Pat offers to represent them and the buyers and sellers agree that this would be fine.  The buyers tell Pat that they are qualified to spend $260,000.  The buyers also tell Pat that they feel the house is overpriced compared to other comparable houses they have seen.  They would like to initially offer $240,000 and will not go over $245,000 through the negotiations.

DevilAngelNow, what is Pat to do?  Pat has a buyer willing to bring an offer for the house, but Pat knows that the buyer and seller are $5,000 apart from the most that will be paid and the least that will be accepted.  What Pat should do is have the buyer submit their offer and present it to the seller.  They will most likely negotiate back and forth to their upper and lower limits and then realize that there is no overlap.

However, $5,000 isn't really that big of a gap to bridge, so Pat may try to get the buyer to extend their maximum offer price, or get the seller to lower their minimum selling price.  It's really tempting for an agent to "get the deal done" particularly if they have influence over both of the parties and know the size of the gap.  If the agent feels the gap is surmountable, it's tempting to convince one of the parties that they should offer more or accept less.

If you have your own buyer's agent, this is less likely to happen.  You tell your agent your maximum offer price.  They present your offers to the seller's agent, who then presents to the seller.  You negotiate back and forth until neither party wants to go higher or lower.  Your agent says this is the highest you will go.  The seller's agent says this is the lowest the sellers will go.  You will walk away because you don't want to offer more and your agent will not put undue pressure on you to buy this house.  It is their job to help you find another house that works.

If you want to protect your best interests in a real estate transaction, it is always prudent to have your own independent representation.  Think about how attorneys work, they never represent both the plaintiff and defendent in a case.  It's impossible to be impartial.

 

Comments (14)

Leigh Brown
Leigh Brown & Associates, RE/MAX Executive - Charlotte, NC
CEO, Dream Maker - Charlotte, NC
I avoid dual agency like the plague, and it's a part of my listing and buyer presentations.  Even the most ethical among us, and I do count myself in that group, have a hard hard time staying the course with complete and utter blinders on.  I'd rather sleep well at night and not have buyers or sellers wondering if maybe, just maybe, I sold them down the river over a commission dollar.  Ain't worth it.
Sep 12, 2007 02:20 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services
I am wondering what you think about designated agency?  I think you have that in your state.  Does the information really stay confidential?  Are the problems with dual agency resolved by having designated agents in the same firm?
Sep 12, 2007 02:28 PM
Konnie Mac McCarthy
MacNificent Properties, LLC - Cobb Island, MD
Broker/Owner - VA & MD "Time To Get A Move On!"
I hear ya...I just had this happen...and I said the same thing to my broker....he told me to tell the buyer (I was the listing agent) that I would not represent them but I would write the contract...and they would be my customer...what the heck...is what I would have said...the guy, as I suspected...told me that he wanted representation....duh....I agree....so now when I show one of my listings...I am going to refer the buyer out immediately to another agent...and skip over the whole dual agency thing...it's too uncomfortable anyway
Sep 12, 2007 02:28 PM
Craig Smith
Re/Max Achievers - Frederick, MD
Frederick MD Real Estate

In Maryland you can not represent both parties. You can of course can have the same buyer and seller for a transaction but you only have agency representation to one party and the other party needs to sign a form that specifies they know you are representing the other party. That other party is a customer and you have your client. You still need to treat the other party honestly and fairly. Of course some agents will do whatever to get the deal done whether it is dishonest or unethical. I believe those same agents do it whether on not they have both sides.

As long as the other party signs the form and understands you are representing the other party I believe it is fine. They are adults and the form is 1.5 pages and very easy to understand so if they don't seem to get it maybe they shouldn't even be taking the step into buying a home.

Sep 12, 2007 02:31 PM
James Downing - Metro DC Houses Team REALTORS®, CRS, GRI, ABR,MRP, MilRes
Real Living | At Home - Washington, DC
When Looking to Buy or Sell - Make the Right Move

I completely agree with you.  It is also legal in Washington DC and Virgina; but not Maryland (I have licences in all 3 jurisdictions).  I have argued with other agents (some from Active Rain) about this and many do not see an issue with it at all.

What I HAVE done, as a Listing Agent - I have had buyers with NO agent come in and asked to put an offer on the property.  I make it very clear that while I CAN represent them, I will not because I represent the seller.  I tell them if they wish to make an offer, I will treat them as prescribed by law, fairly and honestly.

I will not advise them on terms of the contract or price; but will write up the offer for them and present to the seller.

Sometimes they agree - sometimes they don't.  I am not a huge fan of even this type of transaction - treating them as "a customer" vs with the privileges off "a client". 

However - if you are working an Open House and someone wants to make an offer - Are you going to turn them away?  Well if you do; that's not representing your seller's best interests.

It is a tricky slope... no question...

Sep 12, 2007 02:38 PM
Andrew Trevino
ADT Real Estate - Wilkes Barre, PA
Wilkes-Barre Homes For Sale
I've never actually been in the position of being a dual agent...yet. It's legal in our state and widely practiced. I can see your point about the difficulty of representing both sides of the transaction. I don't think that it's quite like a court case, but I can see how a mis-step could land you there. Thanks for making me think.
Sep 12, 2007 02:43 PM
Amy Bergquist
RE/MAX Premier, REALTORS - West Hartford, CT
ABR, GRI
Leigh- I also address dual agency in my listing presentations.  If the buyer is represented by another agent in my office, that is fine.  Each person has their own representation and we make sure our party is represented to the best of our abilities.  No sharing information.
Sep 12, 2007 10:58 PM
Amy Bergquist
RE/MAX Premier, REALTORS - West Hartford, CT
ABR, GRI

Joan- CT does have designated agency, but my broker does not practice it in CT.  My broker does practice designated agency in MA.  I'm not familiar with how that's done though because I'm only licensed in CT.  In CT, we do allow two agents from the same office to represent the buyer and seller respectively, but we still consider this a form of dual agency.

I feel comfortable with agents from the same office representing the different parties.  I keep my lips zipped about my clients and don't feel differently facilitating negotiations with my office partners than I do with outside co-broke agents.  I've seen agents in my office going back and forth on inspection issues before and definitely feel that clients on both sides are represented fairly.  We see in-house deals blow up all the time, for the same reasons you would see out-of-house deals fail.

Sep 12, 2007 11:04 PM
Amy Bergquist
RE/MAX Premier, REALTORS - West Hartford, CT
ABR, GRI

Konnie- Yes, it's just easier to refer the buyer to another agent.  Let's you sleep at night...

Craig, James- I understand the client vs. customer concept, but don't feel that there is any benefit to the person if they are the customer.  If someone were to come to me at an open house and want to write up an offer, I would refer them to another agent in my office or have my sales manager facilitate their side of the transaction.  That way you still have an offer for your seller, and can represent them to the best of you abilities.

Andrew- Glad you found it thought provoking!

Sep 12, 2007 11:14 PM
James Quarello
JRV Home Inspection Services, LLC - Wallingford, CT
Connecticut Home Inspector

Amy,

Good blog. I was on the outside of this type of dual agency transaction recently. It was very clear the agents were not working in the best interest of their client-the buyers. This was not lost on the buyers who communicated their thoughts to me privately.

The practice of dual agency in my mind is nothing less than conflict of interest and should not be allowed, period. How this practice was every written into real estate law as acceptable is baffling.

You can read about my recent experience here; Realtors, Do You Challenge or Disagree With the Home Inspector?

Sep 26, 2007 01:10 AM
Amy Bergquist
RE/MAX Premier, REALTORS - West Hartford, CT
ABR, GRI
James- thanks for the comment.  I will post on your blog my thoughts about challenging inspectors.
Sep 26, 2007 03:48 AM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

Dual agency is permitted in California, although it is very rare that I double-end transactions. Like you, I feel it is terribly difficult to do. It makes me wonder about other agents when I look up sold transactions and see one agent represented both sides, but the list price and sold price have such a wide disparity between them. How did the listing agent get the highest and best price for the seller yet represent the buyer who bid substantially less?

I recently handled a transaction in which I represented both the seller and buyer. However, I did not handle the negotiation. The buyer talked directly with the seller and reached a verbal agreement on price and terms. When I communicated with either party, I sent everyone a copy of the e-mail, informing both sides of progress and stayed as neutral as possible.

It's a hard line to straddle.

sig

Sep 26, 2007 05:13 AM
Mike and Dawn Lewis
The Lewis Team at Keller Williams - San Diego, CA
The Lewis Team at Keller Williams in San Diego CA

Amy,

I think dual agency is fine and I have completed many dual agency transactions. I'm not sure where the conflict is for you. You're representing the seller and they know what magic number is they want to accept as an offer. You're representing a buyer who knows how much they're willing to offer. You write an offer present it to your seller and they counter back or accept. It's your job to present the offers and counter offers and for the clients to decide what they want to do. The only conflict would be if an agent acts unethically. Many time if I am doing a dual agency and my commission is 3% and 3% i'll drop my commission to 4% total to bridge any gaps between what the seller wants and what the buyer is willing to pay.

A home will sell for what it's going to sell for. To lose a buyer for your seller because it's harder to represent both parties is crazy. It's an agents job to be a negotiator and professionally and ethically represent both parties. I will say if it is something you don't feel comfortable with refer the client to another agent in another office.

Dual agency is also if two agents under the same broker represent a buyer and a seller. So if agent Joe at ABC comapany and agent Sue at ABC comany "2 different agents working for the same comapany" represent a buyer and a seller this is also dual agency. This happens every day and it's normal business.

I'll dual agency all day long

Mike Lewis

Sep 26, 2007 05:52 AM
Amy Bergquist
RE/MAX Premier, REALTORS - West Hartford, CT
ABR, GRI

Mike- I understand the different forms of dual agency and don't have an issue with two agents from the same brokerage assisting different sides of the transaction.

I also would not lose a buyer for my seller, I would simply refer them to another agent in my office, or have the sales manager of my office assist the buyer with their negotiation.

Dropping your commission to "bridge any gaps" is in your best interest, not necessarily the best interest of the buyer or seller.  It's a bandaid to get the deal done.

How do you handle inspection negotiations?  It's a grayer area, there is no one set "price" that you can work to.  How can you insure that you're doing the best for both the buyer and seller?

Sep 26, 2007 07:19 AM