Dual agency is a scam. If you are a buyer, it has a severe negative impact on your negotiating position. Dual agency arises when a single agent or broker ends up, for whatever reason, representing both the seller and buyer sides of a transaction. In my opinion, for reasons detailed in this post, I believe there is absolutely no upside for the consumer, especially the buyer, in this situation, but there is most often a tremendous upside for the agent. If an agent or broker is requesting that you sign a consent form for dual agency, run, don’t walk, in the direction of another qualified agent to represent you, and you alone. Common sense will tell you that it is impossible for an agent to represent opposing sides in a transaction without shortchanging either one side, or both.
Welcome to my inaugural blog post called Dual Agency is a Scam. My name is Tony Moon and my blog is called The Real Estate Heretic (pronounced “hair-i-tick”). A heretic is someone who dissents from, or does not conform to, an accepted set of beliefs, doctrines, attitudes, or principles held by some established body or profession. In this case, I am referring to the real estate profession. Note that I am not here to bang mercilessly on the profession that has taken care of my family and me for more years than I care to think about, in fact, let it be known that I am grateful for all the blessings it has provided. Rather, I simply believe the real estate consumer would benefit from some insight into the internal workings of the field to which I have devoted a significant portion of my life. Undoubtedly, my blog will occasionally ruffle some feathers because many in the profession, while not out to deceive or take undo advantage of anyone, certainly secretly believe some things are best left unsaid, or at least not fully understood by those we serve.
The reason dual agency (sometimes referred to as dual representation) is the subject of my first blog post is because if there is a bigger scam being legally perpetrated on real estate consumers, I am unaware of it. To understand why dual agency is a scam, it is important to have a working definition of an agent. The broader topic of “agency” is worth a blog posting all by itself and that is forthcoming, but for the purposes of this post it is enough to know that an agent is a knowledgeable professional that you hire to act on your behalf. Your agent is required by law to act in your best interests, provided those interests are legal, even if your best interests are counter to the interests of the agent. In other words, your real estate agent must disregard those things that are in his or her own interest, like a commission check, to do what is in your best interest at all times. This isn’t just hype, it’s the law, a violation of which is punishable by fines, suspension or loss of our license, or worse.
A dual agency situation arises whenever a single agent, agent team, or broker represents both the seller and buyer sides of the same transaction. Most commonly, this happens when an unrepresented buyer (a buyer without an agent) deals directly with the agent representing the seller of a house, that is, the listing agent of an existing house or the salesperson employed by a builder in the case of a new home. Real estate agents, like me, sincerely want to earn your business by providing value. To do this, we hit strongly on our most credible and chief selling points which have to do with the benefits you receive by having professional representation. These benefits fall into two primary areas:
1. Maximizing your desired outcome e.g., maximum profits if you are selling and maximum savings if you are buying
2. Taking care of the complexities associated with virtually all real estate transactions such that you are minimally inconvenienced and are assured that all aspects and issues of the transaction are tilted and resolved in your favor to the highest degree possible.
There is one other common scenario where dual agency arises, even if a buyer has an agent. Let’s say that a buyer is represented by an agent employed by Pretend Real Estate Company and that buyer wishes to purchase a home listed by another agent also employed by Pretend. This is a dual agency situation even though the listing agent solely represents the seller and works out of another of the Pretend offices located clear across town from the buyer’s agent’s office. The reason this is so is because of outdated real estate laws written before there was such thing as buyer’s agents (another topic for another post). Most states require that real estate companies employ one Designated Broker who is ultimately responsible for all transactions that run through that Broker’s employing company. Given that, in the relatively common scenario just described, since both the seller’s agent and buyer’s agent are employed by the same company as the Designated Broker, the Designated Broker is responsible for both sides of the transaction, therefore dual agency exists.
In next week’s part 2 of dual agency is a scam, I will discuss how dual agency is harmful to the consumer and what to do about it.