Dual Agency - are you an advocate ?

By
Real Estate Agent with The Somers Team at KW Philadelphia

Dual Agency

In the last couple of weeks, I have been thinking about Dual Agency and it's place in the Philadelphia real estate market.  In some states, it is not allowed.  In Pennsylvania, it is.  On the consumer notice it states:

"Dual Agency is a relationship where the licensee acts as the agent for both the seller/landlord and the buyer/tenant in the same transaction with written consent of all parties."

Dual Agency - Chris and Stephanie Somers

 

I am interested in knowing what other people's opinions are regarding dual agency.  I have done several dual agency transactions this year and I have a feeling it will continue to be more frequent as a direct result of the intensive internet marketing that we do on our listings.  Basically, since we do so much marketing, often times buyers will come directly to us.  When they do, we will show them properties that fit their needs which may or may not include some of our own listings.  If the buyer decides to write an offer on one of our own listings, that is when we may begin to act as a dual agent.

Based on our past experience with these transactions, I think there are 3 main benefits of dual agency:

1.  Transaction can be smoother and more streamlined as well as being more transparent - you do not have to wait around for the other agent to respond or in some cases, educate the other agent regarding the property (condominium association, the short sale process...etc)  Acting as the go-between can be extremely efficient and effective. 

2. Real Estate Commission - Often times, it can benefit both buyer and seller that a dual agent is involved for there maybe an agreed upon commission that is a little lower which allows some more negotiation room, either on the sales price or perhaps in repair concessions.  For example, we may take a listing with an agreed upon 6 percent commission but it would be stated that if we brought the buyer, it would be 5 percent.  

3. Increased showings for the seller - Because of our internet marketing, we generate a tremendous amount of leads for each listing.  If dual agency was not applicable, what would we do with those leads that want to see the property ?  Hand them to someone else and hope that those leads are communicated with ?  Thus, we can show the properties ourselves or refer them to someone in our office.

I think it is important to note that it is not our goal to be a dual agent.  When it happens, we enter into it cautiously and state the benefits to both parties.   The bigger picture is that we are an advocate for our clients and feel that this can be accomplished in all of the types of agency that we practice:  seller agency, buyer agency and dual agency.

Also, every case should be looked at individually.  If the listing agent is representing themselves or a family member, that might be different where the buyer might be better off served with their own buyer agent.  This can all be discussed with the seller when the listing is taken.

In doing some research, I found some blog posts on Active Rain that also discussed dual agency that are worth reading:

Dual Agency Life in the Fast Lane by Monika McGillicuddy

Entering into dual agency to buy or sell a home - it is not as bad as you think by Jeremy Blanton

Why I Don't Practice Dual Agency by Rich Schiffer

What is your opinion of dual agency ?

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Comments (58)

Larry Bergstrom
Crescent Realty, Inc. Spanaway, WA. - Spanaway, WA
CNE, CRS, GRI

Guys;

So many of us get caught up in the issue of double ending a sale when it comes to dual agency.  In Washington State, if I write up a buyer on my own listing, our Purchase and Sale form has a place where you check a box that says who the selling agent represents (Buyer, Seller, Neither)  - and likewise who the listing agent represents.

If I have a listing agreement with the seller, it's pretty obvious that I represent them.

Just because a buyer comes into the picture, (and I start doing the math) doesn't mean that I should jump ship and suddenly tell my seller that now I don't represent them exclusively!

Of course, I'm not familiar with your state law, but in Washington I can check the box as the selling agent that says I represent the seller, and likewise as the listing agent check that I represent the seller, and spend some time with the buyer explaining what the law of Agency is all about.

The bottom line is, it's virtually impossible to walk a tight rope and not lean to the left or to the right if you're trying to keep your balance, and by doing so, aren't you favoring one side over the other?

That's Dual Agency in a nut-shell.

Dec 21, 2008 01:56 PM
Larry Bergstrom
Crescent Realty, Inc. Spanaway, WA. - Spanaway, WA
CNE, CRS, GRI

By the way, as professionals, I'm sure the %'s you used in your question were just for the sake of example.

Dec 21, 2008 01:58 PM
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

I am not a fan of dual agency, and in reality, under the definition of "agency" here in GA, one cannot truly be an agent for both buyer and seller, but dual agency is allowed if disclosed. 

I cannot possibly fully advocate for both parties.  I CAN deal fairly with both, but I wouldn't be an agent of one of the parties...  If I have a buyer and a seller under contract, I would likely refer one of them to a fellow agent in the office... or not in the office, depending on the client.

Dec 21, 2008 02:08 PM
Anonymous
Anonymous

Just how do you think it is possible to ADVOCATE for two parties with differing agendas? It's an oxymoron.

Dec 21, 2008 02:50 PM
#43
Judi Bryan
Executive Realty Group - Bloomingdale, IL
Your Chicagoland Connection

Sometimes what you believe about dual agency is determined by your style and your objective.  Certainly the seller (who wants the MOST for the their home) and the buyer (who wants to pay the LEAST for the home) bring an inherent conflict to the table.  And BOTH THE BUYER AND THE SELLER KNOW THAT!!!  Sometimes, because of particular circumstances or because of personalities, it would be downright irresponsible to consider dual agency.  However, there certainly are times when it serves all parties (buyer and seller both) to consider having the same agent working for them. 

The important thing is that the agent cannot advocate or advise anything to one party that would be to the detriment of the other party.  But not everything in the negotiations puts the parties at odds.  If I know the seller is in financial straits and needs to close ASAP, and in working with the buyer I discover they are interested in a quick close, advising one or the other about what to incude in the controct for closing brings their interests together, and doing so violates no ones' interests.  If,  on the other hand, I know the urgency for the seller, but in this case the buyer would prefer a later close, I would refrain from "advising" either about the closing date, but rather provide both with their options and potential ramifications of each option.  In other words, both would receive the same level of information or guidance, as the situation dictates.

Part of our job is to help bring about a "meeting of the minds".  I've always believed in the win/win approach to negotiating...and most of the time that's been very effective.  But as with virtually everything we do in this business, it's important to disclose, disclose, disclose...particularly if you're tackling a "dual' role.  In that case your agency relationship is "limited", and it's important to be sure that the parties know, not just THAT the relationship is limited, but also WHAT THAT MEANS in terms of how it impacts them.

Dec 21, 2008 10:12 PM
South Austin Real Estate Blog
Sky Realty South Austin - Austin, TX

In my mind I could not serve both parties in one transaction and call that fair practice.  Sure I can pass along lender information, inspector information, repair information but who will negotiate for the party?  ME!  now how can I negotiate fairly to both sides?  I would refer the other side out to an associate for fairness.  Just MHO.

Dec 21, 2008 10:37 PM
Brendan Winans
Winans & Associates - Bakersfield, CA
Professional Real Estate Services

Colorado is a "Transaction Broker" state. Dual agency is illegal here. There is a portion of our contracts that states should we bring the buyer to the deal, we would switch to Transaction Broker (intended to be a neutral party in the deal.... not always the case).

 

-Brendan Winans

Dec 22, 2008 01:19 AM
Brian Madigan
RE/MAX West Realty Inc., Brokerage (Toronto) - Toronto, ON
LL.B., Broker

In Ontario, the real estate industry has prevailed and dual agency is permitted.

I practised law for 25 years and thought that dual agency was inappropriate in all circumstances. I have been in the real estate business and have now changed my mind somewhat.

No matter how you look at it "advocacy" will be an issue that can never been reconciled. Just leave that matter for first year philosophy students.

But, who cares about negotiating? Clearly, many of the so-called experts aren't any good at it. So, moving away from advocacy is really no loss in many cases.

 In my law practice, I offered:

 •1)    advocacy,

•2)    arbitration, and

•3)    mediation.

There are special rules that apply to mediation, however, the bottom line is that a number of deals get done that would not have been successfully resolved without a mediator.

Now, the important question is how do I protect myself from all those potential lawsuits? The answer is: a 48 hour cooling off period. Take the mediated agreement to your lawyer and let me know? This way, both parties obtain independent legal advice. They in fact do have their own advocate, and they have the advantage of a mediated agreement.

Brian MadiganLL.B.

Dec 22, 2008 02:56 AM
Jeremy Blanton
Myrtle Beach Homes Blog - Myrtle Beach, SC
Myrtle Beach REALTOR®- myrtlebeachhomesblog.com

Well, I could write what my thoughts are, but I think I already wrote my thoughts rather well :)

Dec 22, 2008 02:13 PM
Cristal Drake
Prudential California Realty - Fullerton, CA
Realtor - Fullerton Real Estate

Wow, you really got them talking here. I personally have never been a party to a dual agency. I am not sure how I would feel.  Sure, double commission is great but I have really had to go to bat for my buyers and sellers at times and not sure how I would feel if I had to make sure they were both fairly represented.  I just want everyone to be happy all the time and if something went wrong then I would hate to be blamed!

Dec 22, 2008 04:11 PM
Jessica Monroy
Associate Broker with HomeSmart - Litchfield Park, AZ

In Arizona we are starting to change the term from "Dual Agency" to "Limited Representation". This new terminology should help those clients that are willing to enter into this type of arrangement to better understand how they will be represented. 

I also want to warn those Realtors who don't believe in dual agency.  If you are setting up your transactions where you are just representing one side of the transaction and the other side is unrepresented...be careful.  Implied agency happens quite a bit without the Realtor even knowing they crossed that line. Should a transaction like that go to court or arbitration, the Realtor who thought they were protected by the checkbox on the Agency Disclosure Form or Purchase Contract where it states agency my not be protected if they had implied agency with the unrepresented party! 

 

Dec 23, 2008 06:03 AM
Chuck Capan
REMAX River Cities - Moline, IL
REALTOR Licensed In IL. - Moline Homes Quad Citie

My 2 cents on "Benefit" #3...variable rate commission can be a slippery slope.  Do you advertise the variable rate? Such as "Agent X charges 6% full commission...if Agent X finds the buyer the rate is 4%...if the buyer agent is from Agent X's brokerage the rate is 5%...if seller finds a buyer the rate is 4.5%...if Agent X finds Buyer A and the deal falls apart then Buyer A comes back 30 days later with Agent B what is the rate 4? 6?...

If  brokerage ABC used the 6-5-4% sliding scale and really pushed it in advertising...would that not cause buyers to seek out ABC agents and in particular ABC listing agents knowing that there is a 2% advantage going with dual agency?

Dec 23, 2008 06:14 AM
Paul Howard
Paul Howard, Broker, Paul Howard Realty 856-488-8444 - Cherry Hill, NJ
Paul Howard Realty, 856-488-8444

The 2% advantage is an illusion.  A good buyer agent should be able to save a buyer several times that over what they would likely pay if using a dual agent.

 

Dec 23, 2008 06:32 AM
Chuck Capan
REMAX River Cities - Moline, IL
REALTOR Licensed In IL. - Moline Homes Quad Citie

Yes Paul that is part of the slippery slope I eluded to.  Is the service of the Realtor warrant the 6% to the seller?  If so, what warrants the discount to 4%?  More or less service to seller?  More or less service to the buyer?

Just for discussion purposes what if Dual Agency was illegal everywhere...sellers could only compensate their agent AND THAT AGENT WAS NOT ALLOWED to share/split commissions with anyone.  Buyers would pay for the services of the Buyer agent.

 

Dec 23, 2008 07:43 AM
Anonymous
Anonymous

 

I'd like to see dual agency illegal everywhere AND no seller agent offers of compensation coupled with an environment in which buyers' typically enter into contracts (compensation specified) with their agents.  Maybe they would take a little time in finding an effective and competent agent rather than one they felt 'comfortable' with.  Those are the ones that tell them what they want to hear from the get go rather than the truth.

Most agents are not competent.

I just got my hair cut and noticed the lady's license on the counter.  I asked her how long it took to get a license, if it was required and how much it cost.  

She said all states require a license, typically it takes at least 1200 hours and can cost up to $16,000.  Humm,  that sounds a lot harder than the few hundred dollars and couple weeks it takes to get a real estate license.  That says a lot about our industry.

 

Paul Howard

 

Dec 23, 2008 08:07 AM
#54
Paul Howard
Paul Howard, Broker, Paul Howard Realty 856-488-8444 - Cherry Hill, NJ
Paul Howard Realty, 856-488-8444

I wasn't signed in I discovered too late when I left the post above.

 

Paul Howard

Dec 23, 2008 08:09 AM
The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

The comments received indicate that there is a lot of uncertainty regarding dual agency.   I will come back after the holidays and respond to some of the comments in more detail.  It is hard to keep up with !  Is great to see a professionaly discussed difference of opinions and views on this.  It is obviously a subject that causes confusion and strikes a chord with realtors and consumers coast to coast.

Dec 24, 2008 01:17 AM
Stephen D White, E-Pro, ABR Cape Cod Real Estate
SDW Realty of Cape Cod - Falmouth, MA

Chris & Stephanie I just wanted to say I read another post on AR about Dual Agency and it is not the most common transaction in real estate by agents and one that the majority of agents wouldnt feel comfortable doing! But like anything else, once you do one, experience pays off!

Here's the other AR blog about Dual Agency at http://activerain.com/blogsview/850052/Why-Dual-Agency-Should-be-Rare

Dec 24, 2008 03:16 AM
Arizona Real Estate Associate Broker
MR Realty - Mesa, AZ

Chris & Stephanie - It's a fine line and yet I think it can be accomplished as long as agents/brokers make aware to their prospective clients who works for who! I've know some brokers that completely stay away from it.

I've done it and I feel confident enough in my business practices that I've been able to approach most sensitive subjects direct without jeopardizing my legal obligation or fiduciary responsibilities!   Great article!

Mar 15, 2009 11:58 AM
Paul Howard
Paul Howard, Broker, Paul Howard Realty 856-488-8444 - Cherry Hill, NJ
Paul Howard Realty, 856-488-8444

You got a lot of response.  

First: I keep hearing about this fine line - it is not a line it is a brick wall and you can't get past it to be an advocate if you are a dual agent.

Your statement:  " When it happens, we enter into it cautiously and state the benefits to both parties.   The bigger picture is that we are an advocate for our clients and feel that this can be accomplished in all of the types of agency that we practice:  seller agency, buyer agency and dual agency."  , does a disservice to your CUSTOMERS.  They are not clients at that point and you can not be an advocate for them in all the areas that are important.  Your responsibility is not to tell them what YOU think are benefits but rather it is to tell them the disadvantages of dual agency and the fact that you CAN NOT act as an advocate when that advocacy is in conflict with the interests of your OTHER CUSTOMER.  

When you fail to do that you break both the letter and the spirit of the law requiring disclosure.

Paul Howard

 

Mar 15, 2009 01:02 PM