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Dual Agent: A Misunderstood Concept

Written by on Monday, 25 November 2013 2:27 pm
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Is the real estate agent you are working with representing your interests? Is she your agent? Is he a designated agent? Is she a dual agent? Do you know, and more importantly, does your agent completely understand his/her role?

For many years, the agent represented only the seller. If you were selling, you would list your home with a real estate broker - called the "listing agent". If another broker/agent found a potential buyer who entered into a sales contract, that agent was the "selling agent".

Today, however, there are many forms of agency:

single agency: the agent represents either the seller or the buyer, but not both in the same transaction;

designated agency: (also referred to as "designated representation"). Here, the seller has a listing agreement with a broker and the buyer has an agreement to be represented by another agent/broker - but who is affiliated with the same real estate company.

Brokers and agents in the Washington metropolitan area are required to provide disclosure of their role to prospective clients. If there is a designated representation, all parties are put on notice that the agent must not disclose information obtained in confidence to other parties in the transaction.

Dual representation: (also called dual agency). Here, the agent represents both the seller and the buyer. According to the District’s disclosure form, "the ability of the licensee (the broker) and the brokerage firm to represent either party fully and exclusively is limited. The confidentiality of all clients must be maintained."

This is the area of real estate brokerage that is extremely confusing. According to a survey compiled this year by the National Association of Realtors, many agents who responded do not understand dual agency, cannot explain it to their clients and in fact do not provide the State required disclosures.

In Maryland, although the disclosure forms use the term "dual agency", in fact it really is the same as the District’s "designated agency". The form that potential clients must sign states "if all parties consent in writing, the real estate broker ... (the "dual agent") will assign one real estate agent affiliated with the broker to represent the seller... and another agent affiliated with the broker to represent the buyer..." Agents in Maryland are not permitted to represent both buyer and seller.

Virginia has a new law which will take effect July 1, 2012. It is a comprehensive approach to enhance the agency relationship disclosure requirements between agents and those they represent. Accordingly, single dual agency is permitted, so long as the agent has provided the potential client the written consequences of such practice and obtains the written consent of the client.

What does the agent have to disclose?

  • the agent will be unable to advise either party as to the terms, offers or counteroffers;
  • that the agent cannot advise the potential buyer of the suitability or condition of the property;
  • that the agent will be acting without knowledge of the client’s needs, or experience in real estate, and
  • that either party may engage another agent if either requires additional representation.

The question then becomes: why should I - as a potential buyer or seller - agree to a single dual agency arrangement? What’s the benefit to me?

Recently, the New York Office of General Counsel issued a memorandum entitled "Be Wary of Dual Agency". The memo cautioned consumers that "by consenting to a dual agency, you are giving up your right to have your agent be loyal to you, since your agent is now also representing your adversary. Once you give up that duty of loyalty, the agent can advance interests adverse to yours. For example, once you agree to dual agency, you may need to be careful about what you say to your agent, because, although your agent still cannot breach any confidences, your agent may not use the information you give him or her in a way that advances your interests."

And, while most agents are honest, there is always the possibility that what you tell the agent will get back to the other side.

Many brokers - and legislators who allow dual agency - believe that it is not a problem so long as buyers and sellers are fully informed and sign a written disclosure form. But in my opinion, that is not the real world. Buyers get excited about a new house and do not pay attention to the various documents they sign - including the real estate sales contract. Similarly, often the issue of dual agency arises only after the seller has signed the standard listing agreement ; the seller’s broker suddenly finds a potential buyer who is not represented by counsel or by another agent.

My advice to buyers and seller. While I have serious reservations about the designated agency arrangement, I can live with it since there are at least two agents involved - one representing the buyer and one the seller - albeit from the same brokerage company.

However, I cannot under any circumstances recommend anyone to engage in a single agent dual agency agreement. You will not be properly represented - which has been the hallmark of american real estate agents for years.

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  About the author, Benny L. Kass

15 comments

  • Comment Link Patricia Beattie Friday, 18 April 2014 8:12 am posted by Patricia Beattie

    Estratos, there is a lot involved in selling a property. The sale price you've indicated is fair market value for the property, still in 2014.

    Yes, you can always have multiple offers. The agent would have presented those other offers to you, if it existed.

    A common rule of thumb is: how many offers did you receive during the first 30 days of being listed. If the answer is 0, there's a problem, typically price. If the answer is 1, I would also encourage the Seller to accept the offer. If the answer is 1 or more, you're golden.

    The number of days on market is very important when selling. If the property is overpriced, it sits. If the Seller is serious about selling, a short time on market shouldn't be an issue, regardless of how the offer and sale came about.

    Many NYC agents practice dual agency and there is nothing wrong with it, it should have been disclosed, is my only beef. The reason it is common in NYC is because of the very quick turnover of properties. Typically, an agent lists a new property and receives consumer inquires and bam, deal done. Dual Agency is NOT against the law, however, it must be disclosed.

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  • Comment Link elainestratos Saturday, 12 April 2014 7:30 am posted by elainestratos

    Can a seller have Multiple Bids if your Realtor has already engaged a client in Dual Agency……..?I don't see how ,unless
    she wants to wrap it up with the first offer???

    I suppose I should have made sure that I wanted at least four bids before even considering the first offer…Naive…
    Seems she does not playing the field it seems like a lot of work for the Realator and easier to accept the first offer…
    Sellar is not in charge..me…no other bids ????I don't believe it…This is protecting your new client thru Dual Agncy..you don't want a higher price…it behoves u to sell (The Realtor) to your new client…there is the caveat..np under there have been lawsuits..

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  • Comment Link estratos Thursday, 10 April 2014 11:20 am posted by estratos

    My Agent gave me the impression that this one Buyer was the only one in all of New York City that wanted my Upper Eastside
    Studio 650 sq ft./extra large w/alcove/Doorman/550 maintanance/ 301 east 62nd. street..that may want my apt. unrenovated..during the 2010 RE crisis although there were many apts selling….as always in well heeled NYC…Dual Agency Undisclosed makes for bed partners…on agents side try to close as quickly as possible…as I now know…why get more money?Just do not show up with any other buyers..simply room for Fraud……………and no MLS to co-broke…lost about 30 thousand I suppose….sold 10/26/2011..345,000….Dual agency also allows the Buyer to hustle the Broker…less work and the Broker is happy to get rid of your apartment with Manipulation.

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  • Comment Link Patricia Beattie Sunday, 06 April 2014 9:48 am posted by Patricia Beattie

    Estratos, I am sorry for your experience. You are 100% correct.

    The Listing Agent and their broker (company) have Fiduciary responsibility to you, FIRST. Any changes to your Seller Agency relationship, which may or may not occur, based on YOUR CONSENT, should have been explained at listing time and reviewed and documented again once a buyer is brought in.

    It is the AGENT's responsibility to ensure a Seller/Buyer clearly understands any and all Agency relationships. Not the consumer's responsibility. Agents are educated in real estate transactions and have a duty to perform and inform the public, consumer, buyer and seller.

    Agents neglecting and ignoring their duty to inform and educate consumers are the ones giving the good agents a bad reputation.

    By the way, you can file a complaint against that agent if you have papers confirming there was no signed paperwork consenting to "dual agency" it was in fact undisclosed and against the law. You may be able to recover a portion of the commission fee paid and the agent will learn a valuable lesson.

    Here is the link for NYS: http://www.dos.ny.gov/licensing/complaint.html

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  • Comment Link e Sunday, 06 April 2014 7:27 am posted by e

    In reference to former comment….The Agent did not inform me the Sellar…..so this is Undisclosed Dual Agency….perhaps you would say it was my business to read the Disclosure Docs..or my Real Estate Lawyer…My UES Studio sold and comm was 17,000…………So Im not even getting into the ramifications of this..obviously the Agent felt it (not important)…or simply purposefully…withheld…then we can go next to what my answer would have been ostensibly had I been informed…She knows a lot of sellers out there would simply say let the buyer get their own representation!…………or I would have said ask for 10 grand more side he wants it so badly..then bring me in other bids…Now this is how you do business…otherwise a lll parties are in bed with the BUYER!!!!!!

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  • Comment Link estratos Saturday, 05 April 2014 7:45 am posted by estratos

    Case in point….I was the seller of a coop in NYC..UES…
    in six mos. my Agent only and regularly pushed one buyer on me…..Dual Agency…how about the obvious and very important fact that this automatically makes a sale to another buyer less in the interest of my Agent who is really representing the buyer..
    Forget Double Dipping,no Multiple Bids,,,and unfortunately never ever even mentioned the Disclosure Docs…Withholding of information…this clearly goes against fiducuary is not your Fiduciary….Basically, believing there is never another buyer
    out there……….with Doorman…this in 2010…

    *

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  • Comment Link PatriciaInAstoria Tuesday, 31 December 2013 11:00 am posted by PatriciaInAstoria

    Adele,
    Sorry you, and others disagree. I don't find the bullet points or some of the agency descriptions cited to be accurate, in NYS terms.

    I will say, it's interesting to me the lawmakers and the State agencies who complicated Agency are now writing papers against it?! My opinion on the reasons why is because agency was not and is not clearly understood and now precedent is being set. The laws are written for Sellers and technically, a broker has ccload | fiduciary to every listed [seller] property it has contracted ~ and that's wherein the issue lies. Once a buyer walks into the same agency and has interest in any of the listings therein and an agent from the agency takes on the buyer, the broker is in dual agency.

    Then there's the MLS and the internet "real estate" sites [Trulia, Zillow, etc.] ... another topic, another time.

    With practice, an Agent can perform dual agency expertly and until then, probably should refrain, or use an attorney to mediate.

    Below is the full NYS "warning," not only the excerpt.

    Have a great day.

    BE WARY OF DUAL AGENCY
    With the growing number of very large and widespread brokerages, the issue of dual agency arises more frequently than ever before. Any purchaser, seller, lessor or lessee confronted with a dual agency issue by their real estate agent should not take the issue lightly. Parties to a real estate transaction, including real estate brokers and salespersons themselves, seldom realize the inherent problems of a real estate agent acting as a dual agent.

    Dual agency arises when a real estate broker or salesperson represents adverse parties (e.g., a buyer and seller) in the same transaction.

    Dual agency typically arises in the following way: a real estate broker employs two salespeople, one who works for the buyer as a buyer's agent and the other who works for the seller as a seller's agent. The real estate broker and his salespeople are "one and the same" entity when analyzing whether dual agency exists. As soon as the buyer's agent introduces the buyer to property in which the seller is represented by the seller's agent, dual agency arises.

    Dual agency can also arise in a more subtle way: A real estate broker who represents the seller procures a prospective purchaser who needs to sell her property before she is able to buy the seller's property. The prospective purchaser then signs a listing agreement with the real estate broker to sell her property so that she can purchase the seller's property. The real estate broker is now a dual agent representing both parties in a mutually dependent transaction.

    When you employ a real estate broker or salesperson as your agent, you are the principal. "The relationship of agent and principal is fiduciary in nature, ‘...founded on trust or confidence reposed by one person in the integrity and fidelity of another.' (citation omitted) Included in the fundamental duties of such a fiduciary are good faith and undivided loyalty, and full and fair disclosure. Such duties are imposed upon real estate licensees by license law, rules and regulations, contract law, the principals of the law of agency, and tort law. (citation omitted) The object of these rigorous standards of performance is to secure fidelity from the agent to the principal and to insure the transaction of the business of the agency to the best advantage of the principal. (citations omitted)." (Emphasis added) DOS v. Moore, 2 DOS 99, p. 7 (1999)

    "A real estate broker is strictly limited in his or her ability to act as a dual agent: As a fiduciary, a real estate broker is prohibited from serving as a dual agent representing parties with conflicting interests in the same transaction without the informed consent of the principals. (citations omitted) ‘If dual interests are to be served, the disclosure to be effective must lay bare the truth, without ambiguity or reservation, in all its stark significance.' (citation omitted)

    ‘Therefore, a real estate agent must prove that prior to undertaking to act either as a dual agent or for an adverse interest, the agent made full and complete disclosure to all parties as a predicate for obtaining the consent of the principals to proceed in the undertaking. Both the rule and the affirmative [defense] of full disclosure are well settled in law.' (citation omitted)" Id. at pp. 9-10.
    In a purchaser/seller transaction in which dual agency arises, the agent must not only clearly explain the existence of the dual agency issue and its implications to the parties, the agent must also obtain a written acknowledgment from the prospective purchaser and seller to dual agency. That acknowledgment requires each principal signing the form to confirm that they understand that the dual agent will be working for both the seller and buyer, that they understand that they may engage their own agent to act solely for them, that they understand that they are giving up their right to the agent's undivided loyalty, and that they have carefully considered the possible consequences of a dual agency relationship.

    The fiduciary duty of loyalty that your real estate agent owes to you prohibits your agent from advancing any interests adverse to yours or conducting your business to benefit the agent or others.

    Significantly, by consenting to dual agency, you are giving up your right to have your agent be loyal to you, since your agent is now also representing your adversary. Once you give up that duty of loyalty, the agent can advance interests adverse to yours. For example, once you agree to dual agency, you may need to be careful about what you say to your agent because, although your agent still cannot breach any confidences, your agent may not use the information you give him or her in a way that advances your interests.

    As a principal in a real estate transaction, you should always know that you have the right to be represented by an agent who is loyal only to you throughout the entire transaction. Your agent's fiduciary duties to you need never be compromised.

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  • Comment Link Adele Hrovat Tuesday, 31 December 2013 10:31 am posted by Adele Hrovat

    Patricia, just because dual agency is "practiced in many states" doesn't mean it's a good practice. Rather than repeat myself I'd suggest referring again to the last half of the article:

    What does the agent have to disclose?
    •the agent will be unable to advise either party as to the terms, offers or counteroffers;
    •that the agent cannot advise the potential buyer of the suitability or condition of the property;
    •that the agent will be acting without knowledge of the client’s needs, or experience in real estate, and
    •that either party may engage another agent if either requires additional representation.

    The question then becomes: why should I - as a potential buyer or seller - agree to a single dual agency arrangement? What’s the benefit to me?

    Recently, the New York Office of General Counsel issued a memorandum entitled "Be Wary of Dual Agency". The memo cautioned consumers that "by consenting to a dual agency, you are giving up your right to have your agent be loyal to you, since your agent is now also representing your adversary. Once you give up that duty of loyalty, the agent can advance interests adverse to yours. For example, once you agree to dual agency, you may need to be careful about what you say to your agent, because, although your agent still cannot breach any confidences, your agent may not use the information you give him or her in a way that advances your interests."

    And, while most agents are honest, there is always the possibility that what you tell the agent will get back to the other side.

    Many brokers - and legislators who allow dual agency - believe that it is not a problem so long as buyers and sellers are fully informed and sign a written disclosure form. But in my opinion, that is not the real world. Buyers get excited about a new house and do not pay attention to the various documents they sign - including the real estate sales contract. Similarly, often the issue of dual agency arises only after the seller has signed the standard listing agreement ; the seller’s broker suddenly finds a potential buyer who is not represented by counsel or by another agent.

    My advice to buyers and seller. While I have serious reservations about the designated agency arrangement, I can live with it since there are at least two agents involved - one representing the buyer and one the seller - albeit from the same brokerage company.

    However, I cannot under any circumstances recommend anyone to engage in a single agent dual agency agreement. You will not be properly represented - which has been the hallmark of American real estate agents for years.

    Report
  • Comment Link PatriciaInNY Tuesday, 31 December 2013 10:09 am posted by PatriciaInNY

    Dual agency is practiced in many states, in CT for example, it's been the only way for many, many years. Basically, the agent discloses the types of agency to the seller at time of listing, explaining the disclosure form clearly, to the Seller.

    When a buyer comes along to the listing agent for that listing, explain agency to them via the form.

    It is up to the Buyer and the Seller to decide and agree. Not the agent! If they don't want dual agency, move on to designated agency. If dual agency is agreed, the responsibility of the listing agent is to treat both parties fairly and honestly and not disclose any known confidential information and, to act as a mediator, relaying exact information regarding the negotiations & transaction only, and nothing more.

    It's not that difficult.

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  • Comment Link Adele Hrovat Tuesday, 26 November 2013 10:10 pm posted by Adele Hrovat

    Single agency, exclusive buyer agency or exclusive seller agency results in the most beneficial representation with FULL fiduciary duties for either the seller client or buyer client hands down. Dual agency and designated agency has the potential for the agent and/or the agents broker to double dip commission and that can be powerful motivator to do whatever is in the best interest of the agent/broker and not the consumers. The author of this article, Benny Kass, is a real estate attorney and he presents the true picture of the legal dangers of dual/designated agency. Consumers in most instances don't even realize what true fiduciary representation is. Sadly most agents don't fully explain it or understand it either. If they did, what consumer, with full disclosure, would not want 100% full fiduciary representation. They don't come to us because we can "facilitate" a transaction - they come to us because, as THEIR LEGAL, licensed agent, we can consul and advise them throughout a transaction. As for designated agency - it's a sham - the principal broker is always a dual agent no matter how state laws are tweaked to make it easier to make money. The principal broker and his
    company "double dip" on the commission. Just follow the money. BTW - the Seller who's home you list wants you to sell it for the highest price and best terms you can negotiate while protecting the Sellers interests. How can you do that in dual agency and fulfill that commitment to both parties? Bottom line: It can't legally be done - you can't serve two masters.

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  • Comment Link Mark Burns Tuesday, 26 November 2013 1:44 pm posted by Mark Burns

    In California, that agent Antoine mentioned has broken the law. You've got questions of fiduciary duty and potentially an action for procuring cause. It is an age old problem that criminals will perpetrate crimes regardless of the law.

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  • Comment Link Louis Tuesday, 26 November 2013 1:38 pm posted by Louis

    I would not advocate a dual agency for my seller client, nor as a buyers agent. as a sellers representative I do have the option of disclosing to a potential "customer"/buyer that I have a fiduciary relationship with my seller and that I cannot give the customer advise, but I can facilitate a purchase agreement. This can be done ethically, with honesty and integrity, by treating the buyer fairly as long as they understand that they cannot expect full service, beyond writing an agreement and seeing through the closing process.

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  • Comment Link Antoine Tuesday, 26 November 2013 10:57 am posted by Antoine

    Allow me to give you what one of my buyers told me happened to him: He saw a property he was curious about., and went to a viewing. The listing agent told him that if he bought the property with him, he would make sure he got it for 10% less than asking and he would give the buyer a 1.5% commission rebate at close of escrow. How does that serve the seller? You think the seller knows what that agent did? And what does that do for the relationship I have with my buyer? Plenty of negative aspects on this issue ruin it for all of us.
    A

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  • Comment Link Mark Burns Monday, 25 November 2013 10:23 pm posted by Mark Burns

    You mention that while most agents are honest, you wouldn't want what you tell the agent to get back to the 'other side.' It is pretty naive to think that two dishonest agents couldn't accomplish this just as easily as one. The next step in eliminating dual agency would be to not allow an agent to have a transaction with another agent that they have had a transaction with in the past. After that, you can outlaw agents that are acquaintances or might have met each other while networking and pitching their listings and buyers.

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  • Comment Link Dave Lubke Monday, 25 November 2013 5:11 pm posted by Dave Lubke

    So if you wanted to sell your home, and you listed with an agent. Your saying you would not want him to sell it for you.

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