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When Dual Agency Can Be A Good Thing

Written by Realty Times on Monday, 14 April 2014 1:07 pm
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A man can't serve two masters, the Good Book says; but neither the law nor common practice precludes the possibility of both buyer and seller being represented by the same real estate agent. When this happens a "dual agency" situation is created; and dual agency is a subject about which both confusion and controversy abound.

First of all, how does dual agency come about? In what sorts of contexts does it occur? No doubt the example that most readily comes to mind is when an individual agent shows his or her own listing to someone who then decides to buy it (or at least to try). A most natural setting where this might occur would be at an open house.

Dual agency is not restricted to situations where there is only one individual real estate agent (i.e. person) involved. We have noted before that California law stipulates that it is the broker or the brokerage company that is actually the agent in a transaction.

Suppose, for example, that Jim Jones of the ABC company writes an offer for a buyer who wishes to purchase the property listed by Jane Jackson who is also an agent at the ABC company. There would be dual agency in this situation, because the ABC company is the agent of both buyer and seller. Moreover, this would hold true even if Jim and Jane worked out of different offices of the ABC company. It wouldn't matter if Jim worked in the Los Angeles office and Jane in the San Diego office; the ABC company would still be acting as a dual agent. (This is not the case when there are two independent franchisees represented, even though they share the franchise name.)

It is not hard to imagine why some people find dual agency controversial. "How," they ask, "can the same agent represent parties whose interests are in conflict?" "It sounds like asking the same person to be both prosecutor and defense attorney." "Surely," these critics say, "this can't be done; more precisely, it can't be done without at least one of the parties being at a disadvantage."

In response to this, let us note first what California law requires. (Other states may differ.) There are two primary conditions:

(i) Dual agency must be adequately disclosed to both parties. There are severe penalties for agents who fail to disclose dual agency.
(ii) The law specifically prohibits someone acting as a dual agent from telling the buyer how low the seller will go, or from telling the seller how high the buyer will go. (Not that agents always know these things, anyway.)

However, we know that all sorts of other information can influence what someone may offer, counteroffer, accept or not accept; and it is this fact that the critics seize upon. They will argue that insofar as the dual agent uses his skills and knowledge on behalf of the buyer, then in that respect he will be doing a disservice to the seller, and, of course, vice versa. How could this not be so?

Those who believe that dual agency does not entail unavoidable conflict reject the model that the critics assume. They do not believe that sales negotiations are what the theorists would call a "zero sum game" -- one in which every plus for one side means a minus for the other. That may be an appropriate model for the adversarial proceedings in a courtroom, where one party wins and the other loses; but it fails to take into account that sales negotiations are, after all, negotiations. The aim is not simply for one side to "win" and the other to "lose." The aim is to get a deal together, to create a transaction that is, of necessity, acceptable to both parties.

Not only is it the aim of sales negotiations to arrive at a mutually satisfactory agreement; but also, especially in residential real estate, there are often important considerations which have nothing to do with the ultimate price. There are matters of personal pride, emotional attachment, convenience, etc. All of these are factors which an agent, or agents, must take into account.

More than one transaction that could have happened didn't, because agents were not sufficiently sensitive to the personal nuances that play such an important role in negotiations. That is especially likely to happen when agents act like adversaries. Ironically, it is precisely because of their special relationship with the parties that dual agents can frequently be the ones who are most likely to assist the buyer and the seller in arriving at a mutually satisfactory result.

Bob Hunt is a director of the California Association of Realtors®. He is the author of Real Estate the Ethical Way.

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8 comments

  • Comment Link James Deskins Thursday, 17 April 2014 11:22 am posted by James Deskins

    The majority of Realtors today do not promote dual agency. It's become the drunk uncle that you have to put up with but nobody likes. Your argument has been posted over and over again throughout the years. If people just wanted to "get the deal done" then your argument may hold water. But the only person in a transaction that "just wants to get the deal done" is the dual agent. Partial representation to two parties will never equal full representation to both. Try as you may, you will never convince an educated buyer (or seller, for that matter) that dual agency is to their benefit. Ever.

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  • Comment Link Dianne Alhaik Tuesday, 15 April 2014 3:38 pm posted by Dianne Alhaik

    Having previously worked in the legal field, I would strictly use the comps as the basis for the seller to set their price and the buyer to arrive at a fair market price. That way, you have solid information in black and white as to how an offer was procured. I would also bring the buyer and seller together to keep the transaction as transparent as possible, as the potential for future litigation is less likely if all the parties are face-to-face from the beginning.

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  • Comment Link Andrew Show Tuesday, 15 April 2014 2:45 pm posted by Andrew Show

    Bob, one question that universally arises from a seller when they consider selling their home is "What is it worth?" among others. And I won't go into the experience, honesty and current hyper-market knowledge to accurately and effectively "counsel and advise" a seller.

    So move further down the timeline and a buyer asks the same (dual) agent the same question, "What is it worth?" What is the dual agent's response? And what does the dual agent "advise and counsel" a buyer?

    Are we supposed to be "Deal-tors" and simply put the deal together regardless? As a dual agent are you a "Deal-tor"? And since a dual agent has prior inside knowledge of the seller and private discussions with them are they going to share those intimate details with a buyer - or not?

    EVEN IF you take the extra (or sometimes double) commission out of the equation and IF the dual agent got paid the same by the seller no matter what it still begs the question - Deal-tor or not?

    And lest we forget there is the issues regarding inspection results and requests for remedy - how aggressive (or not) is the dual agent going to be - on either side?

    I'll stick with finding the right home at the best price and terms for my Buyer-Clients without any real conflicts of interest, insider trading, or double dipping - thank you!

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  • Comment Link Ron Tiller Tuesday, 15 April 2014 12:30 pm posted by Ron Tiller

    What a bunch of (mostly) self serving rhetoric. The Holy Bible is correct. Only one master.

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  • Comment Link Paul Howard Tuesday, 15 April 2014 11:42 am posted by Paul Howard

    This post lacks honesty. The obfuscation involved in the content is striking.

    An advocate must be proactive in protecting their client. They must try to discover information that is not obvious - not merely disclose what is on the surface. Being a proactive advocate does not require acting in a adversarial manner and I believe the writer knows that. Thus the obfuscation is intentional and deceptive.

    A dual agent will try to close the deal that created the dual agency. A buyer advocate will (or should) help the buyer to have a back up ready.

    Shame on you.

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  • Comment Link Antoine Tuesday, 15 April 2014 11:37 am posted by Antoine

    Allow me to tell you what my mother told me year ago: THE OCCASION MAKES TH THIEF! In this case, if the buyer and seller is represented by the same agent, the opportunity for the agent to say / do something illegally is very high. And, how can you prove afterwards of what exactly happened?
    Buyers actually specifically call listing agents, and try to work with them to write the offer, because they say/indicate they then have an advantage of "getting" the purchase offer accepted.
    I treat dual (person) agency differently. If it is my listing, and I have a buyer, I have my broker write up the buyers offer. In this case, another offer from another agent has just as much chance of getting accepted, as I do not inform the buyer of what kind of offers have been received. I think ALL brokerages should do that. It would also prevent what you see on MLS, in that a listing agent had an accepted offer after zero (0) days of being on the market.
    Lets clean up our industry as much as possible. It would for sure help our "reputation".

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  • Comment Link Lance Hanson Tuesday, 15 April 2014 11:14 am posted by Lance Hanson

    I could not agree more. Doing the right thing and being honest in the transaction has better results by far. Having knowledge of each party even without disclosing that knowledge to the other can simply find a solution to problems that is beneficial to both. Win Win is achievable.

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  • Comment Link Judi A Desiderio Tuesday, 15 April 2014 11:08 am posted by Judi A Desiderio

    Agency Law -- especially Dual Agency-- can be confusing even to seasoned agents.
    there are elementary questions which come to mind such as how can a Seller's Agent truly be representing the seller if they show a buyer any house other than just that one home.
    and are you representing the seller's best interest when you explain situations such as there is a sex offender living in the area
    Bottom line-- all agents are expected to disclose EVERY/ANY defects they know about a home and it's area-- this is part of the full disclosure law -- and if an agent was truly representing a seller's best interest they would never show any other home for sale to customers who chose to see the seller's home

    We can come up with a solution to protect the public yet not put agent's in this position

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