Understanding Dual Agency – 5 Critical Considerations!

As promised,  I am writing a series of articles on real estate agency, including Dual Agency.  One of the primary motivations for me to start my own brokerage was to practice “single agency”.  What this simply means is RealtyV2 will either represent a Client as a Buyer, or a Seller, but never both in the same transaction.  While dual agency is legal and a wide spread practice in California, I think there are plenty of reasons why you may not want it.

If you don’t know much about real estate agency, I would suggest reading What is Agency Relationship? Here is a excerpt from the post.

Dual Agency is the most complex of the three relationships. A real estate agent in California can legally be the agent of both the Buyer and the Seller in a transaction, but only with the knowledge and consent of both the Seller and Buyer. In a dual agency situation the agent has the following affirmative obligations to both the Buyer and Seller.

A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either the Seller or Buyer.
Other duties to the Seller and Buyer as noted above.
In representing both Seller and Buyer, the agent may not, without express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the priced offered.

Okay, now that you should be really confused, let me take it a step further. Let’s say that you want to make an offer on the home listed by Joe Agent of Top Agency. You have been working with Susie Sales who is also working for Top Agency. Because the Broker for the Company employs both agents, you are in a Dual Agency Situation.

Okay so that is clear as mud….how about this?

Let’s say that you had a legal issue that you needed help with.  You ask around to family and friends and come up with an excellent recommendation for a local Attorney to handle your case.  You are going to rely on his or her expertise to guide you through the issue and represent your interests.  Of course that Attorney has a Fiduciary Duty to you.  How would you feel if the other party against you retained the same Attorney to represent their interests?  Doesn’t sound like such a good deal does it?  BTW – Attorney’s don’t have dual agency for obvious reasons.

So why does Dual Agency exist today in our profession?  Is it really the best thing for the Client?  More on that in another post…

Here are 5 things to consider for now regarding dual agency:

1. If you purchase a home directly from the Seller’s Agent (Listing Agent), that agent has been hired by the Seller to get the highest and best price for the subject property.  They has also been hired to market the property in it’s best light and to “sell you” on the property.  This isn’t wrong, it is important because a listing agent should get the property sold for the Seller at the best price.  The listing agent should do everything to protect the Seller’s interests throughout the sale and close. Now the agent for you the Buyer (Selling Agent), they are serving two masters with very different interests.    The Listing Agent has to also try and represent the Buyer and their interests. Tough job!
2. Information is everywhere - experience and knowledge are not.  One of the main reasons that you should want a REALTOR® to represent you is their experience and expertise.  Real estate is a process that involves sales, marketing, negotiation, contracts, inspections, contingencies, deadlines, and relationships.  You want that agents duties to be only your interests.
3. Years ago when I was training new agents, I constantly reminded them to use their power for good, not evil.  I don’t know how many times over the years that I have talked my Clients out of buying the beautiful mc-mansion perched above the busiest Interstate 5 on-ramp for the easy to fix up home in an excellent neighbored requiring some care; homes can be painted and re carpeted, but moving I5 is not likely to happen.  Do you trust the agent to point this out if they are the listing agent?  Do they really only have your interests at heart?  Homes are purchased most times from emotion and then justified with intellect (See Pushy Real Estate Agent Video).  You will want to have some faith in the agent standing next to you rather than the listing agent who will get hell if he/she mentions the close proximity to the 12 lanes of speeding commuters.
4. Yea, but I am going to get a better deal going through the listing agent.  The Seller will cut their commission and it will save me money. This is rarely a good reason for using dual agency.  First, you don’t know how honest the Listing Agent is and if they will even give the Seller a break on commission.  Secondly, the discount will almost always be surpassed with an effective Buyer’s agent negotiating for you.
5. It really does not cost you anymore to have your own agent, and it may cost you a great deal not to!  Commissions are normally split between the Listing and Selling Agent.  A good agent won’t be focused on what the split is, they will be focused on what is best for their Client.  Take your time and interview a few REALTORS® for this important job.  Trust is something that is built up over time.  Service is what you deserve, so pick wisely and don’t sell yourself short by not having your own advocate – it really is that important.

Consult a real estate attorney for advice on dual agency. Visit our agency category for more information.

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