Dual Agency And The Dead Horse – Closing Thoughts

Simple Truths

• Homes are bought on emotion, and then later justified with intellect.
• You will fall in love with a home you see, then emotion will rule and you’ll buy it.
• The agent next to you in that moment should only have your interests in mind.

These are a series of posts that I have done on discussion of real estate dual agency.  While I somewhat feel I have been beating a dead, smelly horse, and organized real estate is not likely to changes it evil ways, hopefully these and other posts from thinking REALTORS will give you another perspective and if you want your own agency.

Don’t fool yourself, there are some powerful pillars of organized real estate dedicated to the status quo. This will not change from within the industry.  The establishment likes it the way it is.

Disclaimer:  I have been practicing real estate over 20 years and have been personally involved in ‘dual agency’ relationships.  The single agent dual agent transactions (only a few) made me the most uneasy, and wanting a long hot shower afterwards. Of course working with large brokers, two agent dual agency is almost a given with the Consent to Dual Agency Relationship form which is shipped in semi-truck size cargo boxes, from large steamer ships unloaded by forklifts.

While I consider myself to be on the extreme of real estate agency, much discussion has been focused on a single real estate agent representing both the buyer and seller.  Many feel that one agent representing the Seller, and another representing the Buyer, but both working for the same Broker is less onerous.  While I agree somewhat, you can’t be a little bit pregnant – in California, this is still defined as Dual Agency.

There is a real tendency  to downplay Buyer Agency, and that by having it things won’t get done so easily, bad agents will mess up the deal, the Seller won’t get there way.  These are really all just code for don’t rock the boat; like Rodney King so bravely said, “Can’t we all just get along?

Here is a recent comment by Daniel Beirne on “Inmen regarding Romancing The Hogger.”

In fact, most real estate sales result in negotiations that have very different established rules of practice. In a successful negotiation, a negotiator is at least mindful of the other side’s goals and at best they try to meet the needs of the other side in order to achieve a better outcome for their client.

Why should we remove a better outcome for our clients from the equation?

In a dual-agency transaction just like a “fully represented” transaction, there is a simple truth. The seller wants to move out and receive a fair value for their property and the buyer wants to move in and pay a fair value for the property.

In most cases this is not a conflict of interest, but there is a high degree of interest and value to having an agent or representative that respects both parties’ basic desires. That person is a dual agent.

A dual agent can steer away from clauses in contracts and in actions that are geared to get the upper hand. Who needs an upper hand when both parties have the same interests?

Banning all dual agency is a myopic approach to all transactions when all transactions are not alike.

Realtors should instead learn their profession, and they should focus on learning professional negotiation rules and practices before throwing away a service to the consumer like dual agency.

Bringing a loaded gun to mediation is not a help. Bringing an open mind and a problem-solving attitude is what the public needs and what Realtors should provide.

Really, single agency and loaded guns? You really couldn’t make this stuff up.

Again, I think this is code for let the Seller get there way and don’t even think about causing any trouble.  The art of selling real estate is win-win – but it should be with each parties interests fully represented.

A few of the really really big and famous real estate bloggers have been posting on Agency recently.  There were some rather strong worded posts on Inmen News and the comments continue to ping my e-mail box.

Jay Thompson of Phoenix Real Estate Guy answers the question, “why do real estate agents practice dual agency?” on a recent post.  Jay can be a bit direct, and you don’t have to put much thought to what he is thinking – you gotta love him for that.

Beats the hell out of me.

Could it be for the windfall payday it can produce?

I won’t say this is why all the agents who practice dual agency do it, but it’s important for the home buyer and seller to be aware of.

When a home is listed for sale, there is a commission that is negotiated. That commission is split (usually evenly, though it doesn’t have to be) between the listing (sellers) agent and the buyers agent. Well, technically it’s split between the listing and buyers brokerages, which then farms it out to the agents. But for simplicity sake, we’ll say it’s split between agents.

Let’s say, for example only, the commission is a total of 6% of the sales price and evenly split. So when the transaction closes, the seller’s agent gets a check for 3% of the sales price, and the buyer’s agent gets a check for 3% of the sales price.

In a dual agency situation, the sellers agent is also the buyers agent. So guess what? That person gets the entire 6% commission.

It’s called “double siding” or “double ending” or “double dipping” the transaction.

I have witnessed brokers and agents whooping and hollering and high fiving when they close a double-sided deal. Are they carrying on because both of their clients were fully served and represented? No, they are acting like they just scored a game winning touchdown because they just got a big fat paycheck.

It makes me want to puke.

Now another favorite read of mine and fellow San Diegan is Kris Berg over at San Diego Home Blog.  After reading her post I was almost convinced that maybe dual agency was not so bad after all, she has that kinda power.

Let’s take a quote from her recent blog as to why real estate agents do dual agency?  Kris argues that the two agent dual agency can be beneficial and can be all warm and fuzzy.  Not sure how the attorney’s would weigh in on this but I totally get what Kris is saying.

So, why would dual agency possible be acceptable, even beneficial, to both parties? There can be many reasons. Let’s start with defining the “agent.” I happen to work in tandem with my husband and business partner. Functionally, we do not operate as the two-headed agent. He has closed transactions where I have never met the client or seen the home and the other way around. In the event we both have an initial relationship with the client, it always evolves to the point where there is one primary point of contact, and the other is relegated to back-up mode. Who takes the lead is a natural evolution, sometimes dependent on schedules but more often on personalities.

So, we have the ability to act as dual agents because we are “dual” agents. This may sound like semantics, and it won’t work if you are working with agents who are ethically challenged, but ethics are central to our model and our being. The day I knowingly breach ethics, you have my permission to shoot me through the temple and call it a day. (I’m embellishing; report me to the Department of Real Estate and have my license revoked. It’s just as painful but a little less a felony.) Case in point – we actually had a listing this year where I was the lead on the listing, while Steve had a buyer client he had been working with for a year who wanted to make an offer. He did, with Steve, and two other buyers did, with their own agents. The home closed escrow two months ago, and Steve’s client is still out looking. It was one of my proudest moments.

If anyone makes it through to this point here is my conclusion and I promise I will bury the horse.

• Agency is important – but picking the right REALTOR® is critical.
• Make an informed decision up front what is important to you to fit your needs and goals.
• Two bad single agency agents don’t add up one really good ethical dual agent.

Will you get a better deal because the Seller is paying less commission?

• Maybe, but in real life that difference is between 1 & 2%
• A good Buyer’s Agent can out negociate that savings every day

Okay, now where did I put that shovel, and how in the world am I going to bury a horse in downtown San Diego?  Any ideas?