The National Association of Exclusive Buyers Agents is urging Congress to include real estate agency disclosure language in mortgage reform legislation, including the Anti-Predatory Lending act currently under consideration.
“Too many consumers have no idea that when they contact an agent listing a home, that agent must do everything possible to achieve the best outcome for the seller,” organization President John Sullivan says. “As a result, these consumers have no one involved from the beginning of the transaction who can advise them on negotiating techniques, price points or the acquisition of an appropriate loan.”
Another blog post by Zac Bissonnette posted on WalletPop discussed the hazards of dealing with dual agency. the post references a HBTV Show called the Property Shop.
Tatiana takes the listing on a duplex, even though she admits to believing that it’s overpriced by $100,000 at $459,000. A young couple comes in and wants to offer $409,000, and Tatiana takes the potential buyer on as a client, making her a dual-agent, representing both the seller and the buyer in the same transaction. Tatiana suggests that they start with an offer of $380,000 and then heads back to the sellers’ home to present it.
That’s where it gets interesting: The sellers rejects the $380,000 offer and then Tatiana tells them straight-up that her buyer is willing to go into the 4′s on the home.
Here’s the problem: As an agent of the buyer, she has a responsibility to keep confidential information they provide that might harm their negotiating position: If Tatiana is going to tell the seller that they’re willing to go into the 4′s, what is the point of making an offer in the 3′s?
Real estate agent and Diary of a Real Estate Rookie author Alison Rogers tells me that “Ethically, Tatiana should either say to the buyer ‘I’m an agent of the seller and anything you tell me is going to the seller, so watch what you say in front of me.’ Or, she should say ‘Here’s what you can tell me in confidence.’ But she can’t play both sides.’”
Rogers is also troubled that Londono, as an agent of the seller, advised the buyer to make a lower offer. “There are few cut and dry rules in representing sellers, but one is that getting a higher price is generally better.”
What does all this mean for prospective home buyers?
Dual-agency is perfectly legal in some states, although specific rules vary. But even if it is legal and the agent recommends it, which you can be sure he will since a double commission is on the line, it’s still not something you should do. There is too much potential for sticky situations and conflicts of interest and no particular benefit to the buyer, in most cases. Rogers tells me that it’s “not generally in a buyer’s best interests” to use the same agent as the seller. “You’re walking into a negotiation and it’s better if you have someone to negotiate for you. Bring your own person to the table.”
Another interesting post over at Inman – Dual Agency and the “hogs” that love it says:
A common argument by critics: “You wouldn’t want your lawyer to represent the other side in a legal dispute.”
Is dual agency ever a good thing for consumers? Are consumers still largely in the dark about dual agency and what it means? Will the practice of dual agency ever be wiped away completely from the real estate industry?
Romancing the ‘hogger” written by Teresa Boardman which inspired the post above says:
When I went to real estate school I learned about the “hogger.” That is the sweet deal that our instructors told us would happen if we represented both the buyer and the seller. Stories were told about unrepresented buyers calling listing agents and those agents selling the listing to the buyer. It is also called dual agency.
While most ethical agents don’t view dual agency as a money making endeavor, the real problem lays in the ability of that agent to represent both the Seller’s and Buyer’s interest in a transaction. In fact a dual agency picks up twice the potential liability .
The idea of agency is a consumer education challenge. Consumers do not understand real estate agents, real estate companies or agency. The whole Realtor and commission process is a mystery to most buyers. They just want to see the house, and they don’t care about who gets paid what or how.
There is an upside to being a dual agent in that it pays well but there is also a downside. The dual agent can not act in favor of or on behalf of one party or another.
Finally I think that Jim Duncan of RealCentralVa.com said it best:
My belief remains: The only party who benefits from Single Agent Dual Agency is the Realtor. And even this is a short-term financial gain that sacrifices public perception of an industry already clinging to integrity.
Want to learn more about California Real Estate Agency? Please visit our Agency Category for more.
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