The dual-agency double standard

REThink Real Estate

By Tara-Nicholle Nelson, Thursday, January 21, 2010.

Flickr photo by <a href="http://www.flickr.com/photos/23327394@N05/2246609033/" target=blank>uwdigitalcollections</a>.

Q: I will be purchasing a vacation home this spring. The home I'm interested in is currently offered by a real estate agent. This agent will be acting as a "double" agent -- working for me and the person who has listed her property with the agent. How does this work?

A: I find your choice of words intriguing. This situation -- where the listing agent also represents the buyer of a property -- is known in real estate jargon as "dual agency," but perhaps there's some significance to your use of the term "double agent." Dual agency simply implies that one brokerage or salesperson is working as the legal agent of both buyer and seller.

However, the term double agent connotes someone who pretends to spy on a target for another party, but is in fact loyal to the target.

Mindset Management

Are you concerned that perhaps your dual agent will be more of a double agent, selling out your best interests to the seller? The reality is that dual agents who were originally just the listing agents often do have a deeper relationship with the seller than with the buyer.

Is it possible for them to avoid situations in which they reveal one side's confidences to the other? Yes -- and frankly, it's a dual agent's legal obligation not to divulge your confidences, such as your top dollar, etc., to the other side.

Nevertheless, dual-agency situations are a breeding ground for suspicion and perceived bias toward one side, even in the best-case scenario. In the worst case, actual favoritism can occur. There are some potential, occasional upsides to working via a dual agent, too, to be fair.

But the consensus inside the industry is that more often than not, buyers represented by listing agents are depriving themselves of full advantages of representation you would have if you had your own agent.

Need-to-Knows

Different states and different agents treat dual agency differently -- some don't allow it at all, and virtually every state that does allow it requires that the arrangement be disclosed and consented to by both parties in writing. It's necessary to understand that there are two types of dual agency, though insiders agree on how critical the distinction is.

Single-agent dual agency is the most precarious sort -- where a single agent works for both buyer and seller. In two-agent dual agency, two different individual agents represent the parties, but the agents are employed by the same broker.

The biggest critique of dual agency arises from the fact that among the key benefits of having an agency relationship with a real estate agent in the first place are the fiduciary duties you are owed as client. One of these -- loyalty -- requires that your agent treat your best interests as supreme over her own interests and those of everyone else involved in the transaction. ...CONTINUED

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Submitted by Benjamin Clark on January 21, 2010 - 1:33pm.

HUD also states in the newest version of their Guide to Settlement Costs booklet:

"If you want someone to represent only your interests, consider hiring an 'exclusive buyer’s agent', who will be working for you."

An Exclusive Buyer Agents works for a company that takes no real estate listings and never represents sellers as clients.