Dual agents can balance interests
Letter to the Editor
By Inman News, Wednesday, July 22, 2009.Re: 'Romancing the "hogger" ' (July 20)
Dear Editor:
Advocates of discarding dual agency are laboring under the premise that real estate sales are always a practice of pure one-sided advocacy.
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.
Daniel Beirne
ZipRealty Inc
Philadelphia, Pa.
***
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Submitted by John Rakoci on July 23, 2009 - 5:40am.
"Why should we remove a better outcome for our clients from the equation?". Dual agency means better "income" for the agent and potential pitfalls for the buyer, seller, & agent.
Submitted by Robert A. Hulme on July 23, 2009 - 6:05am.
Most Realtors are very ethical, the few bad apples make it difficult for everyone. Eliminating Dual Agency will protect the Home Buyer every time and we can make it a little more difficult for the bad apple to survive.
www.summitcountyrealestate.ws
www.wasatchcountyrealestate.ws
Submitted by Jay Thompson on July 23, 2009 - 6:05am.
"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."
I don't believe this is correct. In my experience the seller wants to get the most money they can, and the buyer wants to pay as little as possible.
The conflict in representing both sides of that equation seems stunningly obvious.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Nick Chucales on July 23, 2009 - 7:09am.
For those that believe that dual agency can be handled by the utmost professionals, I usually respond with "would you want your lawyer representing the other side in a legal dispute". But we have a poster that has pointed out that we are not lawyers. He is right we are not lawyers, but we still have a fiducary duty to our clients and how can you provide each party with complete representation? It is still a sales transaction and each side expects the best price, the seller wants the highest price and the buyer wants the lowest price. To use a different analogy, would you disclose to a car salesman the amount you are willing to pay for a vehicle and expect him to get you the best deal? The car salesman works for the dealership and you work for the seller!
Submitted by Jon Astaris on July 23, 2009 - 7:57am.
"would you disclose to a car salesman the amount you are willing to pay for a vehicle and expect him to get you the best deal?"
Yes, actually it's exactly how I've done it buying many cars for myself - and for my friends, who always take me along because I cut the best deals possible for them. I do my research, I learn all there is to know about the car and then I make a low ball offer. The idea that the listing agent (car dealer) works for the "seller" is wrong. He works for ALL THE PARTIES, his goal is the SALE of the car/house/shoes/widget. All of these no dual agency theorists have absolutely nothing but straw men for their arguments. Robert Hulme's theory that there are a few bad apples and doing away with dual agency will "protect everyone" is just plain silly on its face, in fact it is the principle that has brought us to the laugthable, ridiculous state of afairs we are in today - see my comment to Ms Berg's article re: Check lists.
There is NO evidence, just "principle" - suppositions. Dual agency is not the problem. Lousy lazy agents are.
Submitted by Jay Thompson on July 23, 2009 - 8:04am.
Jon -
My E&O rep said that 90% of E&O claims stem from dual agency. I agree (strongly) that lousy agents are a problem. But if the vast majority of claims stem from dual agency, then dual agency itself is an issue. It's not ALL lousy agents.
Jay Thompson
Broker / Owner
Thompson's Realty
Blog: www.PhoenixRealEstateGuy.com
.
Submitted by Jon Astaris on July 23, 2009 - 9:01am.
Jay:
"90% of E&O claims stem from dual agency" therefore "dual agency is an issue." It may well be the other way around, though.
Just as in the days when some large ladder manufacturer was sued (because some careless "consumer" slipped and broke some o 'dem bones), it made a big national news splash, and before long most if not all ladder manufacturers were sued or threatened with lawsuits, so now ladders come from - exactly.
Americans with Disabilities Act produced in a few years MILLIONS of slip and fall claims - all commercial and many residential establishments were in danger thanks to Bush the Elder. Professional plaintiffs and shakedown law groups appeared and thrived in the "penumbra" of the new free-for-all "issue" until some judges realized enough was enough. In the interim untold billions were extorted by these lovely gangs of highwaymen.
SO when a legal eagle sniffs "dual agency" he remembers the "issue" is in every lagal rag, blog, flyer, chat and recommends filing a complaint - "don't worry Mr Buyer, we'll ammend it later."
Submitted by John Rakoci on July 23, 2009 - 9:39am.
So- Jon the super negotiator cannot use those skills in a dual agency deal- fair to the buyer?
Submitted by Jon Astaris on July 23, 2009 - 11:13am.
John Rakoci - I am not sure I understand your question (or comment?) but "super negociators" have gone the way of the electric typewriter...All pertinent information needed to make the correct decision/offer/deal is readily and almost always freely available. Real estate agents are (should be) little more than information peddlers and transaction overseers - though when some astute escrow officer sets up the "synergy" desk to do just that, the real estate agents will be gone. In fact it is the direction the business is going anyway, legislatures at all levels trying to micromanage all business transactions, step by step, through statutes, laws, regulations - why? So they can come up with taxes and fees they may have overlooked, and control the lives of the all-too-accomodating consumers in every detail.
Meanwhile the agent has been reduced to an information desk.
Here, Mr Seller - all the available comps. The Solds the Pendings the Listeds. Let's you and me go SEE some of them so you have a better idea. The best we can do is "x" price.
Here, Mr. Buyer - the comps. I have already shown you 15 homes in this price range, the comparable pendings as well. This demonstrates that the price of our listing is "x". I will write an offer for you at any price you want but the evidence we have
puts the "x" on our mark.
I like digging up the information on cars and doing deals for my friends as much as I like my friends, there is really no negotiating involved, just perhaps the order in which you present your "reasons" for your offer. The information on houses is/should/will soon be just as easy to get at for every "consumer" as about cars - but will he get away long enough from his cellphone, XBox, youtube, etc. to find it?
That's the problem, John. A citizen convinced that his life in all its aspects is now completely taken care of by somebody somewhere, and that he is free to spend most if not all of his time in the "pursuit of happiness" i.e., leisure and entertainment activities. All he needs to do is vote for the right candidate - Yes We Can!
The crazy thing is that there are some in government who sincerely believe they can deliver.
Submitted by Bruce Hahn on July 23, 2009 - 1:36pm.
American Homeowners Grassroots Alliance
"...there is a high degree of interest and value to having an agent or representative that respects both parties' basic desires. "
If you ask a buyer to list their "basic desires", near the top of every list will be to "pay the lowest price." If you ask a seller to list their "basic desires", near the top of every list will be to "get the highest price."
Dual agency does not respect either parties' basic desires in that regard. It balances their interests only in the sense that by not helping either one in negotiations, you are are treating them equally. The service (negotiation assistance) expected by both was not provided to either. Certainly no one could argue that there's any favoratism there. Even better, while not favoring either party, you also get two commissions!
Dual agency was made possible by the successful legislative efforts of state real estate associations to allow the practice. It's hard to understand why any reasonable consumer would not appreciate the deep respect for their client's basic desires that is reflected in those efforts.
On the other other hand, part of the reason that real estate agents are held in low public esteem may be that they do understand.
Bruce Hahn
American Homeowners Grassroots Alliance
Submitted by Lenn Harley on July 23, 2009 - 2:19pm.
Much dual agency is practiced by agents who promise to be "fair". To whom? The seller with whom you have a contract? Or, to the buyer from whom you want a signature.
Once there is a buyer and a seller, being fair to each is probably from an agent practicing dual agency without disclosure, which is FRAUD.
You cannot put lipstick on this pig and change it into anything it isn't other than a bigger paycheck.
Lenn Harley
Broker, Homefinders.com
http://www.homefinders.com
Submitted by Paul Howard on July 26, 2009 - 6:12am.
When I am 'fair' to a seller that means I won't cheat them. I will also treat them with respect. That does NOT mean I will treat them equally. In fact I will NOT treat them equally. I will use every legal means I have to gain an advantage for my buyer client.
That is how I work. If a buyer wants an agent that will work in that way they should be free to choose such an agent. Does disclosure do that for them? Not necessarily -in fact it almost never does. Buyers often see a house online they like and call the company representing that seller. They usually don't buy that house but if they "like" the agent they may stick with them. They may lose sight of the issue of representation.
What if they look at the house with the agent of the seller and then want to buy it but wake up and want someone on their side because they don't feel they are experienced enough to go it alone? If they try to change, many agents will shout PROCURING CAUSE.
Buyers usually don't sign brokerage fee agreements with their agent because the agent goes along with whatever the seller and their agent have decided to 'offer' a buyer's agent as 'compensation'.
AT THE CORE of the issue of dual agency is the commission system. Although lack of proper and timely disclosure is a HUGE problem the brokerage fee system is interconnected.
To make a real change:
- outlaw the system that all too often ties the buyer's agent's fee to an offering from the seller or their agent. They may determine a 'set aside' but should not have the expectation that it will equal the buyer's agent's fee as negotiated independently with the buyer.
-Require agents to have a written contract with buyers as a condition of collecting a fee.
-Start by making it illegal for an agent to collect a commission for a sale unless the buyer has been given and signed a REAL agency disclosure PRIOR TO looking at the house.
State legislatures could address this but as I see it it is a federal issue. Much of the money involved is funded by government backed loans. That makes it a legitimate area for involvement by the feds. As it is, the current commission system inhibits competition. It nearly eliminates any chance of competition regarding brokerage fees on the buying side of the transaction and this is facilitated by the virtually universal practice of the MLS "offer of compensation".
Paul Howard, Broker
www.NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Ileri Ogunfiditimi, REALTOR® on July 28, 2009 - 9:09am.
Paul,
Although buyer agents generally receive their fees from the seller/listing broker, buyer agents can actually receive their fees directly from the buyer or a third party. The time to discuss these fees is when the buyer agency/representation agreement is executed.
Buyer agents also can charge what they feel is suitable for their services based on what the market will bear and ARE NOT obligated to accept the commission offered by the seller/listing broker. In fact, listing agents/sellers are not obligated to offer compensation when they cooperate with other brokers either. (See the NAR Code of Ethics).
We must remember that there isn't a standard commission fee. The 6% fee that listing brokers usually charged is just the average. The 3% that buyer brokers usually charge is just an average too. But the question is, How many buyers are in a financial position or willing to pay the buyer's agent fee out-of-pocket? The answer: not many. This is why the seller/listing broker is encouraged to pay the buyer brokers' fee - it relieves the financial burden of the buyer.
Now, it's important to understand that the buyer is not off the hook. Once an agent executes an agreement with the buyer, it's the buyer's responsibility to PROTECT the agents' fee. It's an inaccurate practice to refer to the buyer agent as providing "free" services because "somebody" has to pay the buyer broker for services rendered.
But as many of you may have realized by now, nothing that I've just discussed has anything to do with dual agency. Nevertheless, buyer agency needed some explanation in order to distinguish it from dual agency. Dual agency gets a bad rap because more education on real estate agency (in general) is needed. Three resources to check out: "Agency Relationships," by John Reilly; "Brokerage Essentials: Legal Guide," by NAR; and "Buyer Representation," published by Dearborn. Trust me. You'll definitely have a better understanding of real estate agency after reading these three books.
Lastly, the commission compensation system isn't the problem and doesn't discourage competition. Getting paid by commission is comparable to getting paid on contingency. Same thing. Different name.
Ileri Ogunfiditimi, REALTOR®
Ileri Ogunfiditimi, LLC/Jobin Realty
7825 Tuckerman Lane, Suite 201
Potomac, MD 20854
Direct Dial (240)403-3400, Ext 742
Direct Fax (866)283-7840
Email: ileri@ileriogunfiditimi.com
www.ileriogunfiditimi.com
www.jobinrealty.com