Dual agency can 'work very smoothly'

Submitted by Paul Howard on January 22, 2010 - 5:00am.

It is hard to believe that there are still agents out there who think any consumer can do as well for themselves in a transaction as they can do with an agent acting as an advocate.

Why do you think that HUD in their recent update of their settlement cost booklet on page 6 recommends considering an 'exclusive buyer's agent' for representation? (Google "hud new closing cost booklet")

Exclusive Buyer's Agents are advocates.

An advocate is proactive in discovering things that will give their client an advantage in negotiations of price, home repairs, alternatives.

A dual agent can NEVER act in a way that will give one side an advantage over the other.

When I represent a client I don't want them to be equal - I want mine to have an advantage that will save them real money or get them a better house.

That is, of course, more work for me and it is still smooth for my client in almost all cases. But when I think it is appropriate I'll still tell them to walk away and move on. A dual agent can't do that.

You can find Exclusive Buyer's Agents at the website of the National Association of Exclusive Buyer Agents. http://www.naeba.org
or at http://wwww.facebook.com/buyersagents

Paul Howard, Broker
NJHomeBuyer.com Realty
www.facebook.com/homebuyers
Cherry Hill NJ 08002

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Submitted by Nick Chucales on January 22, 2010 - 8:03am.

Bernie,

While I respect your right to your opinion regarding dual agency, it is this mind set that keeps the average real estate agent from being perceived as a true professional. The vast majority of agents are perceived as no better than car salesmen. You as a real estate agent have a fiduciary duty to your client, and that cannot be accomplished in dual agency. It is time to stop looking at the best way to make the most amount of money in the easiest possible way, and to start looking at what you can do to provide the most prefessional level of service to your client. It appears that Mr. Howard understands that and is a professional.

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Submitted by Jeremy Hart on January 22, 2010 - 10:07am.

Well said, Nick.

Bernie, an attorney can't represent both sides in a transaction, so how could they possibly suggest to a client - who's asking them to review documentation - that it'd be okay for a real estate agent to represent both sides?

An agent shouldn't try to be on both sides either. As a licensee, you have a responsibility - a promise - to protect your clients' interests, whatever they may be. You can't also promise to protect another clients' interests in the same transaction and give full representation to both, it's impossible.

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Submitted by Steven Ladin on January 22, 2010 - 11:57am.

Interesting topic...

Even in commercial real estate traditionally, the role of the commercial brokerage firm has been to represent property, bring tenants or buyers to the table and negotiate a transaction in the best interest of the owner. Most brokers negotiate from both sides of the table, claiming to objectively represent an owner and a tenant or buyer in the same transaction. The pressure of retaining major listing arrangements for local and national accounts often influences the outcome of transactions within a firm.

Our firm does not believe it is possible to negotiate from both sides of the table. Because our Clients are corporate tenants and investment buyers, we work on our Clients behalf as partners, without conflict of interest and with sincere objectivity.

We have actually changed our business model and won’t accept listings from landlords because we strongly believe that working for both landlords and tenants creates potential conflicts of interest that may not be readily apparent to a Tenant.

Many commercial real estate brokerages, however, operate as "Full Service" firms. At first, this may sound good - what's wrong with offering a full range of services? Full service brokers typically represent both landlords and tenants. For example, did you know that a commercial broker (or brokerage firm) may make double the commission amount if a tenant signs a lease in a building where its broker / brokerage firm also has a listing with the landlord? Will a broker negotiate aggressively on behalf of a tenant if this broker also has a listing agreement with a building's landlord or is soliciting a landlord's listing business? We think not!

Steven Ladin
Chief Executive Officer
Phone: (763) 331-3010
Fax: (763) 331-3014
11140 Highway 55, Suite F
Minneapolis, Minnesota 55441
Email: sladin@ladinventures.com
www.LadinVentures.com

Follow Me On Twitter: @LadinVentures

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Submitted by Bernie Hassan on January 22, 2010 - 2:50pm.

Bernie Hassan

In 2009 my office did more than 35 Dual Agent Transcations. My agents are trained and every buyer and seller has legal representation. Again the comparison of a Realtor to the work of an Attorney in a transcaction is still nonsense. Making reference to an agent being average just because that agent has gone the extra steps to be professional and handle both sides of the transaction again shows that some in this industry just do not get it.(MR.Chucales) Also, while HUD recomends buyer agents in it's informational material IT NEVER SAYS DUAL AGENCY WILL NOT WORK.(Mr.Howard). We can agree to disagree. I have been a professional Realtor since 1986. I have been a manager and trainer since 1990. I currently host a local radio program since 2005 "Real Estate Today" on AM1460 WXBR in Massachusestts.Not exactly and average agent resume. If anyone would like to speak to me directly I would be happy to share how I train succesful dual agents with integrity.
Bernie Hassan-Mgr.
Weichert Realtors,Briarwood Real Estate
508-230-8200x 314
bhassan@briarwoodrealestate.com
Bernie is the host of Real Estate Today heard each Tue. on
AM 1460 WXBR or on the internet at www.1460WXBR.com

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Submitted by Nick Chucales on January 22, 2010 - 3:15pm.

Mr. Hassan,

While I applaud your career accomplishments and the fact that you have a talk show, none of that equates to being a professional. I think we have all seen or heard individuals on the radio and/or TV that are less than professional. In fact my guess is that you can turn on the TV to any of the News Channels and see and hear someone within 15 minutes that is less than professional in their conduct, comments or demeanor. I am not saying this is you per se, just that by being on TV or radio does not make you a professional or even an expert. You will never be able to convince me that you can represent both parties in any transaction equally (regardless of the transaction, whether it be purchasing a car, appliances, or services, etc.). One last thing, you stated that every client that was involved in a dual agent transaction within your brokerage had legal representation as well. If this is a fact, why where your agents needed at all? The lawyers could have handled the entire transaction at a fraction of the commission that was paid. Was that excercising fiduciary care?

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Submitted by Paul Howard on January 22, 2010 - 4:37pm.

Mr Hassan, I don't know about you but my clients tend to want me to work as an advocate and help them get a better price/terms from a seller. A dual agent CAN NOT do that. Sure a dual agent deal can be 'smooth' if neither the buyer nor the seller have any expectation that their 'agent' will advocate for them but my clients tend to expect me to be an advocate. Also, HUD didn't just say consider a buyer's agent - they said consider an EXCLUSIVE BUYERS AGENT - and they did it in bold print.

Paul Howard, Broker
NJHomeBuyer.com Realty
www.facebook.com/homebuyers
Cherry Hill NJ 08002

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Submitted by RealEstateCafe on January 22, 2010 - 4:57pm.

Dual agency: The illusion of individual savings & the real cost to society

For links on blog post below, see original at
http://bit.ly/RepealDualAgency1

Exposing the hypocrisy of dual agency, and it's evil counterfeit buyer agency twin, "designated agency" has been a crusade for real estate consumer advocates, like The Real Estate Cafe, for more than 15 years. For the most part, proponents of buyer agency have stressed the financial benefit to individuals -- something the original article fails to even address. Instead, the article may give the mistaken impression that buyers can maximize their savings by working with a dual agent because of "...a commission reduction to cover repairs or a lower purchase price, if they represent both sides."

Those savings are trivial by comparison to the deep discounts skilled buyer agents can negotiate for their clients. For example, The Real Estate Cafe saved clients over $1 million dollars during one recent year (see map of selected savings, all but one over $100,000).

Still, what's more important from a policy perspective is to switch from debating savings at the micro-level to costs at the macro level, ie. the cost to society. With one in four mortgages underwater, it's essential for legislators and regulators, both a national and state levels, to investigate whether dual agency, and related "blind" bidding wars, helped inflate the housing bubble and to enact reforms to prevent a repeat in the future.

Research findings from one snap shot, a Cornell study on dual agency, suggest dual agency helped create overvalued housing prices, which tax payers are now being forced to bail out. More specifically, Cornell researchers found that listing agents increased asking prices by 10 percent "when an internal buyer with a high willingness-to-pay is available," and generated sales prices 5 percent higher on transactions involving in-house sales. Ironically, researchers concluded that the net impact on the market was insignificant because "agents cut sale prices to capture both sides of the commission or trade favors with colleagues." That's one of the strongest arguments to outlaw inside trading, and require no conflict of interest agreements from any real estate agents involved in foreclosures. (As CNBC recently reported, short sales are already plagued by fraud and kick backs.)

Even if individual buyers don't understand the financial benefit of using a buyer agent, shouldn't taxpayers have an advocate to prevent buyers from overpaying any time government subsidies are used to purchase or finance a property? Yale Economist Robert Shiller may have had something like that in mind last year when he told ConnectNY that ever family in America should have a personal financial advocate. Fortunately, the cost of paying for that advice is already built into the typical real estate transaction. If you're NOT using a buyer agent, you're giving the listing agent / agency a double pay day whether or not they are acting as disclosed dual agent (something the original article also fails to mention).

Speaking as a real estate consumer advocate, my hope for the new decade is that (1) dual agency laws will be repealed, (2) any company involved in short sales or foreclosure disposition will be required to sign a no conflict of interest policy which includes dual agency, and (3) in the future, "blind" bidding wars replaced by controlled bidding environments, like N-Play, to maximize transparency and minimize deceptive buyer manipulation.

Until then, we invite readers to discuss what regulatory reforms are needed to protect real estate consumers.

For links on blog post above, see original at
http://bit.ly/RepealDualAgency1

Bill Wendel
The Real Estate Cafe
Serving a menu of money-saving services for "do-it-yourself" homebuyers & FSBOs since 1995
617-661-4046
realestatecafe@gmail.com
http://realestatecafe.blogs.com

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Submitted by Ray Sherman on January 24, 2010 - 6:33am.

Dual Agency is illegal in Colorado. We finally figured it out. You cannot serve two masters.

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Submitted by Ileri Ogunfiditimi, REALTOR® on January 29, 2010 - 11:02am.

Hi All,

This debate will continue ad infinitum. I actually agree with Bernie that dual agency does have merit and a place in real estate brokerage. It can be especially useful when penetrating one's book of business. Essentially, there are two methods of growing revenues when operating a professional service business: 1) increasing client/customer share; and 2) increasing market share.

Method #1 involves working with your existing client database, while method #2 involves working with new prospects (and suspects). Guess which method requires less of a drain on marketing resources and capital reserves? You're correct if you said #1. These are fundamental Sales Management principles practiced by many big corporations and profitable businesses.

[If you don't know anything about sales management, please research the topic. I believe that your understanding of territory management (farming), sales meetings (now a thing of the past for most agents), and market segmentation and penetration will become clearer.]

Now, in regards to dual agency. Dual agency can come into play if an agent lists a property that a past client would buy based on previously known criteria (i.e client profiles). In such a situation, a relationship already exists. Again, we're not talking about prospects or suspects for that matter. We're talking about past clients -folks with whom you've already provided services to or done business. I would surmise that a majority of agents (90%) never develop an effective book of business during their business career because it's not suggested in real estate school and is rarely taught by the sponsoring brokerage firm.

However, it's a legitimate business practice to cultivate your client base by offering them existing or new services/products - and that includes real estate assets with which your clients' needs and objectives are satisfied. This strategy is used by many service professionals including, commercial real estate brokers, dentists, lawyers, corporate salespeople, and consultants just to name a few.

And it is an effective method of staying profitable even during downshifts in the economy. Bernie is a good example of that. His business, obviously, made money in 2009 as did some other professional service firms/individuals. I personally know of folks who did well last year, in spite of job layoffs, foreclosures, reduced marketing budgets and lowered capital expenditures!

I think part of the problem too, is that many agents don't see themselves or position themselves as serious businesspeople. Real estate brokerage is a business opportunity (if you are an independent contractor), not a JOB. In business, there's no ONE RIGHT WAY of achieving success. Dual agency may work for your business or it may not. Most of us are independent businessmen and -women. So we don't have the same life goals, interests, training, talents, education/knowledge, business methodology, or comfort zones.

At the end of the day, we each have to make a personal and/or business decision as to what works for us as an individual real estate practitioner. Keeping in mind that what works for one agent, may not work for another. That's just a reality many of us, who are now in the business world, have to learn to accept.

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

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