Who wins with dual agency?
Letter to the Editor
By Inman News, Friday, January 22, 2010.Re: 'The dual-agency double standard' (Jan. 21)
Dear Editor:
I have long thought dual agency should be illegal or at least listed as unethical. As the article states, one of our fiduciary responsibilities is loyalty to the client. Well, would you want a prosecuting attorney representing your defense?
I think the same applies in real estate. How can a listing agent who is supposed to negotiate the best deal for the seller get the best deal for the buyer? I just don't see it. When the situation has arisen for me I have always brought another agent into the deal to represent the secondary customer. Just my two cents.
Dona Cardenas
RE/MAX Greater Atlanta
Dunwoody, Ga.
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Submitted by Kevin Turner on January 22, 2010 - 2:23pm.
I guess it depends on who you believe is your client. Surely its the person paying the commission - the seller. My responsibility is to the person who pays me! If I am getting a commission from the seller and the buyer then there is a problem. While ever the seller is paying a commission I will be trying to get the most I can for his/her property from the buyer.
Submitted by Tim Walters on January 22, 2010 - 2:56pm.
Kudos Dona! Glad to see a Realtor who "represents" both the Seller and Buyer feel a little funny about doing so, further more make more money in the process acting as a dual agent.
Go to www.nodualagency.com to learn more or www.naeba.com to find out an options for consumers who want 100% representation.
Submitted by Gary Frimann, CRB, CRS, GRI, ABR, ABRM on January 22, 2010 - 3:10pm.
First, I agree with your premise with regards to law, if the prosecutor also defended the Accused, we would have a police state. However, our job is more akin to performing a marriage.
What if you were in a small town, and you worked for the only Brokerage in town, and the next nearest Brokerage was 50 miles away? You'd have to call them and wait for them to show up to write the offer...
Usually, the issue boils down to the price term. I have, as of late, asked my selling clients to please never reveal to me what their "bottom line" is, as so many seem so anxious to blurt out when I take the listing.
However, consider the following example:
Seller is asking $105K. Buyer's offer comes in at $99K. After much hand wringing and head beating, Seller refuses to take less than $100K. Buyer refuses to to pay a penny more than $99K. We have a $1K difference, a gap that cannot be bridged. So, I as an agent make a decision to cut my commission by $1K, if the Seller agrees to $99K.
Seller netted what they wanted!
Buyer got the house for the price they wanted!
Who loses? The agent!
(Nowadays, the appraiser would mess the transaction up, so it would fall apart anyway!)
No fiduciary duty was breached.
Naturally, the Seller felt they could have gotten more, and the buyer felt they could have paid less (Google: "The Frimann Principle").
I can see where the agent visual inspection could be an issue as the agent is too worried about just consummating the transaction, and it is too easy to overlook a potential red flag, but the argument usually is based on the price term. Simple solution. Do not get your seller's "bottom line" or your Buyer's "top price". Interrupt them when they start to tell you what it is, and tell them you do not want to know what it is, as you are trying to work the best deal for them.
What if you get more for your seller than they wanted, and the buyer pays less than they originally were willing to offer? Did you breach your fiduciary duty then? NO.
They should both be thrilled, correct?
BTW, the Prosecutor has a duty to the People of the state. He is trying to take away the Defendant's life, liberty or money. The defense attorney is trying to mitigate that, by offering up mitigating (or contradictory)evidence. As mentioned, we are performing a "marriage", bringing together two parties to a satisfactory agreement, acceptable to both parties.
All that being said, in actuality, I am not a big fan of dual agency, as I feel the agent always loses one way or another.
Gary Frimann
Broker / Owner
EAGLE RIDGE REALTY /
SIGNATURE HOMES & ESTATES
http://www.EagleRidgeRealty.net
http://www.SignatureHomesAndEstates.com
Submitted by Ken Lampton on January 22, 2010 - 3:20pm.
When I have a choice in the matter, I prefer to represent either the seller or the buyer. Not both.
Why? Not because I doubt my ability to follow the rules regarding dual agency laid out for me by the State of Texas. Not because I think it is inherently unethical to act as an intermediary.
No, I just think it is smart to avoid extra legal complications whenever possible.
----------------------------
Ken Lampton
RE/MAX Realtors
www.m-street-dallas.com
Submitted by Paul Howard on January 22, 2010 - 3:51pm.
Those of you who actually understand the concept of fiduciary duties (that excludes everyone that thinks the source of the payment of the fee determines representation) and have the ethics to back it up should consider opening up your own shop as an exclusive buyer brokerage. You will find that the folks at the National Association of Exclusive Buyer Agents would be happy to share their experiences. It is good for business. Find them at http://www.naeba.org (contact the executive director for information)
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Dorothy Harrison, Associate Broker, CRS, SFR, ABR, e-Pro on January 22, 2010 - 5:05pm.
In 30 years I have performed a dual agency transaction maybe 5 times. I find it uncomfortable and really don't like it. How can you be faithful to both sides? If you stand back and be neutral you have helped no one. That is not honoring your fiduciary duty to your client. I probably won't make as much money but I'll feel good about who I represent knowing I did my best.
Dorothy Harrison,
Associate Broker
www.dorothyharrison.com
Coldwell Banker Residential Brokerage
Chandler, Arizona
Submitted by Joseph Marovich on January 22, 2010 - 8:04pm.
I have published an article called "The Truth About Dual Agency." If you are interested in a copy, send an e-mail to me: Joe@MarovichBusinessInstitute.com
There is much misunderstanding out there, e.g., allegiance is owed to the one who pays. As a dual agent you limit your fiduciary duties, not eliminate them. Confidentiality and Disclosure are in conflict. Loyalty, i.e., advice, advocacy, and allegiance, is eliminated. It's not going away in many states, so it behooves REALTORS to learn how to practice it properly.
Joseph Marovich, ABR,ASR,e-PRO,GREEN,GRI,PMN,RSPS,SRES
Inductee REBAC Hall of Fame
MAROVICH BUSINESS INSTITUTE
www.MarovichBusinessInstitute.com
732 961-9618
Submitted by Steve Gillespie on January 22, 2010 - 8:13pm.
Let’s see; we spend our marketing dollars to get a buyer to call or email "us" on a home we've agreed to try and sell for a Seller....right?
Then, when the buyer finally calls and decides they'd like to buy the home, we get the idea we are to send them off to get "proper representation".
At which point we: 1) risk losing the buyer to other property or general negativity toward the subject property, or 2) have just put our Seller in a less advantageous position due to the fact we have placed the buyer with a super-negotiator-representor-expert.
To top that off, guess who's money we use to pay for the super-negotiator-expert that will be doing battle against our Seller? YEP! You guessed it!
Does that make sense?
When we walk into a grocery store, do we automatically assume the cashier at the checkout line is making sure we're getting the best possible deal the bag of potatoes?
At what point can we assume the buyer who just emailed in, (from our marketing dollars), fully doesn't understand that they are merely answering an advertisement: And that they are at risk of potentially be "sold" a house by someone they have no relationship with?
Why can't we be like the cashier and just smile and take their money?
This may sum it up; we spend our money to find the buyer. We send the buyer off to load their muskets. They come back with an army and blast away at our Seller. After the Sellers' legs are blown off, we let the Seller fund the entire war effort.
And I’ve only been in real estate about 25 years. Can’t wait to see what is next!
Submitted by jim canion on January 23, 2010 - 6:18am.
Jim Canion ,Co-Founder
http://www.connectrealty.com
As long as we continue to think like cashiers we will continue to be treated like cashiers. The world we now live in has changed. The antiquated rules developed over the last 25+ years no longer apply in most situations. We must evolve to a profession of advocates with expertise and loyalty that extends far past a single transaction.The future is one of long term relationships and not individual transactions. It is no longer a US versus Them world. Yes we still have to have sales skills to make the system work but there is far more required.
Most of the problems are coming to light today because of the fact that most home buyers are searching for homes over the internet and dont feel they need help with this process. In the past they needed to have an agent to get a look at most homes. Today with virtual tours and videos a buyer can easily view many homes in a short period without an agent. So when they "call", the first person they talk to is the sellers agent.This is the point at which a decision must be made. It may be possible to carry on without advising the buyer to obtain his or her own representative. You may be able to sweep up the whole commission. The results are all bad. We recently had an local agent with a franchise operator pull off a very big sale where she took both sides and made a big score.
The short term results were celebrations and awards from the broker who took a big cut. The long term results are that some fellow agents recognize this as unprofessional with potential liability to the buyer who may not have been properly represented.
In summary,thinking long term may be difficult in this economy but it will pay off for you as well as our profession.
Jim Canion
iConnect411.com
Submitted by Robert Vaughan on January 23, 2010 - 5:17pm.
I'm not surprised there is so much response to this blog. It is a hotbed topic to be sure.
If dual agency is being used to mean that the same licensee is representing the seller and the buyer in the same transaction, I have to agree that there is too much incentive for the agent to act unethically and control the transaction rather than facilitate it.
I have spoken to several buyers lately who do not want a buyer agent representing them and to only work with the listing agent because, based on their experience, they believe that in a multiple offer situation, the listing agent will ensure that only a buyer they represent will get the home thereby keeping all of the commission.
I'm sure this isn't true in every case, but I can imagine in these times, the greater reward and virtually no consequence for such practice does lend itself to this activity occurring.
If this type of "dual agency" was not allowed, there would be less incentive to behave unethically. There would be a clearer line to protect the consumer. After all, it is our fiduciary duty to put the client's interests before our own, right?
As Mr. Marovich mentioned prior, our fiduciary is limited in dual agency performed by a single licensee. The service is "watered down". We can no longer help the client negotiate the best terms and we become information conveyers and order takers. Is that what we promise the seller when we take the listing?
However, if dual agency is by definition the brokerage representing the buyer and seller, but using a separate licensee to represent each party, then I think there is less gray area.
Find a partner in your office that you can work a deal should you have a listing and find the buyer. They will reciprocate when they have the listing and buyer as well. Then there is just as much commission earned in the long run and the clients are properly represented. And if you are the listing agent, resist the temptation in a multiple offer situation to persuade the seller to accept an offer submitted by your buyer regardless of qualifications or tell your buyer information that you wouldn't tell another buyer that you don't represent. Treat everyone fairly and operate in good faith, and maybe we won't be looked upon by the public like greedy used car salespeople.
Submitted by Paul Howard on January 24, 2010 - 5:08am.
Mr Vaughan,
Finding a 'partner' in your office to work a deal with does nothing to eliminate dual agency. Agents that form 'teams' some of whom claim to act as buyer's agents and some of whom claim to act as seller's agent don't seem to understand that the only entity they are an agent of is THEIR principal - the broker (company) they work for. That COMPANY is the agent of the buyer and/or seller.
You can't get around dual agency by setting up a deal with someone else in your company.
Even in designated agency states the company and the person that both agents work under is a dual agent.
Those who prefer working for buyers and have a brokers license should think about setting up their own shop as an exclusive buyer's brokerage.
Paul Howard, Broker
NJHomeBuyer.com Realty
Cherry Hill NJ 08002
Submitted by Peter C. Fyler on January 24, 2010 - 7:04am.
Dual agency has created a huge amount of frustration for brokers who have chosen out of conscience, not out of greed and self-interest, to represent buyers exclusively. I truly believe it is only going to be when consumers --- the buying public wise up and say enough is enough that this practice will end. In some states it is already illegal. We have a habit in this country -- call it complacency, to accept unacceptable behavior. Why we do that I have no idea, but if I had to guess I’d say it’s so we don’t have to take responsibility for our actions. I’ve heard it more than once when a buyer says, “I know my agent is not working in my best interest but what can I do, I want the house”.
When a consumer signs an exclusive right to represent agreement, the agent representing the consumer becomes the Fiduciary. What is a Fiduciary?
A Fiduciary is an agent of a Principal/Client. The legal or special relationship of trust, confidence, or responsibility between two or more parties, most commonly a "Fiduciary" and a "Principal/Client", is called the Fiduciary Duty.
As a Fiduciary, the agent owes the principal the duties that can be easily remembered by the acronym OLDCAR.
Obedience – The duty to carry out all lawful instructions of the Client.
Loyalty – The duty to act in the best interest of the Client.
Disclosure – The duty to disclose all information relevant to the Client.
Confidentiality – The duty to keep the Client’s confidential information, CONFIDENTIAL! That duty survives termination of the agency relationship; it is forever. However, that duty does not apply to legally required disclosures such as known physical hazardous property conditions.
Accountability – The duty to protect, isolate and account for all money, documents, or other personal property provided by the Client to the agent.
Reasonable Care and Due Diligence – The duty to act competently and be capable of performing the duties undertaken on behalf of the Client.
It is imperative that a traditional agent explain to a consumer at the time they are discussing initiating a buyer agreement that the agent is requesting the right to transition to dual agency when necessary. When an agent transitions from an exclusive buyer agent to a (disclosed) dual agent, that agent can no longer provide the consumer with complete fiduciary duties of loyalty, full disclosure and reasonable care and obedience. I liken this kind of relationship to being in a fully engaged marriage and then all of a sudden backing up to first date status. Why would anyone want to do that?
I chose exclusive buyer agency because I love people. I engage with the people I work with and I really care about there well-being. I love helping people and advocating on behalf of buyers who recognize that there is a business model out there that truly has their best interest at heart when they are making one of the biggest financial investments of their lives. I also want to echo what Paul Howard said; you can learn more about exclusive buyer agency at http://www.naeba.org. You can also go to http://www.SplitRockRE.com where I have a wealth of information FOR BUYERS ONLY.
Submitted by Larry Sunday on January 24, 2010 - 10:56am.
Larry E. Sunday
I totally agree with Dona. Having been involved with Professional Standards for both my local and state associations for many years I learned early on that dual agency is a mine field for Realtors. Even with written permission from all parties there is no way that you can successfully tip toe down the fence separating the needs of both the seller and the buyer. I have referral arrangements with other agents on buyers that are generated by my listings. They do the same for me. It works out very well.
Submitted by Erik Lerner | RealEstateArchitect.com on January 25, 2010 - 11:07am.
I agree there are inherent conflicts. However, when both buyer and seller are informed about those conflicts and, given the option to be referred to another broker still choose dual representation, I'm hard pressed to find a reason not to go forward.
I disagree with the lawyer comparison. The worst thing about the legal system is that it's all or nothing - there's always a Winner and a Loser. The best thing about real estate brokerage is that, in the best cases, Win/Win is the operative principal. A willing buyer and a willing seller equals two Winners.
Submitted by Geoff Halford on February 11, 2010 - 2:01pm.
As long as the Realtor remembers that it is the interests of the clients (Buyer and Seller) that is paramount, there should be no problem in creating a Win-Win situation for the parties to the transaction. It is when the Realtor lets their own greed rule the situation that problems arise.
In the legal world the is a parallel, "mediation". Here in Canada it seems that the mediation route is gaining popularity. Make sense when you think about it, a trained professional assesses the want an needs of both sides and assists both sides in achieving what what desire.
Does Dual Agency work in all situations? No! Can it work in many situations? You bet!
All to often we see sales reported where the Listing Agent is the Selling Agent is the Seller or Buyer! How can you represent both parties and be one of them as well?