Agents, dual agency and 'referees'
Letter to the Editor
By Inman News, Monday, March 1, 2010.Re: 'Fairness in Dual Agency' (March 1)
Dear Editor:
I am no real estate attorney, but I believe dual agency is impossible by definition. It automatically creates a conflict of interest. Agency creates fiduciary duty -- and vicarious liability -- of the agent or broker to represent a client with utmost good faith, loyalty and trustworthiness, and to negotiate the best possible price for a client without disclosing specifics about the price or the motivation of the client.
How is it possible to be completely dedicated to two clients' interests (on either side of the transaction) -- or to a seller-client and numerous buyer-clients making multiple offers -- at the same time?
Some states have dual agency and some do not. Most of those that do not haven't eliminated the ability of the broker or agent to handle both sides of the transaction. The (real estate regulatory agencies) in those states have merely created another form of representation called transaction brokerage.
As a transaction broker in say, Colorado, where I also hold a license as an independent broker, as well as in California (which does have dual agency), the agent can "stand aside," as it were, and acts as a neutral "referee" between the buyer and seller, without agency.
In such cases, the agent is not party to the actual contract, thereby reducing the agent's vicarious liability and eliminating any appearance of conflict of interest. I believe all states should consider simplifying the nature of agency by eliminating dual agency in favor of transaction brokerage in the case of a double-ended sale.
Bradley English
Sales consultant
First Team Real Estate
San Clemente, Calif.
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Submitted by Bruce Hahn on March 2, 2010 - 6:41am.
American Homeowners Grassroots Alliance
Mr. English is right about both dual agency and transaction brokerage. In addition to the conflict of interest, dual agency is the source of a large share of the consumer lawsuits against brokers and agents, and one of the big reasons that the profession is held in such low esteem. Try to justify dual agency's existence to a reasonably intelligent consumer, and you'll be met with an increadulus look.
Transaction brokerage is dual agency stripped of its pretense, so why not just be honest with clients and let the market determine the value of transactional brokerage services. Transactional brokerage can be an opt-in process for both buyers and sellers, with compensation to be determined through separate negotiation with the buyer and seller. Since both are presumably happy with the agent (or they wouldn't be working with them in the first place), a satisfactory arrangement should be possible in most cases. Agents and brokerages will still be able to double dip, but consumers will be getting what they paid for rather than having something they had expected (fiduciary duty/assistance in getting the best price/terms from their respective perspective) effectively denied them without any practical recourse.
Bruce Hahn
American Homeowners Grassroots Alliance
Submitted by John Rakoci on March 2, 2010 - 6:59am.
I am not a fan of dual agency. I am a licensed broker in NC & SC. Both states permit dual agency. Although I have acted as a buyers agent for office listings, neever have I tried to work both sides of a transaction. I see no way to be fair to both parties no matter how anyone would try. The ability to act as a 'referee' in CA makes little sense to me. I see very little value to the consumer and feel compensation should be the same.
Submitted by Barbara Delantoni on March 2, 2010 - 9:30am.
First of all, to my knowledge, there is no ability to "act as a referee" in California. We do not have transactional brokerage here, thank God. What we have is actually pretty clear and straight forward. One can act an agent for the seller, the buyer or both (dual agency).
I do agree that dual agency is ridiculous. You can't represent both sides fairly. As soon as I explain to my clients that it is like an attorney representing both sides, they get it.
As an Exclusive Buyers Agent (EBA) my loyalties are crystal clear. I represent the buyer and only the buyer. The only time a problem could arise is if I had two buyers interested in the same property and that is extremely rare.
As far as I am concerned dual agency and transactional brokerage have the same problem. They are for the agent's benefit, not for the buyer's (or the seller's).
Barbara Delantoni
Buyer's Broker
Redwood City, CA