Most home buyers and sellers have some concept of single agency when it comes to real estate. Agency is the relationship between a home buyer or home seller and their real estate agent. Agency determines who the agent works for in the relationship and what level of service they can provide you.
You have the listing agent or seller’s agent that work for a seller and owes the seller a fiduciary responsibility. Or, you have the buyer’s agent who represents the buyer and owes them a fiduciary responsibility.
When you are involved in a transaction, understanding your agency relationship is extremely important. Especially as a home buyer an agent can work with you, not necessarily for you, in several ways.
What is Dual Agency?
Dual Agency is when an agent represents both the buyer and seller.
An agency relationship implies there is a fiduciary responsibility. A fiduciary responsibility is the highest level of care a buyer or seller can receive. In many definitions of fiduciary duty it often says the fiduciary has to put the clients needs before their own or any other.
Your going to ask “Kevin, how is that possible to represent both the buyer and seller at the same time?”
My response is “It is not”
Dual Agency is the dark side of real estate. Dual agency puts an agent in conflict over their fiduciary responsibilities.
Yet, Dual Agency is perfectly legal in the state of Massachusetts and other states across the county. As far as the government and real estate law is concerned there is nothing wrong with it. Though, it is important to check state laws as it can vary greatly from state to state.
Many agents will practice dual agency when the opportunity arises. Yet, there are others who won’t practice dual agency because they have an ethical problem with it.
I fall in the camp of I have a problem with dual agency.
Dual Agency Must Be Disclosed
As you read this article. One thing to remember is Dual Agency must be disclosed to both the buyer or seller before a showing can occur. This means that the both parties must agree to dual agency.
The problem is in how it is explained to both buyer and seller. If you are fully informed of what rights you are giving up and you are comfortable with it, by all means consider dual agency.
But inherently there is some problems with dual agency, which we will discuss in this article.
When Could Dual Agency Occur?
I am going to simplify this because there are some finer points of real estate agency. So there are two scenarios that could trigger a dual agency situation.
First, is a buyer comes to an open house and wants to be represented by a buyer’s agent and wants to put an offer in directly with the listing agent. The listing agent agrees to represent the buyer as well as the seller. This would trigger disclosing both parties that the agent is working as a dual agent.
Second, is an agent or another agent in the same office has a buyer already. As a buyer client they come to a listing of that agent or one from the same office. Remember agency falls back to the broker of record and the agents are acting under the umbrella of the broker.
The only way the parties can proceed as is, is to agree to dual agency. If a buyer or seller does not agree one party has to be referred out to another agent or agency where than both parties can be fully represented by their own
What is Wrong with Dual Agency?
A Dual Agent Can’t Fully Represent You
Lets look at what happens, you find an agent you are happy with and you decide to have them represent you to either sell your home or help you buy a new home.
Represent you. This ultimately means your needs, as a client, must come before anything and everything else. The full fiduciary responsibility of an agent working for a buyer or seller is obedience, loyalty, disclosure, confidentiality, accountability and reasonable care. Just about everyone of the responsibilities is in conflict in a dual agency situation.
Dual Agency bypasses the fiduciary duty to fully represent you. Your agent now really becomes a more of a facilitator or a paper pusher. They can not favor one party over the other and cannot not perform any duties that would give one party and advantage over another.
This can be very hard to stay completely neutral.
Now how disappointing is it to find an agent you want to represent you and to have them tell you they are in a dual agency situation and cannot provide the counsel they promised you.
What Can’t a Dual Agent Do that a Single Agent Can?
Home Sellers- Dual Agents can’t and shouldn’t:
- negotiate an offer on your behalf
- give opinion of offer and it’s strength and weaknesses
- counsel you on whether you should accept an or not accept an offer
- recommend specific service providers like an attorney
- negotiate concessions or repairs after the buyers home inspection.
Home Buyers- Dual Agents can’t and shouldn’t:
- give opinion of value
- help structure an offer beneficial to the buyer
- negotiate your offer on the buyers behalf
- recommend their preferred service providers like home inspectors and attorneys
- make negotiation recommendations after the home inspection and negotiate the repairs or concessions.
In either case, your agent in a dual agency situation, cannot provide you the counsel you were expecting when you hired them as your buyer’s or seller’s agent.
Who Does Dual Agency Benefit
Quite frankly dual agency doesn’t really benefit the home buyer and home seller in any way. The client is giving up some of the rights that they would have in single agency situation where the agent (or agency) represents one party only in the transaction.
So who benefits? The agent/agency…. it is there chance to get the full commission without sharing it with another agent. If a seller agent becomes a dual agent they are getting both the list side commission and the sell side commission. It is a double pay day.
The One Explaining Dual Agency Has a Vested Interest
If your agent approaches you about dual agency, remember that agent has a vested interest as I explained above.
This is where the problem lies. Are they explaining dual agency without glossing over the finer points of what you are giving up? Or are they fully explaining they cannot fully perform the duties as they outlined when you hired them.
I recently had an open house and a buyer wanted to write an offer. I said sure meet me at the office after the open house but be aware I work for the seller and owe them a fiduciary responsibility. They said fine.
We meet at the office and they started asking me to help them get the best price for the house, what was the sellers bottom line, could I give them an idea what the house was worth, they would want a recommendation for a good home inspector, etc… Now these are all tasks a Massachuesetts buyer’s agent can perform in a single agency situation, but one a dual agent should not perform.
I can certainly write an offer for a buyer as a sellers agent with the understanding from the buyer that I am merely facilitating the offer and I represent the seller’s best interest. They are on their own. In no way am I representing them.
But these buyers wanted, and quite frankly, needed the full services a buyer’s agent can provide.
I will not generally work as a dual agent. Why? I feel the seller or buyer has hired me to represent them a certain way and I owe them that. I also believe that dual agency is very difficult to practice properly. It opens up liability for me and for my seller.
After I explained agency in full, we both decided it was best if I referred them out to another agency to be represented. Yes, I gave up half the commission, but it was the right thing to do.
Liability of Dual Agency
This is especially important to a seller, more so than a buyer in a dual agency transaction. Your agent is an extension of you and you are ultimately responsible for your agents actions. It is called vicarious liability.
With that said most real estate law suits come about over agency and/or property disclosure. When you have your listing agent and the buyer has a buyer’s agent there is a line between the two and provides you with the least amount of liability.
As a dual agent that line gets very, very grey. Is your agent practicing dual agency the way they are supposed to? Are they presenting any liability issues for you?
So What Should I Do If I Am Presented with Dual Agency?
Dual agency must be disclosed to both parties prior to even a showing. Both parties have the option of rejecting dual agency. I would say for the majority of home buyer’s and seller’s reject dual agency, you are giving up to many services that a single agency relationship provides you.
Agents that practice dual agency have several reasons that they throw around for it being a benefit.
Smoother Transaction- There may be some truth to that but in most cases there is much co-operation between the seller and the buyer’s agent. Both agents are working diligently to get the job done. Generally, if a deal is difficult it is not because there is another agent involved.
Savings- There is the thought that a buyer can save money by buying directly thru the list agent. Me personally and many agents I know…. not going to happen. Its twice the work and I am under contract for the same commission either way.
The only time I would even consider dual agency for a buyer and seller is if they are both savvy real estate buyers and sellers. For example if the buyer is an investor that has bought and sold a number of properties and a seller that has sold several properties.
But if this is your first or second time around the block, reject dual agency it is does not benefit you and you are giving up too many services from the agent who is supposed to represent you.
Summary of Dual Agency
Please, please take the time to understand real estate agency. I can’t tell you how misinformed real estate consumers, especially buyers, are on how an agent represents them. I have run into buyers, who are shocked to find out their agent doesn’t work for them or they are in a dual agency situation.
Dual Agency is a choice and you can choose to participate or not to participate. In the story above, that same buyer did go on to buy my sellers home and both parties were fully represented by agents.
Most of my buyers and sellers hire me partly because they are seeking quality advice, reassurance and guidance. I can’t always give you that in a dual agency situation. You are going to be on your own on a lot of the decisions that need to be made that a typical client would be looking for input on from their agent.
Personally I would not do it as a buyer or seller. There is absolutely no benefit to you in most cases.
As a last thought, I tell home buyers and sellers, you don’t know what you don’t know.
What My Counter Parts Have to Say About Dual Agency
- Bill Gassett, Hopkinton MA Dual Agency, cant do it. It is impossible to serve two masters in a real estate transaction who are sitting on the opposite sides of the table.
- Kyle Hiscock, Rochestor NY One of the potential drawbacks of dual agency in real estate is that some agents will do whatever it takes to make a deal because they are receiving the entire brokerage fee.
- Anita Clark A dual-agent, or a real estate representative of both the buyer and the seller, is likely torn between getting top dollar for their seller and supporting the budgetary interests of their buyer.
What Other Sites Have to Say About Dual Agency
- Realtor.com The biggest issue with dual agency is that having the same person represent both sides can be seen as an ethical dilemma
- Consumer Advocates in American Real Estate Dual Agency is a conflictive relationship that strips buyers and sellers of service to a level that can best be described as abandonment
- Washington Post Inherent in any dual agency is a conflict of interest, because the seller seeks the highest possible price and most seller-favorable terms
- Nolo.com But you want to avoid dual agency. If you’re going to pay a full commission, you want someone who fully represents your interests. If an agent asks you to consent to a dual agency, flatly deny the request
Dual Agency- Welcome to the Dark Side of Real Estate is provided by Kevin Vitali a Massachusetts REALTOR located in Tewksbury MA. If you would like to sell your home or buy a new home give me a call at 978-360-0422 and let’s get the process started.
Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford