Dual Agency, Double Commission, and a Bad Idea For You.
Who represents who?
In several real estate industry blogs and forums, I’ve been seeing a lot of mention of dual agency lately. Whether dressed in fancy terms, disclosed or undisclosed, there is only one reason for dual agency – double commission for the listing agent. In Texas, we call it “intermediary” and it is a form of disclosed dual agency.
So what is dual agency? At its core, it is a way for an agent to represent both the buyer and seller in a limited capacity. One agent, two opposing clients with different interests at heart (buyer vs. seller). Do you see the problem already? Although intermediary is perfectly legal here in Texas, it has two sides to it. Because all contracts you sign with your San Antonio real estate agent are actually contracts with the broker (ie, if you sign a listing agreement with me, you are actually signing a contract between you and RE/MAX Access and my broker, Sheila Moran – with me acting as their representative), if the buyer and seller are both represented by agents from the same office, intermediary status must be disclosed and agreed to by both buyer and seller. There are forms that accomplish this. Once the two agents take on this role, they are able to continue their normal relationship with their clients, but can not (and shouldn’t be anyway) speak about the transaction with each other and give away any of their client’s confidential information (such as price the seller is willing to accept, that the buyer is willing to pay more than list price, etc.). However, it is also possible for one agent to act as an agent to both the buyer and seller in a limited capacity.
Limited capacity?!?!
When one agent represents both parties in a dual agency capacity, they must act within accordance with their state guidelines and treat all parties fairly and honestly. What they can’t do is give you the full benefits of working with a Realtor®. They have to keep certain information confidential that they might actually legally have to tell you if they were only working with you (and not the other party). This creates somewhat of a conundrum in my opinion. Why would you, as a buyer or seller, want less than full service from someone you’re paying a commission to? Why would an agent want to work both sides of a transaction? The answer to that is simple – double commission.
So let’s take a look at that in simple terms: if your agent is working as a dual agent (intermediary here in Texas), you get less than full service and the agent makes double commission? How does that make you feel?
I refuse to practice dual agency because of the potential conflict of interest I see in it. If I represent you as a buyer, I will more than happily show you my listings (where I represent the seller), but if you want to write an offer, I will refer you to another agent (or you’re free to find your own). If I represent you as a seller, I will show potential unrepresented buyers your property, but you will never see an offer come in that has my name as the buyer’s representative.
I will however practice intermediary within my own office. If a fellow agent submits an offer on one of my properties and all proper disclosures are made, I see no problem with working alongside a fellow office mate. Of course, in order to protect my clients, I would never discuss the transaction with my office mate.
So what do you think – is dual agency a bad idea for you?
photo courtesy of Evalia England
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Comments
Since this is an article directed towards consumers, I don’t want to get into a huge industry debate here. I agree with almost everything you say here save for one point … The listing agent doesn’t receive “double commission” when they sell their own listing. They simply do not have to split their commission with another agent.
Maybe it’s different in Texas, but here in California the commission is negotiated between the listing agent and the seller. The listing agent then decides how much he will pay the buyer’s agent for bringing the buyer to the table.
I also do not do dual agency for the same reasons you state. When a buyer wishes to write an offer on my listing I give them the option to hire another agent or to sign a non-agency agreement with me making them an unrepresented buyer. I make it clear that I represent the seller and that they shouldn’t tell me anything that may tip their hand in negotiations.
It really isn’t the most comfortable position to be in as it does put up certain walls so I don’t go out and look for ways to put myself in the situation.
.-= James Malanowski´s last blog ..PALMDALE, CA: FIRE IN THE SKY =-.
James – You have a valid point. Here in Texas the commission is often split between buyer agent and listing agent (after listing agent determines that percentage with their seller). It would not necessarily mean double the commission, but more than not it would.
Some listing agents will even discount their commission with the sellers in a situation like this, but for the simple reason that they (as dual agents) usually wind up doing the work of two agents, this isn’t what I would call widespread.
When showing homes to unrepresented buyers or (in the rare case of showing a home to a represented buyer) I always make it clear that they shouldn’t say anything they don’t want the seller to know, because I work for them – and what I know, they know. I prefer not to show my homes to unrepresented buyers for this very reason.
I think dual agency boils down to greed more than anything and I know there are plenty of agents who would disagree with me on this, but I just don’t see it as a viable option when trying to keep all sides represented to the fullest (which is my goal).
Good point about “the walls” and a great reason to do what you can to avoid being in that situation.
.-= rerockstar´s last blog ..Dual Agency, Double Commission, and a Bad Idea For You. =-.
I agree with you about not practicing dual agency or intermediary, as I am in Texas too. It’s just too much of a conflict of interst and I don’t think you can provide a fair service to both clients at the same time. Just refer out the other side to avoid any hard feelings and you won’t have any problems.
Brent – It’s always nice to hear someone else say they don’t like it. I was speaking to a prospective client (investor) the other day and got into the whole conversation and you could hear that they were shocked by some of what I was telling them – because no one had explained it in quite the same way as I did.
I can’t help but think that it’s impossible to not influence the outcome knowing both parties’ interests and desired outcomes. I’d rather not mess with the ethical (and potentially legal) conundrum that dual agency creates. I’d rather see both parties fully represented and I really hate negotiating with myself. Haha.
I’m hoping that we’ll see an end to dual agency within my lifetime.
Matt~
Excellent post! I have never sold my own listing! I have always referred the buyer out to another agent. I want everyone to be entitled to representation and just feel it opens up the door to too much liability! Now that I am the broker I just farm the business out to my agents and it is a win/win for everyone! Well done and keep on bloggin!
Jeani
Jeani – Thanks. I’m always happy to hear that there are others out there that refuse to do it. I’m with you – it opens up a lot of liability and who wants to tell a client that they can’t be full represented? That just seems backwards to me.
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