DUELING WITH DUAL AGENCY

By
Real Estate Agent with Howard Hanna Smythe Cramer

"I expect my agent to find a buyer for my house. I'm comfortable having my agent on both sides of the deal."

Does it make sense that your agent can negotiate the best price for you ... and also negotiate the best deal for the buyer of your home? If you were in a lawsuit would you feel comfortable sharing the same lawyer with your opponent? What we're trying to say is that A real estate transaction is inherently adversarial. Yet many sellers can't forsee the complications that may arise when their agent brings in their own buyer.

DUELING WITH DUAL AGENCY

When you hire an agent to list your house think of it mainly as hiring someone to "market" your property and to negotiate on your behalf. The agent places your house on the M.L.S., which is an information system where agents in the community cooperate with one another and communicate what is for sale. The expectation is that there's an agent out there who is working with a buyer who may be looking for a house like the one you have listed. Your agent works for you the seller, and the buyer's agent works for the buyer. Most states have laws requiring real estate agents to disclose in writing to each party exactly who they represent.

Many states however allow an agent to represent both parties. This is called "Dual Agency." Though legal this can easily result in a conflict of interest. Recent statistics from the Consumer Federation of America indicate that 52 percent of those surveyed don't believe that dual agents can properly represent the financial interests of both parties in a real estate transaction. We agree and frankly we're amazed that more people don't see dual agency as a huge problem. It's the equivalent of playing both ends against the middle.

DUAL AGENCY

On the other hand if a prospective buyer walks into a listing agent's open house, or calls that agent regarding that house only, and is someone your listing agent has never worked with before, that's O.K. That buyer is merely a customer and is not your agent's client. The agent remains loyal to you the seller and the potential for a conflict of interest is eliminated.

If you're uncomfortable about your agent bringing in a buyer, you can request that your agent refer that buyer to another agent at their office. Sure, your agent may expect a referral fee but the two agents should be prohibited from sharing confidential information about you or the buyer.

The Consumer Federation of America claims that more than 60 percent of those surveyed believe that there is the potential for a conflict of interest when agents for the buyer and the seller work for the same company. We disagree with this belief. Our experience has been that agents in the same office don't share files or confidential information about their clients.

Problems may arise when a real estate firm uses the antiquated showing log system, as many do. The log can be viewed by any agent in the office since it's usually in an open file at the front desk. If your house is listed at an office that uses this system, and if the prospective buyer's agent works there too, that agent can easily check-out the level of activity on your property. If there have been few showings the agent will be more inclined to recommend to their client that they make a low-ball offer. The remedy for this is for sellers to tell their agents that you prefer an out-of-office service to book showings. It's not expensive and eliminates the threat of possible insider knowledge. More and more companies are turning to this type of showing system.

It should be mentioned that many states have something called a "Transaction Agent." This is a limited form of representation where there's no duty of confidentiality or full disclosure on the part of the agent with neither buyer nor seller clients. The transaction agent works on an equal basis with all parties. Their purpose is simply to assist both parties in reaching an agreement, and to act as a facilitator in putting the deal together. We like this form of agency and wish that it was available in every state.

FIND A HOME: http://markostrovsky.com

Copyright 2010 Mark L. Ostrovsky All Rights Reserved

Posted by

Mark & Elly Ostrovsky

Howard Hanna Smythe Cramer

Cellular: 216.577.1156

EMail: EllyandMark@GMail.Com

Website: http://MarkOstrovsky.Com

 

Mark is a licensed attorney in Ohio & in Massachusetts and works with his wife Elly in residential real estate representing buyers and sellers in Cleveland, Ohio's Eastern suburbs. You can search for homes on their website:

FIND A HOME: http://markostrovsky.com/

 

 

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Rainmaker
439,798
E.J. "Mike" Carlier
CENTURY 21 MarketLink Realty - Lakeville, MN
Lakeville MN

Can you explain how referring a buyer to another agent working for the same broker is not also dual agency?  I understand that some states have designated agency, and that, magically that conflict of interest by the broker disappears.  In my opinion, neither is ideal for the consumer.

Likewise, I don't think it does much for the consumer to merely diminish the responsibilities owed by the agent to the role of a messenger, dedicated to neutrality and no negotiating advantage.

Jan 31, 2010 12:39 PM #1
Rainer
38,117
Mark & Elly Ostrovsky
Howard Hanna Smythe Cramer - Beachwood, OH

E.J., technically it is dual agency if the same brokerage is on both ends of the deal of course, but it's been our experience that the agents in the brokerages here do a good job keeping their client's information confidential and that they do not share. That being said, there is always the potential for an agency violation by accident or through something much worse.

As for transaction agency, we do not have this in Ohio. I do believe that if buyers and/or sellers are comfortable with this "option" that hiring an agent who acts merely as a facilitator should be available to consumers. Thanks for your comments and your insights.

Jan 31, 2010 12:49 PM #2
Rainer
93,531
Merrill Moss
HomeSmart Elite, Scottsdale AZ - Scottsdale, AZ
Scottsdale AZ Homes For Sale

It is merely human nature that agents would grasp for dual agency whenever they can, but I doubt  most have given serious consideration to the vastly increased liability. Even if clients get a reduced commission as a result, in my humble opinion dual agency exists primarily for the economic benefit of agents, with client's interests inevitably discounted. All of the schemes for making it work have compromises. I don't think the extra bump in commission is worth it, and frankly, wouldn't mind a bit if dual agency was abolished.

Jan 31, 2010 12:59 PM #3
Rainer
38,117
Mark & Elly Ostrovsky
Howard Hanna Smythe Cramer - Beachwood, OH

Merrill, I agree with you. Dual agency is just plain wrong.

Jan 31, 2010 01:13 PM #4
Rainer
135,577
Charlie Gantz
Keller Williams Commercial, Tampa Bay - Saint Petersburg, FL
J.D., M.B.A.

Mark, you and I cannot have dual representations as attorneys and I feel the real estate industry will eliminate this concept of dual agency sometime--the sooner, the better, as far as I'm concerned.  Charlie Gantz, Greenwood, IN; J.D., M.B.A.; Owner/Principal Broker, Atlas Commercial Real Estate, LLC

Jan 31, 2010 01:18 PM #5
Rainmaker
480,225
Barb Szabo, CRS
RE/MAX Trinity Brecksville Ohio - Cleveland, OH
E-pro Realtor, Cleveland Ohio Homes

Hi Mark, I rarely am a dual agent as I do not believe in it's effectiveness, or lack thereof. I will be glad when it is illegal in all 50 states. I'm pretty sure it is illegal in Florida already and possibly in California. I will make an exception when the buyer adds a contingency for attorney review.

Jan 31, 2010 08:19 PM #6
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Rainer
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Mark & Elly Ostrovsky

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