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Dual Agency

March 1, 2013

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The California Association of Realtors and State Law allow dual agency.  First of all what is an agency.  Having just passed the brokers exam this is defined as:  

a legal relationship that is established between a principal (buyer or seller) and an agent (real estate broker) where the agent represents the principal in dealings with third parties. The relationship requires the mutual consent of both principal and agent.” (CAR Q&A)

 Agency specifically means the Broker of Record, not a particular agent.  Ie: I work for Prudential California Realty.  This means that any agent procuring an offer from Prudential California Realty would be a dual agent.  If an offer is procured from another agent who is an independent contract with say Re/Max, then dual agency does not apply.

So, this means in relationship to Real Estate that either a Seller or a Buyer can hire an agent to list or help purchase a property.  It also means that the listing agent can also represent a buyer and visa versa as long as it is disclosed.  No problem.  Well, in my opinion, there are lots of problems.  The agent has a “fiduciary” responsibility to the principal.  The agency disclosure spells this out as “utmost care and responsibility.” On the other side, they only owe what is called “honest and fair dealing” to the other parties.

 I have been asked many times as a listing agent to represent the buyer.  For the most part and more recently, I have refused to represent a buyer on the properties that I list.  That does not mean that I do not show the property or hold open houses or do whatever is necessary to properly market a property or to accommodate a buyer so that the Seller is able to procure an offer.  Yes, as a listing agent, I and the Seller both want the Seller to get the highest price and best terms.

Note in this market, buyers are getting desperate: I was asked if I would accept $5000 “under the table” to help a buyer procure a home.  This is illegal and of course the offer to pay me directly was not accepted. 

 The reason I believe buyers are asking the listing agent to also represent them is that they will get inside information so that they can get the house.  Implicit in this is that the buyer may also think that since the agent is making money on both sides then he will get the offer accepted and/or the transaction will go smoothly. 

 Dual agency becomes a problem if an agent is representing one or several buyers on the home in addition to the Seller.  The questions have to be asked:  Who is the agent representing?   What do they need to do to satisfy both the buyer(s) and the Seller?  There is only one house and many buyers, and all but one of them will be successful.  Who does the buyer blame, not believe, or eventually sue if they are not successful in getting their offer accepted?  Can one agent keep two or more people happy?  The agent is put in a precarious position in this age of multiple offers if you believe in the old adage that a man cannot serve two masters and yet is asked to do so.  Once long ago, when I was a dual agent and negotiating on behalf of the buyer, the Seller asked me point blank, “Who are you working for?”

 I urge Sellers to ask their listing agents not to work directly with Buyers on their listings.  I ask listing agents to refer any Buyers out to excellent buyer’s agents to represent the Buyer.  I also ask Buyer’s agents to communicate with your Buyers not to contact the listing agent directly. Please keep in constant communication with the Buyer so that the “fiduciary” relationship is maintained.

Dual agency is allowed and is legal but not advised in this dynamic market or perhaps not advised at all.

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