Dual Agency, Compromised Representation and Special Interest Groups

Dual agency, also called limited agency, is where one agent represents both the seller and buyer during a property transaction.

There's not much room to negotiate when one agent represents both buyer and seller.

There’s not much room to negotiate when one agent represents both buyer and seller.

A real estate agent compromises his or her ability to fully represent either client, when representing both simultaneously. In most states this practice is legal. If explained properly, no buyer would ever do it, but because additional disclosures required by dual agency are often explained poorly, a buyer’s perspective and understanding of this compromising relationship is not fully understood. Little do buyers realize that their agent can no longer give either client a “contractual advantage”. This can be huge. For example, if a listing agent has been instructed by the seller to list a home for $100,000, and the agent knows it is only worth $90,000, he can only say to his new buying client that the property (by fiduciary obligation to the seller) is for sale for $100,000 – and not one penny less. Sadly, many unknowing buyers paid $100,000.
The carrot for Realtors is that the projected commission can double when both parties are represented. This is just as bad as a couple using the same attorney for a divorce. But the unethical practice will continue in most states due to the strong real estate lobbies at the state and national level. Special interest groups protect the groups that pay them, not the consumers who utilize the real estate industry’s services – food for thought for consumers who are buying or selling a house.


Choosing the right doctor, I mean, real estate agent?

A man went in to have some foot surgery. His doctor was trustworthy, honest and professional. Two years later the same man needed brain surgery and insisted that his podiatrist do it because he trusted him so much. Of course, most of you would tell that guy to have a brain surgeon do the operation. We all know why.

Which brings me to this great analogy in real estate. A man, Mr. Buyer, bought a home and was represented by Realtor Bob. Bob did a great job representing Mr. Buyer. In fact, some years later, Mr. Buyer needed to move. And his automatic reaction was to call Realtor Bob. But Mr. Buyer is making the same mistake the guy in the first paragraph made. How could this be?

clay Make sure you hire the right agent, or it might be a long walk home.

As many of us know, the training for a foot surgeon and brain surgeon is very different. They are specialists in medicine. In real estate, real estate agents have only two jobs – representing buyers and sellers. But the skill set necessary to do either job is about as different as being a podiatrist or a brain surgeon.

So when Mr. Buyer bought his home, Realtor Bob functioned as a buyers agent. And years later, Mr. Buyer calls Realtor Bob to sell his home to work in the capacity of a listing agent. Does Mr. Buyer know anything about the different skills needed from an agent when they are acting as a listing agent? Probably not. Should he be concerned using an agent who may or may not have the skills to effectively market a home for sale? Well, he doesn’t have a clue. How would he know?

Too often, consumers wanting to buy or sell a home will choose an agent, based on trust. Trust has nothing to competence yet consumers make choices without getting any factual information. You don’t have to be a brain surgeon to figure this out. Of course, most Realtors don’t want you to know whether they are competent in both areas. But there are ways to find out.