More Questions On Dual Agency
We tried to dig deeper into this subject as our other blog post had so many responses.
As a buyer of property, it can be both exciting and overwhelming. The same could be said for a seller. But, the real question is: Who’s looking out for me as a buyer? As a seller?
There are agencies that represent both seller and buyer even though most buyers and sellers view agencies as a single agency looking out for all parties involved.
An agency is a business or organization established to provide a service, usually one that includes arranging contracts between two other parties (e.g., home buyer or home seller and their real estate agent). The key individual(s) or principal and the agent form an agency relationship. The agency establishes who the agent works for in the relationship along with the level of assistance.
Representation of a dual agency is two-fold
- • The seller’s agent stands in for the seller and owes them a fiduciary responsibility.
- • The buyer’s agent who speaks for the buyer and owes them a fiduciary responsibility.
It is vitally important that you understand what side of the fence you are on when doing business with an agency. As a buyer, sometimes the agent is on your side and looking out for your best interests. However, that is not always the case. Sometime an agent will represent you, but not really be for you.
What Is Dual Agency
Dual Agency is when an agent represents both the buyer and seller in the same transaction.
As previously mentioned, an agency relationship indicates that there is a fiduciary responsibility. This is considered a high level of trust and care a buyer or seller can be given. It is often stated as putting the needs of clients first in all situations.
That begs the question: Is it possible to represent both the buyer and seller at the same time?
By definition, no, it is not.
As such, this suggests a dark side of dual agency in real estate and places an agent in conflict as to who he/she represents.
In spite of how it looks, dual agencies are legal many states. Even the government and laws give no indication that it’s wrong or illegal. But, to be on the safe side, be sure to check your state’s local laws concerning dual agencies.
Since some agencies are dual agencies, more times than not, an agent might jump at the opportunity to represent both buyer and seller when given the opportunity. Still, many won’t do it because they find it to be unethical.
Where do you stand?
Disclosure of Dual Agency
If an agency does operate as a dual agency they must disclose this information to the buyer or seller especially since they will be handling confidential information. Also, they will not be able to show a listing if they do not reveal their duality. In other words, both the buyer and seller parties must agree to dual agency.
Disclosure may sound like a great solution to dual agency, but it isn’t quite that simple. For example, a consent to dual agency involves giving up some rights. But, no matter how simple or easy something may appear to be, there exists some problems as well.
How Dual Agencies Occur
Dual agencies can happen when a single agency represents both buyer and seller in a single transaction and also where there are smaller markets in small towns.
Primarily, it’s when a potential buyer goes to an open house and would like to be represented by a buyer’s agent and plans to place an offer immediately with the listing agent. Since the agent is from a large brokerage firm that employs real estate agents that represent both buyers and sellers, as such, the listing agent agrees to represent the buyer. Consequently, the dual agent should disclose this information to all parties involved.
Bear in mind, an agent comes under the umbrella of the broker and if an agent takes on a client whether buyer or seller, they are operating as a dual agency.
By law, both the agent and the client must agree to the dual agency if they wish to continue to do business together. Otherwise, they should be referred to someone else who can fully represent them.
Downside of a Dual Agency
A dual agency cannot fully represent you as a buyer or seller. Why?
- • It is impossible to be completely loyal and fiducially responsible to you and the agency at the same time. Especially since the agent will be looking out for the interests of buyer and seller in the same transaction.
- • They cannot offer you counsel.
- • They must remain neutral (no negotiations or recommendations).
- • They should not give express their views on the value of the said property.
- • They should not assist in structuring an offer beneficial to the buyer.
As home sellers, dual agents cannot or should not negotiate offers on your behalf, express their views of an offer given to you, advise you to accept or reject an offer, recommend or negotiate special service providers or home inspectors.
Who Benefits from a Dual Agency?
Since real estate agents earn their commissions from the sale of a property and normally have to split it with the buyer’s agent, as a dual agency representing both buyer and seller they don’t have to split the commissions with anyone.
Clearly this is a win-win situation for the dual agency. Who wouldn’t want to keep the whole pie instead of having to halve it with someone else?
Remember, in order for an agent to act as a dual agency, they must disclose this to the buyer and seller. However, this doesn’t mean that they will be completely forthcoming and reveal all the intricate details. They have a vested interest in representing both buyer and seller as I mentioned above. Still, you can always reject the dual agency and look for a single agency to represent you.
This could cause liability issues for the seller simply because in a normal situation where each buyer and seller is represented individually there is the least amount of liability. However, with a dual agency it increases liability.
Dual agency is often misunderstood by both buyers and sellers and as such, leaves room for liability. For example, there tends to be a greater potential in increased conflicts and miscommunications. Thus, the legal ramifications could run into the hundreds of thousands of dollars being paid out due to nondisclosure or improper handling of a dual agency.
Make sure you know that your agent is fully representing you as home buyer or seller. To get a Top Realtor in Surrey to handle your next Surrey Real Estate Transaction contact Becky Zhou PREC Team.