Brett Stomps | Windermere

The Dangers of Dual Agency

To me, I can't tell what is more of a surprise: why buyers agree to be represented by listing agents, or why the listing agents feel it is ethical to represent both sides of a sale. Limited dual agency after all is "limited" for a reason. So, why do people do it? I certainly don't.
Table of Contents
Table of Contents

Bringing Clarity to Dual Agency

Dual agency is exactly what it sounds like, an agent representing both parties. As a REALTOR®, we abide the code of ethics, and in addition to that, we have a statutory duty to protect our client’s interest to the best of our ability. However, when a REALTOR® acts on behalf of both clients, they are limited. This is because helping one party more than the other would be seen as a violation to their duties to the other client.

So, how can a REALTOR® protect both of their client’s interests to the best of their ability? The truth is, they can’t. They have to abstain. They become paper pushers.

Why do Agents Dual Agency?

Money. I can’t think of any other legit reason to represent both parties. This is because when representing both parties the agent will receive twice the commission (or whatever the seller has agreed to).

Now, I can see how a listing broker could justify lowering their commission fee for the seller as a means to entice the seller and buyer to sign off on dual agency, but at what cost? 1% savings at most? That’s to even say the listing agent lowers their commission at all. Does the listing agent deserve this second commission if a buyer saw the listing on the internet and decided to call, then wrote an offer? No, that’s NOT how an agent earns their value. Not in my opinion, anyway.

An agent earns their value by giving 110% representation to their client. By calling out the “BS” during negotiations and guiding their client to make decisions which save them more than that 1%.

What Agents Should Do

It’s very easy for a listing agent to call a colleague and send a referral agreement for the prospective buyers who wants to write an offer on their listing. Giving a referral isn’t the same as receiving twice the commission, but it is truly best for the buyer’s interest and their sellers.

To me, this is the most ethical thing to do, without question. And treating both parties with honesty and good faith is a part of the REALTOR® code of ethics.

The Dual Agency Trap for Buyers

This is how buyers fall into dual agency, I see it far too much unfortunately.

A buyer is browsing the internet in search of available properties. They see one that catches their mind, so, they call the listing broker for more info. The listing broker answers the call and gives more information about the property. No problem, right? True, not a problem at all. It’s when the agent starts giving the buyer personalized guidance is when we have an immediate issue.

The buyer is now taking the word of the seller’s representative as to how to write an offer, the interest the property has had, etc. At this point in time, the listing agent has the seller’s interests 100% in their mind, not the buyers. It isn’t until the buyer signs a buyer agency agreement along with an offer to purchase that the listing agent now has to NOT say anything detrimental to the buyer.

However, the sad part is, the damage has probably already been done. All before any paperwork is signed, the listing broker has already told their seller all the dirty details about buyer’s position. The buyer isn’t even aware that their new agent spilled the beans before their relationship was defined in writing.

Is this legal? Yup.

The Dangers for Sellers

For sellers, you hired your agent because you wanted complete representation, right? You didn’t want to deal with all the fine details of making real estate decisions alone. This is why you hired a professional, so they can save you (or earn you) a few thousand dollars and earn their wage alongside you.

When you allow your listing agent to represent the buyer too, you signed away any assistance with strategy and personalized guidance. This is because your agent can’t say anything detrimental about the buyer’s position. Where an agent who is 100% on your side could help you see through the gray area of negotiations and call someone’s bluff, they can’t even do that anymore under limited dual agency.

You have effectively hired a very expensive paper pusher.

Dual Agency Dangers for Agents

I won’t go much into this, as the agents choosing to dual represent know the risks they are taking. At any point if the dual agent discloses confidential information, or aids in the damage of the other party’s interests, the dual agent is potentially liable for damages (if it can be proved). Which may be nearly impossible to do, and at the very least, costly. Goodbye potential 1% discount!

To put it straightforwardly, it’s all about the dual agent now. They’ve worked with hundreds of clients and you’re just another commission at this point. If they’re willing to forgo their representative duties (the #1 value a REALTOR® has) for more money? Then to me, they’re after their own interests, because after all, they can’t do anything detrimental to either party, so who are they really working for at this point?

When Dual Agency is Acceptable

The only time I can ever imagine a scenario when representing both parties is acceptable is when both parties know how to represent themselves. They’ve bought and sold many properties and they know how the process works and what they want.

Solving Dual Agency

The only true way to obtain 1-on-1 complete unrestricted representation is to have separate representation. The buyer has their own agent, and the seller has their own agent.

Final Advance

Don’t ever allow yourself to be represented by the same agent as the buyer or seller. The financial gain (if any) is not worth it. You wouldn’t use the same lawyer who was representing the person suing you, right? The same logic applies here.

Find your own representation and work with your interests protected.

Disclaimer

The information provided on brettstomps.com is intended to be educational and accurate. However, information on brettstomps.com does not substitute as buyer and seller due diligence when transacting real estate. Buyers and sellers are advised to work directly with a licensed real estate professional, seek additional professional services when applicable, and to inquire at the state, county, and city offices for their due diligence.