Back in the day…
Back in the day, when interest rates were 18%, and the MLS consisted of a huge 3-ring binder, agents and brokers mostly represented sellers, but the public didn’t exactly understand this. They would call up an office, or a listing agent to see a home, write an offer, and assume that whoever wrote that offer, was representing them. They had no clue that the listing company and agent were actually representing the seller!
Over the years, and many lawsuits later, the evolution of agency has emerged. And to be honest, the public still doesn’t get it, and neither do many agents. The National Association of Realtors has released their Bi-Annual Legal Scan, and while agency in and of itself isn’t the leading cause of disputes, dual agency came out as a high ranking issue.
Ah, agency, the thing we love to hate.
It can be confusing to everyone involved in a transaction, as the types of agency that a company or state allows us to practice may differ. Many places will allow all types of agency, where Realtors are able to represent sellers, buyers, or disclosed dual agency, when we represent both the buyer and seller as clients. We can also still double side a transaction, but not represent both parties, with one being a client, and the other being a customer, again as long as it’s disclosed.
Representing one party, either the buyer or seller, is fairly straight forward. Their best interests are kept in mind. Confidential information is to be kept, well, confidential. We don’t, or shouldn’t give out a buyer’s purchasing power, credit scores, reasons why they are buying, or what they may be willing to give up in order to own a home, such as repairs, or closing costs.
In working for a seller, we shouldn’t be telling others why they’re moving, what their bottom line is, if they may be willing to contribute closing costs, if they have to bring money to close, or if they are willing to negotiate certain real property. Although, any of these things may be alright to talk about, if the clients give their permission, and if they do, it’s best to get it in writing.
Difficulty in disclosing dual agency
All of the above applies to disclosed dual agency as well, although this may be more difficult to accomplish. It’s much easier not tell something to another agent than to your own clients. Our clients will know we have the scoop, the dish, the down & dirty, but when acting as a dual agent, we must zip it.
Clients, too, must understand that when one agent is representing both parties as a dual agent, we can still advise, yes, but we are limited in what information we can share. In short, we owe them honesty, loyalty & a fiduciary duty to both clients when acting as dual agents. Can that even be done fairly?
In Ohio, we also have the option of double siding a transaction, while not representing both parties. One person would be the client, the other the customer. With clients, we owe loyalty and a fiduciary duty to, customers, we still owe honesty to, but no loyalty, or a fiduciary duty. Our agency form specifically says that any confidential information may be disclosed to our client, and that the customer is representing their own best interest.
This can useful in a FSBO situation, or when dealing with a buyer that may not want representation. When explained thoroughly that the customer will not be represented, and whatever information is given over may be divulged, this can be an okay way to proceed with a transaction, as long as all parties agree to move forward.
Some cases are not dual agency
This can be confused with dual agency, and often is, but as both parties are not represented, there is no dual agency. Some people may not need to have representation. If we think of the experienced investor, the lawyer selling a FSBO that only needs their house in the MLS but is fine to handle negotiating, the contracts, and closing, or possibly the buyer who has purchased before, and feels comfortable enough buy without the use of a buyer’s agent, but wishes that the agent coordinates the closing details.
Dual agency and the MLB trading
As July’s trade deadline has come to a close and Augusts’ is fast approaching in MLB, we’re going to use players, agents, and owners as an analogy here, for why I am not a fan of dual agency.
Players have agents who represent them in negotiating contracts, extensions, trades, bonuses, who will be picking up the remainder of the player’s contract, where they play, and often include no-trade clauses – meaning what teams a player won’t play for.
The agents deal with owners, and the MLB who have to approve trades, and players usually have to pass physicals upon being traded. Imagine if a player’s agent also represented a ballclub- when negotiating a trade, who would that agent really be working for? Would they be working with the ballcub or the player’s best interests in mind? A player’s agent knows everything there is to know about a player, the injuries, the STATs, where he wants to play, or doesn’t.
In theory the agent would also know how much money a club would be willing to spend on a given player, what they needed & wanted in their line-up, what their farm system was like, and who they were willing to trade. They would know what was negotiable and what wasn’t for both the player and ballclub. (Does any of this sound familiar?) Would that play agent be able to keep it zipped? Or would they be using known information to make the best deal for one of their clients, and who would it be?
An unpopular point of view – let’s make less money
It isn’t a popular viewpoint, to say that we, as agents should take less money, or do fewer transactions, especially when the law says it is legal to do so, not when many of us have taken a hit in the wallet in the last few years. But I believe that clients should, when they want representation, have quality representation when buying and selling. It’s one of the biggest choices our clients will ever make.
Our clients should know we have one person with only their best interests at heart, not someone else’s. Of course, as long as the law of the land is the dual agency is alright, companies, brokers, and agents will continue to practice it. Do agents and their brokers always know who and how they are representing someone in a transaction? Do their clients or customers? Does anyone know the difference?