Dual agency is a term that comes up almost anytime there’s a listing presentation I’ve found, and although I might be the minority, I don’t like the idea of it. So, I’m going to break down here what it is, how some people can do it, and how it is illegal in some states.
First things first, what is dual agency? According to Forbes they define it as, “Dual agency is when a single real estate agent represents both the buyer and the seller in a real estate transaction.” Sounds simple enough that one person can help both the buyer and seller complete the transaction in what might seem streamlined. But it isn’t that simple. Forbes goes on to say that “In 10% to 20% of home sales, both parties have the same agent. However, this practice, called dual agency, can sometimes create more conflicts of interest since they’re not supposed to lean more toward the best interest of either the buyer or the seller. More than half of homebuyers and sellers don’t realize that there are different types of agencies, according to a 2019 report from the Consumer Federation of America, a research, advocacy and educational organization based in Washington, DC.”
Many times, I’ve found that in listing presentations dual agency is brought up by a simple question usually when we start talking about commissions. The standard commission in Michigan right now is 6%, which typically breaks down to 3% to the listing broker and 3% to the broker on the buying side, and the question is “What if you (implying me—the listing agent) bring the buyer?” Enter the issue of dual agency.
Some agents will enter into dual agency and have both the buyer and seller sign a disclosure regarding it, other agents may reply something to the effect of “If I bring the buyer, I’ll lower the commission to 5%,” other agents on teams may separate the buyer and seller and others like myself will simply say they don’t do it.
My job as a listing agent is to represent and market your property to the best of my ability and represent your best interests. My job as a buying agent is to represent my clients needs and to try to potentially negotiate the best price and terms for them. As a listing agent and buying agent I am privy to knowledge regarding things such as how much a buyer can actually afford versus what might be listed on their pre-approval, or how low a seller is really willing to go to get a property sold based on their other expenses or current lifestyle. In my opinion all of this makes it very difficult if not impossible to be truly neutral and represent each client best.
I think teams can navigate dual agency the best if needed, such as if a listing opportunity presents itself and the team of two or three agents gets the listing, and then a buyer they are also working with is interested, when it comes times to write an offer, the communication style changes. One of the team members works exclusively with the buyer, and the other team member works with the seller while going back and forth on price, terms, or negotiations.
I’m lucky enough to have an amazing group of other agents in my office that I would love to work with on the side of a deal with. So in my situation if I have the listing and do an open house where a buyer may come through that is interested, I am happy to talk to that possible buyer about the property because I am still doing my job by marketing the property for my seller, but if that buyer says they love it and want to write an offer, I politely pause the conversation and will include another agent from my office to take over from there. The other agent does not know my client and can advocate best for that buyer.
There are eight states where dual agency is either illegal or heavily restricted: Alaska, Colorado, Florida, Kansas, Oklahoma, Texas, Vermont, and Wyoming.
When the market was at it’s most competitive several months ago, I can think of several situations where I submitted offers for clients in multiple offer situations and we may have been one of 11 or 12 offers, only to find out that the winning offer was also represented by the listing agent. I am not saying that there was anything funny going on, but I’d prefer to be on the cautious side of that and not even put myself in that situation for the sake of not only my reputation but my client’s best interest.Posted by Ariel Christy on