Inside Agent: What is dual agency and what does it mean for homebuyers?
By: Ellen Beck
Special to The Examiner
July 8, 2009
vSometimes the buyer agent working with would-be homeowners and the listing agent representing the sellers of a house they want to purchase are one and the same.
It’s called dual agency. Realtors either love it or hate it, and many don’t want to talk about it. Those who hate it contend you cannot serve two masters. Those who love it say it allows them to give their clients the fullest range of choices and opportunities. And, of course, there’s the money.
Here are the basics: Most Realtors are both listing agents and buyer agents, depending on the client. At any given time, a real estate agent may have multiple buyers to whom they show houses and multiple sellers whose houses they are trying to sell.
In a dual agency contract, you are purchasing one of your buyer agent’s listings, putting the agent in the position of representing both sides of the transaction. Buyer representation contracts contain clauses both informing you of this possibility and asking you if it is OK. If you say no, then your buyer agent cannot show you their listings.
The whole idea behind having a buyer agent is to ensure buyers and sellers each have professionals working in their best interest. During the negotiating process, each agent’s goal is to get their clients the best deal. Agents must give their clients certain things — such as honesty and confidentiality and disclosure of information.
But can an agent do that for both sides at the same time? Agents are required to keep client information confidential and at the same time keep clients informed of all pertinent information as it comes along.
If an agent knows his buyer will pay up to $500,000 for a house, isn’t he obligated to tell the seller, whom he also represents, that bit of information? If he knows his seller will come down to $450,000, isn’t he obligated to tell his buyer that bit of good news? Would both telling and not telling violate the agent’s duties to his clients on both sides? It comes down to whether you want your agent playing on both sides of the fence.
It is difficult to see how an agent could not be affected by knowing information on both sides as he or she negotiates the “best deal” for both the buyer and seller. It would seem more likely the agent is reaching for any deal that works, or pushing one side or the other. The agent runs the risk of being more referee rather than representative.
Dual agency raises many questions that do not have ready answers. But, there are wonderful and ethical agents who do dual agency and have no issues with it.
One way around potential problems is designated representation. That is when a broker appoints another agent from his or her firm to represent a buyer. Buyers might suggest that if their agent has listings they should consider.
A big reason for the popularity of dual agency is, of course, the money. A dual agent collects commission on the transaction as both the buyer agent and the listing agent.
The numbers really can really start adding up. Consider this scenario: You are the agent and you sell the Smiths’ town house for $500,000 and get a listing commission of, say, 3 percent, or $15,000. Then, you act as the Smiths’ buyer agent when they purchase for $700,000 a center-hall Colonial listed by you for the Roberts. That’s a 3 percent buyer agent commission of $21,000 and, say, a 2 percent listing commission of $14,000. Next, the Roberts want to downsize, so you put on your buyer agent hat and find them a great condo on the beach for $400,000, for a buyer agent commission of 3 percent, or $12,000. Two clients, $62,000. Not bad.
Ellen Beck, who was a Realtor in Virginia, coordinates real estate coverage for The Washington Examiner. Her column, Inside Agent, appears occasionally in the First-time Homebuyers’ Guide and on the First Home page. It can also be found at washingtonexaminer.com.
