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New: Dual Agency or Double Agent – What’s the Difference?

Posted on May 3, 2007

Recognizing that what is legal is not always what is best, I am writing this in response to a situation I recently found myself in: Imagine you are a buyer, searching for a home – for nearly a year and a half. The perfect home comes on the market, and your agent is hot on the trail; previewing the home, running comps, feeding you all the information you need to make an informed decision.

Wanting to have all the latest status info, your agent contacts the listing agent, who reveals that she has a buying client of her own, who is viewing the subject property for a 2nd time, and considering making an offer. What to do? The listing agent, under Washington state law, and according to current MLS rules, has the legal right to “represent” both sides of a transaction. Now my question: Is it ethically, physically, and humanly possible for one person to effectively represent both sides of any transaction?

What would you do? If, as a responsible agent, you recommend that your clients submit an offer prior to the listing agent’s clients, you know the listing agent’s competing offer will win, regardless of how strong your clients come in, unless the competing offer is significantly weaker in several fronts. If the offers are even close to comparable (and it’s reasonable to assume they will be), the listing agent has the undeniable advantage of inside information – both with respect to the seller and their buying clients, and is free to adjust the offer accordingly.

While as a buyer this might suggest you should rush to the closest greedy double agent you can find, offer in hand, the fly in the ointment is that your “representation” is exactly as valuable as the paper it’s written on. And ultimately, representation is what “agency” is all about. Then again, maybe I’m just being cynical and naïve.

However, to put it another way, would you feel comfortable entrusting your defense in a court of law to the prosecution’s attorney? Could you ever be certain they were on your side? If something goes wrong, what is your recourse? In a recent transaction I learned of second hand, a double agent recommended that his seller return ½ of the earnest money that was legitimately collected when the buyer backed out of the deal. As a direct result of that, the agent was able to keep the buyer as a client. Now, can you really believe that agent was acting in the best interests of his seller?

We heard of another example where a buyer’s agent called the listing agent to let them know that they would be submitting an offer that afternoon. What the listing agent didn’t disclose was that he had a buyer waiting in the wings – once he told his buyer that another offer was coming in they wrote up an offer and presented it before the competing offer arrived. Everyone was happy at the time: the seller was happy to have their house under contract, the buyer got the house they wanted, and the listing agent was making more money. The catch? The other offer came in a few hours later $12,000 over list! Because the seller had agreed to dual-agency, and because the listing agent acted in their interest and not in the interest of their client, the listing agent made twice as much for netting their seller $12,000 less.

In my estimation, an agent/realtor who willfully pursues double agency is not executing the fiduciary responsibility of their position, which I believe contributes to the negative perceptions of my chosen profession: the money-grubbing, backroom dealing, cigar chomping good-old boys network of crusty agents.

Jesse and I have made a professional choice to avoid the legal, ethical, and moral quagmire of dual agency- we won’t do it – ever. It’s part of the mission statement on the opening paragraph of our website – “Home realization through effective representation” And we mean Representation, not “representation”. Now, as I mentioned at the outset, double agency is legal and supported by our laws and our Multiple Listing Service. As an old codger I know would say, “That don’t make it right!”

Several states and MLS’s across the country have eliminated this practice, recognizing the negative associations stemming from it, and the enormous potential for abuse. Another argument I feel has not seen enough exposure is with regard to the effect it can have on a local housing market where the practice is widespread. It is the real estate double-whammy equivalent of price-fixing and insider trading. We know the pressures our local housing market is experiencing, with the CAO (critical areas ordinance), double-digit appreciation, and a significant affordability gap. When you add the subtle, but substantive twist of double-agency (for you laymen, the official euphemism is ‘dual agency’) to a statistically significant number of transactions, one can only wonder what the economic impact has been, and continues to be, on our market.

Ask your agent if they practice dual agency – if they do, you might want to find someone who’ll represent your interests before theirs. “Impossible!” you say? Not at Pickett Street 🙂

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