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New: Dual Agency- Sharks that swim on the land

Posted on Mar 12, 2009


“Can’t you feel ’em circlin’ honey?
Can’t you feel ’em swimmin’ around?
You got fins to the left, fins to the right,
and you’re the only bait in town.” – Jimmy Buffet, ‘Fins’

In an economy turned topsy turvy, with which-end-is-up news coming out daily, and a seemingly endless parade of graft, corruption, greed, and new stories daily turning up parasitic relationships where there should clearly be walls of propriety, it’s hard to know which way to run.

As many homebuyers know, buying a home can be a baffling task- and that’s assuming everything goes well. Obviously, as millions of people now know, it doesn’t always end in the American Dream. With a purchase as life-altering as your first home, it’s absolutely essential that you place your trust in an agent who deserves it. Unfortunately, the desire to ‘get a deal’ often overrides the common sense priority of ‘know whom you’re dealing with’.

In the state of Washington, every agent is required to present to a new client, preferably at the first meeting, a pamphlet labeled, “The Law of Real Estate Agency”. It is a 4 page 8.5″ x 11″ (double-sided) masterpiece that lays out the various options for real estate representation, and the duties of an agent in each of the given scenarios. The choices are: Buyer’s Agent, Seller’s Agent, and Dual Agent. As an exclusive representative of either buyer or seller, my duties are;

a) to exercise reasonable skill and care,

b) to deal honestly and in good faith,

c) to present all written offers and other communications in a timely manner,

d) to disclose all known material facts,

e) to account in a timely manner for all moneys,

f) to provide a pamphlet on the law of real estate agency to all parties to whom the licensee renders services, and finally,

g) to disclose in writing, to all parties, prior to rendering brokerage services, whom the agent represents in the given transaction.

Seems fairly clear so far- If I’m representing either the buyer or seller, we all know which team I’m on, and the rules of the game are laid out.

However, Washington state, along with several others, recognizes Dual Agency. This is where the lines get blurry. Look at the list of items for an agent on either side, and consider what a & b might look like for a dual agent. What is ‘Reasonable skill and  care’, when the reality is that this deal is only going to benefit the agent?  And how do you deal ‘fairly and honestly’ with two opposing parties?

Think for a minute how you’d feel walking into a courtroom to face the judge. Your lawyer, the guy who’s going to stand up and argue your defense, and whom you’re paying money- probably lots of it- is already in the room. He’s standing beside the guy who’s accusing you of a crime. And they’re talking- about you. Clearly their conversation concerns some aspect of the case, and you don’t know what they just said. A few minutes go by, and the lawyer walks to your side of the room, smiles, shakes your hand, and sits down. He leans in close, whispers a few lawyer comments in your ear, then gets up abruptly to go chat with your accuser again, who is understandably confused by the switching alliances. This is the essential fallacy of dual agency- one person can’t faithfully execute the will of two masters- especially when they’re on opposing sides! Now, assume the outcome doesn’t turn out how you’d hoped- you paid for your lawyer, after all. Who are you going to blame? He said he was a dual agent. You knew up front that he was in this for the money. In fact, his only true loyalty was to his wallet. Did you really expect representation, too?

But lawyers can’t practice dual agency. Only real estate agents. If lawyers can’t then why should it be OK for the representative of parties to a major financial transaction? That’s an excellent question- I’m glad you asked. Unfortunately, I don’t have a good answer. Several states have recognized that dual agency is a bad idea- the state of New York’s legal counsel even published a memorandum warning of the inherent dangers of dual agency. If you’re a buyer, it’s tempting, but clearly this is a tangle of conflicting interests.

However, I know of agents who specifically make an effort to ‘double-end’ deals. And I’ve known more than one prospective buyer who proposed just such an arrangement to a listing agent, in an attempt to score a potentially better ‘deal’.  The reality is that this opens up the agent to a wide range of accusations, from accepting bribes, to huge liabilities should the transaction go sour. And there’s no getting around the stain of the ‘appearance of impropriety’ that comes from being involved in a shady deal.

Do  you really believe it’s possible for one person to maintain the confidentiality requirements of two parties to a transaction? Could you negotiate a deal between two parties, knowing all the details, without divulging any confidentialities to either. Keep in mind that the agent, in representing the seller, already has a written contract that legally obligates him to ‘due diligence’ and loyalty to the seller. He can’t sign a second ‘buyer’s agency’ agreement without violating the first contract. So your representative is ‘representing’ you in name only- his true loyalties having been exposed by his willingness to blur the lines.

In the interest of avoiding this legal and moral quagmire, our team has adopted a strict ‘No Dual Agency’ policy as one of our founding directives. When making the largest purchase of your life, there should be no doubt who’s on your side.

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