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Jed Lane; Fog…, Real Estate Pro in San Francisco, CA

Dual agency? Can an agent protect two clients interest.?

Asked by Jed Lane; Fog City Guide, San Francisco, CA Tue Jun 3, 2008

I don't think so. I heard it expressed as I can't be a tiger with two faces and that is exactly how I work. My goal in a transaction is to take advantage for my cleint of anything I can, isn't that what a fiduciary duty is? I would not be able to do that if I was having to weigh out the interst of another party. How can a lawyer argue the proesecution and the defense in a trial. He has to be able to seek advantage and press one side or the other.
I've heard of one technique that could work for me and that is to invite the clients to sit down at a table and hash out the terms and conditions themselves.

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I find dual agency (or transactional agency in some states) to be a serious conflict of interest. As you point out, Jed, you can't serve both sides of the deal. The only one you're really serving, when handling both sides of the deal, is yourself and you're doing your clients a terrible disservice, in my opinion.

It's not that I believe that an ethical Realtor would divulge any proprietary information, nor that they wouldn't do their utmost to be "fair" and "even handed" to both sides, but that's not why we were hired.

Our seller client hired us, in part, for our skill and counsel in negotiation. Our buyer client also hired us, in part, for that same skill, as well as the ability to pick our brain regarding inspection issues, how to handle them, what to ask for (repairs or credits), and how hard to press.

When we agree to be dual agents (and let's be frank, most clients do NOT understand the total implications of dual-agency), we have to effectively sit by the wayside as a disinterested party and allow the clients to "hash it out" between themselves. I like to call it "therapeutic real estate"... if they ask me what to do regarding an inspection problem, I get to behave like a therapist and ask "What do YOU think we should do?"

That's not what they hired us for. They're receiving short shrift and we're being paid twice. Not a good deal for the consumer.
3 votes Thank Flag Link Tue Jun 3, 2008
Alan May, Real Estate Pro in 60201
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No the disclosure is not mandatory and most attorneys will not let them fill it out. All the seller has to do is give the buyer $500 at the closing if they don't fill it out. It should be more and they would fill it out. You'd be surprised how many complain about the $500. We are also not supposed to run comps for the customer, but it is public record so it isn't hard to get them. We have a lot of interest in buyers, however the buyers for the most part refuse to sign a buyer's agency contract. They are used to the way it is and don't want to sign anything. I think we are the last bastion of attorney controlled closings. They have a strong lobby.
0 votes Thank Flag Link Mon Jun 9, 2008
JR
Even when I bring a buyer to someone else's listing, they are the customer and they do not get any advice and no disclosure of the seller's details regarding why they are selling, what they owe, or what comps sold for.
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Doesn't the seller have mandatory disclosures about the history and condition of the property they are selling? We don't get the why they are selling or what they owe but we defiantely run comps for the buyer if we are representing them. It sounds as if agents do't have much interest in buyers on LI. I understand that lawyers do the contracts and the close but I quess I don't really know how the process works there.

I think that we all operate under the same agency/fiduciary relationships but with some differences. But it seems that our markets and local practices are very different.
In California agents prepare all kinds of documents and contracts. They are fill in the blank type contracts but there are reams of paperwork in our transactions.
0 votes Thank Flag Link Mon Jun 9, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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Thanks Ute and Jed. In NY, we don't prepare contracts or paperwork (at least not on LI). We don't often do buyer agency. If we take out a buyer, we explain broker's agent buyers agent and dual agency. Most customers will not sign a buyer's agent agreement, therefore most customers are our customers not clients. They must sign a disclosure that explains this and explains the fiduciaries we owe the client and what we owe the customer. Even when I bring a buyer to someone else's listing, they are the customer and they do not get any advice and no disclosure of the seller's details regarding why they are selling, what they owe, or what comps sold for. Most of my own customers seem to have no problem finding all this out themselves on line. We do have to be careful about implied agency, and both parties must agree to dual agency. I'm never had a seller cllient agree, usually right from when I take the listing, when I explain dual agency to them.
0 votes Thank Flag Link Sun Jun 8, 2008
That is nice Sylvia. Ute, I liked the Latin thrown in. JR here is the CA DRE definition of agency relationships:
CREATION OF AGENCY RELATIONSHIPS
A principal and agent can create an agency relationship by:
• agreement between them;
• by ratification;
• by estoppel; or
• as the result of the conduct of the parties and the agent’s inherent relationship with
third parties (i.e., ostensible or implied agency).

When we work with FSBO's or event the limited or fee for service business models we have to be extremely careful to not create an agency/fiduciary relationship with the other side. Liabilities are huge and it is so easy to have a jury misinterpret your actions.
This is great because I'm learning new things and I'm also meeting agents that I know understand our business. If I have business going to any of the areas you all are from I know who to call.
Maybe we should start a Trulia Professionals Network on Linkedin or somewhere.
0 votes Thank Flag Link Sun Jun 8, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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Oh the other thing I forgot to mention is the Trust level. You have to have earned your client's trust that you are acting on his best behave.

I had a couple of listings where the sellers would not let me do dual agency - told me upfront they would not allow that and it's fine with me, because I don't advise that anyway. As time goes on, they changed their minds and told me they'd love to have me represent both because by now they trust me and they felt I'd have deserved that. It did not happen in boht cases; but it's sure one of the best compliments I could have gotten from them. :-)

Sylvia
0 votes Thank Flag Link Sun Jun 8, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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I always let my broker handle one side to keep it fair and in the up in up. We have to be fair to the client without being concerned about how much we are going to make
Web Reference: http://www.delpagroup.net
0 votes Thank Flag Link Sun Jun 8, 2008
Hello J.R. In CA, we don't have that distinction between client and customer when it comes to dual agency. The agent is either the agent or he is not. If an agent wants to make sure that he/she is not going to be considered an implied agent, he/she will make sure to have the buyer sign a non representation agreement. CA law is very strict on disclosure of dual agency (the very first document that a buyer (or seller for that matter) has to sign is the Disclosure of Agency Relationship which addresses, inter alia, the dual agency relationship possibility. If you don't want to be considered the buyer's agent for legal purposes, you should not prepare any of the paperwork for the buyer. The same is true when you represent a buyer in a FSBO transaction. We all know that as the buyer's agent you'll probably pull double duty when you deal with a FSBO, but in CA you'd make sure you'd get that non-representation agreement and stick to it. It would not be a good idea for an agent to do work for the non-represented party that the agent would normally do in his/her capacity as an agent and then try to avoid liability by pointing to the non-representation agreement. I understand that not all states handle agency relationships the same way we do in CA. I hope this helps you understand why we are having this discussion here (the poster of the question is from CA).
Best regards,
Ute Ferdig
0 votes Thank Flag Link Sun Jun 8, 2008
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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Doesn't anyone simply work with the seller as their client and buyer as their customer on a sale? I've worked both sides on some of my listings and never done it as a dual agent.
0 votes Thank Flag Link Sun Jun 8, 2008
Sylvia,
Yes it makes sense and those are good examples. I have a relative that buys lots of real estate and always uses the listing agent. He feels that they have the greatest motivation and he is quite clear on what he'll spend for the property. That is another example of acceptable dual agency. When the principle is knowledgable.
0 votes Thank Flag Link Sun Jun 8, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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Hi Jed:

Again - I deleted the last one, very similar, but written very late last night and there were places which do not make much sense to even myself this morning. So I am resending it. Sorry.

Here it is ..................

Although our policy is to discourage dual agency because I do agree with you, it is really difficult to protect two clients' interest in a dual agency, especially a transaction with potential problems, unless you are very skillful.

However, I can also see benefit of doing so at times; especially with proper disclosures. A couple of simple, hypothetical cases -

Seller has a lot of equity, want to relocate and does not want to go through the trouble of preparing the house for sale and put it on open market. The agent happened to have a client who is interested in buying this home and agreed to the seller's terms. The agent ended up representing both and perhaps negotiated some credit, perhaps not. However, both sides are happy with what they get out of the deal. The seller sold for a sizable profit and does not care if he gets another $10 or $20K. The buyer loved this hard to get location and does not mind doing some repairs.

If they are represented by two agents, both negotiate hard for one or the other side, that side might get a few thousand dollars more or not; the the deal might fall through. In this case, both sides rather have minimum trouble and just get it done within the perimeter both agreed to. To me, this is a win-win.

Here is another one. It's a short sale, the seller just want to sell the house and really does not care how much the house sold for because he just wants not to get foreclosed upon. The buyer saw it somewhere, calls the agent and makes an offer right at listing price. There is no negotiation because it's at listing and the buyer is already getting a great deal if the lenders approve. Assuming a successful transaction, both sides accomplished their goal.

I think sometimes we need to look at the bigger goal and let the clients decide what's the best for them rather than for us to decide what's the best for them.

Each case is different. This is a fine line and you have to tread it very carefully. But I can see it can be successful, again with proper disclosures and advisory. .

Wonder is this makes sense?

Sylvia
0 votes Thank Flag Link Sun Jun 8, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
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Patrick,
It takes an expert in negotiation to perform dual agency.
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I agree with the best practice of getting the parties together as I said in my original question. But, you knew there was a “but” coming . . . I am an expert in negotiation and I'd say that getting everyone together is more of a mediator than a negotiator.
A negotiator looks for advantage and then exploits the advantage. If I'm sitting down with both clients I can't be involved in asking for concessions, increases in price, terms that have an advantage to one side or another, I can't know the bottom line for either. All I can do is keep the discussion moving towards conclusion and record the hopefully happy outcome.
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Now before I get all the nasty hate mail, because I am not afraid of doing my job!
~~~~~~~~~~~~~~~~~~~~
There will be no hating in this thread! This is a place to exchange beliefs, experiences and provoke thought.
I've learned already of some states restrictions and the concept of a transaction agent, which I'd never heard of before.
Here's my favorite story of why I can't see myself doing both sides. My client saw a house and fell in love. We got in contract before I'd seen it. I attend the inspections and I'm seeing little things wrong. It was a flip where a 60's ranch style was updated, new kitchen bedroom over the garage etc. I noticed that the light switches were put in upside down. Not a big deal but speaks to the quality of the workmanship and the attention to detail of the contractor.
I saw an advantage and I worked it. I delayed the removal of contingencies while we continued our investigations and got some estimates to correct the workmanship. I was getting to about $3,000 in work. The listing agent asked what would it take to move ahead "5, 10, 20,000".
I know none of you would ever say those words. I talked to my clients and we asked for a reduction in price $75,000 and they countered with $55,000 reduction. I said I would talk it over with my clients and get back to them within 24 hours.
I'm sure that all of you have stories like this where you recognized an opportunity and exploited it. What would have happened if I was representing both parties in that transaction?

Ute,

All in all, I think it is very important to set the expectations straight before entering into a dual agency relationship.
~~~~~~~~~~~~~~~~~~~~~
I agree completely. The disclosure though needs to go so far as to say I can't do part of my fiduciary duty for either of you in dual agency. I can't negotiate for you or suggest that either side will offer more or take less. If something is found in discovery it will have to be worked out between the two of you. I will mediate and my manager will be available also.

I believe this is the ethical stand. Please disagree with me. I want someone to open my eyes to another way to look at this.
0 votes Thank Flag Link Sat Jun 7, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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Hello Jed. I believe that dual agency is very tricky because of the perception of conflict of interest. I say perception as I think it's important to keep in mind that the agent is not the ultimate decision maker in any transaction. We act as consultants and execute our clients' instructions. While I don't think that representing buyer and seller in a transaction is per se a conflict of interest, I think there is a potential for one or both clients to become upset because the agent may have to present requests for repairs that the seller will not like and the seller may reject the request altogether in which case the buyer will not be happy and very likely blame the agent for it. I discuss dual agency in great detail when I enter into a listing agreement but the reality is that most people think they'll be alright with it until they are faced with the real situation. While I can see the benefit of arranging a meeting with the buyers and sellers, I am not sure that the dual agent should be the one who is leading the meeting. Ideally, the meeting should be conducted by a trained mediator who is neutral to the transaction and knows how to diffuse heated arguments. I think we all know that emotions can get the best of both buyers and sellers. I am particularly wary of listing agreements in which the agent agrees to accept a lower commission if the he/she also represents the buyer (e.g., 5% instead of 6%). While this may very well be beneficial to the seller financially, it may create a problem when the listing agent later determines that a dual agency relationship would not be a good idea. The listing agent should still be able to decide to refer the buyer to another agent without the seller thinking that they paid more commission because of something the agent did. All in all, I think it is very important to set the expectations straight before entering into a dual agency relationship.
0 votes Thank Flag Link Sat Jun 7, 2008
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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Jed,

It takes an expert in negotiation to perform dual agency.

In a market that is so one sided, being that it is a buyers market it is more difficult to perform dual agency

About a year ago I wrote a post about my experience sitting buyer and seller down at a table and coming to terms.
It was like soaking everyone in Gasoline and passing around a match. It was very scary. I had a great risk at losing my sellers, and buyers.
Everyone walked away happy, and I remain in monthly contact. It was a great experience.

So why do a dual agency.

1. The buyers and Sellers want to?
As a listing agent I find the buyers all the time. The buyers want to buy, the sellers want to sell. It is your job to put the deal together.

"Oh, so you can collect a full commission on both sides"

That is the typical thought of a Real Estate agent who has never even stood in a room with a buyer and seller at the same time, let alone negotiate a deal.

Most typical is about half the commission, what do you think happens when buyer and seller are 10K apart, and that`s my final offer! The Realtor gives it up!
How often will you have a buyers agent and a listing agent split 10K?

So when you come across buyer and seller who both want to use you as their agent, are you suppose to "Refer" to another agent, ( do you get a referral fee?, do you disclose that? ) and run the risk of that other agent screwing up the deal, and how is this buyer suppose to "trust" your recommendation?

Have you ever done a house swap? Those have dual agency written all over them.

The Fact is Dual agency happens
It is not Illegal or unethical. It is a service provided to buyer and seller.

Now before I get all the nasty hate mail, because I am not afraid of doing my job!

I explain how I work dual agency at all listing appointments, and the commission structure.

When I meet a buyer, and they are interested in my listing, I explain that they can find another Realtor on their own, or we can all sit down together. My goal is to sell the house.

Side note: Tell a buyer to go find another Realtor, you will be amazed how much more they want to use you.
0 votes Thank Flag Link Sat Jun 7, 2008
Mr.P, Other/Just Looking in Arizona
MVP'08
You could always represent your client (maybe the seller) and act only as a transaction broker for the buyer. You have to be fair and honest to both sides, always. But, you have to keep your client's confidential info private. Any known defects must be disclosed. You, as a transaction broker, cannot give advice, but you can give them information so that they make an informed decision (CMAs for example). You cannot negotiate for the buyer, but you can still negotiate for your client. You have more responsibilities for your "client" as opposed to a "customer." And, of course, get an agency type agreement before you do anything!!! As for hashing it out between the two parties, I would say that is a "no-no."
0 votes Thank Flag Link Thu Jun 5, 2008
Maggie, is that the law in your state? We, here in California can do it but we are reminded constantly how it increases you likelyhood of being sued.
0 votes Thank Flag Link Thu Jun 5, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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All Agents are bound by the Code of Ethics to treat both parties to a real estate transaction honestly and fairly, however, agents can only represent either the buyer or the seller - not both. Their fiduciary duty is to the party they represent.
0 votes Thank Flag Link Thu Jun 5, 2008
Connie,
I'm not talking about dual agency where two agents with the same brokerage represent clients. I know that is dual agency but my question goes to one agent representing both sides of a transaction.
0 votes Thank Flag Link Thu Jun 5, 2008
Jed Lane; Fog…, Real Estate Pro in San Francisco, CA
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No, they are only representing both parties fairly and dealing with material facts only. In essence you are not being advised of what to do, only given material facts.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Tue Jun 3, 2008
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