When you meet with an agent the first time buying a house or even the 100th time you buy a house, there is so much information presented to you, it’s hard to know what it all means.
One of the biggest pitfalls a client can fall into is something called “Dual agency”.
From Realtor.com, the definition of Dual Agency is “When a buyer is represented by the same brokerage firm that has the listing, it is called dual agency. When one agent represents both the buyer and the seller in one transaction, it is also called dual agency. In many states, dual agency is illegal: it can be a conflict of interest that best serves the broker.”
Ok, what does that mean?
In Arizona, it is legal to be a dual agent. There are two types of dual agencies that you need to know..
1). The agent themselves is representing the seller and the buyer.
2). The brokerage (the person/group the agent works for) represents the buyer and the seller.
To understand this a little bit more, an agent can be their own broker as well. A broker needs to have gone to Real Estate School for brokers and passed another additional exam. They are also required to take more Continuing education credits. In most cases, one agent works for a brokerage (group) that has one broker (like a boss or overseer).
If I was representing the Seller on 123 Cherry Street and entered into a contract and also represented the buyer who wanted to purchase 123 Cherry Street, I would become a dual agent. When you work with an agent as a buyer, you grant them permission to know what you can afford, what type of home you really want, and how much you are willing to try for it. As a seller, you let your agent know how much you are willing to sell for and sometimes the minimum you can clear before walking away from a deal.
How can one person keep all of that information separate when working with two people negotiating on one property? There is just no way that you can tell part of your brain to forget what the other part knows.
So, if I am the dual representing agent, I cannot tell the buyer “Hey, the seller will settle for this much. Just lowball it and they’ll take it”.
I also cannot tell the seller “Hey, I know they were approved for much more than we put for the price, negotiate higher with them.”
As the agent, I can either divulge everything or divulge nothing because I have fiduciary responsibility (trusted confidence) for both people of the same transaction.
And, as a dual agent, I may be double dipping in commissions. Who am I really looking out for? It would appear that the agent is looking out for themselves.
There is also the “Dual agency” of the brokerage. I belong to a group with a broker (boss) who manages multiple agents who may have a home listed that my client may be looking at. If my client wants the home listed with the other agent in my office (we will name her Cate), I can still work on the best efforts of my client, but if the deal starts going a little crazy, my boss now has to be a referee instead of a teammate. However, there are cases where one side doesn’t do their duties as spelled out by the contract, in which my boss would have to side with the person following the contract. But when an agent is representing both the buyer and seller in a deal, issues arise.
There are many, many cases where agents have lost their licenses and have been sued because of dual agency. The important thing to ask when interviewing an agent is “Are you a dual agent? Will you practice dual agency?”
Representing a client on such a huge decision requires skill, care, honesty, and confidence. An agent who represents both sides of a transaction cannot possibly be fair to both sides. An agent can refer either client out if they realize they may end up in a dual agency situation, and still get some from a referral agreement from another agency.
I don’t practice agent dual agency, and am upfront with clients if a home is listed with another agent in my office. There is too much to lose for everyone when doing dual agency and only monetary gain for the agent.