Q: I will be purchasing a vacation home this spring. The home I’m interested in is currently offered by a real estate agent. This agent will be acting as a "double" agent — working for me and the person who has listed her property with the agent. How does this work?
A: I find your choice of words intriguing. This situation — where the listing agent also represents the buyer of a property — is known in real estate jargon as "dual agency," but perhaps there’s some significance to your use of the term "double agent." Dual agency simply implies that one brokerage or salesperson is working as the legal agent of both buyer and seller.
However, the term double agent connotes someone who pretends to spy on a target for another party, but is in fact loyal to the target.
Mindset Management
Are you concerned that perhaps your dual agent will be more of a double agent, selling out your best interests to the seller? The reality is that dual agents who were originally just the listing agents often do have a deeper relationship with the seller than with the buyer.
Is it possible for them to avoid situations in which they reveal one side’s confidences to the other? Yes — and frankly, it’s a dual agent’s legal obligation not to divulge your confidences, such as your top dollar, etc., to the other side.
Nevertheless, dual-agency situations are a breeding ground for suspicion and perceived bias toward one side, even in the best-case scenario. In the worst case, actual favoritism can occur. There are some potential, occasional upsides to working via a dual agent, too, to be fair.
But the consensus inside the industry is that more often than not, buyers represented by listing agents are depriving themselves of full advantages of representation you would have if you had your own agent.
Need-to-Knows
Different states and different agents treat dual agency differently — some don’t allow it at all, and virtually every state that does allow it requires that the arrangement be disclosed and consented to by both parties in writing. It’s necessary to understand that there are two types of dual agency, though insiders agree on how critical the distinction is.
Single-agent dual agency is the most precarious sort — where a single agent works for both buyer and seller. In two-agent dual agency, two different individual agents represent the parties, but the agents are employed by the same broker.
The biggest critique of dual agency arises from the fact that among the key benefits of having an agency relationship with a real estate agent in the first place are the fiduciary duties you are owed as client. One of these — loyalty — requires that your agent treat your best interests as supreme over her own interests and those of everyone else involved in the transaction. …CONTINUED
Because buyers’ interests often come into conflict with sellers (sellers want the highest price, buyers want the lowest, etc.), you can see how a dual agent cannot, by definition, treat both buyer’s and seller’s interests as supreme. By law, in most states, dual agents must disclose that they simply cannot provide fiduciary duties to either side.
But in practice, because the relationship with the seller often predates the relationship with the buyer, buyers represented by dual agents can end up feeling like they got short shrift.
So, many experts and legal cases loudly proclaim that buyers should avoid dual agency wherever possible. This black-and-white stance fails to credit the fact that dual agency is very much a standard practice in some areas, meaning that it is infeasible (though technically legal) for a buyer to access certain homes without working with the listing agent.
It also belies the reality that in some instances, the listing agent can indeed obtain deal points in the buyer’s favor, occasionally including a commission reduction to cover repairs or a lower purchase price, if they represent both sides.
Action Plan
1. Get clear on exactly why you are working with the listing agent rather than getting an agent of your own.
2. Consider whether you feel that you are willing and able to protect and further your interests as fully as you’ll need to, or whether you would rather have your own agent.
3. If you decide you’d like your own agent, and you have already told the listing agent that you would like to have her represent you, have a direct conversation with her about the challenges of dual agency.
If you still would like your own agent, find another agent outside of the listing agent’s company (ideally via referral) and see if he or she can work something out with the listing agent to avoid dual agency. For example, your broker might offer the listing agent a referral fee.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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