Dual Agency is “Bait and Switch.” | CAARE – Consumer Advocates in American Real Estate

Dual Agency is “Bait and Switch.”Dual agency is a way for brokers to unfairly get paid double. It is most prevalent at large brokerage firms (we recommend avoiding these). Commissions are already arguably too high and savvy consumers can avoid paying a double fee while also preserving their right to representation.Dual agency occurs when real estate agents from the same firm claim to represent both the buyer and the seller in the same transaction. Representing adversarial interests at the same time is a legally impossible situation (“serving two masters”) and is illegal in every other profession. Worse, brokers are incentivized with a double fee if they manipulate you to agree to this.Dual agency (also known as Designated Agency) is often  branded (even marketed) to consumers by large brokerage firms as a thing of value – it is not. Although the term “dual agency” seems to infer an important relationship of trust and reliance, dual agency is a betrayal in which the firm becomes a secret double agent that only gets paid double if they can convince you to do it.In order to avoid dual agency, seek out smaller, highly qualified and independent brokerage firms that understand and agree to other more favorable relationships such as Exclusive or Single Agency representation.Negotiating Tip: Sellers, instead of negotiating a bundled commission, negotiate each part of the commission. Do it yourself (“unrepresented”) buyers typically receive no financial benefit for their work. Instead the listing broker confiscates the entire amount (a hogger). So instead of negotiating a 5% commission, negotiate how much your listing broker will get (2% for example), negotiate how much will be offered to buyer brokers and do it yourself buyers (3%). When buyers are searching, yours will stand out because buyers stand to save 3% only on your house by doing it themselves. Listing brokers should not care whether the 3% is paid to buyer brokers or buyers. If they claim that they have to do more work, then keep shopping until you find a listing broker that is willing.Looks like this:Listing Broker: 2%Buyer Broker or Do It Yourself Buyer: 3% Bait and SwitchDual agency is potentially one of the worst “bait and switches” possible because it involves the “switch” (abandonment) of a trusted advisor and advocate. Even with disclosures, consumers rarely expect the change in relationship (and often never even know that it occured) that comes with dual agency and they are almost never prepared for the complete abandonment that defines dual agency. And despite the degradation in the level of services in a dual agency situation, the client ends up paying double. Should Less Service Equate to a Lesser Fee?The Consumer Federation of America came up with a recommended fee schedule that suggests a sliding downward scale to align the degradation of services that results from dual agency with a lowering of the fee Realtors charge.  According to them, less service should translate into a lower fee.  It is Illegal for Attorneys to Practice Dual AgencyIt is illegal for attorneys to engage in dual agency in adversarial relationships. Yet, attorneys possess far higher entry level licensing standards and education requirements than do Realtors.  In addition, attorneys are trained in how to manage conflicts of interest. Realtors are not.Attorneys must have a post graduate doctorate degree and pass a State Bar Exam in order to become licensed. They also have a meaningful Code of Ethics that provides substantial and public penalties for infractions. Even with their thorough training in agency relationships and conflict management, attorneys avoid dual agency because it places too much risk on their clients.Licensing requirements for real estate agents are essentially non-existent.  The minimum standard to obtain a real estate license in the United States doesn’t even require a high school diploma and an individual can often obtain their license after taking only a 30 hour class on how to pass the exam.  And their “Code of Ethics” is designed to protect Realtors, not clients and is enforced by peers who are members of their trade association and all decisions are kept private.  Real estate licensing laws are typically lax as is enforcement of those laws.There really is no comparison. Realtors do not possess the necessary training or education to engage in such a complex relationship as dual agency.Despite the complete lack of minimum standards and the incredible complexity and danger of dual agency, it is now legal in most states for Realtors to practice dual agency.Attorneys run conflict checks to avoid dual agency and have for the most part bifurcated their profession into plaintiff and defendant firms. Nothing like that system exists for Realtors. We believe that it should. To make matters worse, Realtors don’t understand dual agency, they have little training in conflict management,and disclosure forms are misleading and inadequate.  Consumers don’t understan

Source: Dual Agency is “Bait and Switch.” | CAARE – Consumer Advocates in American Real Estate