Dual Agency Should Be Illegal!
October 28, 2007 in Buyer Broker, General Consumer Info, Law, News, Real Estate | Tags: bad, Buyer Broker, Buyers Agent, Columbus Ohio, dual agency, EBA, Exclusive Buyer Agent, nightmares, Real Estate, real estate transaction, realtor magazine
This is not Real Estate for Dummies. But, it probably should be. The basic definition of dual agency is “The same real estate agent is representing both buyer and seller in the same transaction”. Dual agency is the single worst issue involved in real estate. The average “Joe” out of the street easily understands that dual agency is WRONG. This seems like common sense to the regular guy. So, why can’t the politicians and many real estate agents & brokers understand this simple terrible concept? The main reason why dual agency exists is because of the glorious MOOLAH. Real estate brokers and agents have a huge financial incentive to be involved in a dual agency transaction at the detriment of their buyer or seller. Dual agency has no benefits to protect the consumer (buyer or seller). One of the simplest and best examples that I’ve ever read about the problems of dual agency actually came from a traditional real estate agent (Matt Difanis) in Illinois and not an Exclusive Buyer Agent. A few years back, Matt had a sent this letter to the Realtor Magazine.
Here is another real simple definition; agency is when a real estate broker discloses “who” & “how” they are going to represent a buyer or seller. Home buyers need to STOP spending all their time on the Internet looking at pretty pictures of potential homes and START spending more time fully understanding all types of agency (dual, single, transactional, limited or designated). Understanding agency is definitely not the most exciting part of the home buying process. As a matter of fact, it is down right boring. But, PLEASE, PLEASE, PLEASE; before you start down the path of buying a home make sure you spend time fully researching everything. As with many major financial decisions (car, home, vacation, etc.) most of us end up rationalizing decisions based on emotion, don’t make a decision based on emotion!!
Non-disclosed dual agency is ILLEGAL in all 50 states. But, only a few states have made (disclosed) dual agency illegal. Dual agency should be”outlawed” and made illegal in all 50 states. If you are a buyer or seller involved in a dual agency transaction and you don’t completely understand dual agency than you should immediately contact or RUN to your nearest real estate attorney.
Wouldn’t it be nice if life were clear-cut? Often in residential real estate it is: The most common legal arrangement in the business is for a listing agent from one company to represent the s
Dual agency, when a single real estate agent represents both the buyer and the seller in a transaction, is fraught with conflict of interest. While some agents say they are able to handle the conflict through careful adherence to ethical rules, others are strongly opposed to dual agency, and some groups abhor the practice.
What are agency relationships in real estate? Explanation of dual and single agency, buyer’s brokers, and listing, brokerage, and transaction agents.
, benefiting the seller.
According to the Journal of Real Estate Research (June 2013)
Read the entire article.
With a housing market favoring sellers, buyers are resorting to different tactics to get their offer accepted.Home sales and prices have been on a steady increase over the last few months as the market remains on a stable path of recovery, but low inventory in some markets have created stiff competition—with some areas reporting bidding wars.To help compete, some buyers are incentivizing agents by offering them the opportunity to represent them as well as the seller. Under these circumstances, dual agents get the full commission as both buyer and seller.
“One of the best ways to convince the listing agent to take a somewhat- less qualified offer is to let them represent you and give them the commission as well,” says Eric Tan, a RedFin listing agent in Los Angeles. “A lot of buyers are catching on to this.”In certain real estate markets around the country, inventory is tight and houses are selling above market price. On top of that, foreign investors are jumping into the market and making all-cash offers. If buyers can lure the real estate agent into their corner, experts say the commission potential could help them win a home—even if they don’t have the best offer.
More on this…What if the Mortgage Deduction is Eliminated?Reverse Mortgages: 10 Things You Need to KnowDon’t Fall for these 10 Mortgage MisconceptionsHow Social Media is Changing the Way We Buy and Sell HomesWhile it could work in winning a home, working with a dual agent or agency may not always be in the best interest of both the buyer and the seller. After all, if the real estate broker is representing both the buyer and the seller, each party will never fully know whose corner the agent is actually in. “In very rare circumstance the dual agency makes sense,” says Tan. “We’ve done a lot of market research and according to the data, on average you lose about $5,000 in the sale of a home when you use a dual agency.” Even though buyers are losing money, RedFin’s survey, which was conducted last year, found that one in 10 homes in the U.S. are sold by a dual real estate agency.
Although real estate agents are required by law to disclose if they represent both the buyer and the seller, but often that disclosure isn’t so black and white. Every state has its own laws regarding dual agencies according to John Murphy, a realtor in Plymouth, Minn., and that buyers and sellers will often run into dual agencies when dealing with big brokerage firms.“Real estate is a very entrepreneurial environment and is perfect for small brokers. There are many that are out there, but there also continues to be consolidation like we see in many other industries where the big brokers continue to get bigger and bigger,” says Murphy.
“It’s in the big broker environment where you run in to dual agency situations.”Even in situations where the dual agent is disclosed, home buyers aren’t necessarily informed on what this means. Murphy says he sees a lot of dual listings with new construction sales since most buyers are so focused on purchasing a home and will make sacrifices.In Minnesota, Murphy says dual agents would go from fully representing one party to having limits placed on the representation of both. For example, agents aren’t allowed to argue to benefit one party over the other. “It is like a boxing match where we would move from being the coach in the corner giving explicit guidance, direction and coaching to our boxing client to becoming the referee where we have to remain impartial, says Murphy.
“ I don’t think real estate consumers fully understand this aspect of real estate.”Going with a dual agent arrangement makes a lot of sense for buyers looking for an edge, but in a normal real estate market, critics advise homebuyers to avoid that situation if at all possible.“In today’s market, where the dual agency method can get the property it’s tough to avoid the dual agency but it really does harm the system,” says Tan. “You jeopardize the rights of the buyer and the seller. You’ll never know if you really got a good deal.”
HUD Bans Dual Agency on Short SalesHUD issued a Mortgage Letter on September 23rd prohibiting dual agency on pre-foreclosure sales (short sales). The presumption is that dual agency precludes an arms-length transaction. We agree.Dual agency is a form of representation that is illegal in every other profession and it is extremely harmful to consumers. Dual agency disclaims all representation (it really is no representation at all). Perhaps the most nefarious consequence of dual agency is that consumers are stripped of their representation on the most important and complex transaction of a lifetime. We believe consumers, especially distressed property owners, need to be making informed decisions based upon impartial legal and Realtor advice. We question why the National Association of Realtors opposes this rule that cements the need for impartial Realtor advice in the transaction. Could it be the double commission payable on dual agency transactions?Read our letter to HUD on this important issue by clicking on image below: