The Dual Agency Mythology

This morning brought the NAR-required quadrennial review of the Code of Ethics, a multi-page, multi-article creation that, at the end of the day, says we’re supposed to do right by our clients and play nicely with others.

This particular COE class was intertwined with a course on agency – the concept of real estate licensees and their relationship with the public at large, customers to a degree, and clients in general. And, inevitably, there was a shudder in the room when the concept of limited dual representation – wrongly labelled as dual agency – was raised.

In Arizona, all real estate representation begins at the broker level. Though you may think you’re listing your home for sale with me, in reality you’re listing your home with Thompson’s Realty and as such, all of the brokerage’s 30-odd agents are working on your behalf and honor bound to work in your best interest. And if you’re working with me to purchase a home again, in reality, you’re working with Thompson’s Realty and all of the brokerage’s agents are bound to work in your best interest.

Enter dual representation, which potentially can happen any time a buyer working with a Thompson’s Realty agent is looking at a property also listed for sale by Thompson’s Realty. That there may be two agents involved, one working with each side, is immaterial.

First off, dual representation cannot take place without both disclosure and informed consent on the part of both parties. So, as a buyer, if you’re not interested in any such situation, just tell me and we won’t look at any Thompson’s listings and, as a seller, tell me and we’ll keep our buyers away.

That’s fairly easy to do when you have 30-odd agents. I imagine that’s got to be more than a little bit of a nightmare for the brokerage in town that happens to have more than 2,000 agents following a merger a few years back, or even another brokerage that recently merged with the late John Hall & Associates. Because, you know, it’s not like there was a John Hall agent whose television ads run every morning and it’s not like he’s got a ton of listings.

Where was I … oh yes.

With limited dual representation, essentially all of the fiduciary duties an agent normally has to his or her client – confidentiality, obedience, accounting, loyalty, etc. – go out the window because it’s impossible to completely fulfill those fiduciary duties to both buyer and seller simultaneously. Which is perfectly fine, as long as both buyer and seller provide their informed consent.

Again, it bears repeating, this situation arises any time the buyer and seller are being represented by the same brokerage, even if its by two different agents.

I emphasize because there’s a substantial percentage of agents who abhor limited dual representation. My own then-broker and now-owner, while not prohibiting the practice by his agents, frowns upon such things because of the inherent conflict of interest involved.

It’s not at all uncommon to see agents claim to never “practice dual agency” or otherwise have to contend with limited dual representation because they only represent sellers and send all sign calls to other agents, or because they only represent buyers and send all potential listings to other agents.

Except … if those sign calls or potential listings are going to other agents within the same brokerage, in essence the agent has done nothing whatsoever to prevent a limited dual representation situation. It’s all little more than a pantomime, a sleight of hand designed to distract unknowing buyers and sellers from the reality of the situation – that limited dual representation can and does occur every day. Whether it’s single-agent or dual-agent limited representation is little more than semantics, as the rules are exactly the same in either case.

How can you possibly do this, you might ask. Isn’t it your job to get the highest dollar for your sellers?

In a word, not really. My job as a listing agent is both to get the house sold and to represent my sellers’ best interest. If two offers come in – a financed offer contingent upon an appraisal and the buyers’ ability to get the loan, and a cash offer for $5,000 less with no contingencies to speak of – acceptance of which offer is in my sellers’ best interest? (If unclear on the answer, please return to Whataburger for a crash course on the shake machine.)

Representing a buyer or seller is about more than just the dollars and cents. At the end of the day, it’s about getting the house sold for the seller and getting a house bought for the buyer in whatever manner is necessary to represent their best interests and (ideally) realize their real estate goals. In my experience, the only people who dispute those are those who see real estate as a zero-sum game – one side must win, one side must lose.

Horsecaca.

If there’s anything I wish to accomplish here, folks, it’s to help you see more clearly how real estate really operates once you peel away the pabulum and rote answers so many agents who never have considered what it is they do and how always seem to provide … we syndicate listings because all listings need to be uploaded wherever possible (which, technically, includes about 1.2 billion known websites), an agent can’t adequately represent a buyer and seller simultaneously, we’ve got to have that Open House because darn it, how else will potential buyers ever know you’re home is for sale …

If you personally aren’t okay with the concept of an agent representing both you and the other buyer, no worries. Might I suggest you not call listing agents and make sure whomever you’re working with is comfortable getting you referred to another brokerage if needed, just to play it safe.

I’ve got no issue with that. Where I do have issue is in agents who separate single-agent and dual-agent limited representation as if they’re two very different things when, in reality, the only difference is a handful of letters.

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

2 Comments

  • HowardArnoff 5 years ago

    Excellent as always JD. I know all states have different laws but I like how we in South Carolina split dual agency into single agent dual agency (which I am not a fan of) and designated agency (allowing each party to have their own representation).

  • Paul Howard 5 years ago

    Jonathan,This is a great piece. To bad so few agents don’t really ‘get’ that agency is at the company level. (I’m not aware of a state where that is not the case but – could be.)
    There is one way that buyers can have their buyers agent and not risk losing out on seeing property listed by their agents company.  That is to use an Exclusive Buyers Agent (EBA). The definition according to NAR (and taught in the ABR course): An EBA is an agent that works for a company that as a matter of company policy never lists homes or represents sellers.  This is also the definition used by the National Association of Exclusive Buyer Agents. Agents that are moving in that direction and want to open an Exclusive Buyer office should contact NAEBA  www.naeba.org or http://www.naeba.info.  

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