(Newswire.net — January 24, 2019) —
Maximum Real Estate Exposure
Duel Agency Explained:
For many consumers the basics of how real estate is conducted is a confusing mess. It is understandable as most people don’t buy and sell homes daily for a living.
Confusion becomes easy when someone does not explain how things truly work. One of the common areas of real estate where lots of buyers and sellers get confused is agency.
In other words, who represents who in a real estate transaction. It should be simple but that isn’t always the case. Most people understand that a real estate agent working for a seller is what’s often referred to as a “sellers agent”. Likewise, an agent working for a buyer is called a “buyers agent”.
In each of these scenarios the real estate agent has a fiduciary responsibility to their client. They should be working hard to get the client the best terms and conditions in their purchase or sale. The real estate agent is their advocate or trusted advisor every step of the way during the transaction.
Here is where it gets tricky. There is a third type of agency, known as dual agency, that confuses a significant percentage of people, including real estate agents. For purposes of this discussion, I am going to explain dual agency as one real estate agent “trying” to represent both the buyer and seller in the same real estate transaction.
Let me start by saying that is completely impossible. How can someone represent the interest of two parties that have conflicting goals? Do you have a puzzled look on your face right now? Don’t feel bad if you do!
Dual agency is a complete conflict of interest. In dual agency the real estate agent is not allowed to give advice to either party that would benefit them in anyway.
The agents hands are tied in comparison to what they would normally be doing if they were a buyer’s agent or seller’s agent. They become a neutral party.
A real world example of why dual agency is so bad for consumers.
Let’s say Mr. Jones decides to sell his house and hires Mr. Johnson to sell his house. In a traditional sale where an agent from another company brings a buyer, Mr. Johnson would be counseling them throughout the sale on important decisions. One example would be advising them on how to deal with an offer.
What terms should the seller accept? Is the price right? If not, what should the counter offer be? In this scenario, Mr. Johnson is a trusted advisor throughout, all the way to the closing. A perfect arrangement. Now let’s go over the same scenario but this time the buyer goes directly to Mr. Jones real estate agent, Mr. Johnson.
In this example, Mr. Johnson practices dual agency. So Mr. Johnson is now representing both the buyer and seller. The buyer makes an offer on Mr. Jones home. It’s about twenty-five thousand below the asking price Mr. Jones having not sold a home in over ten years asks Mr. Johnson what he the counter offer should be.
In dual agency Mr. Johnson is not allowed to answer the question. He cannot favor the buyer or the seller. He effectively is not allowed to give any advice. Just think about this for a minute – Mr. Jones is paying Mr. Johnson tens of thousands of dollars to sell his home and he can’t get any advice!
What person in their right mind would accept dual agency? Folks, this happens everyday across America other than those states where dual agency has been banned. Dual agency benefits one party – the real estate agent!
Dual Agency is Not Explained Properly
Over and over again real estate agents do not explain dual agency properly. In every state where dual agency is allowed the real estate agent must explain how dual agency works.
Here is the problem – the person explaining dual agency has a vested interested in the client accepting it. Why do real estate agents want dual agency?
It raises the chances they can double dip – getting a commission from both sides of the transaction. So what happens is the real estate agent sugar coats dual agency.
They don’t explain it well to the client. No seller would ever accept dual agency if they knew their real estate agent could not help them do the most basic things expected of an agent. Dual agency is a sham that should be banned in every state.
Designated Agency is Different Than Dual Agency
Here is where it becomes a bit more confusing. In some states like California, they refer to dual agency as two agents from the same company each representing a buyer and seller.
Most states refer to this as designated agency, where the broker assigns each party to have their own representative. The buyer has a buyer’s agent and the seller has a seller’s agent. Each clients information is held in confidence. Many would argue that designated agency is just as bad as dual agency. I disagree.
In designated agency each party has an advocate in their corner fighting for their best interests. In dual agency they do not! Designated agency is no different when it comes to representing a buyer or seller if they had an an agent outside the company. Each party is represented.
Final Recap
If you are buying or selling a home you should always have your own real estate agent. The benefits of having someone representing your interests in a real estate transaction can never be understated.
If you are selling a home you should never accept dual agency. There are no benefits.