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Revisiting Dual Agency – Like Gefilte fish, sometimes it makes sense

(This is a little trip through Kris' brain that I originally penned back in July, 2009. With all of the recent hubub surrounding the listing syndication debate, many have chosen to make the idea of dual agency central to their arguments (ironically, on both sides). So it seemed fitting to rerun my own position on the idea of an agent playing a dual role in the transaction. In short, it's risky business at best, but I continue to hold that whether the practice is the devil incarnate or not is strictly situational. It depends on a lot of things — including the buyers and sellers and their particular needs, the circumstances, and the agent involved. Gefilte fish is generally sort of gnarly too, but there a couple of times a year is makes sense and ends up tasting pretty darn good.

Oh – and the part about the buyer's agent being disintermediated by the web? Thankfully, I wrong about that one. But listing agent shoppers are still out there in force, make no mistake.)

I don't care what you say, Mommy loves me more!
Creative Commons License photo credit: Ruth L

(Editor's Note: Steve is somewhere out of broadband range with Daughter #2 conquering yet another pristine high Sierra trail, this being his 48th "last-trip-ever-cause-I'm-getting-too-old-I-promise" backpacking adventure. I do my best work — and get into the most trouble — when he is unaware.)

It seems we are at it again. Dual agency is the topic du jour on the blogs this week (which makes no sense, but you get what I mean), and I spent most of that time plugging my ears and averting my eyes. That is because I seem to be in the minority on this issue. But having decided recently to get back on the horse, I am ready to declare "game on."

Dual agency, strictly speaking, is where the same brokerage represents both the buyer and a seller in a transaction. If two different agents from the same company, say Millineum 42 or Rock Solid Realty, are representing both parties, this is dual agency, but that is not the kind of dual agency most are concerned with. It is the single-agent dual agent which tends to get everyone in a lather.

Dual Agency Refresher

Say I have a listing contract with a seller. I have an agency relationship with the seller; I am his fiduciary. Now, what if a would-be buyer comes to me and asks me to write an offer for him? In this case, if I agree, I also am establishing an agency relationship with the buyer; now, I am his fiduciary as well. On the face, this sounds like the work of the devil, and rightly so. The argument is rather obvious. How can I pound my fists on the table in an attempt to negotiate the highest price for the seller and then, presto, change hats and chairs and argue for the lowest price for my buyer client? I can't. But…

I'll repeat a little speech we are called on to deliver at almost every listing presentation, and it is generally in response to the question, "If you represent the buyer too, will you reduce your fee?" Remember, the listing contract specifies both the total fee due to the listing agent and the portion of that fee that will be paid to a cooperating broker. Right or wrong, the seller is paying the listing agent the fee, and the seller and listing agent are agreeing that a portion of the fee (usually, but not always, half) will be sent the way of the buyer's broker if there is one. In short, the seller is hiring me to bring a palatable offer to the table. Part of doing that is by offering compensation to another agent who can assist, but it is the listing agent's contract.

The Speech

But, back to the speech. It goes something like this. Dual agency by its very nature begs at least the perception of conflict of interest, so it is not something we seek out. In addition to marketing your home and generating offers, my job is to negotiate the best price for your home that the market will bear while keeping us all out of the pokey. In certain circumstances, dual agency may be to your benefit and to the buyer's. In others, it may not. Under no circumstances will we act as dual agents if even one of the parties is just slightly less than thrilled with the notion. Thrilled clients trump the paycheck every day of the week. That's how we roll.

Where is the argument?

So, why would dual agency possible be acceptable, even beneficial, to both parties? There can be many reasons. Let's start with defining the "agent." I happen to work in tandem with my husband and business partner. Functionally, we do not operate as the two-headed agent. He has closed transactions where I have never met the client or seen the home and the other way around. In the event we both have an initial relationship with the client, it always evolves to the point where there is one primary point of contact, and the other is relegated to back-up mode. Who takes the lead is a natural evolution, sometimes dependent on schedules but more often on personalities.

So, we have the ability to act as dual agents because we are "dual" agents. This may sound like semantics, and it won't work if you are working with agents who are ethically challenged, but ethics are central to our model and our being. The day I knowingly breach ethics, you have my permission to shoot me through the temple and call it a day. (I'm embellishing; report me to the Department of Real Estate and have my license revoked. It's just as painful but a little less a felony.) Case in point – we actually had a listing this year where I was the lead on the listing, while Steve had a buyer client he had been working with for a year who wanted to make an offer. He did, with Steve, and two other buyers did, with their own agents. The home closed escrow two months ago, and Steve's client is still out looking. It was one of my proudest moments.

If you as an agent are in a position to divide and conquer, it can work. If you have an established relationship with a buyer who trusts only you to represent them, it can work. If you are a single agent who has to deal loyalties from a deck just to "make the deal," then the dual agency naysayers have a valid point.

Web 2.0 is Disintermediating the Buyers' Agent

I'm not saying this is a good thing, cutting the buyers' agent out of the equation. It's not; in fact, it stinks. It's just that the reality of the world in which we now live is that consumers are empowered with information and access. They are taking matters into their own hands. And many buyers sense that by buying direct, there may be a benefit. I'm not saying it is always so, or even mostly so (Note to attorneys: Commissions are negotiable!), but variable commissions are not all that uncommon. An example of a variable commission is where the listing agent agrees to a total commission of "X" unless he represents both parties, in which case the commission will be "X minus something."  So, free agent buyers (no pun intended) are becoming more commonplace. And, in the case of the variable commission and two parties living in the land of reasonableness, a gap can be closed to their mutual benefit. Turn your back on this segment of the buyer population, and you are shrinking your selling client's buyer pool to their detriment.

Circumstantial Evidence

Finally, circumstances may beg for a dual agency situation. Recently, we were approached by a would-be buyer for one of our listing who wanted the home – badly. They were informed, they had been looking, they had done the research and the math, and they knew exactly what they wanted to pay. Only, they had a home to sell. Now, had they waltzed in with another agent, our client may have been less than inclined to entertain their contingent offer. But, the seller trusted us. They knew how we marketed, they trusted our opinion of value, and they knew that if we said the buyer's home would be under contract in a given period of time, it would. Anyone else, and they likely would have kicked them to the curb. Using the divide and conquer approach, we now have two clients who couldn't be happier with the outcome, which is ultimately the goal.

In Short (like I'm capable of that)

Dual agency has many forms. It can be evil incarnate or it take the form of accomplishing what we were hired to do – sell the home.  It is situational; there are situations in which is can work exceedingly well, yet other times it can be a recipe for disaster. Making a blanket indictment of the practice is, in my opinion, knee-jerk. One of the biggest vocal opponents of dual agency, Ardell DellaLoggia, once said it best:

"If" the beginning of every residential real estate transaction were the buyers and the sellers and their agents meeting and chatting, maybe having dinner together and a drink or two for an hour. Then everyone walks through the house together while the seller tells the buyer the story of their life in the house and the buyer and agents ask questions. Then the offer is written, and proceeds through the inspections to find things the seller just truly doesn't know about. At the end of the transaction when all items and terms are fully negotiated, the buyer comes into the room with a check in his hand. The seller comes into the room with the keys to all doors and garage door openers and manuals on appliances. The agents review the final numbers and nod to the closing agent.

Sometimes, just sometimes, that is what a dual agency situation can accomplish.

Kris Gomez

Kris Gomez is Owner and Designated Broker of San Diego Castles Realty. She has been serving San Diego buyers and sellers since 1997.

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  • San Diego Castles Realty
  • 12265 Scripps Poway Parkway, Suite 115
  • Poway, CA 92064
  • P: 858.530.2374
  • F: 858.876.1701
  • E: info (at) sandiegocastles.com
  • CA BRE# 01853496

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  • Kris Berg, Broker
  • CA BRE #01241572