You know what I have been thinking about lately? Dual Agency. Yeah….kinda boring I know, but I recently had a client bring it up and it got me thinking about how most people don’t know what it is, yet alone the pitfalls of it.
Dual Agency is when the listing agent for a house for sale also represents the buyer. It has nothing to do with being a spy or anything exciting like that.
The problem isn’t really with the concept of dual agency itself. Sure, it is possible to fairly represent opposing parties. The problem is whether or not the agent will do it. Just for fun, I pulled the market share info on several top agents in town. This is a report that tells you how much they sold. It breaks it down into categories like what percentage of the list price the agent’s buyers paid, what percentage of the list price their own listings got, plus what percentage of the listing price was achieved when they were the dual agents. Can you guess which category had the highest percentage of the list price. Yep….The ones where the agents represented both the buyer and the seller.
Whenever I see a house that sold for much more than I thought it would, I check to see who the buyer’s agent was. Much of the time it was the listing agent. There is a house in my neighborhood where the agent WAS the seller, the listing agent and also represented the buyer. Does it surprise you that no other house its size has sold for that much?
It seems to me that it is the buyer who ends up being the loser usually. I mean, the asking price is already out there. Can you picture this conversation: The buyer asks the agent what the house is worth. The agent says something close to the asking price. The buyer believes their agent. The buyer pays too much. Now, some stupid agents will do this anyway, but getting both sides of the commission sure can be a temptation.
I’ve been in a dual agent situation a few times. What I do to make it all fair is to totally pretend that I don’t know anything about the other party. It can be tough. I have often made a lot of extra work for myself. Heck, one time I really made a lot of extra work for myself. I had sold a property to a buyer who wanted to use me. When negotiating the price, I had to act like I wasn’t the listing agent and recommend a strategy. Then I had to turn around, present the offer to the seller and recommend a strategy for them. The advice I gave each party was in their own best interests. The crazy thing is that when we were doing the walk-thru, there had been a big storm and the basement had leaked. Soooo, I had to say to my buyer that it would be best to not close until the problem is solved. Why would I do THAT? Because that is exactly what I would have done if there was another agent representing the seller….which made it hard for me to deal with when I put on my listing agent cap and told the seller about it. I told the seller the exact same thing that I would have told her if there had been another agent involved, which was that we have had the place on the market for a long time, and this guy was the only buyer in line for the place, and that it is her house, so there would still be water in the basement even if this buyer walked away. She asked what I thought we should do, so I told her to offer an allowance to get the place water proofed. We negotiated a figure and got it done. Now, it would have been easier for me to just have recommended what I already knew each party would have agreed to, but each party deserves 100% representation, so they got it.
Dual agency is usually something to avoid, especially if you are a buyer. However, if you must, you really need somebody who can pull it off with integrity to make it right for everybody.