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Is it possible to competently represent the best interest of two different parties in a real estate transaction? Dual agency has been practiced by real estate brokers for years but has it ever been a good idea?

Imagine a law firm attempting to defend both plaintiff and defendant. Or a campaign manager working for two opposing political candidates. People and companies tend to avoid such arrangements and their inherent conflicts of interest. But the business of real estate has for decades operated knee deep in dueling allegiances.

The practice of dual and designated agency is legal in some form or another in all 50 states across the nation which amazes me. It indeed shows how influential the National Association of Realtor's lobbying organization is. While the practice remains legal for now, my question is whether or not it is ethical or even possible.

Dual Agency in Today’s Real Estate Environment

Before the advent of buyer agency, all agents represented the seller. The seller hired an agent to sell their home, and all the other agents who brought buyers were working as sub-agents to the seller. The seller agreed to fit the bill by offering commission; let's say six percent, to their representatives.

Back then most buyers thought they were represented by their agent only to find out later they were not represented at all but no one told them. By the late 1990's there had been enough complaints, and something had to change.

Along came exclusive buyer representation. Now the buyer hired an agent to represent their interests in a real estate transaction. What did not change is that the seller continued to fit the full commission bill but was only getting half the representation they were previously. On top of that, the real estate agent and brokerage representing the seller could also represent the interests of the buyer as well thus splitting their loyalty but not the commission. So while the real estate industry oligarchs redefined representation to calm the cries of consumer advocacy groups, it changed little regarding compensation or the ability of brokerages to represent both parties. Do you smell something burning yet?

Far and away one of the most dangerous agency situations is dealing with multiple offers while representing both the buyer and the seller under a "disclosed limited agency" agreement. Disclosed limited agency is just another name for dual agency. Things can get very complicated when there are multiple offers on a home which is more common in a low home inventory market like we have now. What if a seller agent is dealing with more than one buyer who wants to purchase the property? Represent that!

My Take on the Practice of Dual Agency

I represent buyers and seller differently. There are many different strategies and ways to craft an agreement for the purchase of a home. It is exceedingly difficult to combine both strategies in an effort to represent the best interest of both parties at the same time. What happens if the buyer I now represent asks me what I think the property is worth and wants advice on how much they should offer? If I tell the buyer less than the asking price of the home I am representing for the seller have I lied to the seller or breached my commitment to represent them competently? The challenges extend far beyond these items.

I think that representing two different parties in the same real estate transaction is extremely difficult. I believe that most real estate agents and brokerages handle dual and designated agency representation as honestly as they can. Like most things, everything is okay until it's not. By then the weakness of the idea is exposed for what it is, and there are often consequences.

One of the critical factors in the world of real estate representation and practice is to put the interest of your client before your own. I 'm not sure trying to serve the interest of two masters in a real estate deal to make both sides of a commission is a way of living up to that highest of standards.

Before you consider buying or selling a home or property consider how you want to be represented and by whom. Don't be afraid to ask the right questions! Have a great Easter!

Knowledge is Power!

Jeffrey C. Hogue