Dual agency is controversial among brokers

Posted: April 13, 2014

Do you want to start a lively row among Realtors? Utter the words dual agency, in which one Realtor, or one brokerage, represents both the seller and the buyer of one home.

"I don't see how you can get the buyer the best deal you possibly can and the seller the same thing," said Paul Bondy, president of Exit Realty in Ambler.

The buyer wants to spend the least amount of money on a home; the seller wants to reap the most he can for his home, Bondy said. "The only person who benefits," he said, "is me."

A Realtor manages dual agency with extra care, said Nathan S. Naness, of Berkshire Hathaway Home Services Fox & Roach.

"I don't encourage it, but sometimes the listing agent is the best one to sell his own listing," said Naness, who sells primarily in Center City. "If a listing fits my buyer, and both parties have consented to dual agency, I will show them the listing."

By law, an agent must inform both parties about serving in a dual role, and they must agree to that role in writing, Naness said. He sells mostly by referral, so he usually has lists of prospective buyers and sellers.

Real estate pros are unequivocal about dual agency, and not just in the Philadelphia region. The relationship is banned in four states - Colorado, Florida, Kansas, and Wyoming - and though most other states allow it, dual agency can legally occur only with the proper disclosures, said Sara Wiskerchen, managing director for media communications at the National Association of Realtors.

To manage dual agency, a Realtor maintains his or her fiduciary responsibility to both parties, disclosing any problems about the house that the seller makes the Realtor aware of and keeping mum about numbers until an actual bid is made.

When a dual-agency relationship goes awry, as it sometimes does, the courts tend to side with the consumer.

In Virginia, an agent lost an appeal when the client, even though there were no losses, sued because the agent had not disclosed dual agency.

In a California case, an appellate court ruled in favor of both seller and buyer, each of whom had sued the broker who had represented them. That case involved overlooked problems in the house and a statute-of-limitations claim by the broker, which the court said did not apply.

In Pennsylvania, said William J. Weber, a partner at the law firm Connor, Weber & Oberlies, dual agency is discussed at the beginning of the relationship and again when any offer is made on the property.

The most likely place a prospective buyer will encounter dual agency is at an open house, whether for a previously owned home or new construction.

Bondy said the seller's agent must hand each prospective buyer a document known as a consumer notice, essentially letting the person know he or she is the seller's agent.

"The buyers would talk to the agent. Meanwhile the agent is representing the seller," he said.

With new construction, several industry pros said, builders use their own representatives and their own documents when buyers come calling.

Buyers need to be educated, they said, and should not count on saving the 3 percent commission because it won't happen.

"There is no savings. . . . It doesn't work that way," Bondy said.

If a buyer walks into a development with a representative on site, he should protect himself and ask to see some paperwork, Weber said: "As in all circumstances where the possibility arises, the full disclosure and informed consent required by law must be honored."

There does not appear to be any savings for the buyer if he or she enters into a dual-agency agreement on an existing house.

Said Stephanie Uff, of Cityspace in Center City: "The commission is already determined ahead of time. So if the buyer thinks he might save, he won't."

How does a seller make out?

A study published in 2013 found it's all in the timing: Sell in the listing contract's first month, and the seller gains an average of $28,800 more. But sell in the last 30 days, before that contract expires (with the stipulated commission), and the seller loses an average of $9,300.

All in all, dual-agency agreements cost the seller about 1.7 percent, the study showed.

Dual agency can create efficiency if you have an honest broker because only one broker is handling the entire transaction, said the study's main author, Bennie Waller, of Longwood University, near Richmond, Va.

But, he added, "From the buyer's and seller's perspective . . . make sure they understand that the broker is working for the seller, because he is paying the commission."

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