Notorious R.O.B.

Hey Rob-

Can't say I disagree with anything you're saying here. In my state (NJ) dual agency is legal when fully disclosed and agreed upon by the parties. Its ethics remain debatable. As you properly noted, the “legal standard” is the MINIMUM standard deemed acceptable in any society. The ETHICAL standard is what we aspire to as professionals. If we want to be taken seriously as professional Realtors (and I am a huge fan of the #RTB movement), then I agree it's important to tackle this issue head on. I know of no other profession where it is “legal” for a fiduciary to “share their allegiance” with adverse parties…consent or no consent.

I know of a couple brokers in my state who will only work as transaction agents for buyers of their own listings. They'll facilitate the transaction for them, but will maintain their agency relationship with their seller clients. Until something happens on a legislative level in NJ, this may be the wisest course of action.

Rob, Bravo!

Ah, the once per year dual agency post and resulting rhetoric.

All this #RTB discussion through the RENET and Twitter in my opinion is laughable when dual agency continues to thrive. Yet powerful forces exist to protect the status quo with only a small minority taking a stand against the practice. The consumer looses and continues to hold us in low regard.

Interesting to note that the upcoming revision of the California Purchase Agreement has moved agency confirmation to the first page. This is a state where Agency is almost never disclosed when legally required.

The common practice of brokers using the Dual Agency Consent Form is almost universal in California and if Clients took a few minutes to read it and understand it, would they really agree and sign it? Why opt for crappy representation?

You simply cannot serve two masters.

Coming from a Broker's standpoint when I managed over 175 agents, there was never a more stressful moment than when a transaction spun out of control with threats of lawsuits, only to find dual agency rear it's ugly head. The legal department scrambles to solve the issue quickly before the whole mess is dragged into the light of day. The company certainly does not want to see the inside of a courtroom.

Most laughable to me is the partner or married agents claiming each of them will represent the other side. Full disclosure, I have actually done this 10+ years ago in my career – but have repented. Is anyone really naive enough to believe this is an effective strategy?

The solution for dual agency is don't do it. PERIOD.

If a Broker or agent needs to deal with both a Seller and a Buyer have one of the parties execute a Non-Agency Agreement. The agent and broker is free to fully represents the interests of their Clients with a fiduciary responsibility without offering agency to the other party. Solves the “can't we all just get along so the seller can save some money” argument and works for those parties that are savvy enough to represent themselves. Most folks when faced with that choice decide they want representation.

I would hate for the solution to be the removal of the fiduciary nature of our relationship with Clients. Going down that road will lead the industry to nothing more than glorified salespeople only out for their individual interests. That will be a sad day and you might as well auction your home on e-Bay.

Alas, this conversation will go on for a bit with all the usual arguments and then peter out as the next hot topic hits the network. Shame that we don't have more voice against dual agency and until that day comes don't talk to me about raising the bar.

Rob, thanks for the great read, let's see if the #RTB folks are really committed to making a substantial change in our industry or they just want to argue about digital photographs, MLS remarks, and 2 day designations.

Rob,

You beat me to the punch on this.

I've written but not yet published a blog post (“Dropping the F Bomb;” the “F” stands for fiduciary) at P1Fran.com which deals with the basic overriding point that you are making here, which is that “fiduciary” and “dual agency” are two ideas that don't co-exist very comfortably.

In fact, this opens the door to a much larger point (which is more the topic I'm driving at in my blog post), which is this: how can you have a company that is based on SELLING as much as possible (the goal of just about every real estate company) and SERVING (the fiduciary issue) at the same time?

These objectives would *appear* to be in direct opposition to one another. At a minimum, there is certainly the appearance of a conflict of interest. At best, these are awkward stablemates.

I've been selling real estate for nearly two decades, and I've done everything in my power to avoid dual agency transactions. I think I've *maybe* done two, and even though I've never had a problem, I held my breath from start to finish because the risk is so much higher simply because of PERCEPTION. Even when you handle these sales PERFECTLY, the concern always remains that one – or, forbid, both – clients will feel the OTHER CLIENT somehow got more favorable treatment. Truly, it is impossible to serve two masters.

Real estate companies, coaches and trainers who preach “getting clients to quick decision points” and “convert your clients faster” and “how to juggle hundreds of clients at once” certainly are not preaching a message of “undivided loyalty,” are they?

Stated differently, you cannot serve the almighty dollar AND the client at the same time.

THIS, in my mind, is the biggest Achilles heel of our industry: this disjunct between SALES and SERVICE.

This is NOT to say that all Realtors who handle a lot of clients are shirking their fiduciary responsibilities – of course not. This IS to say that MANY agents are ALL ABOUT THE DOLLAR, and the industry in total walks a very fine line between serving its' collective clientele and serving itself.

Keep on writing thought provoking stuff, Rob. I love it.

Best,
Michael McClure

Good post for discussion. Designated agency has solved many problems in this respect here in Michigan and we still have disclosed dual agency. Disclosure is the golden thread combined with following the golden rule of course.

Big boxes forgot the CLIENTS ages ago.
Dual agency is in the best interest of the agency, not the client.
North Carolina doesn't want full disclosure of all the $$ they make for a double-header.
NAR is encouraging agents to add another 2-day 'expert' title … for $175 or $350 … and the flocks are fluttering to the courses.
Who is protecting the clients??
Don't think I'm not posting a link to this post on my blog.

And here's part of Virginia's section about Dual Agency's limitations.

Because of the Broker's dual representation in such a transaction, Buyer understands that Buyer and the seller have the responsibility of making their own decisions as to what terms are to be included in any purchase agreement. Buyer should be aware of the implications of Broker's dual representation, including the limitation on Broker's ability to represent the seller or Buyer fully and exclusively. Buyer understands that Buyer may seek independent legal counsel in order to assist with any matter relating to a purchase agreement or to the transaction that is the subject matter of a purchase agreement. Provided Broker has acted in accordance with its obligations under this Agreement, Broker shall not be liable for any claims, damages, losses, expenses or liabilities arising from Broker's role as dual representative. Buyer shall have a duty to protect its own interests and should read any purchase agreement carefully to insure that it accurately sets forth terms Buyer wants included in the purchase agreement.

“I think one possible solution is for all clients to be the broker's clients.”
In California the client does belong to the broker. That is why dual agency is alive. It allows the broker to have two different agents represent two different principles in the same transaction.

Jay, making an exception for a short sale isn't a good idea depending on the state. If the seller is facing a deficiency, then the listing agent should be trying to get the highest price possible, not the lowest. You cant do that and represent the buyer adequately in that scenario.

I dont have a problem with dual agency as it applies to the broker as long as one agent isnt representing both sides. I know that flies in the face of JD's point, but that means that brokers need to hire better with regard to both agents and management.

Agency and fiduciary are not that difficult to get right. Its simply a choice to do so.

I do know that the http://www.altisourcehomes.com employed brokers can not take the buy side and is often commented with more satisfaction during the home sale process. If both sides are taken, it can be a slippery slope but in the times of new services for buyers, agents/broker seem to need to re-invent themselves.

Aloha R.O.B, We're a big fan of this article over at Hawaii Life.