Dual agency could present problems for buyer or seller

Is your agent representing both buyer and seller?

The controversial question of dual agency – one agent represents both sides in a real estate transaction – has moved to include all agents in the same office and could affect salespersons nationwide.

The plaintiff in a case before the California Supreme Court contends that even though the listing agent was originally contracted by the seller, the listing agent was an agent of the broker in the same office as his buyer agent. Therefore, the listing agent also owed him, the buyer, representation as well.

The California Second District Court of Appeal agreed, stating, “When a broker is the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer and the seller as the broker.”

Historically, the “broker” was the boss in the office. He or she is now known as the “managing broker” or “office manager.” Many real estate agents now refer to themselves as “brokers.”

The California case, Horiike v. Coldwell Banker, comes on the heels of another dual agency controversy, the sale of a $12.25 million Malibu view compound that reportedly turned out to be smaller than advertised. According to Bloomberg News, the buyer, who had visited more than 80 properties, claimed he was cheated and sued the agent and the brokerage. He won a state appeals court ruling that sellers’ agents have a fiduciary duty to protect buyers’ interests, not just those of their clients, when there’s only one brokerage involved in a deal.

Some property professionals question how they could get the best deal for both buyer and seller simultaneously, while others say the listing agent is best equipped to sell his or her own listings. 

The National Association of Exclusive Buyer Agents, a group representing homebuyer interests, has long been opposed to dual agency. The group has stated the practice does nothing for consumers and only benefits the agent who can collect both the buyer’s and seller’s portion of the commission.

“When agents working under that broker represent both the buyer and the seller, it presents an impossible situation,” wrote Chris Whitehead, NAEBA president.

According to the National Association of Realtors, Colorado, Florida, Kansas and Wyoming ban dual agency. Other states allow it with the proper disclosures.

Dual agency is legal but isn’t for everybody, according to Mike Spence, an attorney and a licensed real estate instructor.

“I’ve taught real estate law part time for 25 years and when I ask how many brokers practice dual agency, the results are almost always 50/50,” Spence said. “Many brokers make the business decision not to do it. Others do it because they feel it exposes their clients to a larger pool of buyers or sellers.”

In addition, the agent must disclose in most states that role during any phase of the transaction in which he or she acts with less than “unequivocal loyalty” to either interest.

When you sign a contract with an agent to represent you, make sure you understand all provisions. In some cases, it can be an exclusive agreement wherein the agent can seek the agreed-upon commission even if you eventually purchase without the agent in an area miles from the agent’s area of expertise.

“In some cases the contract cannot be revoked, regardless of how you find it or who assists you,” said Alan Tonnon, a longtime real estate attorney and author. “You may find yourself paying for services you did not think you received during the life of the contract.”

Check all agent agreements twice. That way, you may only have to pay once.