Just like actors and professional athletes have agents, so do home buyers and sellers. Why? Because they want to be represented by a specialist who has deep industry knowledge, vast connections and deadly negotiation skills. They want someone who knows the ropes and can advise when to push harder on a counter offer and when to pull back. They want their own iron fist in a velvet glove.
But can you imagine an actor’s or athlete’s agent also representing the studio or team? Probably not. But this “Double Agent” situation happens in real estate all the time.
Many home buyers and sellers don’t understand what their agency relationship is, if they have one at all or whether or not it’s exclusive. It’s a terribly important issue that, in my opinion, is often glossed over.
It can be unclear whether you are truly in an exclusive relationship with your agent. When selling a home, it’s obvious if you’ve signed a listing contract that your agent represents you in the sale of your home. But what about buyers? Who’s representing them? It could be your agent, assuming a dual role. Are you okay with that?
What is real estate “agency” anyway? People ask me if agency representation starts when you first meet an agent, even if casually, like when you stumbled into an open house? Is it official if you’ve looked at several homes for sale with them, or when an agent visits a home you’re thinking of selling? Is it only official if an agency agreement is signed?
Thankfully, hiring a buyer’s agent in California can be as simple as verbally discussing your decision to have them represent you. Or it can be formalized by signing a “Buyer Broker Agreement” which determines the time period for which you are bound to that agent, and they to you. Here in California, “agency” is implied as soon as an agent and a prospective buyer or seller begin to have serious discourse about a transaction.
That said, California agents are required to have ALL potential buyers and sellers sign a “Disclosure Regarding Real Estate Agency Relationship” document the moment we begin to discuss any potential future transaction. Despite being the law, it almost never happens. This is not a binding agency agreement; it simply clarifies what an agent representing you is required to do, per law, should you decide to hire them.
This is important because it is legal here to represent both buyer and seller in a sale, like a “double agent.” It happens all the time and is referred to as double ending or dual agency. Many listing agents build their business plans around double ending all their deals to earn twice the commission per sale. These agents often deliberately won’t allow other agents to show their listings to buyers. Or if they do allow the showings, those other offers somehow never make it to the sellers. It’s a case study in conflict of interest.
One agent in Newport Coast brazenly told my clients that unless he represented them and wrote their offer, they would never buy a home he listed. And he listed a lot of them. He knew they were my clients. We had sent him purchase offers that always seemed to go nowhere. We never got counter offers. In frustration, they relented to his demand for dual agency. And voilà, they got the home. Did they get the best terms? Probably not. Did the sellers get top dollar? Probably not. Did the agent care? Absolutely not. He made out great.
It blows my mind every time I ask a potential client to sign this disclosure form and they tell me, in spite of already having bought or sold homes here, they have never seen it before. One can only assume that their agents either didn’t want them to know they had a fiduciary obligation to them, or (gulp) the agents were themselves unaware of said fiduciary obligation. I can’t decide which option is worst.
How can any agent prove that they have promoted the best interests of their Seller while protecting the best interests of the Buyer when they are literally opposed, fighting for the highest and yet lowest price? It’s a slippery slope. If either party has regret after the sale closes and decides to lawyer up, accusing the agent of not diligently representing their interests because of a conflict of interest, it can create a virtually indefensible position. Even honest agents who behaved perfectly can lose this fight.
I’ve represented both sides in a sale before, only twice. Once for a short sale, where the seller deferred to the lender for all selling side decisions. And the other was a fully disclosed intra-family sale, where they wanted my guidance with the process. I don’t typically double end because when I list a home, I market it so aggressively that it’s exposed to thousands of buyers through various media sources. The statistical probability that the best buyer is already my client is infinitesimally minute. It could happen. It just hasn’t yet.
Do not misunderstand me. I am not out to demonize dual agency. It can, and occasionally does, occur with great outcomes for all parties. It requires complete transparency and willingness on all sides to share an agent. Sometimes this results in reduced commissions paid by the seller in exchange for some mutually agreed concessions for the buyer. As long as everyone is aware of what is happening, it can be fine.
Buyers and sellers should also be aware that “dual agency” exists if different agents employed by the same broker, even when from different office locations, represent a Buyer and Seller respectively on the same sale. Does this mean that the agents are likely to give up any private information about their clients to the other side? Certainly not. Yet, the law sees this as risky, because the brokerage benefits from both sides of the transaction.
The only way to completely avoid dual agency is to forbid your agent to engage you in a contract with any other agent from their brokerage. Yet the larger and more successful a brokerage, the more probable it becomes that you miss out on a property or buyer that is perfect for you, just because that agency conflict exists. Yikes!
So what can you do? You can direct your individual agent to not personally represent the opposing side. For a listing agreement, my clients often add language stating that I may not personally represent a buyer for their home. This is because I have carefully explained what dual agency is “from the outset” as required by law.
Agency is by its nature imperfect, and I highly recommend you speak with an attorney about any real estate agency relationship. It’s worth serious consideration. This is why contact information for a few attorneys can be found in the “Resources” section of my web site.
If you would like to have a conversation about real estate and wish to see this agency disclosure for yourself, it would be my pleasure to chat with you – after I’ve sent you the form.