If you were being sued, would you hire the attorney or law firm suing you to defend you?  Silly question?  Sure, most people wouldn’t because of the obvious conflict of interest.  Yet, in real estate, this goes on all the time! Many prospective home buyers call the seller’s listing company- who may also offer to be your “buyer’s agent”- to view properties listed by that company.  

Big mistake. 

Why?  That company directly represents the best interests of the home seller by law, with legal obligations to negotiate for the highest possible price at the best terms for the seller.  They are required to tell the seller everything they know about you, including your level of motivation to buy, contemplated higher offers, your income, employment, assets, mortgage borrowing potential, etc.  They cannot, however, tell you anything they know about the seller that would reduce their ability to sell at the highest possible price and terms.

For hundreds of years, the concept of Agency under Common Law meant ’an agent can represent only one master in a transaction’.   That is, until recently in real estate, when the concept of Dual Agency- representing both the buyer and the seller as clients simultaneously by the listing company in the same transaction- became a viable and accepted ‘business model’ in residential real estate practice. 

In order to make dual agency legal, “full disclosure” by the agent of the limitations of dual agency is required, with the ”informed consent” of both the buyer and seller needed to continue.   The agent is asking each respective client to permit the agent to forfeit their fiduciary duty of ‘undivided loyalty’, which means that the agent is now partially loyal to the buyer and partially loyal to the seller.  Being partially loyal is like being a little bit pregnant- impossible!   Dual agents cannot be considered true agents, but merely opportunists. 

If the buyer refuses to give consent to dual agency, that buyer can be referred to a different company to represent his/her interests in that transaction.

Dual agency permits a conflict of interest to occur, by requesting the buyer and seller to each give up their right to the agent’s undivided loyalty.  Whose interest does the dual agent now represent?  Dual agency is self-serving and mainly benefits the interests of the real estate company by allowing it to collect a full commission- double the money, while maintaining control of the transaction.

Dual agents (aka ‘double agents’) cannot fully represent or advocate for you when they also represent the seller on an in-house listing.  Prior to the late 1990’s, dual agency was considered by attorneys and consumer advocates as a legal and ethical grey area.  Dual agency was considered an inappropriate practice and strongly discouraged by the National Association of Realtors (NAR).   Dual agency only benefits the listing company financially, since they pocket both sides (listing and selling) of the commission- double the money for half the work.  Buyers and sellers are on their own to negotiate price and terms, and to uncover any drawbacks about the property or the transaction on their own.  A dual agent cannot offer advice or counsel to one party that would benefit or harm the other party in the same transaction.  

New York is a ‘buyer beware’ state in real estate purchases.  Before home buyers choose a particular home to buy, they would be much better served by selecting the right agent (company) before starting their home search.  In this way, their best interests are protected every step of the way, while often saving significant amounts of time and money. 

The best agent for any home buyer is an exclusive buyer’s agent from an exclusive buyer’s agency.  An exclusive buyer’s agency is a real estate company which does not list property for sale (more on this in a later post).   This practice of not listing property ensures 100% representation from the firm on any property 100%  of the time, dual agency or non-agency are never an option.