Can 1 realty agent work for both buyer and seller?
A: That’s easy to answer. While I know that dual agency is allowed in almost every state in the U.S., I don’t like it. There is an old adage that says one cannot serve two masters. In my opinion, that’s exactly what happens in a dual agency relationship.
I know that many — but not all — professional real estate brokers and agents will be unhappy with my opinion, but let’s face it: Can one agent really represent both the buyer and the seller?
A recent case needs to be carefully analyzed. In Horiike v. Coldwell Banker, the California Supreme Court held that if a real estate brokerage company represents both buyer and seller, it owes a fiduciary duty to both sides.
The case (which you can easily search on the internet merely by typing “Horiike”) involved an agent who was hired by the seller but worked for Coldwell Banker, which represented the buyer.
According to the court, “It is undisputed that Coldwell Banker owed such a duty to the buyer. We now conclude that the associate licensee, who functioned on Coldwell Banker’s behalf in the real property transaction, owed to the buyer an ‘equivalent’ duty of disclosure.”
The court reminded the real estate industry that dual agency “is a relatively recent development” and that “the statutory law permits dual agency provided that real estate agents both inform their clients of the agency relationships involved and obtain the clients’ consent.”
In general, wherever dual agency is involved, the laws require that dual agents are not allowed to disclose to a buyer that the seller is willing to sell at a lower price without the consent of the seller, or vice versa — a dual agent cannot tell the seller that the buyer is willing to pay a higher price without the consent of the buyer.
Clients often ask me if they should sign a dual agency agreement. My standard answer is that I am personally opposed to the concept, but it is legal. If the client likes the agent, I then encourage them to go ahead and sign the form, but to be very careful about what they tell the agent. He or she also represents the other side.
And while I am on this topic, let me raise another concern. Imagine that you are in the process of buying a new house, and have entered into an agreement with a real estate agent. Say that agent then asks if she can list your current house for sale. This might sound like a good deal, but is it? You want to get the best price for your house, but even with the most ethical agent, the temptation is to achieve a quick sale. So I discourage such an arrangement.
Before I get lots of nasty tweets, let me say this: I believe that most agents are hardworking, honest and ethical, and I respect the job they do. Many agents don’t like bringing attorneys into their transactions, and although I disagree, I respect their opinion too.