Exclusive View: Dual Agency and Duties to Clients

When real estate agents enter into dual agency representation relationships with two clients, exactly when does it serve the best interests of the clients and when does it serve the interests of the agent? This is part 1 of 2 “Duties to Clients” posts.

Dual agency representation occurs when an agent has a listing representing the seller, and then along comes a buyer with no representation, and the listing agent convinces both clients to be simultaneously represented by this same agent. The Illinois real estate license law has been protected to allow traditional firms to continue to make commissions on both sides of the deal as long as they sufficiently warn the consumers about the real versus perceived extent of their agent representation.  For the protection of the public, dual agency has actually been declared illegal by seven states.  But not in Illinois, where the complications around this whole ‘agency’ and ‘representation’ subject merely requires each agent to obtain signed agency disclosures from their clients, customers, and consumers (they have to make exactly such distinctions).  And then most traditional firms train their agents to try to get everyone to also sign agreements upfront to consent to dual agency (thereby agreeing to receiving significantly less representation) so as to enable the possibility of “going for double commissions” whenever the situation arises.

At least agents do have to ask both sides for permission before being allowed to cease being their client’s true advocates. What’s the difference? If they get dual agency, then by law they will have to step out of the negotiation process (no longer help their clients obtain information to improve their bargaining position, no longer assist their clients by advising on or countering prices or terms). Dual agency representation boils down to simple order taking and facilitation. And after a home inspection it becomes simple, “here’s what they said, let me know what you want to do”. And the Dual Agent gets to earn double commissions despite their demotion!    

As a buyer, never under any circumstances even consider allowing dual agency representation. Perhaps you've heard of the divorce attorney’s example? It boils down to one spouse saying "gee, your attorney seems smart and capable and nice, do you mind if they represent me as well?"

Do you really think that anyone who practices and defends dual agency is demonstrating ethics and serving client interests, or are they instead pursuing their own interests? I don’t have to provide the answer to that one, I think it’s obvious. Buyer beware…

Stay tuned, next up is “Referrals and Duties to Clients”.