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Los Gatos Weekly-Times

  September 08, 2004     Los Gatos, California Since 1881

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Using a dual agency carries more risks than benefits

By Jean Newton


Since problems can sometimes surface when a buyer and a seller share the same real estate professional during the sales transaction, many Realtors issue a caution or "buyer beware" at the mention of "dual agency."

While "dual agency" typically refers to the process in which one agent represents both the buyer and the seller in a single sales transaction, it can also refer to agents from the same real estate company in the situation when the broker for the company ends up handling both sides of the deal. The topic generates some strong opinions from local Realtors, who cite ethics and good practices as the overall guiding light for deciding whether dual agency works or doesn't work.

"A listing agent representing both the buyer and the seller is not an advantage for either party. It is impossible to negotiate well for either party when you know so many details from both sides," said Alicia Tuvell of Coldwell Banker, referring to personal financial information and discussions about setting the price. "The cases that I have seen usually end up with both clients unhappy and feeling that they were not fairly represented."

Realtor John Leslie of Alain Pinel Realtors in Los Gatos believes open houses create many of the instances where agents "double-end" a transaction because the listing agent meets a buyer who wants to make an offer to the seller. The seller has to agree to the dual agency and usually responds to a reduced sales commission.

"The risks involved in dual agency are well-known. The most common is agent self-interest. The risk of losing a larger commission may lead agents to minimize or soften possible deal breakers that may occur in the course of the transaction," Leslie said.

The second risk involves disclosure. When different agents are involved, there is a check and balance when it comes to making sure all the disclosure items are covered.

"Disclosure is the big alligator for all agents. It may be a nondisclosed item missed in escrow, or much later, when the buyer moves in and flips out over a neighbor raising pit bulls in their garage or a hidden gas tank under their patio from the 1970s. The result is always miserable for all, usually involving legal fees," Leslie said.

Realtor Helen Cockrum also thinks dual agency hinges on the word "disclosure." Although she prefers that a buyer have his or her own agent, she has had good experiences with dual agency.

"We become dual agents any time another agent from our company brings in an offer on our listing. We are dealing with the person who brought in the offer on a daily basis to get the job done, and the fact that we are a dual agent may not be at the top of our memory," Cockrum said. "For the client, it is probably better for each to have his agent with a different brokerage. When we are dual agents, it must be disclosed and agreed to by the buyers and sellers."

For Michael Shields, a commercial investment broker with Coldwell Banker Commercial in Cupertino, the question of dual agency depends on the agent.

"If an agent acts unethically, then dual agency can be a problem for one or both parties. Full disclosure and true representation are critically important. Many lawsuits have arisen from dual agency, and its future may be in jeopardy from a legal standpoint, since ethics often precede the law," Shields said.

On the other side, Shields has investment clients who prefer that he handle both sides of the transaction. "They know that I will represent both parties honestly and ethically and do everything possible to ensure a satisfactory close of escrow. These investors know the potential damage a lawsuit can generate and often prefer a qualified investment broker handle both sides," Shields said.

Dual agency among the larger companies can be difficult to avoid at times, said Realtor Arvada Darnell of Coldwell Banker, since the larger companies often have a large inventory of listings.

"The agent is taking on tremendous liability by representing both the buyer and seller. The agent's job is to get the highest possible price for the seller and to negotiate the lowest possible price for the buyer," Darnell said. "It is rather like representing both sides of a divorce as an attorney. The only situation where this may be somewhat fair is to negotiate a strictly 'as-is' contract that is acceptable to both parties."

Darnell believe ethics plays a particularly important part when it comes to the issue of dual agency.

"The public and many agents are unaware of the Code of Ethics that Realtors must comply with. Herein lies the difference between an agent and a Realtor. Not all agents are Realtors. Realtors are members of the California and National Association of Realtors and we have a very clear and strict Code of Ethics that we practice and embrace, ensuring that the professionalism stays in our industry," said Darnell, who personally says no to representing both sides of the transaction as a matter of professional policy.

Christina Allen, attorney and broker/owner of Signature Realty in Cupertino, does not believe the same agent can adequately represent both the buyer and seller and confidently say that both principal's interest will be protected.

"Representing a client is so much more than filling out paperwork. We are privy to our clients' confidential and personal information, which is necessary to assist us in closing the transaction. Knowledge of that information requires us to protect that communication, not use that information in any way that may cause harm to our client, and always put our current client's interests before our own and before potential clients' interest," Allen said.

Agents who are well-trained professionals know what it takes to close a transaction and will cooperate with the other agent to bring proper and timely closure to the transaction for the client's benefit, said Allen.

When entering into one of the biggest transactions most people will ever make in a lifetime, home buyers and sellers should consult their legal adviser if they have any concerns about representation.

                                                                                    Copyright SVCN, LLC.

 

 


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