Should Dual Agency Be Banned or Embraced?

Some REALTORS® say dual agency should be banned; for others it’s just another day at the office

By Andrew Conner

This year, the long-controversial practice of dual agency has been brought back into the spotlight due to a few high-profile news stories. These include a decision by the Real Estate Council of British Columbia, Canada, to ban dual agency in most cases, a failed attempt to ban the practice by the California legislature and a class-action lawsuit brought against one of the largest real estate brokerages in upstate New York that alleges “predatory behavior” surrounding the firm’s dual agency transactions.

Whether it’s something you practice regularly or something you wouldn’t even consider touching, most REALTORS® have an opinion on dual agency. For some, it’s integral to their business; others think it makes fairly representing a client almost impossible and should be banned outright.

Defining dual agency

At the state level, dual agency can mean different things. When REALTORS® talk about dual agency—particularly in a negative context—they are often talking about a transaction where one agent represents both the buyer and seller, also known as “double-ending” a deal. However, another common form of dual agency occurs when two agents from the same brokerage or company represent both sides of the transaction. Depending on the jurisdiction, this is sometimes called designated agency or appointed agency, and is generally less controversial.

In fact, a 2011 Inman News poll of real estate agents found that while almost 60 percent of agents called dual agency where one agent represents both buyer and seller either unacceptable or not desirable, two-thirds of agents called designated agency acceptable.

Unfortunately, not all states recognize designated agency. One such state is Alabama, which has caused Sandra Nickel, CRS, founder and CEO of Hat Team REALTORS® in Montgomery, Alabama, along with other dual agency specialists to lobby hard for its legal adoption.

“It’s not that it’s illegal in Alabama, it’s that it’s not a recognized agency status,” Nickel says. “We do it now to some degree, but it is called limited consensual dual agency and it’s exactly what the name implies: limited.”

So a ban like the B.C. ruling would have an adverse effect on Nickel’s business—she estimates about 25 percent of her firm’s closed sales are “in-house”—even though most of those involve two agents. Nickel says she would be doing her clients a disservice to not pursue a designated agency-like transaction.

“When you hire me as your listing company, that’s exactly what you want me to do: You want me to go out and find a buyer,” Nickel says. “And if the listing is ‘in-house,’ the selling agent is going to have access to a great deal more information and in all probability have a far better and deeper working relationship with the listing agent than would be possible with a member of another firm.”

Double-ending and disclosure

While it may seem that designated agency is the solution to the issue of dual agency, for some agents, double-ending a deal is a significant aspect of their business. For those agents who commonly practice dual agency, disclosure is incredibly important. Not only is it legally required in most situations, but it also helps establish the most necessary aspect of a double-ended transaction: trust.

Retta Ripperger, CRS, broker at R Realty in Creston, Iowa, has found that because she operates in a small town and many of her clients know her or people who can vouch for her personally, dual agency is rarely an issue with her clients.

“I have had very few people turn it down—one or two in my entire career,” she says. “We’re in a small town and everybody knows everybody, and they wouldn’t come to my office if they didn’t trust me. But the way our paperwork is written, if you explain things when people are listing, they understand and are given the opportunity to say, ‘No, I don’t want to do that.’”

However, some REALTORS® and advocacy organizations such as Consumer Advocates in American Real Estate argue that no matter how much trust a client has in their agent, a double-ended deal disadvantages the buyer and seller.

“No matter what, when listing a new property, an agent learns about the motivations, goals and plans of their client,” says John Stark, CRS, a broker associate at Iowa Realty in West Des Moines, Iowa, who has acted as a dual agent in many transactions over 15 years, but now prefers to refer any potential dual agency transactions out. “When dual agency comes into play, that knowledge can create an implicit bias to the original client.”

Stark gives an example where a seller lists for $250,000 but will take $225,000, and a buyer considers offering $225,000 but will pay full price if necessary. With knowledge of both clients’ situations, it’s difficult to navigate the transaction in a truly fair way. Because of situations like this, Stark feels “dual agency has a great potential to make both parties feel underserved as clients.”

Frances Britten, CRS, at HomeQuest REALTORS® LLC in Kailua, Hawaii, who has been a dual agent many times, says disclosure and trust help her avoid any situations like Stark mentions.

“The first thing I do in a [dual agency] situation is to disclose it,” Britten says. “I have a trust relationship with my clients whether they’re buyers or sellers. If I know or suspect there’s something that needs to be confidential, I first make sure that I’m legally permitted to keep the client’s confidence and, if I am, then I keep it.”

Britten also explains that she has facilitated transactions as a dual agent that otherwise would not have happened. For example, a few years ago she helped bring together a seller who was threatened with foreclosure and a buyer who was having trouble qualifying for the price range of the neighborhood he desired, and closed a deal that solved both of their issues.

“In the end, there was no foreclosure and the sale closed with what was in both the buyer’s and the seller’s mind a win-win for all concerned,” Britten says. “I know because I still get Christmas cards every year from both!”

The future of dual agency

For every CRS like Britten and Ripperger who see no problem with dual agency, there is another who shares Stark’s opinion that it reflects poorly on the industry. Eric Lopez, CRS, associate at RE/MAX Realty Associates in Munster, Indiana, was involved in dual agency transactions early in his career, but he found that “as a dual agent, I couldn’t help either side determine the price in an offer or counteroffer, and therefore I wasn’t living up to my fiduciary duties to either client.”

While he had a negative experience with dual agency, Lopez doesn’t support banning it outright through legislation because that could affect designated or appointed agency transactions, which in some states still fall under dual agency. He thinks that REALTORS® should take it upon themselves to restrict dual agency.

“Instead of a legislative fix, I would prefer our National Association of REALTORS® step up and eliminate it, potentially by putting [a limit] into the code of ethics,” Lopez says. “It would be another reason to set us apart as REALTORS® from other real estate agents.”

However, at the moment, dual agency is generally an issue left to each state. While at least one state has attempted to ban it legislatively, there are still avenues for dual agency (or designated or appointed agency) in most, if not all, states. For at least the near future, it looks like CRSs will have to make their own personal decisions about how to practice it—or not. 

Andrew Conner is a freelance writer and editor based in the Chicago area.

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