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Dual Agency: Recognizing the Danger
Dual Agency
Dual Agency is legal in New York State with informed
consent. "Informed consent' means that the agent has the legal duty to
"fully inform" you of all the negative aspects of Dual Agency before you
consent to it. However, the common practice is to "disclose" and not
"fully inform". A dual agent no longer owes you the duties of Undivided
Loyalty and Full Disclosure. These are pretty important duties and an
agent wanting your consent to dual agency should fully explain what you
are giving up.
The purchase of a home involves a large investment on your part. Whether
you are a first time or experienced homebuyer, you should be using the
services of an agent who truly owes you the duty of "Undivided Loyalty"
and "Full Disclosure". Undivided Loyalty requires the agent to be loyal
to you, to be an advocate for you, and to look out for "your" best
interest throughout the entire process.
A dual agent, on the other hand, can't be an advocate
for you, can't negotiate for you, can't suggest an offering price, and
can't point out potential defects or problems. A dual agent can't
provide you with information about the seller such as motivation for
selling, price they paid or how long or how many times the property has
been on the market. A dual agent is prohibited by law to provide you
with any information which could be detrimental to the seller's
position.
Full disclosure requires your agent to get you the
answer to as many of the following questions as possible:
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What did the seller pay for the home?
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What improvements has the seller done, what did they
pay for them and what is their actual added value to the property?
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What are other similar homes selling for?
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What is this home really worth?
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What is the seller's motivation for selling?
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How long has the home been on the market and at what
price?
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What defects are there in the home?
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What "potential" defects are there in the home?
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What deferred maintenance is there in the home?
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What should my negotiating strategy be?
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What price and terms should I offer?
Sellers only need the answer to two questions:
A dual agent is prohibited from giving the buyer the
answer to any of the above questions, even if they know the answer. If
they do give the information to the buyer, they are in violation of the
law and if the seller discovered it, the seller could sue to rescind the
transaction. The seller, on the other hand, gets his answers before he
accepts the offer. They will ask for a copy of his mortgage pre-approval
or other proof that the buyer can in fact get the money and of course
they know the price and won't accept an offer until the price is where
they want it. Dual agency is generally not a problem for sellers.
About Designated Agency
Many traditional real estate companies in NY State are
now practicing "designated agency" . You really need to be very careful
with this one. Designated Agency is not an official option in NY State.
It has no basis in NY real property or license law or statute. It has
come about solely due to comments made by the Secretary of State
Alexander "Sandy" Treadwell, in a Realtor Magazine.
The concept of designated agency is that if the managing
broker of a real estate company designates one agent in the firm to
represent the seller and another agent in the firm to represent the
buyer, the buyer and seller get full client level services including
"undivided loyalty". The managing broker and the firm still have a dual
agency relationship with the seller and the buyer, yet the individual
designated agents don't.
Common sense will tell you that something is quite wrong
with the above practice and the assumptions it is based on. All agents
or brokers in a real estate company come under the direct supervision
and control of the managing broker. If the firm and the managing broker
have a dual agency relationship so do all the agents and brokers who
have their license with the firm . Buyers and sellers enter into agency
relationships and contracts with the real estate company, not with the
agents of that company. All agents licensed with a real estate company
automatically represent all seller clients of the firm and also all
buyer clients of the firm. Simply designating certain agents to
represent certain clients doesn't change this dual agency role of the
firm and their respective agents.
Also, in order for true designated agency to result in
full representation of the seller and the buyer for an in-house
transaction there would have to be a so-called "Chinese Wall" built
within the office. This refers to the necessity to insure total
confidentiality of all information pertaining to all buyers and sellers.
It means no sharing of information about sellers or buyers during sales
meetings, during casual conversations around the coffee pot or water
cooler, or over lunch. It means the locking and securing of all files
and file cabinets. It means zipping the lips of all sales personnel and
employees within the firm or associated with the firm. A very tall order
indeed.
As a buyer, how do you know that the seller and their agent don't
already know how much you are qualified for or how much you would be
willing to spend for a home? Agents regularly say things at sales
meetings such as: �I have a buyer client, the Smiths, who are qualified
to buy a home up to $200,000.� Or if you are using an in-house mortgage
company, this information would be readily available for any agent in
the real estate company. If you are negotiating on a home listed at
$200,000 but you would like to pay $190,000, do you think that having
the agent, designated to represent the seller, know that you are
qualified and can pay $200,000, just might negatively effect the outcome
of your negotiation?
Designated agency is a fiction. The agents are still
dual agents, in spite of what they might tell you. Your best bet is to
avoid both dual and designated agency whenever it is presented to you.
And the best way to guarantee that you won't be presented with dual or
designated agency is to hire an exclusive buyer's agent who never takes
listings ore represents sellers.
For additional information about dual and designated
agency, click on the link below.
�Dual Agents must be loyal to both Buyers and Sellers� by Amanda Campagna
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