What is dual agency?
It is not uncommon for Realtors, who are working with prospective buyers, to show properties they have currently listed on the market. A buyer, who has already formed a relationship with a Realtor and is interested in purchasing one of the Realtor’s listings, may consider dual agency. Thus, dual agency occurs when a Realtor represents both the buyer and the seller for the same property.
Dual agency is allowed in Washington State (RCW.18.86.060) and clients often request Realtors to serve as dual agents. As Realtors, we urge our clients to approach dual agency with caution. Dual agency transactions can be more difficult for Realtors who must protect their clients’ confidentiality, including their clients’ motivations to buy or sell.
Laws that prevent dual agents from showing bias also limit the input received by both the buyer and seller alike. For example, a dual agent can provide and explain factual information that may be used to help determine a property’s value, but cannot provide his or her professional opinion as to a property’s value. As another example, a dual agent can receive an offer on a property that the dual agent feels is a good offer and take the offer to the seller. However, the dual agent cannot tell the seller what the buyer may or may not do in negotiating the price.
The laws surrounding dual agency can be confusing. Here is a concrete example of how a transaction involving dual agency might unfold:
Realtor Mike is holding an open house to sell Jane’s charming waterfront cabin. Beverly meets Realtor Mike while touring the open house and decides she would like to purchase the cabin through him. At this point both Jane and Beverly agree to allow Realtor Mike to act as a dual agent. Thus, dual agent Mike represents both Jane as the seller and Beverly as the buyer. However, he is now operating under the laws of dual agency. Dual agent Mike can provide Jane and Beverly with factual information and explanations, but he cannot provide his professional opinion regarding price negotiations.
So, dual agent Mike cannot inform Beverly that the cottage is lacking several desirable features, such as a second bathroom and a garage, and because of these design flaws, the house is overpriced. During inspection, Beverly learns that there are some floor boards that need to be replaced in the bathroom due to prior water damage. Beverly offers full price for the cottage contingent on Jane replacing the floor boards. In his professional opinion, dual agent Mike believes seller Jane should have the floor boards replaced because buyer Beverly is offering such a good price. However, if seller Jane does not want to do any repairs, dual agent Mike is obligated to express the wishes of the seller to the buyer and let the buyer decide what to do, just as he remained quiet on his opinion regarding the price Jane offered.
In summary, dual agency does not always result in the best transaction for either party.
In the previous example, we don’t know what Beverly will offer or what Jane will accept. Essentially, the negotiations reflect the real market place at work in its purest form. Often transactions are quite complex. Having your own Realtor to help you write and counter offers based on professional opinion can be invaluable. In any negotiation, price is only one issue in a purchase. The way the price is negotiated and determined may affect other aspects of the transaction that are very important but not considered in determining the price.
