What Is Dual Agency and Why Is It Bad for Homebuyers?
I’ve talked a lot on the site about what an exclusive buyer's agent is AND why you should work with an exclusive buyer's agent when buying a home in San Diego. In this article, though, I’m going to talk about the alternative – what dual agency means, and why dual agency doesn’t work in the homebuyer’s favor.
Dual agency can be a complicated concept, but put simply, dual agency occurs when both the buyer and the seller are “represented” by the same agent (or even by different agents who work at the same company) in a single transaction.
Basically, if the same real estate company is “representing” the buyer and the seller on a transaction, the agents are dual agents for that transaction. By the way, dual agency is illegal in California if the seller and buyer have not consented to it in-writing OR if it has not been disclosed to the seller/buyer in-writing prior to them entering-into a purchase contract.
Why is Dual Agency Bad for Homebuyers?
At the end of the day, if your realtor is a dual agent, you’re simply not getting the kind of representation you expected to receive when you hired them.
Unfortunately in a dual agency scenario, the homebuyer typically loses. This is because the realtors involved in a dual agency transaction have to "back-off" on their representation obligations to the clients.
The homebuyer is no longer owed several of the fiduciary duties that a buyer’s agent would normally be obligated to (because that would hurt the company’s other client in the transaction, the seller). Basically the homebuyer becomes only a customer (not a client), someone with whom the agent/brokerage works but does not truly represent, and your agent becomes more of a paper-pusher and a facilitator of the transaction than someone who is actually working on your behalf.
San Diego real estate agents owe their customers fair and honest dealings and disclosure of material facts, but they owe their clients a whole lot more! A buyer agent’s fiduciary responsibility to his or her client includes:
- Care: Agents are required to protect their clients from foreseeable risks and use their expertise to their client’s advantage. You will not get this if your buyer’s agent is a dual agent.
- Loyalty: Agents are required to put their client’s interests above anyone else’s - including the customer’s (buyer’s) interest or the interest of the agents themselves. This means your agent wouldn’t necessarily be obligated to tell you about the potential downsides of a property you are considering buying. You will not get this if your buyer’s agent is a dual agent.
- Confidentiality: The agent cannot communicate confidential information about the client or the transaction; this includes telling a buyer about the seller’s willingness to take a lower price, etc. It’s not prudent for you to expect your private information to remain confidential when your agent is also working for the seller.
- Obedience: Agents are required to act in good faith according to the instructions and wishes of their clients (as long as it’s nothing illegal or unethical). You will not get this if your agent is a dual agent (especially if the act may be detrimental to the seller).
- Disclosure: Agents need to keep their clients informed of all material facts, both favorable and unfavorable, that could influence their client’s decision. You may get this in a dual agency situation, but you may not.
Often, in a dual agency transaction, the original relationship was between the agent and the seller, NOT the agent and the buyer. This is why you should never call the agent on the For Sale sign and never go to an open house without your own buyer’s agent. Open house agents and the agents listed on the sign represent the seller and will thus be working in the seller’s best interest.
FAQ: What happens if you’ve gone to an open house on your own OR you’ve started looking at properties with an agent or brokerage that also represents sellers?
I’ve had a lot of people call me in this situation, when they want to place an offer on a home but suspect they are not getting the best representation. As long as you have not yet signed a buyer representation agreement, there is a very good chance I can help you.
Of course, it’s best to avoid the hassle altogether and start out working with an exclusive buyer’s agent from the very beginning!
If you’re looking to buy in San Diego and are interested in learning more about how an exclusive buyer’s agent can work in your favor, contact me today to set up a Buyer Strategy Session.
Justin Gramm is the founder and principal broker of Globella Buyers Realty, your San Diego Exclusive Buyer Brokerage.
Exclusive Buyer Agents do not list homes for sale and never represent sellers. They have no "inventory" to try to sell you. They can represent you in purchasing any home. They are specialists at representing buyers only on the buyers' side of the transaction. Exclusive Buyer Agents work to get buyers the best price and terms when they buy a home.
If you have excellent credit and plan to buy a home or condo in San Diego County within 90 days, contact Justin Gramm to hire an agent on your side of the transaction. Call Justin at 858-437-2662 or E-mail.
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