Dual Agency…what’s that all about?

Yesterday I discussed the new real estate law in Michigan, so far as it defines the duties and services of real estate brokers and agents. Basically those laws were set up to define what the consumer can and should expect from a buyer’s or seller’s broker/agent. In addition to the general duties and services that were defined yesterday, the term Buyer’s Agent(s) is also defined thusly:

A buyer’s agent, under a buyer’s agency agreement with the buyer, acts solely on behalf of the buyer. A subagent of the buyer is one who has agreed to work with the buyer’s agent with who, like the buyer’s agent, acts solely on behalf of the buyer. Buyer’s agents and their subagents will disclose to the buyer known information about the seller which may be used to benefit the buyer.

In addition to the general duties and services that were defined yesterday for Seller’s Agents, they are further defined thusly:

A Seller’s Agent, under a listing agreement with the seller, acts solely on behalf of the seller. A seller an authorize a seller’s agent to work with subagents, buyers agents and or transaction coordinators. A subagent is one who has agreed to work with the listing agent, and who, like the listing agent, acts solely on behalf of the seller. Seller’s agents and their subagents will disclose tot eh seller known information about the buyer, which may be used to the benefit of the seller.

Those are both fairly straightforward and clear; but, what happens when a listing agent also brings the buyer into the transaction? This would be called Dual Agency. Many states do not allow Dual Agency, but Michigan does and it tries to define the role thusly:

A real estate licensee can be the agent of both the seller and the buyer in a transaction, but only with the knowledge and informed consent, in writing, of both the seller and the buyer.

In such a dual agency situation, the license will not be able to disclose all know information to either the seller or the buyer. As a dual agent, the licensee will not be able to provide the full range of fiduciary duties to the seller or the buyer.

The obligations of a dual agent are subject to any specific provisions set forth in any agreement between the dual agent, the buyer and the seller.

What a slippery slope this whole dual agency thing can become. Long time agents are used to “double dipping” by representing both parties in deals and getting both the listing and the selling side commissions. I’ve had a couple of occasions to do that myself and I can relate to you that it is a very stressful position to be in as an agent. You really have to be on guard all of the time to make sure that you don’t slip and share some bit of confidential information with one side that would put the other side at a disadvantage. I really prefer not to be in that situation, as I dare say most agents might also agree.

I’d also opine that few, if any, agents take the time to get written permission before jumping into dual agency situations. They may go back prior to closing and get something signed, but in the heat of showing a house or putting a deal together, few take the time to do what’s right (and required by the law) up front. Agency has become a very cumbersome thing to deal with up front, even in normal situations; much less in potential dual agency situations.

Rather than put myself in a dual agency situation; as early as I can, I inform buyers whom I’ve encountered at open houses of my listings or who might call on the sign and want me to show them the house, that I represent the seller for that house and that I would have to continue in that role; even if they want me to help them write an offer. I tell them up front that they should not divulge confidential information to me, because I work for the seller and that I would have to share that information with the seller.

I generally go on to tell them that I am not out to put them at any disadvantage and that I will honestly answer their questions and will help them in an honest and professional manner to prepare an offer, if they would like my help. I also let them know that I can recommend another agent in our office who is not working for the seller, if that would make them feel more comfortable. That’s really about all I can do in that situation.

That last part about recommending another agent in our office brings up the concept of Designated Agency. Real Estate One is a Designated Agency company, not all companies are in Michigan. How Designated Agent works is defined by the Michigan law thusly:

A buyer or seller with a designated agency agreement is represented only by the agents specifically named in the agreement. Any agents of the firm not named in the agreement do not represent the buyer or seller. The named “designated” agent acts solely on behalf of his or her client and may only share confidential information about the client with the agent’s supervisory broker, who is also named in the agreement. Other agents in the firm have no duties to the buyer or seller and may act solely on behalf of another party in the transaction.

So, I can go get any other agent in my local office or any other Real Estate One office and they can immediately become the agent for those buyers, because we are a designated agency company. If the agent that you are interviewing is not from a designated agency company, then you cannot assume that other agents in his/her office are not working for you. They may be sub-agents of your agent or they may be agents for potential buyers. You just don’t know for sure.

You’re just better off with clearly defined agency rules, which designated agency provides. So, ask that potential agent “Is your company a designated agency company?” Listen to the answer and if it starts out with “Oh, don’t worry about that, we’ll get to that later” you should be worried.