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Twenty years ago, when Teresa Boardman was just getting started in real estate, a young man walked into an open house she was hosting. The man liked the property but lacked an agent of his own, so Boardman stepped in and became a dual agent on the deal. Agents in her office are thankful for the situation.
But things didn’t go well.
Teresa Boardman
“Ten days after the sale, they tried to give the house back,” Boardman recalled recently. “The buyer’s mother called and said I forced him to buy it.”
Boardman is now a broker and owner of a Minnesota real estate company of the same name, followed by a handful of other similar deals over the decades. But overall, the early experience illustrates why she’s not a fan of so-called dual agency, a situation in which a real estate professional represents both sides of a transaction.
“I pretty much avoid double agency,” she told Inman. “The same goes for the agent who works for me. It just doesn’t look good.
Boardman’s view of dual agency is not uncommon. At real estate events, in the comments sections of news articles and on agent forums, industry members often express concerns about this practice, also known colloquially as “double ending.” In a call with Inman, Boardman summed up the prevailing sentiment: “There’s just too much responsibility.”
Still, dual agency has also received more attention recently due to the National Association of Realtors’ landmark commission lawsuit settlement. The settlement has fueled widespread speculation that the real estate industry is on the verge of major change, which some believe could involve dual agency.
In response, Inman contacted industry leaders and experts across the U.S. to learn about the dual agency landscape. Notably, one takeaway from these conversations is that there is little consensus on the impact of commission settlements.
However, many industry members did say that situations that tend to create dual agency may become more common in the future. If such a future does become a reality, agencies may have to evolve the way they work to cope.
Dual agents may become more common
So why are people talking about dual agency now?
The answer has to do with NAR’s new settlement rules regarding commissions. Among other things, the organization has decided that sellers’ agents will no longer be allowed to compensate buyer’s agents in their real estate agent-affiliated multiple listing services. The seller’s agent can still pay the buyer’s agent, but unlike now, that compensation offer cannot be entered into the MLS.
Additionally, the NAR requires buyers to sign an agreement with their own agent before touring a home.
The rules are set to take effect in August, and some have speculated that sellers and their agents may stop providing compensation to the other side of a transaction, prompting buyers to abandon their agents rather than pay out of pocket.
In other words, more unrepresentative buyers could theoretically come to the table. And, to further tease out this thought experiment, if buyers start showing up without an agent, the seller’s agent may find themselves in the situation Boardman describes above: trying to close a deal for their own client , so both parties are responsible for both transactions at the same time.
This scenario involves a lot of what-ifs, and NAR’s new rules don’t require it to come true. This is just one possible permutation. But many who spoke to Inman do believe that there will be more unrepresented buyers in a post-settlement world.
Laurie Weston Davis
“I think there are going to be a lot of buyers who show up without a buyer’s agent,” said Laurie Weston Davis, broker and owner of BHGRE Lifestyle Property Partners in North Carolina.
Asked whether more unrepresented buyers would emerge as a result of the NAR settlement, Boardman responded: “Absolutely.”
“Do we think more buyers will purchase individually? The answer is probably yes,” Miami Association of Realtors CEO Teresa Kinney told Inman.
Data suggests this attitude may be widespread. A recent report from financial firm Keefe, Bruyette & Woods cited Redfin survey data and found that 71% of brokers believe that fewer homebuyers would hire an agent if they had to pay an agent out of pocket. Only 14% believe that if the burden of agent fees were shifted to buyers, buyers would hire agents at the same rates as now.
Adding to the pressure on the situation is the U.S. Department of Justice, which has said it wants commissions to be “decoupled,” meaning it does not want sellers and their agents to pay buyer’s broker commissions. It remains to be seen how proactive the DOJ will be, but if the agency gets its way, it could further incentivize future homebuyers to avoid agents.
Regardless, one possible change to the status quo arising from the settlement is that there will be more unrepresented buyers, which in turn could lead to more dual agency.
Double ending challenge
Not everyone Inman spoke to believed dual agency would explode in the near future. But almost everyone agrees that no matter what happens, the concept is fraught with challenges.
Kendall Bonner
Kendall Bonner, attorney, team leader and eXp Realty’s newly appointed vice president of industry relations, notes that many sellers choose their agents from among their friends. These relationships can run deep and last for years or decades, which is very beneficial to the seller. But Bonner wondered, what happens when a buyer asks that agent to represent both sides of the transaction?
She wondered, “Are you willing to extend the same level of obedience, confidentiality and loyalty to a friend on one end and a stranger on the other?” She was referring to the fiduciary duty of attorneys in her home state of Florida to their clients. “Breaking these fiduciary duties can have serious consequences. It can lead to litigation. It can lead to distrust.
Many others who spoke to Inman also said legal issues could arise in a dual-agency situation. The problem, as many industry members said in conversations with Inman, is that sellers want top dollar and buyers want a bargain—creating an inherent conflict of interest.
Scott Breidenbach
“I think, essentially, one of the disadvantages is that it sets the stage for us to potentially be trying to accomplish something that we shouldn’t be doing,” said Scott Breidenbach, a partner at North Dakota-based Beyond Realty and president of the association. “So, there could be some unethical behavior because of the money involved. I’m not saying it will happen, but there is potential.”
Breidenbach, for his part, doesn’t think dual agency will become more common in the future.
Summer Goralik, a real estate compliance consultant and former California Department of Real Estate investigator, also emphasized that these concerns are not unfounded. While working for the state, she repeatedly saw agents get into trouble due to double-agency situations. She also talked to attorneys and “half of the cases on their desks were related to breach of fiduciary duty because it involved dual agency.”
summer goralik
“For those agents in California, those agents who do engage in dual agency and have their agents engage in dual agency, you’ve maximized the risk,” she added.
Challenges can also get more exotic. For example, imagine a dual agent facing a bidding war. What happens if the seller the agent represents wants the best price, but the buyer doesn’t have the most competitive offer? The challenges and temptations are only getting bigger.
When dual agency is legal
The United States is a patchwork of disparate laws when it comes to dual agency. According to Arelo, most states do allow dual agency, although at the same time requiring all parties involved to sign a written agreement. A few states allow dual agency without an agreement.
A total of nine states ban dual agency. According to ARELLO, the first to do so was Texas, in 1993, and the most recent was Maryland, in 2016.
Photo credit: Arelo
However, the legal landscape is complex; both Bonner and Miami Association of REALTORS chief counsel Evian White-DeLeon noted that in Florida, for example, there is a modified version of the concept that allows brokers to handle transactions Both sides, while imposing restrictions on what they can do.
Between the liability minefields and the intricacies of the law, there’s a lot to consider. It’s fraught with challenges and isn’t always legal, which means some evolution may be in order.
How dual agency might evolve
Industry insiders interviewed by Inman were divided on how to deal with unrepresented buyers. But Weston Davis speculates that it may be more common for listing agents to include acknowledgment of the concept in their contracts. For example, she said, in the post-closing world, the contract might specify one level of compensation for the listing agent if the buyer has an agent, and another level of compensation if the buyer doesn’t have an agent. In the event of a double closing of the transaction, another level of compensation may be specified.
There’s no reason such an agreement shouldn’t exist today, but in a world where the vast majority of buyers have an agent, and sellers often provide a commission to the buyer’s agent, there’s little need for one.
Another possibility Boardman discussed was listing agents who ended up being unofficial dual agents.
“I do think we’ll see that,” she added.
Some industry members stressed that in this case, the listing agent only has to represent the seller’s interests and is under no obligation to connect buyers with inspectors. But it is also possible that, faced with the prospect of a deal being done or not, they may have no choice but to maintain the flow of documents in a way that is not necessary in a traditional deal.
Future deals may require more work or be more profitable for the listing agent.
Listing agents also have the potential to make more money. Sean Frank, founder and CEO of Mainframe Real Estate in Florida, summed up the sentiment prevalent among the speakers on this article: “I don’t think you’re going to find a property where you can do both sides of the transaction for free. broker.
“The seller will probably pay more for both parties,” Frank added.
The future is unwritten
Nearly everyone Inman spoke to had a different vision of what the future might look like. For example, Frank said he “doesn’t think the change will be as big as people think”. He noted that, at least so far, he has not seen “a listing agreement that does not provide buyer agent compensation.”
Weston Davis, on the other hand, said the commission lawsuit “will be a bigger shift than many people think.”
The views of other industry members fall somewhere in between, and these views are important because they underscore how uncharted these waters are. But a recurring theme in the story’s dialogue is that agents should at least be prepared for some kind of new world.
“I think there’s a danger,” said Goralik, an investigator-turned-consultant. “There’s a danger in thinking that nothing is going to change.”
Email Jim Dalrymple II
