Time to Look Again at Agency in Virginia

It is incumbent upon us, as the keepers and practitioners of the industry, to constantly evaluate ourselves and our profession. The time has come to re-evaluate Agency as we know it.

We had a great discussion here in March – Part One and Part Two and an eloquent defense (albeit flawed in my humble opinion) of Single Agent Dual Agency by Candy Lynn.

VAR looked at Agency from 1992 until 1994 and the law went into effect on July 1 1995.

A lot has changed since our Association last looked at Agency (for starters, the Internet has redefined our world).

The time has come to re-examine the state of Agency.

Matthew Rathbun brought up the Agency Conversation again at AgentGenius recently

“Realizing that cooperation with other real estate professionals promotes the best interests of those who utilize their services, REALTORS® urge exclusive representation of clients; do not attempt to gain any unfair advantage over their competitors; and they refrain from making unsolicited comments about other practitioners.”

~ Paragraph 5 of the Preamble to the REALTOR® Code of Ethics (emphasis mine)

“Don’t forget the problems caused by being a Dual Agent. The difficulties associated with this perfectly legal agency relationship seem to be on the increase. Be very careful to communicate and explain dual agency to prospects and clients and avoid dual representation if at all possible.””

~ Schafer Oglesby, Virginia Real Estate Board Chairman – 2006 Newsletter

“Virginia law merely permits you to engage in it with the informed consent of the parties provided you act accordingly. Their informed consent, once obtained, does not mean the conflict ceases to exist, merely that the clients consent to your acting as a dual agent notwithstanding the existence of the conflict. This is an important point to remember: the conflict does not go away just because you get the requisite consent. You still must act in a manner consistent with the conflicting interests of your clients.”

~ Lem Marshall, VAR Legal Counsel “Commonwealth Magazine 2004″

If you’re an agent practicing Dual Agency and get sued, how long do you think it’ll take an attorney to pull up these documents and the large number of posts warning against Dual Agency? A jury is going to have a hard time understanding why agents still pursue this archaic practice, while everyone is warning against it.

The purpose of writing this post is to reaffirm the need to examine and study at the continued viability of Single Agent Dual Agency and to clarify once again that this is not a call for an end to Designated Agency (whereby one company represents both sides of a transaction) but a request to look at one agent representing both parties. Let us look at the greater good of the industry and profession and the perception of the industry by the consumers whom we are purportedly “representing” rather than a short-sighted look at our pocketbooks.

(Did you know that Dual Agency has been illegal in Colorado since 1 January 1994?)

It would be far better to take the lead in examining this than to be lead by the courts/legislators/regulators, no?

Other than Candy’s argument, I’d love to hear an ethical argument that doesn’t begin or end with, “but I want both sides of the commission!” (if you really want to go this route, who wants to tackle Divorcing the Commissions?)

Update 22 October 2008: If you happen to feel strongly enough about this, please comment below and/or email VAR’s Leadership Team.

Further reading:

Realty Times

Dual Agency at Bloodhound

Dual versus Single Agency

Searchlight Crusade

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12 Responses to Time to Look Again at Agency in Virginia

  1. Jim

    On this issue we totally agree. In my opinion, it is a “very very rare” occasion when dual agency is fair to all parties.
    How can one truly serve two master???

    With the current market conditions I can imagine that this will be a very “explosive” topic.

  2. Becky Yacone says:

    Dual Agency
    How to earn HIGH “Courier fee”.

  3. Scott Rogers says:

    Jim — refresh my memory on your opinion of an agent representing the seller as a client and working with the buyer as a customer in the same transaction…

  4. Jim Duncan says:

    Scott – On that, I’m indifferent. My opinion is that one Realtor cannot effectively represent both parties in a transaction.

    It’s been said before – could you, as an attorney, represent both the plaintiff and defendant? If we’re honest about truly “representing clients” the answer is no.

    A customer should be free to not have representation – and this leads to a further discussion about divorced commission, but that’s a windmill for tilting at another day.

    Honestly, I fear that the only change that is going to come is from outside the Realtor world, as today’s Realtors are too invested in the status quo.

  5. Scott Rogers says:

    I agree with you on single agent dual agency. I actually used that lawyer parallel in an article in our local newspaper when I was asked to write a real estate column. It was in my first few months as a Realtor, and publicly denouncing dual agency did not win me a lot of friends in the local Realtor community. :)

    I asked my question above because I believe there are plenty of appropriate times for that to take place. It would always be best for a buyer to have a Realtor representing them, but if I am representing a seller, it is not in my client’s best interest to tell an interested buyer to go find representation — it is best (in my opinion) to work with them as a customer.

  6. Ki says:

    Personally I dont like the idea of dual agency. I think it hurts us as a profession. It creates too many opportunites for conflict of interest situations.

  7. In my opinion, Dual Agency should only be used in one very rare situation. that being if you have a exclusive right to represent with a buyer and you end up representing a seller whose house fits your buyers needs perfectly. Given that you are engaged with both of them as clients and that they both agree in writing, disclosed dual agency is the cleanest way to handle the transaction. If you have a listing and a buyer wants to buy it, like Scott, I recommend treating the buyer as a customer.

  8. Jim and Scott–I agree. Single agent dual agency may have a place, albeit a very rare one, in representation. We do over 1000 transactions a year in our office and only about 6 are in the dual agent arena. I tell our agents that if a file crosses my desk with a dual agency designation I better be able to call each party and have them explain to me that they understand that neither party has representation and that the agent is now “neutral” and basically is a paper facilitator. That has curtailed the use of single agent dual agency. We need to fix our own problems (divorcing the greed for more commission dollars) in favor of being the “trusted advisor”–which term will never match single agent dual agency no matter what spin you put on it.

  9. When I read through these posts as a niche REALTOR specializing in land, I find no disagreement. When I read the names of those being quoted and those that wrote the posts, I see strong leaders doing their work by expressing their wisdom. These people are some of our most intelligent and caring members. Agency and education go hand-in-hand. My experience as a Virginia REALTOR is that our agents get little training with land. When was the last time you went on a house caravan where the listing agent showed the lot boundary or an easement? – I bet they showed the kitchen. I think many of our problems come from our education and experience, we have learned how to make presentations that sell property and avoid our knowledge of the land and we have learned where lawyers will strike next, which may be on issues of agency rather than land ineptness.

    Until I see our members better educated on issues of land I will support dual agency. – Yes, I feel that both parties need to be well informed of what dual agency means to both parties. I do not like walking this tightrope, but I feel I am forced into this position because someone has not educated their agent. If you want strong agency, you will need to have a well educated agent.

  10. Sheila Koski says:

    I think the problem begins when we advertise our listings. Naturally people will call us to find out about the listing. That is where it gets sticky. I frankly stumble over my words everytime this occurs. Of course I ask if they are working with an agent, in which they inevitably answer NO. What do you do next?
    I think the process is backwards and needs to be rectified. However, I don’t know how!

  11. Good post! Think a lot of people (buyer & seller) don’t know about the implications of doing both sides..

  12. This has been a hot topic around my office lately. I know that many people, numerous of my colleagues included, are extremely apprehensive about entering a dual agency deal. But I would have to respectfully disagree and feel as if these kind of fears are blown out of proportion. If there is one agent who represents both parties, then this agent can not give an advantage to either one, because it would basically violate the responsibility towards the other client. Now the new buyer’s agent is till bounded by their own fiduciary responsibility to you, since you are their only client in this transaction. In terms of the responsibility to you, there is absolutely zero difference than if the agents were at separate brokers.

    You are losing nothing and run the same exact risk of issues as you would having an agent from a different broker. Thanks for the post.

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