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

The Public Is Watching Us Beat Ourselves Up

On Tuesday, new VARBuzz author Heather Elias wrote a post entitled “Too Bad“, in which she recounted the story of hosting an open house and having buyers do everything they could to avoid conversation at all costs. It’s happened to all of us, I’m sure – and judging by the comments there are a lot of different thoughts on what’s the right approach.

As real-life as it is, there was something else in her post that struck me. She wrote:

I’d hate to think that those buyers are going to end up traveling from open house to open house until they hit upon one that works for them, only to possibly be preyed upon by an agent willing to take advantage of their lack of consumer education about agency and representation.

I’m sure Heather wasn’t inferring that agents who practice Dual Agency are preying upon clients. Candy Lynn made the argument FOR Dual Agency right here on VARBuzz recently, and I can see where she’s coming from given her niche specialty of selling farms. I know Candy, and maybe many of you do as well – I know she’s got her clients best interests at heart, and she makes a good argument in defense of Dual Agency.

Dual Agency has been argued for and against for years, by consumers AND REALTORS®; that’s certainly no secret. Most of those who are against it will say that it hurts the consumer – by having an agent who’s representing both sides, the the consumer is hurt by not having the value of full representation. I thought Heather did a good job of laying out some of the many hats an agent will wear in the transaction – the Market Expert, the Defender of their privacy, the Cheerleader, the Negotiator … the list can go on an on. Dual Agency prevents the consumer from benefiting from the value of full representation. Proponents of Dual Agency might say that by agreeing to Dual Agency, the consumer is waiving their rights to that level of representation, and that’s true. In my opinion though, we have a higher purpose to maintain full representation at all costs. Article 1 of the Code of Ethics reads “…REALTORS® pledge themselves to protect and promote the interest of their client.” (emphasis mine). If that’s the case, then who is the client? Who does the agent serve? Matthew 6:24 tells us “”No one can serve two masters, because either he will hate one and love the other, or be loyal to one and despise the other.”

I’m not trying to bang on whether or not Dual Agency hurts the consumer or not – that’s been covered ad nauseum. No, there’s another group that gets hurt just as much by the practice, and that’s us. You and I. REALTORS®, real estate agents … our entire industry gets damaged by Dual Agency, in my opinion, because it prevents us from providing a fiduciary value to the consumer. If an agent can’t represent the client and provide a solid, tangible value, then all we’re doing is perpetuating the perception that all you need from an agent is someone to unlock front doors. As all of us know, we’ve got a lot of uphill ground to climb as we try to improve an eroding perception of our industry in the eye of the public, and “opening doors” isn’t going to go a long way toward improving that opinion. Ending the practice of Dual Agency and showing clients we’re going to listen, communicate, negotiate and celebrate with their goals in mind – not our own – will do more to repair the damage.

That’s my $.02. The real estate industry has taken a body shot through the practice of Dual Agency, in my opinion, and it’s no one’s fault but our own. If we’d be willing to eliminate the practice, or at least make the decision that on the agent and broker level the practice would not be practiced, it’d be a major step toward showing the public we’re serious about THEM, and not our own bottom line.

Stepping up to the plate – Single Agent Dual Agency

OK OK I’m going to step up to plate. (do I need a flame proof suit?)

First of all DISCLOSURE: Often I am a dual agent, I work in a niche market – horse properties & farms. I am broker/owner of a small firm Valley of Virginia Real Estate, within my firm I have no possibility of Designated Dual Agency.

Horse Property

When I started in Real Estate I thought seriously about being an Exclusive Buyers Representative but as I started working with buyers & showing farms I discovered many, not all, listing agents of horse properties just did not understand the horse aspects of the property. They were trying to sell the house that oh btw there is a “barn out there too, I’ve never been in it but I think you can store about 6 ponies in it & there’s a riding rink too”. Hint – horse folk usually could care less about the house -they want all the details about the horse facilities. After seeing this type of information more times than I want to count, I started listing horse properties so I could better serve the clients – both sellers & buyers. I guess you could say lack of specific knowledge on other agents part drove me to Dual Agency.

My average time from first contact with a seller or buyer client to closing is often well over a year. I build relationships with clients based on the expected Real Estate expertise & my clients very specific needs which require special knowledge of horses, land, riding styles, hay sources, local instructors, equine vets, show schedules, just to name a few. Most of my sellers require & expect me to be present for all showings – most live in fear of something happening to their horses, dogs, cats. They also know most agents just flat don’t know enough about the horse world to be effective. Buyer clients seek me out because they know I have specialized knowledge of horses & riding.

“Candy has had horses and ridden for a long time and so she was able to understand how functional the farm was. Also, horse people have their own language and she “fit right in” with whoever she showed the farm to”

I’ve had more than one client tell me that if I’d shown up in a fancy car with a dress & heels they would have shared a cup of coffee with me, thanked me for my time & said goodbye. I am one of those blue jean wearing , big loud truck driving agent! So what does all this have to do with dual agency?

On first contact with each seller or buyer I explain agency with emphasis on Single Agent Dual Agency. I let them know up front that my firm cannot offer Dual Designated Agency. I send them home with information on Agency to read. If they are not comfortable with Dual Agency as a possibility, we either make arrangements for referral, identify another agent with another firm that can represent their interests or part ways on good informed basis. This conversation is repeated throughout the process.
Do I recommend Single Agent Dual Agency for everyone? NO!!!
It takes a special REALTOR. One that is a stickler for COE & one that is willing to work hard to do it right. Agency & Agency Law must go hand & hand with the COE. Its hard work, it takes extra time, specific education (I highly recommend taking Marcie Roggow’s Class: Negotiating in Dual Agency), specific consent ( IMHO – above & beyond signing the VAR Form on Agency), specific rules during negotiations, specific education to all parties & above & before all – DISCLOSURE!

My farm at the end of the rainbow