How would you like it if you were in a lawsuit, and your attorney at trial, after arguing on your behalf, got up and moved over to the other side’s table, and then started arguing the case against you? You wouldn’t. Would you choose that over representation of you alone? Of course not. But in your last real estate transaction, that (its called dual agency) may be exactly what occurred. But unlike the example above, you would never realize it happened!
Agency is the relationship between a real estate agent and the client. Real estate agents have a fiduciary duty to their clients, that is, they must put their clients’ interest ahead of their own interest, and ahead of that of all others (e.g., the other side of the transaction).
Fiduciary duty should mean that only one side of a transaction could be represented, with the other side choosing to be represented by another agent, or being unrepresented. But dual agency allows the agent to act for both the buyer and seller at the same time. In other words, in Arizona brokers and agents can represent both the buyer and seller simultaneously.
Why? Real estate agents engage in dual agency because they can claim both the sellers’ and buyers’ side of the commission; in other words, they can ‘double dip’ and receive all of the commission dollars. This is despite the fact that by not providing full fiduciary representation to either, they are in actuality providing a much lower level of service.
But wait you ask, how can an agent provide fiduciary duty to me, while simultaneously being required to do the same to the other side? If an agent is truly faithful to your interests, isn’t he or she necessarily being disloyal to the other party, and vice versa? That is exactly the case, so to get around this, the agent has to get your permission to engage in dual agency – but your informed consent isn’t necessary.
Why would a client ever agree to “waive” fiduciary duty? Why would you agree to a dual agency arrangement when you, the client, not only gain nothing by it, but are actually harmed? Home buying and selling is the biggest financial transaction of most people’s lives, so you need the best representation possible. This necessarily requires that the agent put your interest ahead of all others.
Part 2 of this blog will tell you how you how agents in Arizona “trick” you to agree to dual agency, and how you can protect yourself being taken advantage of in your next real estate transaction.