In Part 1 of this series, I revealed that dual agency results in a real estate broker getting paid double for being disloyal. Dual agency occurs when “the agent acts for both of the principals at the same time in the same transaction.” In other words, it occurs when your real estate representative also represents the other side. So if you are the buyer, the agent also represents the seller; if you are the seller, the agent also represents the buyer.

The duty an agent has to a client is a “fiduciary duty.” It’s the highest duty in law, and requires that the agent act in the utmost good faith and absolute loyalty. When an agent represents only you, it requires the agent to put your interests ahead of all others, including that of the agent.

But that is impossible in dual agency. Fiduciary duty is compromised and virtually eliminated for all practical purposes, because the agent is unable to favor the interests of one client over the other. It also precludes the agent from giving you his or her exclusive expertise, advice or recommendations – which is what you hire an agent for!

Obviously no client would ever agree to dual agency, as the client not only gains nothing by it, but is actually harmed. So why does it happen, and why do dual agency transactions occur every day in our metropolitan Phoenix area market?

The reason is simple and ingenious. The National Association of Realtors says that if you agree to it, then it is ok. In other words, if you say yes to dual agency, how can it not ok – you agreed to it! And the state of Arizona concurs; so as long as you agree to it in writing, dual agency is permitted under the rules of the Arizona Department of Real Estate.

But why would anyone agree to it in writing if it is not in their best interest? You might if the agent puts a document in front of you and says “sign this as part of the process to sell/buy your house,” and does not explain its contents or the meaning of dual agency.

But you would learn that it is not in your best interest if you read the document, right? Unfortunately, no. First, most clients don’t carefully read documents they are not told by their agent to be important. But even if you did read it, it wouldn’t help.

Here is how the industry standard form, supplied by the Arizona Association of Realtors entitled “Consent to Limited Dual Representation,” explains dual agency:

“There will be conflicts in the duties of loyalty, obedience, disclosure and confidentiality [by your agent].”

That really explains to you that you are doing something not in your best interest, doesn’t it? Of course it doesn’t, which is exactly what the Arizona Association of Realtors wants. The AAR ensures that you will not be given an adequate explanation of how you are screwing yourself, so you will sign the form when asked. So you are not told!

The Arizona Department of Real Estate is of no help, because it doesn’t require that the disadvantages of dual agency actually be understood by the client. So as long as the client “agrees” to dual agency by signing the form, the disloyalty is legal in the opinion of the Department.

But you can protect yourself from dual agency. Use a real estate agent that rejects it. SimplySOLD believes in giving their clients the highest level of agent loyalty. I will represent you only, and act in your best interest at all times.

Next in part 3 of this series, I will tell you what others have to say about dual agency, how some states have dealt with the problem, and a solution to dual agency for Arizona