Dual agency exists when a brokerage firm represents both the seller and buyer in the same transaction – the purchase and sale of one property, for example. Dual agency is akin to one law firm representing both sides in a court case but having two different attorneys handle opposing sides. Doesn’t make a whole lot of sense, does it? But dual agency is permitted under real estate law in CT and is commonplace. Here’s what you should know if you’re buying or selling a house in Connecticut and how dual agency affects you.
Dual agency in practice. I bought my first house using a traditional real estate agent. The agent showed my husband and me a house that was listed by another agent in her office. We put an offer on the property, it was accepted and we closed on the house.
It was years ago but I don’t recall signing a form or having dual agency explained to me. I did feel that the agent we worked with was not very helpful to us as buyers; but, I didn’t know enough about real estate or buying real estate to put my finger on it. It wasn’t until I worked with an exclusive buyer’s agent in the purchase of my next house that I realized what it was. My first real estate agent wasn’t helpful because she really didn’t work for me.
A Dual Agent Represents No One. When I signed a buyer agency agreement, a clause in that contract essentially reserved the agent the right to give me proper disclosures when and if a dual agency situation were to exist. According to real estate law in Connecticut, a real estate agent does not have to give you that disclosure until a dual agency situation exists. Dual agency only exists when you’ve signed a contract with a brokerage firm and its agent to represent you as a buyer and you locate a house that is the broker’s listing (the agent works for the broker and all listings belong to the broker). You’re about to put in an offer and that’s when you find out – the brokerage represents the seller and therefore you must sign an “agreement” that you understand the broker can’t do certain things for you any more, a Dual Agency Consent Agreement.
Here’s why this is a problem for buyers and sellers. You’ve signed a contract with a broker and its agent to represent you. As their client, you are owed certain “fiduciary responsibilities,” namely Obedience, Undivided Loyalty, Full Disclosure, Confidentiality, Accounting and Reasonable Care and Diligence. When represented by the same broker, neither the buyer nor seller can be guaranteed Obedience, Loyalty, Disclosure or Confidentiality. Therefore, the Dual Agency Consent Agreement has both parties agree to be essentially unrepresented because the broker cannot fulfill all of their fiduciary responsibilities to both parties.
Using my home purchase as an example, my agent would not have been able to tell me, for instance, that the seller might be willing to take less than asking price. Ignoring the fact that she might have overheard this information from the listing agent in her office, she would be hurting the position of the seller who is a client of the brokerage firm they both work for. Neither agent can disclose the motivation of their party – e.g. divorce, new job, pending purchase or sale of another property, that would give an advantage to one side.
We would have paid more for the house but our agent couldn’t tell that to the seller! At the time, I thought we really made out in the deal. But when we went to sell the house two years later, the woman who bought it had a hawk for a real estate agent and we got nailed for inspection items that either the inspector our agent recommended didn’t pick up on or items she dissuaded us from asking the seller to handle.
So, the Dual Agency Consent basically says to buyers and sellers, “We’ll help you fill out the paperwork, but don’t ask any questions.” How’s that for representation?
Not on the Market Yet Listings. I actually have one thing to say about dual agency that’s positive for a buyer. If you’re a buyer in a strong seller’s market and you know exactly where you want to live (the exact town and area) and know a lot about the area, then signing on with a leading listing agent and broker in the area may actually be to your advantage.
When properties are flying off the market, an agent with a firm that has a majority of the listings in the area you want to buy in, will have access to exclusive listings and pre-market listings, the listings that haven’t been added to the MLS yet. Not only may you find out a house before competition, your agent may take a cut on the commission overall, saving you and the seller some money. The agent may not neccessarily hand those savings over to you but you should certainly expect it in return for not really working for you!