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“Fiduciary duty is basically that we are working for your financial benefit and no one else, including ours. ”- Maggie Wells, Lexington, Kentucky-based Keller Williams Realtor
In real estate, there are two closely related concepts called “dual agency” and “designated agency.” In a dual agency situation, a real estate agent represents both the buyer and the seller in the transaction. This often happens when a buyer approaches a listing agent directly about a home that is for sale. In the “designated agency”, two agents from the same brokerage represent the buyer and the seller respectively. “There is a major problem with this because buyers and sellers have conflicting goals,” said Bill Gassett, a real estate associate at RE / MAX Executive Realty in Hopkinton, Mass. “The buyer generally wants to pay as little as possible, while the seller he wants to get all he can. ” Those conflicting objectives can make it functionally impossible for the agent to act as a fiduciary, since any advice that benefits one party would harm the other. And that sets aside any conflicts of interest an agent may have in terms of their own commission. To that end, eight states have banned the practice of dual agency: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont. Of those eight states, four permit-designated agencies (Alaska, Colorado, Maryland, and Texas). The “designated agency” is essentially a form of dual agency in which two agents come from the same brokerage. This is because agents must be licensed with a broker and the legal relationship is between the buyer or seller and the broker, according to a spokesperson for the National Association of Realtors. However, designated agency situations are much more common than dual agency agreements. In some markets, especially smaller towns and cities, it is not unusual for a real estate company to be dominant. “We have a large market share, so we end up having buyers who will buy listings from other agents in our office,” Wells said.
“Eight states have banned the practice of dual agency: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas and Vermont. ”
“The designated agency not only creates an appearance of impropriety, but encourages dishonest conduct by putting brokerage firms in the position of being able to manipulate real estate transactions for their own benefit,” Consumer Advocates at American Real Estate, a non-profit advocacy organization. But others argue that the designated agency is not a harmful practice because the buyer and seller each have an agent who acts as a fiduciary. Each state sets rules that agencies must follow regarding disclosure, so your agent must generally inform you whenever your signature represents a list you are considering. If an agent does not make proper disclosures, I would advise against working with them and even consider contacting your local real estate board to raise the issue. When your agent gives you that information, ask questions. Specifically, you need to find out how the agency maintains confidentiality throughout the home buying process. After all, you don’t want your agent to gossip about the offer you’re making on the water cooler. Sellers (and buyers, if applicable) in such a situation may also want to see if there is room for maneuver with commissions, if both agents are from the same company. If you move forward, but later begin to have concerns that your agent is not acting in your best interest, you should contact the brokerage firm to see if you can be assigned to work with another agent. There may be benefits in a situation where both your agent and the other party’s agent work for the same company. It’s a seller’s market right now in many areas, so buyers often compete with multiple parties to make a winning bid. (In large, dense cities like New York it’s a buyer’s market given the COVID-related exodus from the city.) A buyer whose agent comes from the same firm as the listing agent could also have an advantage over the competition. “It may depend on your relationship with that agent and your experience with that agent,” Wells said. “The agent might say, ‘Hey, I’ve done deals with her before and that’s going well.’