A

Single vs. Dual Agency Representation

An Insider 's View of a Real Estate Transaction

retirement-aged couple came to my office for a first meeting, a recent referral from a repeat

client. I asked: "What is most important to you about this real estate transaction?"

They responded: "We want an experienced and educated advocate."

In my experience, this is what every client truly wants. Akin to those in the practice of law, I am often in the position of meeting a prospective client at a critical decision-making point in life. Real estate transactions nearly always involve changes: changes in finances, family size, marriages, employment, location, tax needs, and even court-mandated matters. All clients need loyal advocacy.

SINGLE AND DUAL AGENCY

There are two main types of agency representation in real estate transactions: single agency and dual agency. In single agency, the buyer and seller each have their own separate real estate licensee from separately owned brokerages representing their interests. Dual agency occurs when the same brokerage represents both the buyer and seller. This can be with either one agent or two different agents within the same company.

(Although real estate professionals are referred to as

brokers, REALTORS®, licensees, and agents,for purposes of this article I will use 'agent.')

For consumers and agents, selecting single agency has positive legal, financial, and emotional impacts. My position is that only single agency is consis- tent with an agent's fiduciary duty and avoids conflicts of interest. In contrast, dual agency may not be beneficial to buyers or sellers and is in conflict with fiduciary responsibility.

WHAT ARE THE IMPACTS OF SINGLE AND DUAL AGENCY?

In practice, there is no effective way an agent can represent both a buyer and a seller in the same transaction. It compares to one attorney representing both a plaintiff and a defendant in the same trial.

In client representation, agents have a fiduciary duty in each transaction. Per the California Association of REALTORS® required purchase contract form on agency (CAR Form AD), buyers and sellers are advised that each party is owed a "fiduciary duty of utmost care, integrity, honesty, and loyalty...." The form also includes Civil Code Sections 2079.13-2079.24, referencing agency.

A confident and well-repre- sented single-agency client is less likely to engage in legal action

by Dawna Davies Photo courtesy of Clara Vanherweg

against their real estate agent or other transaction parties. The CAR Form AD states, "When you enter into a discussion with a real estate agent regarding a real estate transaction, you should from the outset understand what type of agency relationship or representation you wish to have with the agent in the transaction."

Unfortunately, in practice, consumers usually find them- selves in dual agency transactions. They do not have an opportunity to opt out of the agency arrange- ment or enough information to understand the difference.

FINANCIAL IMPLICATIONS

Financial implications of dual agency are significant, and often only benefit the real estate agent. A common mistake that buyers and sellers make is that they assume that if they represent themselves or have a dual agent, they will get a 'better deal.' In dual agency, the real estate agent makes twice as much when the buyer

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SLO County Bar Bulletin www.slobar.org January-February 2016 23

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has no other representation, and

it does not guarantee better terms

for either party.

The negative financial impact

to sellers has been researched

and documented. In a Wall S treet Journal report from 2014 and in

an article from Redfin from 2012,

sellers who engage in dual agency

net 1.6-1.7 percent less than their

list price at the closed sale.

Some buyers think they can

save money by working with

an agent who represents both

sides. They may not be aware

that in traditional real estate

transactions, the commission

is usually paid by the seller to

their agent, who splits their

commission with the buyer 's

agent, through the Multiple

Listing Service membership

agreement with co-brokers.

Therefore, no matter who repre­

sents them, usually the buyer

does not pay a commission.

EMOTIONAL IMPLICATIONS

There is emotional impact

with single agency and dual

agency. Single agency, from the

outset of a client relationship,

preserves the confidence of

a client. Af ter explanation,

every prospective buyer or

seller I have explained this to

understands that dual agency

is a conflict of interest. Many

are surprised that this kind of

representation is allowed.

Clients have come to me

after having experienced serious

frustration with representation

in past dual-agency transactions

with other agents. With few

exceptions, they felt abandoned

by their agent and ultimately

had to advocate for themselves.

This has led to broken trust and

confidence.

Real estate agents often

avoid the discussion of agency

and, instead, influence clients

to choose them as an agent or

to accept their client's offer due to

filial or friendship loyalty, agent's

personal financial need for a

paycheck, or other emotional

reasons. Consumers are not

usually informed that when

parties have signed a real estate

contract for purchase, even

before it is accepted, the agency

relationships are confirmed and

cannot be changed.

Self-advocacy is exhausting

when one is not experienced with

real estate. Consumers cannot

personally keep up with the

industry changes, unless they buy

or sell about every two years. At

my count, there are 180 different

agreements in a typical real estate

purchase contract, with more

than 30 pages of fine print.

SINGLE AGENCY BACKGROUND

The term "single agency"

was advanced and taught in

classes by William Broadbent in

the 1970s. Mr. Broadbent was a

local San Luis Obispo broker and

national real estate instructor

who understood the need to

advocate loyally for clients.

He championed single agency

nationally until his death in 2015.

In his words, "The answer

to client representation is not

Seller Only brokerage firms or

Buyer Only brokerage firms,

but Single Agency real estate

practice."

Thankfully, my father Bill

Davies was a former student

of Broadbent and others who

championed this way of

representing clients. My father

practiced single agency, and

I follow in his footsteps.

DUAL AGENCY BACKGROUND

On the other hand, many

agents are motivated to

engage in dual agency. Dual

agency has been practiced

since the beginnings of real

estate brokerage. It is actively

practiced today. Single agency

is practiced by some agents, yet

those who consistently refuse

to engage in dual agency are

rare.

Locally, in 2015 in the City of

San Luis Obispo, 23 percent of all

property sales were dual-agency

transactions. Nationally, about

32 percent of transactions are

dual-agency. As mentioned, dual

agency is a financial windfall for

agents because they usually make

a much larger commission, often

twice as much because they have

no need to split the compensation

with a buyer 's agent. Some dual

agency agents say they have

24 January-February 2016 www.slobar.org SLO County Bar Bulletin

better control over the transaction parties, less politics, and it is more expedient.

INDUSTRY VIEWS

Unfortunately, the traditional real estate industry establishment does not acknowledge this as a conflict of interest. The general measure for success in the indus- try is how many "transaction sides" you engage in, indicating that the more dual agency you engage in, the more successful you are.

The California Association of REALTORS® (CAR) spent nearly $1.5 million in 2015 preserving the right for agents to practice dual agency (source: www.car. org/governmentaffairs ). Further, there is a required form (Form PRBS) in the CAR standard forms for residential transactions, with a section where the parties automatically consent to dual agency, requiring active editing if a broker wishes to omit.

CLIENT ADVOCACY

I practice exclusive single agency real estate, representing only one side in each transaction. I never represent both a seller and a buyer at the same time for the same property. My choice to practice this way is because I believe in advocacy for clients-

fiercely loyal, passionate advocacy. This has never created a lost sale or missed buyer in 40 years of business. If a buyer comes to me and wants to purchase a property that I have listed, I refer them to another agent. If a seller comes to me with a property to sell that meets the needs of my buyer, I refer them to another agent or encourage them to sell the property by representing themselves. Other agents understand that I do not "steal" clients. This results in more professional transactions with other agents.

Another reason I practice single agency is that I have benefitted personally as a buyer and as a seller from this type of representation. My investment in real estate started at a young age. My specific goals of funding my own education and future financial security were pursued and accomplished because I had a single-agency advocate during my early investing process. Initially this was my father, but as I continued investing as an adult in other areas of the United States, I sought out brokers who would represent me as single- agency practitioners. As my portfolio increased, the need for strategy and advocacy increased as well.

In my assessment, in order

to protect consumers, change is needed in the practice of conventional real estate represen- tation. We are overdue for a conversion to exclusive single- agency representation. My hope is that real estate agents would practice like attorneys, without a conflict of interest. Consumers deserve loyal representation without conflicts of interest. Before they start looking at property or considering listing their home, knowledgeable buyers and sellers should only commit to work with brokers who will practice exclusive single agency.

By practicing single agency in real estate every day, I am passionately proud of the work I do for my clients. •

Dawna Davies is the Broker/Owner of Davies Company Real Estate in San Luis Obispo, and is a third- generation broker. The company, founded nearly 50 years ago, has practiced exclusive single agency for more than 40 years. Dawna has been a co-instructor for California Bureau of Real Estate accredited classes, held multiple leadership positions in the San Luis Obispo Association of REALTORS® and holds various professional designations. Find more information at www.DaviesCo.com.

SLO County Bar Bulletin www.slobar.org January-February 2016 25

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