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What Every Buyer Should Know About the Conflicts of Dual Agency

What every real estate buyer needs to know, about the real estate business.

There was a time, when all real estate agents were either agents or sub-agents of the seller.

“Ten years ago, virtually all real estate agents represented sellers exclusively. The agent who listed a house for sale represented the seller and, if another agent brought in a buyer, the second agent was considered a subagent of the listing agent. The buyer was considered the customer and had no representation, although most buyers mistakenly believed the agent who showed them the house and wrote their offer represented them.” (Hepner, 1998, p. 1)

As consumer activists became aware of this problem, they began to voice their concerns on behalf of buyers who mistakenly believed they were being fully represented by the agent who was showing them homes and writing up their offers. In response to the situation, concerned legislators in different states began to pass disclosure laws that would require agents to disclose their working relationship to buyers.

“Consumer activists and what were then a few fledgling buyer-brokers argued that this situation was unfair to the buyer, even deceptive, and spurred laws requiring disclosure to buyers that agents represented sellers unless there was a written buyer representation agreement. As a result, virtually all real estate companies began to offer buyer representation as well as seller representation - at least partly to compete as buyer-brokerages attracted more business.” (Hepner, 1998, p. 1)

To illustrate how a buyer’s representation is affected, and how disclosure laws have helped:

If buyer is represented by a “sub-agent” of the seller:

“If, for instance, a seller would take much less than the asking price, the listing agent, under the old law, could share this information with fellow agents at a sales meeting. The dual-agency law prevented the subagents at the meeting from sharing that information with their buyers.”(Hepner, 1998, p. 1)

If a buyer is represented by a “buyer’s agent” working for a firm who also takes listings:

“Asked how the client would be better represented, MAR Executive Vice President Mary Antoun said agents representing buyers have been required "to stay mute" on issues that would violate the seller's confidence when the firm the agent works for has the listing and thus represents the seller.” (Hepner, 1998, p. 1)

Buyer agency laws were put in place, to protect the rights of real estate consumers. Many states now require the use of a Buyer’s Agency agreement, which is much like the Listing Agreement used by listing agents to secure seller-clients.

“Before a contract is signed, the bill 'requires that all brokerage agreements for residential property must be in writing' instead of a 'written agreement only for real estate sales,' according to the synopsis. This means that agents representing buyers must execute a written buyer agreement, as agents representing sellers execute a written listing agreement.” (Hepner, 1998, p. 1)

For many years, real estate professionals who choose to specialize in representing buyers exclusively have at one point or another, experienced adversarial tension from traditional real estate professionals who would prefer to continue doing “business as usual.”

“Mr. Brincefield agrees that ‘buyer agency has been a huge change.’ ‘The first person who started talking about buyer agency, about 15 years ago in Northern Virginia, they tried to run out of the business. He was [considered] a traitor. Buyer brokerage was a dramatic change.’ ‘I'm an advocate of buyer agency,’ he says, ‘but I'm an advocate of real buyer agency. Buyer agency has become so popular today, everyone calls themselves a buyer agent. If you have a buyer agent that's really looking out for the buyer, that's great, but like anything else, it depends on what they know - and if they're really doing their job.’ ‘The biggest change in that arena is the awareness of the buyer,’ Mr. Brincefield says. ‘At least now, most home buyers know that they are better off with a buyer agent.’ (Hepner, 2001, p. 1)

Another account of adversarial tension towards buyer agents:

”There was one speaker who at that time was just about the only agent practicing this (buyer agency). He was treated at first like the enemy. But then the concept and acceptance became bigger and more accepted as more agents wanted to work in this role,” (Roketenetz, 1999, p. 1)


Buying real estate is serious business. For this reason, it is important for buyers to ensure that they are 100% represented without the possibility of a conflict of interest. This is the only way to make certain, that your interests are protected 100% of the time.

“If a buyer wants an agent who is an advocate, he or she should find a broker whose firm offers [exclusive] buyer representation.” (Darsa, 1999, p. 1)

"A conflict of interest is more likely when a real estate firm that represents sellers assigns you one of its brokers as a buyer agent. That's why many people believe an 'exclusive' buyer broker is preferable. If there aren't any in your area, and you have to use a listing broker, 'make sure they disclose when they are showing you properties they have a financial interest in,' says Stephen Brobeck, executive director of the Consumers Federation of America." Business Week



The most important thing a real estate buyer can do, when buying real estate is to stay an informed consumer. Know your choices, make well-informed decisions based on the choices YOU know you have, and hiring an exclusive buyer's agent to help you protect those choices.



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Suzette West, RECS - Exclusive Buyer's Broker

Designated Broker / Owner / President

11 years experience caring for Buyer-Clients.

World West Investments, Inc.



A boutique of specialized real estate services, exclusively for residential and investment real estate buyers.

http://www.WorldWestInvestments.com

http://suzettewest.iblogs.com

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