Dual Agency Means No Agency

Dual agency is possibly the worst conflict of interest a Realtor can impose upon their client. When dual agency occurs it means that the agent is prohibited from negotiating on behalf of their client and it creates an insurmountable conflict of interest. Dual agents may not advocate for one party to the detriment of the other. That means no representation.

After losing a class action lawsuit alleging undisclosed dual agency, the Realtor Association sponsored legislation making this conflictive arrangement legal just for them. Even attorneys who are trained in conflict management are prohibited from engaging in dual agency except in some very extreme situations. Instead of being held to the impossible standards of disclosure and informed consent set forth in the common law, real estate dual agents only need to get their clients to sign an incomplete and inadequate “disclosure” and they are exonerated from any responsibility.

Unfortunately, most agents don’t understand dual agency and routinely violate the law. Some agents blatantly violate the law and negotiate in dual agency situations and others create bizarre hypotheticals for their clients that goes something like this: “While I can’t negotiate for you in this dual agency situation, what I can tell you is that if this were an identical house in a non-dual agency situation I would recommend offering $20,000 less.” It is my understanding that some brokers actually train their agents to engage in this illegal conduct. If your agent has engaged in conduct like this, they have likely violated the licensing statute (you should report them to the Minnesota Department of Commerce) and it may void their right to collect a commission or entitle you to damages.

While the dual agency statute prohibits brokers and agents from sharing confidential negotiating information of their clients, it is likely that brokers and agents are using your information against you. If you are selling your house for $300,000 and have told your agent that you would accept $280,000 you should expect that the entire brokerage office will know this. I have seen one example where a top agent in a large brokerage firm actually posted this kind of information all over the office in opposition to his clients’ specific instructions.

Brokers profit the most from dual agency and have a huge incentive in collecting a double fee to encourage dual agency. Unfortunately, that may mean a lot of market manipulation for consumers. Some brokers will exclude listings from Zillow, Trulia and Realtor.com in hopes of reducing the market exposure of the home and selling the house in-house. They don’t care that it may take longer to sell your home and that it may sell for less money so long as they collect a double fee. Others will do “pre-listings” or “coming soon listings” and not even put the property on the MLS right away in hopes of generating an in-house offer. Realtors have all kinds of talking points to manipulate their clients to agree to these schemes that reduce market exposure and benefit only the agent and broker.

If you have been exposed to dual agency, there is a strong likelihood that your agent violated the dual agency provisions of the statute and opened themselves to civil liability (so long as you didn’t sign the arbitration agreement). They may have voided their right to collect a commission and they may owe you damages. If there is a dispute in your transaction and there is dual agency, it is likely that the agent and broker will bear some responsibility.