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Two decades ago when Teresa Boardman was just starting out in real estate, a young man walked into the open house she was holding. The man liked the property, but lacked an agent of his own, so Boardman stepped up and became a dual agent for the transaction. It was the kind of situation that agents in her office celebrated.
But things didn’t go well.
Teresa Boardman
“Ten days after the closing, they tried to return the house,” Boardman recently recalled. “The buyer’s mom called and said I pressured him into buying.”
Boardman — who today is the broker-owner of an eponymous real estate company in Minnesota — has subsequently done a few other similar transactions over the decades. But overall, that early experience captures why she’s not a fan of what’s known as dual agency, a situation in which one real estate professional represents both sides of a transaction.
“I pretty much avoid dual agency,” she told Inman. “The agents who work for me do, too. It just doesn’t look good.”
Boardman’s feelings about dual agency are not uncommon. At real estate events, in news article comments sections and on agent forums, industry members often share concerns about the practice, which is also colloquially known as “double ending.” During her call with Inman, Boardman summed up a widespread sentiment: “There’s just too much liability.”
Nevertheless, dual agency is also getting more attention lately thanks to the National Association of Realtors’ landmark commission lawsuit settlement. The settlement has prompted widespread speculation that the real estate industry is on the precipice of significant change, and some believe that change could involve dual agency.
In response, Inman reached out to industry leaders and experts across the U.S. to find out what might lie ahead for dual agency. It’s worth noting that one takeaway from these conversations is that there’s little consensus on commission settlements’ impact.
However, many industry members did indicate that the conditions that tend to produce dual agency may well become more common in the future. And if that future does come to pass, agents may have to evolve the way they work in response.
Dual agency may become more common
So why are people talking about dual agency right now?
The answer has to do with NAR’s new settlement-prompted rules regarding commissions. Among other things, the organization has determined that sellers’ agents will no longer be allowed to offer compensation to buyers’ agents within their Realtor-affiliated multiple listing service. Sellers’ agents can still pay buyers’ agents, but unlike today, that compensation offer cannot be input into the MLS.
Additionally, NAR has mandated that buyers will need to have signed agreements in place with their own agents before touring homes.
These rules — which are set to kick in in August — have led some to speculate that sellers and their agents may stop offering compensation to the other side of the deal, prompting buyers to abandon agents rather than pay out of pocket.
In other words, the theory is that more buyers may come to the table lacking representation. And, to tease this thought experiment out one step further, if buyers start showing up without agents, sellers’ brokers may find themselves in exactly the situation Boardman described above: Wanting to close a deal for their own client, and, therefore taking on both sides of the transaction.
There are a lot of ifs involved in this scenario, and NAR’s new rules do not require that it become the reality. It’s simply one possible permutation. But plenty of people who spoke to Inman for this story do think that in a post-settlement world there will be more unrepresented buyers.
Laurie Weston Davis
“I think there’s going to be a lot of buyers who show up without a buyer’s agent,” Laurie Weston Davis, the North Carolina-based broker-owner of BHGRE Lifestyle Property Partners, said.
“Definitely,” Boardman replied when asked if there will be more unrepresented buyers in the wake of the NAR settlement.
“Do we think more buyers will go at it alone? The answer is probably yes,” Teresa Kinney, CEO of the Miami Association of Realtors, told Inman.
Data suggests this such attitudes may be widespread. Citing Redfin survey data, a recent report from financial firm Keefe, Bruyette & Woods noted that 71 percent of agents believe fewer homebuyers will hire a broker if they are required to pay that broker out of their own pocket. Only 14 percent thought buyers would hire brokers at the same rate they do today if the burden of paying for representation shifts to buyers.
Adding further pressure to the situation is the U.S. Department of Justice, which has signaled that it wants commissions “decoupled” — meaning it does not want sellers and their agents paying buyer broker commissions. It remains to be seen how proactive the DOJ might be, but if the agency gets its wish, that could provide further incentive for future homebuyers to eschew agents.
Either way, one possible settlement-induced change from today’s status quo is that there will be more unrepresented buyers, which in turn could lead to more dual agency.
The challenges of double ending
Not everyone who spoke with Inman for this story thought dual agency would explode in the near future. But nearly everyone agreed that whatever happens, the concept is fraught with challenges.
Kendall Bonner
Kendall Bonner — an attorney, team leader and newly appointed vice president of industry relations at eXp Realty — pointed out that many sellers choose their agents from among their pool of friends. Those relationships can run deep and stretch across years or decades, which is great for the sellers. But what happens, Bonner wondered, when a buyer asks that agent to represent both sides of a deal?
“Are you comfortable giving the same level of obedience and confidentiality and loyalty to a friend on one end and a stranger on the other,” she wondered, referring to the fiduciary duties agents have to their clients in her home state of Florida. “Violating those fiduciary duties can have significant consequences. It can lead to litigation. It can lead to mistrust.”
Many other people who spoke to Inman also indicated that legal issues can arise in cases of dual agency. As many industry members put it in conversations with Inman, the problem is that sellers want top dollar but buyers want a bargain — creating an inherent conflict of interest.
Scott Breidenbach
“I think one of the cons, essentially, is it opens a door to possibly trying to get something done that maybe we shouldn’t be doing,” Scott Breidenbach, co-owner of North Dakota-based Beyond Realty and president of the Association of Real Estate License Law Officials (ARELLO), told Inman. “So, there may be some unethical behavior because there’s money at stake. I’m not saying it happens, but there’s the potential.”
For his part, Breidenbach does not think dual agency will become more common in the future.
Summer Goralik, a real estate compliance consultant and former California Department of Real Estate investigator, also stressed that these aren’t idle concerns. During her time working for the state, she repeatedly saw agents get into trouble via dual agency situations. She’s also talked to attorneys where “half the cases on their desk have to do with breach of fiduciary duty as it relates to dual agency.”
Summer Goralik
“For those brokers in California, those brokers who do engage in dual agency and let their agents engage in dual agency, you’ve elevated risk to the max,” she added.
The challenges can get even more exotic, too. For instance, imagine a dual agent facing a bidding war. What happens if that agent is representing a seller who wants the best price, and also a buyer who doesn’t have the most competitive offer? The challenges, and temptations, only get bigger and bigger.
Where dual agency is legal
The U.S. is a patchwork of differing laws when it comes to dual agency. According to ARELLO, most states do allow dual agency, albeit while requiring the parties involved to sign a written agreement. A handful of states allow dual agency with no agreement.
A total of nine states prohibit dual agency. The first to do so was Texas, in 1993, and the most recent was Maryland, in 2016, according to ARELLO.
Credit: ARELLO
However, the legal landscape is complex; both Bonner and Miami Association of Realtors Chief Legal Counsel Evian White De Leon pointed out that in Florida, for example, there is a modified version of the concept that lets agents handle both sides of the transaction while imposing limitations on what they can do.
Between the liability minefield and the patchwork of laws, it’s a lot to take in. But the point is relatively straightforward: Dual agency has remained something of a niche practice for a reason. It’s fraught with challenges, and not always legal, which means some evolution may be in order.
How dual agency might evolve
The answer to how to deal with unrepresented buyers divided industry members who spoke with Inman. But Weston Davis speculated that listing agents may more commonly include nods to the concept in their contracts. For instance, she said that in a post-settlement world, a contract might stipulate one level of compensation for the listing agent if the buyer has a broker, another if the buyer is unrepresented, and another still if the listing agent double ends the deal.
There’s no reason such an agreement couldn’t exist today, but in a world where the overwhelming majority of buyers have agents, and where sellers typically offer commissions to buyers’ brokers, there’s hardly any need for it.
Another possibility that Boardman discussed is listing brokers who end up as unofficial dual agents.
“I really do think we’re going to see that,” she added.
Several industry members stressed that listing agents in such a scenario would only have to represent the interests of their sellers, and would be under no obligation to, say, connect buyers to inspectors. But it’s also possible that, faced with the prospect of getting a deal done or not, they might have little choice but to maintain the flow of documents in a way that might not be necessary on a more traditional deal.
Future deals might also be more work, or more lucrative, for listing agents.
It’s also possible that listing agents may make more money. Sean Frank, founder and CEO of Florida’s Mainframe Real Estate, summed up a widespread sentiment among those who spoke out for this piece: “I don’t think you’re going to find a listing agent who is going to do both sides for free.”
“A seller will probably pay more for doing both sides,” Frank added.
The future is unwritten
Nearly every person who spoke with Inman had a different take on what specifically the future would look like. For example, Frank said he doesn’t “think as much is going to change as people think is going to change.” And he noted that, so far at least, he hasn’t seen “one listing agreement that isn’t offering buyer’s agent compensation.”
On the other hand, Weston Davis said that the commission lawsuits are “going to be a bigger shift than maybe a lot of people think.”
Other industry members fell somewhere on the spectrum between those two views, and the opinions are significant because they highlight just how unchartered these waters are. But a recurring theme in conversations for this story was that agents should at least prepare for some sort of new world.
“I think there’s danger,” Goralik, the investigator-turned-consultant, said, “in the mindset of thinking nothing is going to change.”