If you ever wondered about the differences between Exclusive Buyers Agency (EBA) and Dual Agency and other agency relationships, you’re not alone. In many instances, they vary by state. And for most, it can be down right confusing. Generally speaking, when you sign a listing agreement with the seller, you create a fiduciary relationship where you owe that seller client undivided loyalty, confidentiality, full disclosure and more. You are basically working in their best interest. The same holds true in an Exclusive Buyer Agency relationship. You work in the best interests of your buyer client. However, in a Dual agency relationship, you really don’t have that complete fiduciary relationship to either party. It’s always best to ask your agent about the details of these agency agreements before getting into a relationship in order to prevent any misunderstandings during the transaction.
This weeks top Trulia Voices question of the week was asked by KG, a home buyer from Los Angeles. He asked, “Can someone explain the difference between an exclusive buyer agency agreement and a dual agency agreement?”
Here are some community replies to KG’s question:
John Sacktig, a real estate agent from East Brunswick, New Jersey says, “An “exclusive buyers agent agreement” in NJ is for an agent who gets paid regardless of whether the agent finds their buyers the home they want to buy or not. That means that if I get you to sign one.. and Marc shows you a house….and you buy it…. I GET PAID, No matter if Marc shows you the house or anyone Else. It is a docment that binds you to me and me alone.”
Loan Prout, a real estate agent from Jersey City, New Jersey, says, “A disclosed dual agency situation develops when the brokerage company that the agent works for has a listing that is shown to the buyer. There is an agency contract (the listing agreement) where the brokerage represents the seller. To deal with this conflict of interest, NJ allows the agents to work as “disclosed dual agents”, with the written consent of both parties. The agents may not put one party’s interests ahead of the other party’s. All confidential information remains confidential. Agents relay offers and counter offers WITHOUT coaching the parties on how to get an advantage over the other.”
Alan May, a.k.a. “Elvis”, is a real estate agent from Evanston, IL who said, “Dual agency (whether designated, or transactional) goes beyond the conflict of interest involved in “treating both parties fairly and not divulging confidential information.”
What’s your experience with the different agency relationships in your neck of the woods?
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June 23rd, 2008 at 1:41 pm
I abhor dual agency. To me, it is impossible to best represent both sides in a real estate transaction. Oh, I can legally do it, not reveal any confidential info to either side, sign all the forms properly, treat both sides fairly, blah blah blah.
But there is no way to really represent both a buyer and seller in the same transaction.
June 23rd, 2008 at 1:47 pm
The difference between the two is simple - in a single-agent Buyer-Broker relationship, the buyer is the beneficiary of one person advocating solely for his or her best interest.
nearly two pages to explain the perils and pitfalls of Dual Agency - out of a four page agreement! Doesn’t that say it all?
Another way that I have argued in the past is this - if I were an attorney, could I defend and prosecute the same client?
June 23rd, 2008 at 1:53 pm
Oh man…not this subject again. Hope Jim Duncan doesn’t hear about this
IMHO, Dual Agency should be banned. It’s probably the most horrible law on the books in real estate. I’ve also heard that it’s the topic of the most grievances by buyers and sellers about their agent.
In a nutshell, Dual Agency is like asking the prosecuting attorney to defend you as the defendant as well as represent the plaintiff who’s suing you.
Sounds crazy, doesn’t it? Well, that’s what you’re asking the Listing Agent to do when you enter into Dual Agency as a buyer (and seller).
In Dual Agency, the agent can not represent either party more than the other and merely facilitates the transaction. In essence, they can’t look out for the best interests of either party because they have to be equal and fair to both. This means that they can’t offer advice to one party on how to get the best deal, what price to offer, fight for $10K off the price for the buyer, advise the seller what price to counter with, etc.
The Dual Agent is basically useless to both the buyer and seller in most regards and is simply there to help each party sign the paperwork correctly and facilitate the transaction. But here’s the kicker…they get paid twice - Once on the “sell side” and once on the “buy side”!
On the other hand, I compare Buyer’s Agency to having your own defense attorney looking out for you in court. As a buyer with a Buyer’s Agency Agreement signed, it means having your own Buyer’s Agent who is not in any way, shape or form looking out for the seller(s) and is completely at liberty to advise, defend and fight for your best interests.
The Listing Agent has the same responsibility to the seller. Basically, both parties have their own interests being looked out.
There are some people that think they can negotiate getting a part of the commission back from a Listing Agent if they use the Listing Agent as a Dual Agent. Some of the time, they get part of the commission credited back to them.
But that comes at a steep price - they don’t have anyone to represent their best interests nor negotiate on their behalf when it comes to several hundreds of thousands of dollars of their money. And for what, a few thousand dollars?
Btw…the huge conflict of interest that Dual Agency creates and people getting screwed over by Dual Agency is why Buyer’s Agency was created in 1994 in the first place.
A good Buyer’s Agent will look out for the buyer’s best interest AND can negotiate more than a 1 or 2 percent credit off the purchase price anyway.
June 23rd, 2008 at 2:00 pm
D’oh!
That should read - “In Virginia it takes nearly two pages to explain the perils and pitfalls of Dual Agency - out of a four page agreement!
June 23rd, 2008 at 2:02 pm
“Oh man…not this subject again. Hope Jim Duncan doesn’t hear about this”
That’s funny Danilo — look above your comment. You guys were posting at the same time…
Which one of you Virginians came up with that fabulous analogy?
“I’ve also heard that it’s the topic of the most grievances by buyers and sellers about their agent”
According to my E&O carrier, dual agency is the #1 cause of claims.
June 23rd, 2008 at 2:16 pm
Jay - HA! I saw that right after I clicked “submit”. Man, Jim’s quick!
I’m gonna say me on the credit for the analogy because I’ve been using that one for a while now and have only heard Jim use it recently. But maybe he’s just letting me run with it and THINK that I was the first one to use it
June 23rd, 2008 at 2:17 pm
there is only one way to be an EBA. Have a contract with buyer outlining duties, state in that contract that the buyer is paying your commission (attorney should accept the check from listing agent at closing and cut a check to buyers agent so no funds are passed from selling agent) and finally your office should only be involved in representing buyers. I have lots experience in this considering my roots and involvement with EBA. see: http://www.naeba.org/naeba/standards.htm
June 24th, 2008 at 9:56 am
@Jay - I agree. Neither side gets the best representation possible.
@Jim - Perfect example. One that I used myself in the past. People seem to really be able to visualize this scenario.
@Danillo - Thanks for adding your great take on this. Again, the courtroom analogy, to me, says it all. If you want to have the best representation, dual agency is not the way to go.
@Andrew - EBA is really interesting to me. Especially since I have not witnessed it being practiced in NYC. I have however, seen the cutting of the checks disbursed as you mention at closing. My friend and fellow blogger, Christine Forgione, has some more details on how New York Works:
http://nyhouses4sale.typepad.com/ny_houses_4_sale/2006/11/are_you_my_clie.html
January 22nd, 2009 at 10:50 am
I’m a buyer currently in the market for a house, and found this page in response to a search I did on buyer’s agency agreements.
I went out with an agent yesterday to look at several houses. During our meeting, she handed me a packet of info and documents, one of which was an “Exclusive Buyer’s Agency Agreement.”
Upon looking it over after returning home, I can’t envision myself signing it. There’s no upside to me whatsoever, and tremendous potential downside.
There’s nothing in the contract that stipulates the agent will devote X hours of work or provide me with X no. of homes to view, or will negotiate X% off any asking price or reimburse me for the difference. Nothing at all. The only things it does address are things couched in nebulous non-specific like “reasonable consideration.”
However, it spells out in fine detail all the many ways I will pay the agent if I buy a house (regardless of how the deal comes to be), buy a house and sell it in a year, buy a house and do X in a year… Furthermore, it includes a binding arbitration clause which asks me to sign away my right to seek redress through the courts.
Essentially, if I sign this thing, and that afternoon, the agent gets a call from someone shopping in a much higher price range than I am, and the agent smells a bigger potential commission… she can flat out ignore me, and I’m locked in. I can’t do anything without paying her a commission regardless of how much or little she does for me.
I can’t fathom why ANYONE would sign such an agreement. It would be like signing a contract with a lawn service that says you’ll pay them $X dollars a month to maintain your lawn, but doesn’t spell out how often they’ll mow, doesn’t guarantee that they’ll keep the grass below X” length, doesn’t address any standards they will have to uphold. It just says you will pay them, and they will work on your lawn at their discretion.
That’s nuts.
January 21st, 2010 at 5:07 pm
The comment by John Sacktig:
“a real estate agent from East Brunswick, New Jersey says, “An “exclusive buyers agent agreement” in NJ is for an agent who gets paid regardless of whether the agent finds their buyers the home they want to buy or not. That means that if I get you to sign one.. and Marc shows you a house….and you buy it…. I GET PAID, No matter if Marc shows you the house or anyone Else. It is a docment that binds you to me and me alone.”
appears to be intentionally misleading. The question concened agency.
An Exclusive Buyer’s Agent is an agent that works for a company that doesn’t work for sellers - at all.
An Exclusive Buyer’s Agent could never be a dual agent because they ONLY work for the buyer and an Exclusive Buyer’s Agency agreement puts this in writing to protect the buyer.
A DUAL AGENT works for the buyer and seller at the same time.
John choose to state that the agreement’s purpose was to tie the buyer to the agent when the real intent is to ensure that the agent works in an office that only represents buyers and will remain loyal to the buyer and specifies the duties of both the buyer and the agent.