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Seller Savvy – The Two Faces of Dual Agency

When you decide to list your property for sale with me, you’ve literally just put your future in my hands. I don’t take that responsibility lightly. That’s why I am fully on board with Hawaii Life’s strong stance on agency.

First, let’s discuss what agency means, legally and morally. A listing agreement is a contractual arrangement, and because there are (often large!) financial consequences for you as a seller, your broker owes you a fiduciary duty. In other words, they must put your monetary interests ahead of their own (and those of other parties).

At the time of listing, Hawaii Life will have you sign an Agency Disclosure. Later, when we get an offer, in Hawaii if a single firm represents both buyer and seller in the same transaction, that will also be disclosed in writing along with a list of what agents can and cannot do for each party to the transaction.

This is where it can get tricky, because rather than being 100% in your corner through the negotiation phase, your representative must now go to neutral. Some states do not even permit “dual agency” transactions; other states allow one firm to represent both sides, but insist that different agents handle the two sides.

Sellers–are you aware that in many real estate companies in Hawaii, agents are actually paid a higher percentage of the commission you pay the brokerage when they sell an in-house listing than if they sell another firm’s listing? This does sellers a disservice for two reasons.

  1. First, they get paid more in exactly the situation where you get less of your agent’s higher-value-added skill.
  2. Secondly, they are less likely to market your property effectively with other agents! As you may have guessed, Hawaii Life turns this practice on its head.

There is another form of dual agency that Hawaii Life is also scrupulous about. Several of those calls my broker client was overhearing went like this:

AGENT: I would like to show the house you have listed in Hawi tomorrow.

ME: Can you be a bit more specific?

AGENT: The really nice one on a big acreage, I know it’s priced over $1 million.

ME: Do you have the address or MLS number?

The situation I’m in is referred to as unintentional dual agency. Dual agency is not defined as having both the buyer and seller in a transaction. Dual agency is defined as having agency relationships with two parties that create a conflict in the agent’s fiduciary duties. In other words, if I have two listings that might both fit a given buyer’s criteria, technically, I am in a dual agency situation.

That’s why in our listing agreements we always check the box that says our seller will allow dual agency. Because the listing agreement is with Hawaii Life, not with the individual agent, there is a heck of a good chance that some agent will have a listing that some prospective buyer would consider in addition to my seller’s property!

When an agent makes a listing presentation to you, listen for how they discuss their agency duties to you, and whether they mention dual agency at all, let alone unintentional dual agency. If their sales pitch to you is, “I am the top listing agent in your neighborhood,” your next question should be, “Then how do I know you will be giving your best effort to sell my particular property rather than another listing that is similar to mine.” Or better yet, just respond, “But doesn’t that create unintentional dual agency?” and see whether they even know they have a dual agency situation on their hands!

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Diane Chavez

March 2, 2011

Beth,
I was wondering about pocket listings? Are agents with pocket listings in any kind of contract with those Sellers? If not why are some agents willing to show these along with homes that are listed and how would you describe this situation under the topic of agency?

Diane Chavez

March 2, 2011

Beth,
I was wondering about pocket listings? Are agents with pocket listings in any kind of contract with those Sellers? If not why are some agents willing to show these along with homes that are listed and how would you describe this situation under the topic of agency?

Beth Robinson R(B)

March 2, 2011

@Diane, great question!
“Pocket listing” is a very loosely used term. For example, the $5 million property in Kohala Ranch that is a Hawaii Life pocket listing does have a signed agreement, and therefore an agency relationship has been created.
I think that is probably the exception to the rule. When a prospective seller says to me, “I don’t want to list, but show it if you have a buyer”, I always clarify when I call them to show that they are an unrepresented customer and my buyer is my client. At my request, Hawaii Life created a document similar to what we provide unrepresented buyers that I could use with unrepresented sellers because I wanted to spell out what that meant.
Hmmm….I considered writing a post devoted to pocket listings in this series and decided not to, but maybe I should reconsider.

Beth Robinson R(B)

March 2, 2011

@Diane, great question!
“Pocket listing” is a very loosely used term. For example, the $5 million property in Kohala Ranch that is a Hawaii Life pocket listing does have a signed agreement, and therefore an agency relationship has been created.
I think that is probably the exception to the rule. When a prospective seller says to me, “I don’t want to list, but show it if you have a buyer”, I always clarify when I call them to show that they are an unrepresented customer and my buyer is my client. At my request, Hawaii Life created a document similar to what we provide unrepresented buyers that I could use with unrepresented sellers because I wanted to spell out what that meant.
Hmmm….I considered writing a post devoted to pocket listings in this series and decided not to, but maybe I should reconsider.

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