Caesar’s wife on the witness stand: The moral, the practical, the marketable and the defensible approach to forbidding dual agency . . .

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

I had a great letter today from Bob Hunter of the Muljat Group about our policy forbidding dual agency. I’ll quote the whole thing first:

Greg, my wife and I are agents in Bellingham, Wash and I have a question relating to your position on dual agency. Our brokerage is a 100% desk fee operation. The broker takes no cut from any commission. Why would a transaction between two agents from this office harm either of the parties? I have read your website (twice) and think I understand your philosophy (since your make it very prevalent marketing appears to be a pretty important motivator also). Still, in our situation I’m not sure how the clients are harmed.

We have tried different strategies, I represent one client, my wife the other, referring one client to another agent in our office, representing both clients. We have not yet referred to an agent out of our office. In all the years of doing this, we do more dual agency than the industry standard, I can think of only one instance where the buyer ‘felt’ his interests were not being represented fully. The transaction would have the same result with separate agents but any bad feelings are negative. In retrospect we should have contributed money to his cause which would have alleviated any feelings of misplaced loyalty.

If dual agency is outlawed and if the consumers rail against it, then it is a moot point, but I am still interested in your opinion of our office dynamics and why it is not equitable or ethical.

I read your blog regularly and hope to start my own.

thanks

Bob Hunter
The Muljat Group Realtors

Dual agency has a bad reputation for three reasons, only one of which is wholly deserved. That one is true double-dipping agents or brokers who are looking for the biggest payday regardless of who gets hurt. Second is the public’s perception of dual agency, which is colored to some degree by negative opinions about real estate agents generally. But third is the conviction, justified or not, on the part of buyers and sellers that dual agency resulted in unfair treatment. This feeling may not run deep enough to bubble up as a verbalized complaint, much less a lawsuit, but it can still be there. You can find it by talking to friends and family members who have been involved in dual agency in the past. If you bring it up in your early contacts with prospective clients, you’ll get an earful about half the time. You will never find an ordinary consumer who understands dual agency — and likes it.

With respect to state laws, I know that Washington has Designated Agency, which I understand in broad theory but have never practiced. In Arizona and in many other states, every client of every agent within a given brokerage (which may have multiple offices) is actually and only the client of the Designated Broker of that brokerage. In law, dual agency would be either one agent representing both buyer and seller or two salespeople from the same brokerage — both of whom are sub-agents of the designated broker — one representing the buyer and one the seller. In that case, any advice the buyer’s agent gives the buyer necessarily damages the interests of the seller, and vice versa. The net effect is that the designated broker is pitting two (or more) of his clients against each other, even though he owes an undiluted fiduciary duty to each of them.

Disclosed Dual Agency, Designated Agency and Transaction Brokerage are all attempts at a work-around to this problem. For all of me, they all look to me like the problem to be solved is the broker’s legal exposure, rather than the client’s need for fidelity, loyalty and unquestionable zeal in real estate representation.

Even so, I think there is more to this. A few weeks ago, I was showing homes to a buyer. For one of them, I had confidential knowledge about the seller. Even though I wasn’t representing the seller, I regarded that as a de facto dual agency. If the buyer had elected to buy that house, I would have backed out. How about two agents working for different brokerages who happen to play handball against each other every Tuesday or who belong to the same Toastmaster’s club? What about a husband and wife who work for different brokers? Away from the idea of dual agency, how about a husband and wife Realtor/lender team? Or a couple composed of a Realtor and a home inspector?

I personally believe that the moral is the practical, by which I mean that the morally righteous thing to do is also possible and efficacious. I don’t believe there are any barriers between the ethical and the practicable. (And, yes, part of living and working with me is thinking about every little thing down to the last whirling atom.) I also believe that good behavior is eminently marketable, and we market absolutely every good thing we do. But we are Realtors, and we know that we are always at risk of being eaten alive by voracious attorneys, so, like it or don’t, everything we do is informed by reflection upon how it might be portrayed by a plaintiff’s lawyer in a lawsuit — and what inferences, even if wholly erroneous inferences — a jury might draw from that portrayal.

“So, Rona the Realtor, is it your professional opinion that your husband, Hal the Home Inspector — the man who brings his paycheck home to you — was really the best man for the job?”

“Given that you sleep with the buyer’s agent, sharing, when you both have the energy, the most intimate of moments, can you swear before this court that you did not also share any of your own client’s confidential information? Even granting you a presumption of profound conscious integrity, can you truthfully testify that you didn’t blurt out critical facts in your sleep? Is there absolutely no chance that your spouse, your life partner, might have seen some of you confidential work product?”

“Bruce, you and Paul are buds! You go back years together. Surely you knew how high your buyer would go, much as Paul must have known how low his seller would go. How long does it take to split the difference? Clients come and go, but true friends are hard to find, aren’t they?”

We say, as a cliche, “Caesar’s wife must be above reproach.” Per Suetonius, what Caesar actually said was, “Meos tam suspicione quam crimine iudico carere oportere.” (“My wife should be as much free from suspicion of a crime as she is from a crime itself.”)

A better way of expressing the same idea: In what light would a plaintiff’s attorney seek to portray this fact pattern?

I want to do what is righteous, always, this before anything. I want to do what is practical, if only to keep all my fat cells fully inflated. I want to do what is marketable — so I can sell even more real estate. But I do not ever want to get sued. Even if the Errors and Omissions insurance underwriter settles out of court, that’s still a huge loss — and not just financially.

For all of me, I think brokers taking kickbacks from — or even ownership stakes in — lenders, title companies, hazard insurance agencies, inspectors, etc., are just asking for it on precisely these grounds — but each man to his own saints.

Quoting from Bob’s letter:

Still, in our situation I’m not sure how the clients are harmed.

I’m sure they are not harmed. But if the client feels aggrieved, that’s grounds for a lawsuit. And a jury is a body of decent people composed to the last man or woman of people who could not think up an excuse to get out of jury duty.

We have tried different strategies, I represent one client, my wife the other, referring one client to another agent in our office, representing both clients.

In both of these cases, I think a lawyer could fairly easily paint the picture that, since collusion would have been so effortless, the presumption should be that it did occur. This is not fair, but lawyers aren’t paid to be fair.

However: Another way of judging the whole matter is, “What would an attorney do to avoid suspicion of divided loyalties?” No law firm, no matter how many attorneys it employs in how many offices, would represent both parties to a lawsuit. Lawyers and judges recuse themselves at the first hint of a suspicion of a tainted contact — far below any threshold that might be called collusion. Realtors may not want to hold themselves to that standard, but lawyers eat Realtors for lunch every workday — and they get weekends off!

I don’t presume to tell other people what to do. We forbade dual agency as a matter of brokerage policy (and there are only the two of us, so far — the kid and the dog aren’t licensed) not because we were or had been in the wrong, but because we didn’t want ever even to be perceived as having been in the wrong. If our clients feel — even if only in secret — even if only in their restless nightmares — that they have been cheated, then, from our point of view, we have failed them. We want for our clients to see us as their relentless champions — and by that I mean backlit, proud as a Bloodhound, towering heroically over every obstacle, with the music swelling to an anthemic crescendo. We may not succeed in doing that with every client, but that’s our goal.

Dual agency, anything that even hints at collusion, and every form of “referral fee”, disclosed or not, prevents us from developing that kind of relationship with our clients. So, if you ask me why I won’t do dual agency, I could give you four rationales — the moral, the practical, the marketable and the defensible.

Or instead I could give you one comprehensive, thoroughly entrepreneurial answer:

It’s bad for business…

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