Real Estate Representation (Finally) Evolves in Virginia

July 1 2012 will be a day that many buyers, sellers (and real estate agents, I’d wager) learn that the current world of real estate representation is (supposed to be) about representing clients’ best interests – not merely selling a home. That’s the day that the new real estate Agency law will take effect. While single agent dual agency isn’t outlawed, real estate agents are now legally bound to explain to potential clients the pitfalls of single agent dual agency – whereby the same agent “represents” both parties in a real estate transaction. And those pitfalls now how to be clearly spelled out so that most buyers and sellers will likely look at the agent advocating for getting both sides of a transaction with a raised eyebrow (at the least).

Long-time readers know that I have advocated for true client representation for years. Simply put: if you were getting a divorce (or some other potentially traumatic legal matter) – would you hire the same attorney to represent both parties? No. Same with buying a home; usually everything goes well and smoothly, but when it doesn’t – representation is more crucial than ever before. (bolding mine)

1. That following the commencement of dual agency or representation, the licensee cannot advise either party as to the terms to offer or accept in any offer or counteroffer; however, the licensee may have advised one party as to such terms prior to the commencement of dual agency or representation;

2. That the licensee cannot advise the buyer client as to the suitability of the property, its condition (other than to make any disclosures as required by law of any licensee representing a seller), and cannot advise either party as to what repairs of the property to make or request;

3. That the licensee cannot advise either party in any dispute that arises relating to the transaction;

4. That licensee may be acting without knowledge of the client’s needs, client’s knowledge of the market, or client’s capabilities in dealing with the intricacies of real estate transactions; and

5. That either party may engage another licensee at additional cost to represent their respective interests.

Put more succinctly, if a buyer and seller enter into a dual agency relationship:

1 – The agent can’t tell you about price, terms, etc, but may have already (and probably has) advised the opposing party
2 – The agent can’t tell you anything about the property that’s useful or isn’t something you don’t already know.
3 – The agent is an impartial advisor (rather than an advocate for one party)
4 – The agent doesn’t and can’t know anything about the clients wants or needs.
5 – Get another agent to get actual representation.

Single agent dual agency sounds really awesome, right?

Presented anecdotally:

Real estate transactions require septic inspections. If I’m asked if a buyer should open up a septic system and actually inspect the system, my answers are going to be, respectively:

Representing the buyer: Yes, absolutely.

Representing the seller: No, absolutely not.

“Representing” both parties: I don’t know; you should probably figure that out for yourself.

What are the benefits of using a buyer broker agreement?

I tend to use buyer broker agreements with all of my buyer clients fairly early on in our buyer client realtor relationships and this reason is this: first and foremost it lays out my fiduciary duties to my buyer clients. It’s three and a half or four pages of how I work with my clients. It also lays out my buyer clients’ responsibilities to me. We are making a contractual agreement to work with each other. It professionalizes the relationship as well. It lays out exactly how we’re going to work together.

The Richmond Association of Realtors is doing a pretty good job conveying this change (note to CAAR: WordPress makes great websites) – What is a Buyer Broker Agreement?

They even have sample dual agency forms you can download.

I’m happy to talk about this stuff extensively, offline – I have so many examples I could share of how dual agency is bad, how I’ve handled situations where I’ve had to separate myself from long-time clients and concede many thousands of dollars – because it was the right thing to do – and detail many of the ways in which a single agent in a dual agency situation is working for herself and not the clients.

For some background:

February 2009 – Thoughts on Dual Agency
May 2009 – Single Agent Dual Agency – Do Consumers Care?
February 2010 – Part of Virginia’s Buyer Broker Agreement That Speaks to Dual Agency
January 2011 – HB 1907 – Talking About Single Agent Dual Agency in Virginia
January 2011 – A Bill to Protect Consumers: Specifically Single Agent Dual Agency
March 2011 – Real Estate (Dual) Agency in Virginia – Now Updated with a little Reason