Another Reason Why People Don’t Trust Real Estate Agents

John in Home Buying, Home Selling Tips

Multiple Representation (also referred to as Dual Agency) can occur when one agent represents both the buyer and the seller in a real estate transaction. Wondering how one person can effectively protect the rights of two people with such opposite interests? You’re not alone. It’s an obvious conflict of interest that the real estate industry has been able to keep legal.

Ethical issues aside, the other problem with multiple representation has to do with the “double-dip”, or as one real estate agent calls it the “2-1-0”: Getting paid Twice, for One transaction, and serving Zero parties. When the listing agent represents both the buyer and the seller in a transaction they typically “double-end” the deal receiving double the commission.

A home buyer I met recently told me about an experience she had with a Toronto real estate agent double-ending a deal.

After a couple of months of searching, Jennifer finally found the house she wanted to buy. The house had been on the market for around a week and the sellers were taking offers any time. Excited that she didn’t have to compete for the house, she had her buyer agent call the listing agent to inform him that they would be putting in an offer and to clarify a few details relating to the inclusions and exclusions with the house. Her buyer agent called listing agent several times over the span of three days but never received a call back. On the fourth day, they found out that the house had just sold to a buyer who was represented by the listing agent. Jennifer was particularly upset by this experience because had she been given the chance, she was prepared to pay more than what the home eventually sold for.

I was particularly concerned because Jennifer was left with the impression that the listing agent deliberately avoided her agent's calls so that he could double-end the sale. It’s impossible to say what motivated the listing agent who failed return their calls or whether or not he acted unethically.

Consumers perceptions of the real estate industry are not based on the probability of an agent acting unethically but rather by the possibility of an agent acting unethically. It doesn’t matter that most agents would never consider avoiding another agents offer to double-end a deal. The fact that these types of unethical actions are not only possible but very difficult to prove is what consumers see.

What can consumers do to protect themselves from these types of unscrupulous actions? Unfortunately there is very little in terms of consumer protection in the real estate industry. You could file a complaint with the Real Estate Council of Ontario if you suspect that an agent acted unethically. In Jennifer’s case, she felt that it wasn’t worth the hassle and headache to go through the process.

Perhaps abolishing Dual Agency would be a good first step to help restore consumer trust in the real estate industry.

Update March 26th:

A reader named Jim posted a great tip in our comments section.  If you find yourself in a similar situation as the buyer in this story, have your agent prepare and register an offer with the listing brokers office.  This will ensure that you have an opportunity to purchase the property, assuming it is still available.     

John Pasalis is a sales associate at Prudential Properties Plus in Toronto and a founder of Realosophy. Email John

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Comments

[Pete Simmons]

I've had terrible experience with Toronto RE agents over the years - incompetence and in one case, embezzlement from an account used to manage a rental property.

[Pete Simmons]

I've had terrible experience with Toronto RE agents over the years - incompetence and in one case, embezzlement from an account used to manage a rental property.

[Jim]

I feel for Jennifer & understand how this would make her feel. In my experience, my advice is, if a Buyer serious about purchasing a property. I would advise them to have there Agent prepare & register an offer, immediately if they did not hear back from the listing agent. This assures them an opportunity to purchase the property, & they must be notified if they were competing against any other offers. Especially when their agent had not heard back from the listing agent. You can always work out the details of the inclusions during the negotiations. I don't believe this had anything to do with dual agency.

[John Pasalis]

Thanks for the tip Jim.
I updated the post to include your suggestion.

john

[maggie chandler]

personally i think our association should not permit dual agency. there are a handful of vancouver agents who 'sleeve' their listings and are sly about not fulling co-operating. once you get to know who they are one tends to avoid them, which only feeds into their sleezy way of doing business.

we need to take them to task by reporting them to our real estate board but often we avoid the negative situation or are too busy with day to day business.

[maggie chandler]

such a good post, i've linked to it.

[Norm Fisher]

One can hardly blame Jennifer for not wanting to get wrapped up in a complaint. Perhaps she could drop off a hand written, "I would have paid more if your agent had called me back" note in the seller's mailbox. I'm guessing that the seller would have might be willing to get wrapped up in a complaint. This is about the worst kind of behavior an "agent" can be engaged in. It's a complete betrayal of trust.

[John Pasalis]

Maggie, I think your comment really nails one of the most important problems that consumers face when working with real estate professionals.
Specifically:
"once you get to know who they are one tends to avoid them"
The problem of course is that we as real estate agents get to know who the bad agents are and we try to avoid them. But what about the average consumer. They are going in blind every time they choose to work with an gent. They have no way of recognizing the good from the bad until it's too late.

[Dane Caldwell]

I can highly recommend the Realtor, Carl Minicucci who you quote, 'as one real estate agent calls it the “2-1-0”: Getting paid Twice, for One transaction, and serving Zero parties'.

We've discussed ethics in relation to Realtors as well as home stagers a number of times.

Carl is a fabulous person to have on your side during a purchase.

Thanks for posting about 'double-dipping'; hopefully with posts like yours and Carls REBBA will implement changes to their Code of Ethics...until they do...their Code of Ethics means very little.

[Marsha Umansky]

When I act as a Buyer's Agent I do not know if the Listing Agent is ethical and trustworthy. Sorry, but don't single out the Realtors. It goes to any profession. Do you always trust a doctor,a lawer, a teacher, etc... whom you never met? In this world you can get fooled by your own spouse of 10 years... So, stop crying about "unethical Realtors", rather talk about "UNETHICAL PEOPLE".
Now, LET'S GET TO THE POINT.
When I act as a Buyer's Agent and I cannot clarify "some details" within 15-20 minutes while I am writing up an offer, I STILL SUBMIT THIS OFFER, because the details can always be worked out later. I submit it and time it and if I cannot get hold of the Realtor, I'll talk to his/her office. At least I will know I DID EVERYTHING in MY power to make the deal happen.
Jennifer's Agent was not the one I would deal with either.

[Joel Stern]

I was involved in a disastrous dual agency "bait and switch" scam in Silver Spring, Maryland in 2005, which cost me a huge of money and endless aggravation. I brought a lawsuit against a large real estate corporation--Weichert--for violating the Maryland consumer protection statutes that call for mandatory timely written disclosure of the agent's status. The problem, howeever, is that the laws of Maryland--and the great majority of other states--were artfully written to shield real estate agents from the consequences of their incompetence or deliberate fraud. No mandatory penalties are stipulated for breach of the agent's ethical obligations.
If you want to learn more about my case, go to Google, type in my name "Joel Stern", then "Weichert"; you'll find numerous blogs and websites that discuss this issue, but unfortunately not in the entire context of the legal, political and other context that enables the U.S. real estate cartel to flout consumer protection laws with complete impunity.
Joel Stern
202-261-8812 (9-5 EST)

[Beliwered Buyer]

I encountered a worse situation if that's even possible then Jennifer. Richard -- from Remax 2000 Realty orchestrated the perfect crime in mine and about 6 other bidders. He did not disclose his own offer and effectively viewed all our offers and went to his clients saying give X dollars and it yours. Not only did he double-dip but his actions were macilious and vile. He gives real estate agents a bad wrap and there are several honest and hardworking ones around. It's a same. Unfortunately, Jim's tip mentioned above was of no solace in this case as the broker of record Ralph -- was equally deceitful and actually threatened me not file a formal complaint.

[Urmi Desai]

Hi Beliwered Buyer:

I can certainly appreciate your frustration - there is a lack of transparency in the market that hurts consumers. As you may have noted, we have omitted the names of the persons you mention in your story. While we are committed to ensuring that consumers have a strong voice, we also need to respect the rights of others. If you have Real Estate Council of Ontario (RECO) findings to support this story, however, we would be interested to learn the details. If you have not reported your case to RECO yet, you may want to consider doing so:
http://www.reco.on.ca/

Thank you for contributing to this important discussion.

Urmi
Editor, Move Smartly
www.movesmartly.com

[Los Angeles Condos]

When you make the decision to purchase a home, talk with a real estate agent who can give you expert advice and valuable information. The purpose of this initial meeting is not to sign a representation agreement with the real estate agent, but instead to make yourself aware of local real estate customs in your particular area. If the agent has no time to discuss the home buying process with you, then keep looking until you find one who will. A good real estate agent will offer you information on the local real estate market and give you an idea of the types of mortgage products that are available to you. A mortgage broker or lender can also give you valuable information when you decide to buy a home.