What We Talk About When We Talk About Disclosure
Who really represents your best interests as a buyer or a seller? About a year and a half ago, written agency disclosure became law for New York City real estate agents selling co-ops and condominiums. What that means is that every buyer and every seller, in every transaction, must acknowledge in writing whether the agent they are dealing with represents them, the other party, or both. This has been true in most of the rest of the state for years. My opinions about the disclosure requirements have evolved since they were first imposed, in some (at least to me) surprising ways. When I first learned that we would be required to get signed acknowledgment from everyone, it seemed like a terrible inconvenience; now it increasingly seems to me like an excellent idea. I don’t think most of us real estate agents fully understood how much people really ARE confused about whom we represent! For one thing, most people think we represent the person who pays us (in fact, representation and compensation are unrelated.) For another, buyers who show up without an agent at an Open House often really don’t understand that the on site agent represents the seller. Meaning, it is the agent’s job to get the highest price for the seller. Period. When buyers figure this out, many of them decide they want an agent of their own. And I say, all the better. Deals in which each side has representation proceed in a smoother and more orderly fashion. It works better for everyone.
At the time the law went into effect, we agents were pleased that the law recognized dual agency, in which an agent represents both the seller and the buyer. I was just as pleased as anyone else, because we tend to make more money in transactions in which we are the only agent. But here my thinking has changed. I have realized as time goes by that I don’t actually think dual agency is possible. How can I, or one of my agents, actually represent a buyer AND a seller, whose interests are frequently diametrically opposed, in the same transaction? It just isn’t possible. The buyer wants to pay as little as he can; the seller wants to net as much as he can. What agent can fight simultaneously for both those outcomes?
To use another example which happened with one of my agents in recent weeks: a buyer came to her directly with interest in one of her exclusives. Both the buyer and the seller signed the Disclosure Form acknowledging her as a dual agent. They made a deal. The next day, an agent from another firm brought my agent a higher offer, which the seller chose to accept. So how could my agent be fair to both sides? Representing the buyer, she should have thrown all her weight into persuading the seller to stick with the offer he had. But representing the seller, she had to acknowledge that he was getting considerably more money and might be swayed by that. In the end, the seller took the additional money from the new buyer and the original buyer was angry at my agent, claiming that she had not really represented him. And the buyer was right! She simply could not be an advocate for both sides.
So in the end, this is where I have come out: written disclosure confirming that you are a buyer’s rep or a seller’s rep is all for the best. It clears the air. It educates the consumer. And straight dual agency, while a convenient idea in theory, is laden with possible conflict in practice. So I make the same recommendation to consumers and agents alike: don’t do it! The most successful transactions have an agent on either side.