This watchdog group wants states to ban dual agency

The practice is too confusing to consumers, the Consumer Federation of America said

(Credit: iStock)
(Credit: iStock)

The practice of dual agency is too confusing to be allowed in the real estate industry. Or, so says one watchdog group.

The Consumer Federation of America is calling for states to ban the practice and make disclosures less confusing, Inman reported. Buyers and sellers often don’t understand the role their broker plays, the group said in a report.

“Today, many homebuyers and sellers do not know whether their agent is representing their interests, those of the other party, or those of neither,” said Stephen Brobeck, the report’s author and a CFA senior fellow, in a statement.

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A national survey found that most consumers believe agents are “always” or “almost always” required to represent the interests of the buyer or seller they’re working with. But many agents’ relationships are more complex through practices like dual agency, in which an agent represents both sides of the deal, or transactional agency, in which an agent works with both the buyer and seller but has no fiduciary responsibility to either party.

The survey also found that 55 percent of consumers don’t understand agency terms that define their roles and the implications they have. Dual agency can occur when brokers employed by the same firm represent the buyer and the seller in a deal. It can also happen when a seller’s broker finds a buyer or tenant for a property and represents both parties.

The issue of dual agency was central to legal action taken against brokerage Houlihan Lawrence last year. A class-action lawsuit accused the firm of “predatory behavior,” making dual agency part of its fundamental business plan and obscuring its agents’ roles.

Dual agency isn’t uncommon, especially in markets where a few firms dominate, and it’s legal in New York. But improper disclosures and lack of transparency can lead to unethical, or illegal, situations. [Inman] — Meenal Vamburkar