Flat Fee vs Traditional 6% Model Round 4: The Dual Agency Trap
Introduction: The Dual Agency Trap
Welcome to Round #4 in the Traditional Real Estate Vs Flat Fee heavy-weight fight: The Dual Agency Trap. By the way, we also have a video version of this topic if you’re so inclined.
In previous rounds, we covered Flaw #1: the 6% commission and our Flat Fee solution. We also covered Flaw #2: The One-Size-Fits-All service approach and our Unbundling solution. Last round, we covered Flaw #3: The Turnover/Training Paradox and how our Family Firm of specialists solved that problem.
To date, however, Flaw #4: The Dual Agency Trap, is perhaps the most upsetting of all the Flaws in the Traditional Real Estate Model. This is because it’s so damaging to the buyers and sellers and, in a twisted ironic way, is the most beneficial to the Realtors.
I suspect this is why it’s still around, despite the fact that it is 100% harmful to consumers. Let’s get to it.
If you’ve read my book, you know Seller Sam. On the off chance you didn’t read my book, which you should, let me introduce you.
Seller Sam is you. Sam wants to sell her house, make as much money as she can, and have as few headaches as possible. Sam wants what all sellers want.
Sam decides to hire a local Traditional Realtor who has her sign an “Exclusive Right To Sell” listing agreement. 99% of homes that are listed with Realtors use this listing agreement.
Sam’s agent decides to host an open house. At that event, a buyer wanders in. This buyer happens to be unrepresented – in other words, they don’t have their own agent.
The buyer decides to make an offer on Sam’s house. Sam’s agent is there, so he agrees to help the buyer with the offer. All good? Not so fast. Let’s see how this unfolds in a conversation between Sam and her agent.
Sam: How was the open house?
Agent: Great. We got an offer.
Sam: That’s fantastic. What can you tell me about the buyer?
Agent: Almost nothing…sorry.
Sam: Why not?
Agent: Well, they don’t have an agent, so I’m acting as a Dual Agent. I’m not allowed to tell you anything that could hurt them.
Sam: That sucks. Well, since they don’t have an agent, what happens to the 3% buyer agent commission that I’m offering?
Agent: Oh…I keep that.
Sam: Wow…how does that work?
Agent: Really well for me, thank you.
This is absolutely real. Because Sam signed an “Exclusive Right To Sell” listing agreement, she agreed to pay her agent 6% of the price no matter who found the buyer.
Legally, the first page of the offer must contain an “Agency Disclosure” statement. This spells out which agent represents the buyer and the seller. In this case, Sam’s agent is “representing” both parties.
This is called becoming a Dual Agent. But…it should be called a HUGE CONFLICT OF INTEREST. Sam’s agent is no longer looking out for Sam and yet is making twice the commission.
The Conflict of Interest in Dual Agency
Dual agents are legally prohibited from advocating or fighting for either the buyer or the seller. They must remain neutral and they can’t disclose information to either one that would hurt the other.
Dual agents also can’t suggest any tactics or ideas that would give one party an advantage over the other. They must remain impartial during all negotiations, including inspections and appraisal issues.
The problem with Dual Agency is that the parties get almost no representation, but the agent makes out like a bandit because they keep the entire commission for doing very little work. In a way, by using a Traditional Realtor, you are encouraging them to become a dual agent.
That means that if a listing agent has the choice to push for an offer from another agent vs. an offer from one of their own buyers, the agent will almost always choose to push for their buyer’s offer.
Even if their buyer’s offer is weaker or the buyer’s financial situation is weaker, the listing agent will be strongly tempted to convince the seller to take the offer from their buyer.
When that happens, the agent gets to “double end” the commission (keep both sides or the entire 6%). So, the question becomes, who are they really working for here?
Certainly not the buyer and certainly not the seller, who is paying them, by the way. No, they are most definitely working for themselves. Dual agency is illegal in several states but not in Ohio.
A Real-Life Example of Dual Agency Problems
A friend of mine is a buyer’s agent, and we talk a lot. He recently put in a strong cash offer from one of his regular investors on a listing with another brokerage. No inspections. No appraisal. No survey. No nothing. Cash to close in 10 days. This is what we call the Holy Grail of offers.
The offer was accepted by the seller immediately. The listing agent then said there would need to be some minor changes but didn’t say exactly what they were. She would only say that they wouldn’t impact the deal. My friend followed up multiple times a day to get those changes.
Almost a week later, the listing agent finally sent over the requested changes, and the buyer signed them within minutes, thanks to the magic of DocuSign. My friend returned the documents to the listing agent, who then ghosted my friend for three more days.
Now, 10 days after the verbal acceptance, and after agreeing to all changes, the listing agent informed my friend that “unfortunately” the deal is off because…wait for it…”The buyer dragged their feet too long.”
Sure enough, when the deal was finally posted in the MLS, the listing agent was also the buyer’s agent. Not only that but the property sold much later and for less than what my friend’s buyer was offering.
This was a clear-cut conflict, and my guess is that the seller was never even aware of the shenanigans happening with the listing agent. The seller only knew what they were told.
And this is one of many examples we see in this industry of Traditional Realtors putting their agenda ahead of their clients’ agendas. If the state outlawed Dual Agency, these problems would simply go away.
The Solution: Exclusive Agency Listing Agreement
OK–So how do we solve this problem? I’m glad you asked.
Welcome to the “Exclusive Agency” listing agreement. At our firm, the Ohio Property Group, we only use this type of listing agreement.
In summary, the Exclusive Agency listing agreement says that if my seller finds a buyer that doesn’t have a buyer’s agent, my seller pays ZERO commission to me or anyone else. Problem solved.
When a buyer comes along who doesn’t have an agent, we explain to the buyer that we will help them with the offer and get them through to closing. We will answer their questions and do all their paperwork, just like any buyer’s agent.
But…we make it very clear that we are working for the seller. And if they are not comfortable, they should hire their own agent. In over 20 years, we’ve had exactly one buyer say that they wanted to get their own agent, which is exactly what they did.
Our seller, in that case, made it known to the buyer that he would not pay another agent to work against him, so the buyer ended up paying a flat fee to his cousin to be his agent. Everything worked out just fine.
So, rather than try to squeeze double the money in exchange for becoming a Dual Agent and representing neither party, we choose to collect our low flat fee and work for our seller.
Any you know what? Seller Sam and the hundreds of sellers just like her that we help every year have been nothing but grateful.
How Ohio Property Group Solves the Dual Agency Problem
There is a better way to do this thing we call real estate. Check out our Flat Fee, our unbundled services, our Family Specialists, and our No-Dual-Agency approach, and see if you don’t think that it’s the best thing since sliced bread.
We’ve been operating this way since 2003, when we first opened our doors. We’ve helped thousands of sellers save millions of dollars in commissions while taking complete control of their listings.
The Benefits of Our Flat Fee Model
You see, most sellers hate the idea of paying huge commissions to Traditional Realtors. At the Ohio Property Group, we do all the same things that Traditional Realtors do, but instead of charging 6%, we let our sellers choose which services they want, and they only pay a low flat fee. And that fee has nothing to do with the price of the property.
Even better, we let our sellers decide whether to offer a buyer agent commission and, if so, how much or how little to offer. It’s their money, so why not let them decide?
Our sellers get better service and better results and pay a fraction of the cost of using a Traditional Realtor. But don’t take my word for it. Check out our BBB reviews and many testimonials.
Conclusion: A Better Way to Sell Your Home
Better yet, why not schedule a free One-On-One Strategy Session with our team? You’ll get a custom home selling plan that includes our price recommendation, an estimate of what you’ll have left over at closing, and so much more. Even if we decide we are not a good fit for you, you’ll get the custom home selling plan so you can get top dollar for your home when you sell.
If you want to know a little more about our Flat Fee system, check out the videos on our “HOW IT WORKS” page or the dozens of free tools in our Seller Success Library. You’ll find forms, templates, articles, videos, and much more to help you on your home-selling journey.
In the meantime, keep sending your questions. Your best bet is to send me a message at Glen@OhioMLSFlatFee.com. I read and respond to every email…eventually.
Broker/Realtor
Ohio Property Group, LLC
Author: “You Can Sell It”
Host: Talking Realty Podcast
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