May 2019 Newsletter HOT off the press! Sharing our lender shout out this month!
May 2019 Newsletter HOT off the press! Sharing our lender shout out this month!
To Be or Not to Be a Dual Agent....
That is the Question.
A Discussion on Dual Agency from a Realtor's Perspective
By Juliette Calandra "Jette" Ferguson, MBA, CRS, March 22, 2019
I am writing this article from a realtor's perspective with the assumption that dual agency has been properly explained upfront to a buyer and/or seller. This is to show my thought process, as a realtor behind the scenes, when deciding to be or not to be a dual agent. First, let us look at a description of dual agency, as stated by California Association of Realtors:
What is Dual Agency?
As described by California Associate of Realtors (CAR) Quick Guide in October 2018, "An agent becomes a dual agent if he or she personally represents both parties to a single transaction. Per the recent case of Horiike v. Coldwell Banker, an individual agent is also a dual agent if his or her brokerage represents both sides of a transaction. When agents from the same brokerage are working with different parties to a single transaction, each agent is considered a dual agent, even if each individual agent communicates and works exclusively with a single party."*
To whom does a dual agent owe fiduciary duties?
"A dual agent owes equal fiduciary duties to both parties to a transaction which means “the highest good faith and undivided service and loyalty.” Legislation affecting dual agents in January 1, 2019, provides that a dual agent may not reveal to either party facts relating to the financial position, motivations, bargaining position or other personal information that may impact price, in addition to the restrictions already mentioned." *(CAR) Quick Guide in October 2018.
I discuss dual agency thoroughly with every buyer writing a purchase agreement and every seller signing a listing agreement. As mentioned above, there are many ways to become a dual agent and most are innocuous (my opinion); however, today's discussion is on the type of dual agency when one agent represents the buyer and seller on the sale of a property. As long as the dual agent is able to uphold his/her fiduciary duties mentioned above, there is no legal issue; however, this discussion is not on the legality of dual agency, but rather on a realtor's thought process to become or not to become a dual agent in real life scenarios. I describe myself as leaning on the conservative side of this decision process. As we know, agency is a relationship between the buyers and/or the sellers with the brokerage and, in my case, the brokerage is Sotheby's International Realty - Carmel Rancho. Drilling down when I explain agency relationships to my buyers and sellers, I mention, "another Sotheby's realtor may bring an offer or have a competing listing and/or I could bring an offer and/or have a competing listing.” I explain how each scenario would result in dual agency."
Here are some practical examples including my thought processes regarding dual agency:
Recently, a regular buyer-client asked me to write an offer on my own listing, it was a trust sale in Seaside, California. This buyer wanted to work with me because he has worked with me in the past, so I wrote the initial offer with the price and terms my buyer requested after providing him with the same statement that the other five buyer agents received and provided to their buyers. It read, “I expect this home to sell over asking price with multiple offers" (and) "my seller would like a fast close with minimal contingencies." I had a plan in place for another realtor to negotiate price and terms on my buyer’s behalf if my buyer's offer made it beyond the first review. This would allow me to step away from all or part of the buyer-side negotiation, which I felt the best practice due to multiple competing offers on this trust sale. I presented the six offers on a high-level spreadsheet showing offer price and terms. The offers varied in offer price with a $100,000 spread, so it was easy for my seller to eliminate the bottom three offers quickly - my buyer's offer happened to be in the bottom three, so the dual agency situation resolved itself. My seller had three offers he considered of the six and opted to counter one offer up in price and terms. We went into escrow that day with an agent from another company representing the winning buyer. (I was not comfortable with dual agency in this scenario).
As a listing agent, I often obtain multiple offers for sellers and generally refer buyers to other Sotheby's Realtors. If the buyers are my own buyers, I generally follow the protocol in example one. (I was not comfortable representing both sides in this scenario).
Several years ago, I represented a buyer and seller in Seaside. The listing came with tenants in a two-year lease with more than one and one-half years remaining. The renters had a 200-pound dog and three cats and while the pets fascinated me, most buyers were not enthusiastic. Two agents brought buyers that fell out of escrow due to the long tenant lease and pets. At that point, I spoke to my seller and asked if it was okay with him for me to present his home to some 1031 investors I represented. They were seeking an exchange home in the $900,000 range. I told them about the home and tenants and showed them several other properties - each about $450,000 so they could compare purchasing a home in the $900K range or two homes in the $450K range. They liked the idea of the two homes and purchased two Seaside, California homes for their tax exchange. Now, four years later, my buyers kept the tenants with the pets and have a personal vacation get-a-way home. In this case, being a dual agent benefitted my sellers because the other offers had fallen through and I was able to procure a buyer who could close escrow. Because previous buyers in escrow negotiated the price, I felt comfortable representing both sides. Additionally, my seller was thrilled and moved to Budapest, Hungary in search of a new life and my buyers were happy with the previously negotiated price and terms. (I was comfortable with dual agency in this scenario).
The examples are my personal opinions and thought processes regarding my decision to be or not to be a dual agent. I hope this information was helpful to newer agents and/or buyers and sellers evaluating the process of dual agency.
If you are in the process of selecting a Monterey County Realtor to support you throughout the home buying and/or selling process, please call us at 831-402-3800. We would love to interview with you to see how we can best meet your property goals. If you do not select us, let us refer you to a few great agents we know.
Author: Juliette “Jette the Realtor” Ferguson, MBA, CRS, CEO of Jette Ferguson Real Estate Group and Broker-Associate, Sotheby’s International Realty in Carmel, California. 831-402-3800.
*CAR - California Associate of Realtors (10/24/2018, CAR* Revised Quick guide)
More about Juliette Calandra Ferguson, MBA, CRS, Broker-Associate, Sotheby's International Realty, Monterey Peninsula, California
Jette is an award winning top producer and experienced sales and marketing professional with more than 20 years of proven results. She has a unique background including high-tech start-ups, non-profit management, higher education, and real estate. Jette has the ability to work with a wide range of demographically diverse audiences both domestically and internationally. Jette met her husband in Pacific Grove California and now resides in Seaside California where she is the #1 Agent in Monterey County. She achieved her bachelor's degree from CSU-Fresno and her Executive MBA from CSU-Monterey Bay. In 2015, Jette achieved her CRS-Certified Residential Specialist, considered the Master's Degree in Real Estate by many. Jette and her two team-agents believe in education and cross training to support every buyer and seller. As a former trainer, Jette ensures every client receives the attention and communication necessary to understand each step. Call Jette anytime at: 831-402-3800, Jette@TeamJette.com, TeamJette.com
Advice from family attorney.
Robert Waligore is a family law attorney in Silicon Valley. Real Estate is often related with the purchase and sale of property related to marriage and divorce. Mr. Waligore provided common examples including title discussions, property interests, parties who want the property after a settlement. Properties are usually sold or a one party buys out the other party - in a divorce situation. He discusses disputes, property value, property sales timeline and price, and court room issues, etc.
He mentions a judge often requires an appraisal prior to the sale if one party is buying out another party and some appraisers typically work on these appraisals and are experienced testifying in court as expert witnesses. Sometimes each party obtains their own appraiser and/or agree upon one appraiser. Issues that may arise in a divorce situation buy-out, one party may not qualify to purchase the home on their own so this creates difficulties depending on the credit worthiness of individual parties. He discusses a recent case with a wife wanting to buy a husband out of multiple rental properties - litigation was pending in the condo complex which created challenges during the sales process.
Jette asked if their are special lenders willing to support the party trying to purchase, but in reality the facts are the spouse must qualify on their own to buy out the property. There are a number of issues including child support, and once the children turn a certain age - usually age 18, then the child support ends and they no longer qualify.
thank you Robert Waligore, Attorney, for joining us and offering free key advice to buyers and sellers related to family law issues.
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