Friday, September 5, 2014

Never Agree to Dual Agency

Dual agency means serving two masters.  No other profession is permitted to routinely engage in this practice that most professionals feel should be banned (see our attorney survey on this topic).  No other profession has special laws written for them that automatically reduces their liability in these relationships. And real estate agents are perhaps the least qualified to handle this conflict.  Dual agency occurs when real estate agents represent both the buyers and sellers on the same transaction.  When that happens real estate brokers collect a double commission and  they are prohibited from doing anything to the detriment of either party.  That means that they can not help you negotiate price or terms of your real estate transaction.  It means that they are getting paid twice as much for doing a tenth of the work.  

Dual Agency is a conflictive relationship that strips buyers and sellers of service to a level that can best be described as abandonment. Dual agency arises when the real estate broker is representing both the buyer and the seller. It is illegal in every other fiduciary profession except under the most extreme circumstances. It is routinely practiced in residential real estate where there is the least amount of training. When a real estate broker engages in dual agency they may not work to the advantage or the detriment of the buyer or seller. In other words, all the reasons you hired your broker vanish - often with little warning.

Dual agents are legally prevented from negotiating price or terms (two of the most important reasons consumers hire Realtors). And perhaps the biggest problem with this betrayal is that it usually presents itself with little warning to the client - it is a bait and switch. The broker could be acting in the client's best interests all the way up to finding the house that creates a dual agency. At that point the buyer or seller are on their own.

In a dual agency, brokers don't have to share the commission with other brokers so they make twice as much money. They profit greatly from this practice. Realtors, who typically have no understanding of the legal ramifications of their own fiduciary relationship with their clients, often illegally counsel their clients of the so-called "benefits" of dual agency. We're here to tell you that there are NO benefits and that you should NEVER agree to dual agency. Find a small brokerage firm with highly qualified real estate agents and demand that they not engage in dual agency. The likelihood of dual agency arising with a smaller firm is far less than with a large firm.


Would you hire the same Divorce Attorney that is representing your ex partner?
Why would anyone think they are getting a better deal when their Agent also represents the seller?
Back in the Day…
 Back in the day, when interest rates were 18%, and the MLS consisted of a huge 3-ring binder, agents and brokers mostly represented sellers, but the public didn’t exactly understand this. They would call up an office, or a listing agent to see a home, write an offer, and assume that whoever wrote that offer, was representing them. They had no clue that the listing company and agent were actually representing the seller!
Over the years, and many lawsuits later, the evolution of agency has emerged. And to be honest, the public still doesn’t get it, and neither do many agents.  The National Association of Realtors has released their Bi-Annual Legal Scan, and while agency in and of itself isn’t the leading cause of disputes, dual agency came out as a high ranking issue.

What is Dual Agency?
Dual agency occurs when one agent represents both the seller and buyer in the same real estate transaction.
When a potential buyer sees the advertising for a home for sale and calls the listing agent, the listing agent has a choice to show the buyer the home but only represent the seller or to convince both parties to agree to dual agency.


For example, a buyer wants representation by a REALTOR® while purchasing a FSBO. This can be confused with dual agency, and often is, but as both  parties are not represented (the seller is representing them self), there is no dual agency.
Some people may  not need to have representation. If we think of the experienced  investor, the lawyer selling a FSBO that only needs their house in the  MLS but is fine to handle negotiating, the contracts, and closing, or  possibly the buyer who has purchased before, and feels comfortable  enough to buy without the use of a buyer’s agent, but wishes that the agent  coordinates the closing details.

What are the Agents Responsibilities in a Dual Agency Situation?
If they are a REALTOR®, ethics says confidentiality for both parties   should be the norm. So even though the agent is working now for both   buyer and seller they have to provide fair business dealing to both.
However, the practice of representing both parties in a transaction  is  SLIPPERY.  One basic rule of agency requires maintaining   confidentiality.  When an agent represents both parties, the rules of   confidentiality essentially make the agent a document preparer at best.    They can’t share information about either party with the other.
For   instance, an agent representing both cannot tell a seller what the   buyer is willing to spend.  Conversely, the agent cannot tell the buyer   what the seller is willing to take.  Within the rules of agency   representation, it’s required that when an agent knows a material fact,   they must share that fact with their client.
The most important point for you to know about dual agency is that if   your agent is also representing the other side, your agent cannot advocate for you in negotiations or give you advice on pricing. This means that when you hit a stumbling block in the negotiations, your agent can’t fight for your needs.
Let’s say that a buyer and seller are negotiating and they are $5,000 apart on purchase price. When we represent the buyer, our job is to convince the seller that our buyer will not pay more and that they should take our offer because it is the best they will do. As a seller’s agent, our job is to convince the buyer that the house is worth more than they are offering, and the seller won’t reduce the price any more.
Dual agents can’t take either of these positions.
All a dual agent can do is present to each client what the other side has responded, and ask if the offer on the table is acceptable or if they want to make a counteroffer.

Who Benefits from Dual Agency?
With real estate agents coining terms like Double Bubble, Double Dip, Me-Me it’s no wonder there is a perception that Buyers and Sellers don’t benefit from dual agency. 
The only person who benefits from dual agency is the agent.
Many agents are eager to act as dual agents because they get to keep the entire commission. When an agent is hired to sell a home, a portion of the commission paid to the listing agent is given to the buyer’s broker. If the agent represents both sides, then they get to keep the entire commission.
How do I handle Dual Agency Situations?
I don’t do dual agency except in rare situations.
I think it is a bad idea and not in my clients best interests.
If I have a listing and show the property to buyers without their own agent, I explain that I am represent the seller. I let them know that they have 3 choices if they like the property and want to make an offer:
  • I can assist with the paperwork  and the contract details just like a store salesperson can assist  the people that are purchasing products from the store. I represent  the seller and will encourage the buyer to accept the terms that the  seller wants. By the way, this is exactly what new construction  salespeople are doing when a buyer purchases a new home without a  buyer’s agent.  But this would be illegal when the Realtor/Broker is part owner of the construction company. This information must be disclosed to all buyers and when this information is not disclosed this would be considered a violation of license law. In this scenario you will end up losing more and paying more for your new home.
  • I can refer them to another agent  that can act as their buyer’s agent…an agent that can represent  just their interests.
  • They can find a buyer’s agent on their own, and have that  agent submit an offer on the house.
The next time you are in a market to buy, make sure you have your own agent.
If you discover a home through an ad or a yard sign, call an agent that you can trust and that will represent you– not try to sell you on dual agency. Rather than calling the agent working for the seller, and I can arrange a private showing for properties anywhere in Bloomington, Indiana.

Thursday, September 4, 2014


First-time buyer – My agent showed me a house that I like and for which he is the listing agent.  I heard him use the term double-dipping. I know you’re not supposed to do that with chips and dips, but what is that all about in real estate?

Answer - Double dipping at the chips and dip station is a nasty party etiquette faux pas and it can be a nasty real estate practice too, involving not so much etiquette as ethics. Some states have enacted real estate laws and practices to limit the practice or at least to bring full transparency to it. Michigan is what is called a Designated Agency state. That means that we have laws that define the agency role and responsibilities when a Realtor signs a client up to be their listing agent or their buyer agent and it requires a clear definition and agreement with the client about what role the agent is playing.  The cornerstone of the concept of agency is the agent’s fiduciary responsibility to the client.

Curt Vonnegut used to do a commercial for TIAA-CREF, the retirement programs people, in which he had fun with the word fiduciary. It does sound funny. 

From Wikipedia comes this definition of a fiduciary –
A fiduciary is a legal or ethical relationship of trust between two or more parties. Typically, a fiduciary prudently takes care of money for another person.  In a fiduciary relationship, one person, in a position of vulnerability, justifiably vests confidence, good faith, reliance, and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires the fiduciary to act at all times for the sole benefit and interest of the one who trusts. A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the "principal"): such that there must be no conflict of duty between fiduciary and principal, and the fiduciary must not profit from his position as a fiduciary (unless the principal consents). This also goes for Realtor working directly with a local builder. This is also called double dipping and when that Realtor/broker is part owner of new homes being built and sold by the same agent, that's illegal.

So, when a client signs up with a real estate agent to list his house, the agent takes on a fiduciary role with that client. That means that the agent may learn things from the client that the client does not want to others to know, such and how much he’d really sell the place for. The agent is bound by his fiduciary relationship not to disclose that to a buyer. The agent owes his loyalty to the seller.

So what happens when that same agent signs up a buyer couple and starts looking for houses for them. He owes fiduciary loyalty to the buyers and shouldn’t disclose things like how much the buyer is willing to pay to any sellers. So far, so good.

Now, suppose that the agent is sending the buyers listings and they happen to see one of his listings and want to see it. Even worse, they love it and want to put in a bid on it. Where do the agents loyalties lay now? Can that agent serve two masters? Some states allow that to happen and some put some pretty good restrictions on what the agent can do and what level of transparency has to be maintained for both parties to the deal.

Michigan requires that the agent get the written permission of both parties before he should even show the house to the buyers. That written permission should state clearly the compromise that the agent will have to make if placed in this position. The things that need to be dealt with in that document include what the agent can and cannot disclose to either side and includes a strict prohibition against sharing any secrets or confidences that either party has already shared with the agent. Potentially a bigger issue is the fact that the dual agent can no longer negotiate for either side. If having the agent there to handle the negotiations was important to either side, that is gone if the agent is allowed to become a dual agent. Some states, like California, that don’t have designated agency laws in effect, are currently dealing with dual agency cases in their court systems that could have major impact across the country.

So, what’s the double dip thing? That means that the agent is going to receive both sides of the commission – double what he/she would normally make – thus a double dip into the commission pot. That’s not an illegal things or necessarily a bad thing, but is does provide the motivation to perhaps not render as much fiduciary responsibility as is still possible. The agent may become more motivated by the opportunity to double dip that to protect the interests of both parties. Money tends to corrupt like that.

How can you protect yourself against the potential problems that could be caused by dual agency? The simple answer is not to allow it. Since the agent needs to have your permission in most states to act in a dual agent role, just tell them that you’d prefer not to do business that way. Ask them to have a different agent represent the buyer or you, so that each of you has an agent who can give you the full fiduciary attention and responsibility that you should have. In states that don’t have Designated Agency laws that may mean finding an agent in a different company.  

Your agent may refer you to another agent and it is perfectly legal for him/her to get a referral fee for doing that. That way you are still rewarding the agent who worked for you and found you the house that you want, even if he/she can’t be there with you through the sale. If your agent refuses to do something about the dual-agency issue, then fire that agent and find another agent. He/she was more interested in double dipping that in making sure your interests were properly served.

The agent might take the position that he can represent only the seller but can still do the paperwork and put the deal together. Listing agents who meet unrepresented buyers at open houses in their own listings often take that approach. You’ll need to decide whether you feel comfortable with that and whether you are concerned that the agent may already know enough about your and your wherewithal to put you at a disadvantage in the negotiations – people do tend to talk at open houses, especially to the friendly, nice man that showed them through. You can see how hard this can be to keep straight. Double dipping has been a fairly common practice in many places and is a favorite with many agents for obvious reasons; but, the bottom line is that it’s up to you and you need to feel completely comfortable with the representation that you will be getting in the deal. If you are not, remember the advice that you used to hear about drugs or teenage sex, just say no.

Wednesday, September 3, 2014

Should A Home Buyer Use The Listing Agent?

Very Will said. Excellent article! This is one of the best written articles of dual agency I have seen in a long time. This is a must post article in my area just because of the overwhelmed practice of dual agency. 

Double Dipping

Dual AgencyHome Buyers should be aware of what Dual Agency means specifically to them and the purchase of a house or condo.   In the real estate business we refer to this as “double dipping.”
It has been written about for years that when a listing agent also represents the home buyer, it either means no one gets represented fully where the real estate agent becomes neutral or the home buyer is left out in the cold with no representation at all. You need to remember that a relationship was established with the home seller long before the home buyer came into the picture.  In other words the fiduciary relationship was originally with the seller.  You can’t serve two masters fairly! And don’t let anyone try and convince you otherwise.

Dual Agency is Double Dipping

A definition of dual agency is “a breach of agency rules” which must be disclosed to the parties because the agent has a conflict of interest when representing both the buyer and the seller. That should tell you something!
I prefer an “arms length” transaction where I totally represent my client and I do NOT do dual agency. Anyone who says they can give both sides equal representation is fooling himself/herself as well as the uneducated client.
Do some real estate agents like dual agency, well sure they get paid twice. But, for the inexperienced real estate agent who thinks only of the double commission, they may find a lawsuit will eat up that double dipping!  The number 1 claim and complaints filed are about Dual Agency. More real estate complaints occur due to Dual Agency where the client’s did not feel they were fully represented.
These are the States that ban Dual Agency:
  • Alabama
  • Florida
  • Kansas
  • Maryland
Now, the uscrupuious listing real estate agent who has lingo down pat of, “I’ll give you your own PRIVATE showing.” Or scares the buyers into thinking they have to write a contract with the listing agent in order to get the house are all examples of an unethical real estate agent. The uneducated, naive home buyer is typically the one who falls for this lingo. And in the end, some of those very home buyers actually think they got a good deal…how sad!
Private showings are always the case whenever a home is shown unless it’s an Open House so don’t fall for the “private showing” gibberish. And scaring a home buyer into thinking they must write the offer with the listing agent in order to get the house is not only unethical, it’s a lie.  The seller will pick the best offer.  The seller only cares about how much money they will net.  So, don’t fall for that lie.
Do you double dip your chip in the dip? Then don’t be represented by the same real estate agent that represents the seller.  Some things are just not Kosher.  And if you have an established relationship with a REALTOR®, then by all means be loyal and don’t fall prey to ridiculous rhetoric from a listing agent.
In summation, this article is for all home buyers.  You have now become educated on the pitfalls of NO REPRESENTATION when going along with Dual Agency.  The first question an ethical REALTOR® asks is, “are you currently working with a real estate agent?”
A unethical agent never asks and ropes you in and hopes you fall for their tricks while smiling all the way to the bank.  Wise up home buyers and don’t be taken! When you go to that Open House without your REALTOR®, then take their business card with you and speak up…I have a REALTOR®.

Tuesday, September 2, 2014

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We don't build eight minimum code homes at a time we build custom green high-performance homes and we build it right. Don't overpay for a new home with less features and an overpriced H.O.A in South GA, We are the only builder building green homes in South Georgia with Energy bill GUARANTEED!

Capital Home Builders – We are the only true custom home builder in Thomasville, and South Georgia.
Other New Homes
All of our homes are built with Florida Code NOT Georgia…. Better Code / Better Homes..

1) Stronger foundation and Footers - Our Found are built with Wire Mash and Fiber

2) 2X6 Exterior Walls  - Stronger House and More Wall  Insulation

3) Continuous load Path - Stronger House (Ask other builders will not know)

4) Trusses Design with Heel for extra insulation

5) Titanium Underlayment With Ice & water and installed properly.

6) Whole House Surge protector

7) Hole House Wiring For Smart Home

8) Video Surveillance Monitor on Vacation

9) Smart thermostat Lower A/C with Smart Phone.

10) 2.5 Ton 16 SEER A/C unit. For a 2,500 Sq. Ft. Home. Very Energy Efficient

11) Tankless Water Heater

12) Top Quality Energy efficient Windows

13) Advanced Framing - (Ask Other Builders Will not know what that is…)

14) Insulated Georgia.

15) No Bath inserts – Top Quality Porcelain Tile

16) Dual Flush Toilets

17) Architectural Shingles – NOT three tab shingles other builders use.

18) 2’ Overhang trusses for more shade – Other builder NO….

19) 6" Fascia For a better roof look – Other Builders 4” Fascia

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21) Driveway has Fiber with Wire mash – Other Builders DO NOT

22) A/C Unit reviewed by a mechanical Engineer

23) Our homes are rated by an Energy Smart Rater.

24) LED and CFLs - All of our homes come with High-End Lighting  


You will not find a better built home in Thomasville and South Georgia

Tuesday, August 19, 2014


The federal government has issued a warning to realty agents, builders, title agencies, mortgage brokers and other industry participants: Get ready for a wave of RESPA crackdowns, and financial penalties that could make your head spin.
In remarks last week, the federal government's top Real Estate Settlement Procedures Act (RESPA) investigator, Ivy Jackson, said that a recent $450,000 settlement with Tulsa realty agents and builders is just the tip of the iceberg. Potentially dozens of additional crackdowns are in the wings.

Jackson heads HUD's RESPA enforcement unit, and has unleashed dozens of on-staff and contract investigators -- often ex-FBI, Customs Bureau or financial regulatory agency sleuths -- to break up what she called "blatant violations" of federal anti-kickback rules among realty agents, title companies, lenders and others nationwide.
"We are doing investigations in every state," she said, and "we anticipate a very busy (enforcement) year." Jackson's office gets hundreds of tips a year about alleged payoff arrangements involving realty agents, brokers, lenders, mortgage brokers, builders and title and escrow agencies every year. The tips come mainly from local competitors inside the industry, but also are sent in by individual consumers, federal banking regulators, and state officials.
The Tulsa settlement, unveiled in late March, involved allegations that realty agents and builders created shell corporations that bought into local title companies, and then distributed referral-fee kickbacks based on which agent or builder made the referrals to the companies. The participants all denied wrongdoing, but agreed to pay nearly half a million dollars to settle the case.
That settlement followed a much larger agreement with Chicago Title Insurance Co., involving alleged referral-fee payoffs in Texas. In that case, Chicago Title paid the federal government $5 million and the Texas Department of Insurance $1.2 million . HUD alleged that Chicago Title knowingly participated in schemes involving falsified closing documents and illegal payoffs. Chicago Title denied all wrongdoing as part of its settlement.
Jackson told a, real estate lenders and brokers, conference last week that "we are using every resource at our disposal" to move against realty agents, mortgage brokers, lenders and title companies "who ignore the rules" on referral fees. Jackson said that over 60 major investigations, or settlement cases, are currently underway, and that the department now routinely works with state real estate and financial regulatory officials, insurance commissioners, and state attorneys general to identify and stop illegal activities.
She conceded that until recently, RESPA enforcement was less prominent than it is now. But HUD has recently tripled its RESPA investigative staff, and has a contract with a company in Virginia that provides ex-FBI, ex-Customs Bureau and other trained law enforcement and financial investigators to deconstruct even the most sophisticated cover-ups of referral fee arrangements.
In the Tulsa case, for example, Jackson said the realty agents and builders created a "multi-tier" kickback scheme which appeared to pass federal legal tests at the surface level, but failed at the next level below. RESPA prohibits anyone from giving or accepting a kickback, or other thing, of value in exchange for referral of settlement business. HUD regulations permit realty, lending, and title agencies to create "affiliated business" arrangements and joint ventures, but require the participants to have bona fide economic stakes at risk in the ventures. The rules also require distributions of joint venture profits according to ownership shares, rather than on the basis of numbers of referrals of business.
According to HUD, the Oklahoma realty agent and builder ventures distributed profits, based on volume of referrals,and allowed some participants into the scheme for nominal, below-market investments. HUD also charged that the title companies marked up some customers' fees illegally.

I really hope they come our town soon……

Saturday, January 11, 2014


We are the first and only builder building energy smart custom home builders. All of our homes are built above minimum code with high-end materials and quality labors. We GUARANTEE that our homes are more energy efficient than any other new or existing home built in Thomasville, GA. 

You simply can't buy a  NEW HOME and get a better RATING then "GUARANTEED".

When insurance companies offer discounts for lower risk customers, you can bet it’s based on reliable evidence. Think lower car insurance rates for drivers with no speeding tickets, and discounted life insurance for non-smokers.
Genworth, the large private mortgage insurance firm spun-off from General Electric, now offers a discount for buyer of energy efficient houses.  (OK – Genworth implemented this policy in Canada — but reports suggest it’s coming to the US market….
Genworth is validating that the risk of loss to the mortgage lender is lower when the borrower is in a more energy efficient house.
Blue Sky Homes Desert 2
Image via Blue Sky Building Systems
The policy makes a ton of sense.  Attributes of an energy efficient house — better air sealing, more insulation, high performance appliances — are attributes of a well-built house. These measures make a house more valuable. If the borrower gets into income trouble and can’t afford the mortgage payments, a more efficient house will likely hold its value better than a house built to lower standards.
And home value is a strong predictor of lender losses — if a borrower has home equity, default is rare because the house can be sold for more than the mortgage. For more on that, see this paper by economist John Campbell.
A more efficient house also means lower energy expenses, so the borrower might not get into income trouble in the first place. And, these lower expenses are one reason an efficient house is more valuable.
A funny thing about the mortgage market is that this kind of policy can be self-fulfilling. The fact that more energy efficient houses are more valuable is a basis for the Genworth policy to give a discount, but it’s also likely to be an outcome of the policy. That is, the discount on mortgage insurance should allow some borrowers to pay more for energy efficient houses and increase demand for those houses among homebuyers. This effect should remind lenders, investors, appraisers, and others how the current, conventional policy can be self-fulfilling in the opposite direction — loan policies that make it difficult for a borrower to borrow more to pay a premium for a more energy efficient house can inhibit the very evidence needed to support policy correction.
While most U.S. mortgage borrowers don’t get private mortgage insurance, the fact that Genworth has adopted this new policy should be a strong signal to lenders, investors, appraisers, and others to continually assess how the value of energy efficiency is reflected in the property value and the loan.