If someone filed a lawsuit against you, would you consider sharing an attorney with that person so you can both save money? Sounds ludicrous, right? That’s because it is, but it happens in real estate every day with agents instead of attorneys. Listen to today’s podcast to learn how to avoid this scenario.
How does one go about “sharing” a real estate agent in a transaction? It’s called intermediary-dual agency was the name in the past. Texas Real Estate Commission (TREC) defines: “an intermediary is a broker who negotiates a real estate transaction between two parties when a broker, or a sales agent sponsored by the broker, has obtained written consent from the parties to represent both the buyer and the seller.” So, yes, an agent can be in the middle working with both sides of a transaction, but no, the agent doesn’t actually “represent” either side. I disagree with TREC’s statement that the intermediary broker “represents” both clients. If a broker or agent has a tenant client who decides to lease a building which is listed by the same broker, who does that broker really represent? The landlord or the tenant? A broker or agent trying to work both sides of a deal doesn’t really represent either side.
A brokerage firm can assign different agents to “represent” both sides of a transaction and this is called ‘intermediary with assignments’. The broker assigns one agent to the landlord or seller, and another agent to the buyer or tenant. Each of those agents can then actually “represent” their respective client. The broker must remain neutral, however. Also, a broker cannot represent one side and one of his agents represent the other side since the agents are considered subagents of the broker and therefore supervised by the broker. It would appear how obviously fraught this situation would be with problems due to the lack of a real fiduciary relation, on either side of the equation.
Should the brokerage firm decide to proceed under these conditions, there are special documents that are required to make sure their clients are well informed. First, written consent from each party must be obtained. This will be in the written representation agreement. The client must also be given an Information About Brokerage Services (IABS) form to notify them of who is representing whom. On the actual contract there will be boxes that must be checked listing who is representing whom.
Basically, intermediary is just a fancy term for a really bad idea. And I personally don’t think most brokers/agents go through the trouble of doing all the paperwork because it would raise too many questions and concerns. So they just let it slide and hope nothing goes wrong. I personally learned my lesson 15 years ago – nothing went wrong and all parties were happy and felt they were treated fairly, but I could see the dangers. We simply do not believe it’s in our clients’ best interest. I’ll tell someone they should get their own agent even though it will reduce our commission. If they then decide not to be represented, that’s their choice, but we still only represent one side of the transaction.
Bob Gibbons is a Real Estate Advisor & Tenant Advocate (also known as a tenant rep) with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.