Commercial Real Estate Broker Dual Representation
Did you find the perfect office space and are ready to sign a lease or make a purchase? Are you trying to move your property quickly? If you’re involved in any leasing/purchasing real estate process it’s likely you’ve come across the term “dual representation.”
What is Dual Representation?
Dual agency representation occurs when the same broker or firm represents both the landlord and tenant in the same transaction. It’s not uncommon to find this happening when big firms are involved in the process. While it might seem like an ideal solution at the time, it’s often problematic and can cause more headaches during the transaction.
Picture an attorney in a courtroom, representing a defendant client and also attempting to represent the prosecution during a dispute in court. Hard to imagine, right?
Dual Representation: Two Birds, One Stone Mentality
As with the above example, it’s not possible to represent both parties fairly in dual representation commercial (or residential) real estate transactions. There are too many conflicts of interest, and in the end, it gives an unfair advantage to the brokers/firms as it majorly affects the sales price.
For instance, as it’s pointed out in this WSJ.com article, depending on the timing of the transaction, “having an agent represent both the buyer and the seller can either raise or reduce the final selling price of a transaction.” It should also be mentioned that the agent typically makes far more money representing the landlord than they do the tenant – so what’s the incentive there? Some food for thought.
Rather than negotiating a deal that’s good for the broker, an agent should always negotiate a good deal for their client. This is why firms that represent tenants only (as opposed to firms that do both) are ideal for leasing/purchasing as this prevents any potential conflict of interest and helps to ensure the client’ best interests are being served.
Dual representation is illegal in many states. In my opinion, it should not be allowed, period. While a few states still allow dual representation, the good news is that most of them have passed laws (just like this one) that require both brokers and agents to disclose this information. These laws are a great step to help continue to protect buyers and tenants.
Final Thoughts & Tips:
If you find yourself entering into a leasing or purchasing transaction, every potential tenant should hire a broker/firm that doesn’t have any conflict of interest with a landlord/leasing agent. Hire an experienced broker who only has your interests in mind – it’ll save you time, money and your sanity.
Every real estate transaction is different. If you suspect dual representation is occurring, speak up. Always clarify your relationship with your agent. Don’t be afraid to ask for a listing agreement or an exclusive buyer agency agreement. Both are great ways to help ensure you’re being represented, fairly.
Tanaka, Sanette. Wall Street Journal. (2014, January 23) How a Dual Agent Affects Sale Prices. Retrieved from http://www.wsj.com/articles/SB10001424052702304757004579334860673874146