Lew Sichelman

In an infamous 1993 “Seinfeld” episode, George Costanza found himself in hot water when he was caught double-dipping a chip – taking a bite and then dipping the uneaten portion of the chip a second time. 

It was hilarious. But not so funny is when someone double-dips in real life. A freelancer, for example, who bills two different clients for the same expenses. Or perhaps a financial professional who places commissioned products into a fee-based account, thereby drawing income from both sources. 

Double-dipping also occurs in real estate when an agent lists a house for sale and also lands the eventual buyer. When that happens, the agent retains the entire commission, but often fails to represent the best interests of one side of the transaction or the other. And it’s usually the buyer who draws the short end of the stick, according to a new report from the Consumer Federation of America. 

The practice is known in the trade as “dual agency.” It’s banned in eight states, and should be prohibited everywhere, said the report’s author, CFA senior fellow Stephen Brobeck. Absent that, he said state regulators should ban listing agents from attempting to persuade sellers to accept a change in the agent’s status from fiduciary to facilitator when he or she also finds the buyer. 

Method Used for 1 in 5 Sales 

Dual agency is an oxymoron that “can only be justified when agents greatly reduce their commissions and function as a facilitator with the full knowledge and approval of both buyer and seller,” Brobeck said. 

According to his report, double-dipping is more prevalent than most people realize. He estimates that roughly 1 in 5 transactions – about 1 million per year – occur with a single agent, resulting in consumers being charged “excessive commissions” to the tune of several billion dollars a year. 

The rules vary widely from state to state. But generally, a seller lists a house with an agent, who is supposed to represent the seller’s interests above all others. The eventual buyer usually deals with another agent, who speaks for the buyer alone. And together, the agents split the commission – typically 5 percent or 6 percent – down the middle. 

Sellers pay the listing agent’s commission based on the eventual selling price. So, on a $400,000 transaction, the agent’s cut is anywhere from $20,000 to $24,000. But the money comes from the buyer, which leads to the age-old real estate chicken-and-egg question: Who really pays the bill? 

In the typical deal, half the commission goes to the seller’s agent. But when the listing agent also finds the buyer, he or she pockets it all. Some agents will even delay putting the house on the local multiple listing service in hopes of first finding an agent-less buyer. 

If the listing agent is successful in finding a buyer, he or she often tries to convince the seller to change the agent’s status to that of a facilitator, at which point the agent can no longer advance the seller’s best interests. That includes negotiating a higher price or simply offering advice that will materially impact the sale. 

But “buyers suffer the greatest harm,” Brobeck’s report maintains. Because the agent does not represent their interests, either, he or she won’t try to negotiate a lower price. Indeed, if the agent fails to change to “facilitator” status, he or she is obligated to advance the seller’s interests: bargaining for a higher price and refraining from offering advice to the buyer. 

Some Agents Oppose Practice 

The CFA doesn’t necessarily recommend banning double-dipping altogether, though it does want all states to forbid dual agency, which is just one form of the practice.  

“One agent cannot represent the material interests of both seller and buyer,” the report said. “Dual agency aggravates the conflicts of interest inherent in double-dipping.” 

The organization also wants regulators to block agents from changing their status midstream to dual agent, transaction broker or facilitator. These are the terms used in different states to describe an agent who works in the interest of neither buyer nor seller, instead walking a fine line between the two. 

Double-dipping is one of the most controversial practices in residential real estate. While some agents love the idea of working both sides of the fence on the same property, others consider it unethical. 

According to a survey by Inman, an agent- and broker-centric news service, about 1 in 4 view it “unacceptable” and 1 in 3 say it is “not desirable.” (Full disclosure: I once contributed articles for Inman.)  

If you are buying or selling a house in Alaska, Colorado, Maryland, Texas, Florida, Oklahoma, Kansas or Vermont, you don’t have to worry about dual agency. That’s where the practice is prohibited. 

But no state outlaws double-dipping. The CFA warns buyers and sellers to try to determine how often an agent double-dips by reviewing his or her profiles on websites like Zillow and Realtor.com.  

Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com. 

Beware Agents Who Double-Dip

by Lew Sichelman time to read: 3 min