I set out to write an article on the contradictions and complexities of dual agency (sometimes referred to as double ending a deal) in real estate but in reviewing the different court cases and literature, I soon had so many thoughts on paper that I decided to make it a series.
I’ll start by throwing out a few ideas for consideration and in the next few articles I will dive deeper into each idea one by one.

“If two consenting adults choose to attempt a transaction through one agent…I argue they should bear more responsibility in the outcome.”

Firstly, in researching this, one thing that stood out in all the literature was the singular focus on the actions and responsibilities of the real estate agent with only fleeting enquiries into the behaviour of the parties, both consenting adults. 

As well, I see what appears to be a flaw in the way the law treats dual agency in real estate. There is a major difference between legal disputes and real estate transactions in that when two parties contact lawyers, there is already a dispute between the parties and the lawyers are engaged under the accepted premises of an adversarial process. 

In a real estate transaction, the two parties are generally aiming to conclude a mutually satisfactory transaction (though often each is hoping to come out a little better than the other party). It is usually only after or at the end of the transaction that the situation tends to become adversarial, yet the entire process is legally treated as adversarial from the beginning. If two consenting adults choose to attempt a transaction through one agent, they are doing so in the hopes of gaining some benefit and as long as that consent was given with full and timely disclosure, I argue they should bear more responsibility in the outcome.

This human tendency that aggravates dual agency is, to me, best described in the joke about two horse traders. A fellow comes upon two horse traders arguing. He asks what is wrong and they both say that the other guy ripped them off in a trade of horses. He asks them why they didn’t just trade back then and forget about it. Both reply that they don’t want to get ripped off again. Doesn’t that sum it up so well?

“The added risks involved, in my opinion, more than justify the full commission being paid to the one agent, yet both parties often expect a reduction.”

Oftentimes, one of the parties, usually the buyer, will request their agent to contact the other party on their behalf in the hopes of effecting the transaction without a second Realtor and expecting you, the agent, to work in their best interests against the other party. There are a few reasons for this, however, the hope that they (the buyer) will come out ahead is not the least of them, and this puts the real estate agent in a very unenviable position. Sometimes, if you don’t do it, the buyer will find someone who will. Additionally, the added risks involved, in my opinion, more than justify the full commission being paid to the one agent, yet both parties often expect a reduction.

Given that both parties are often looking for “a deal,” this puts the agent immediately in a seemingly irreconcilable conflict of interest. Usually, the more sophisticated client is the one initiating the process and their hope of garnering a “deal” diminishes the more the agent provides market information to the other party. So, the more work an agent does, the less the chance of a deal, and the greater chance of not getting paid for doing more (and better!) work. The less work an agent does, the greater the risk of legal liability and sanctions.

“Finally, under fiduciary duty, we are expected to place our interests beneath those of our clients.”

At this point, I should add that there is nothing illegal or unethical about seeking a “deal.” This is part of human nature, and there is nothing inherently wrong with it. I say this because this conflict is compounded by the fact that the initiating party is often an active investor, the kind of client an agent needs to thrive. The fact that we are in fiduciary relationships per se (fancy legal way of saying by default), precludes agents from favouring the better client in effecting a deal. 

Finally, under fiduciary duty, we are expected to place our interests beneath those of our clients. I find this a curious statement. I have also seen this worded as we are to place our clients’ interests as paramount. This I have no issue with, but the first statement I do because, as worded, it implies we must diminish our interests. 

This begs the question, how far? I expect a) to be remunerated for my efforts, and b) that that remuneration is fair—and I am not prepared to reduce these expectations. Everyone expects this when they go to work in the morning, but am I to diminish these interests? Why? And how much so? 

Stay tuned for more on these thoughts as we do deep dives into each one individually as we explore the wonderful world of dual agency.

Alan Hu/pacificevergreenrealty.com

The Supreme Court of British Columbia has ordered Alan Hu, a Surrey-based Realtor, to surrender his profits from the sale of a $3.35-million property after breaching his fiduciary duty to a client.

According to a court decision published on Jan. 10, Pei Hua Zhong, a Chinese immigrant of “modest means,” hired Hu to sell his South Surrey, B.C. home and purchase a new property in Surrey in 2017. Zhong signed a contract to buy a property listed for $2.1-million, conditional on securing the down payment by selling his current home.

When his home failed to sell by the subject removal deadline, Zhong decided to pursue bridge financing, planning to use the equity in his existing property to secure the down payment.

While Zhong prepared a second offer of $2.05-million, Hu referred his friend Lingxia Tao, who was vacationing with him in Las Vegas, to another real estate agent to compete for the same property. Zhong was not made aware of the referral. Tao’s offer, submitted with Hu’s assistance, included a clause allowing her to assign the contract to a third party.

In January 2018, the seller accepted Tao’s bid of nearly $2.1-million, cutting Zhong out of the deal. According to court findings, Hu later acquired the property through an assignment from Tao and in 2021, sold the property for $3.35-million— a profit of more than $1.2-million. 

2038 174 St., Surrey B.C., Image source: homesbyalan.ca 2017

In her decision, Judge Amy Francis wrote that Hu “intentionally undermined Mr. Zhong’s bid to purchase the 2038 (174 Street) Property so that he could take an interest in the 2038 Property for himself,” describing his actions as a “marked departure from ordinary standards of decent behaviour,” and “deceptive and underhanded.”

Hu’s failure to act in client’s best interests

She emphasized that a Realtor’s core responsibility is to act loyally and transparently in the client’s best interests. Hu violated this duty when he shared Zhong’s bid with Tao, facilitated her competing offer and ultimately acquired the property through a contract assignment.

Justice Francis found that Tao relied on Hu for instructions and she was not held legally liable.

While litigation regarding the profit split from the sale between Hu and Tao is ongoing, the court has ordered Hu to disgorge all “ill-gotten gains” from the sale​.

Insurance and regulatory implications

In February 2022, Hu submitted statements to the Real Estate Errors and Omissions Insurance Corporation, though intentional misconduct like fraud typically falls outside the scope of coverage. The B.C. Financial Services Authority, which oversees real estate agents in the province, is reviewing the judgment and considering regulatory action.

In addition to surrendering profits, Mr. Hu must also repay the $19,000 referral feed he took for the original purchase of the Surrey property. 

Ethics is a cornerstone of the real estate profession, but the question of authority—who decides what is ethical?—is one that continues to challenge us. As professionals held to high ethical standards, we must ask: Who determines these standards, and what gives them legitimacy?

This topic came to the forefront for me recently while reading Ayn Rand, a thinker known for her sharp intellect and polarizing ideas. Whether one agrees or disagrees with her, her work prompts critical reflection. In an essay titled ‘Who is the final authority in ethics?’, Rand explores this very question in a broader context. It’s a discussion that resonates deeply within our industry, where ethical decisions are not just theoretical—they shape our daily interactions and professional conduct.

What process guides your ethical decision-making?

Before continuing, my question to you is, what process do you follow in your ethical decision-making? Take a few minutes and ponder what your thoughts are, who or what you think is the final authority in real estate ethics and why, because my ultimate answer may surprise you.

This question cuts across all of human history and will likely never be ultimately resolved to everyone’s satisfaction; I must leave these deeper questions out of today’s discussion, but let me start with a personal example and a point of view that will delve into the controversy somewhat.

While I’ve never been in this situation, I have an issue with an Alberta regulation. 

Alberta’s rule surrounding personal real estate trades

Wild Rose Country has a rule for Realtors surrounding personal real estate trades; it requires industry members who wish to purchase a property from a person who has chosen to represent themselves to disclose to that person any contemplated future trade of that property and anything we know that could affect the value of that property—so I must tell them they underpriced the property. 

This rule was brought in at a time when agents themselves were buying and selling a lot of real estate. I completely understand why it was brought in as we have market knowledge the average person doesn’t but I find no ethical justification for it in most markets. 

The seller has chosen as an adult and of their own free will to represent themselves for the express purpose of saving my fees yet I must provide the most valuable service I can offer—for free. 

What are your thoughts? Do you have an ethical issue that you question?

My truths and your truths

Given that we have a personal interest in this issue, the first point of view we must consider is our own. 

Are each one of us individually our own final authorities on ethics? What’s right and good for me is my decision and what’s right and good for you is your decision—and we may both have different views on ethics. My truths and your truths. Before reading further, toss this around for a few minutes and see what you think. 

This is a combination of two closely interrelated ideologies; relativism and subjectivism. Relativism suggests that there are no objective values or truths; all truths are relative to time and place. Subjectivism suggests that all values are subjective, a matter of personal opinion. 

While there are arguments to be made for both of these points of view, and they are gaining some popularity, as a worldview they break down. 

Popularity often wins but it wins by brute force, not by good arguments. In the end, we are asking to rule by our personal whims. I reject them both categorically. 

This quickly leads to anarchy and degradation of society. While many of us make good value judgements, our prisons are full of people who didn’t and more still are walking the streets after having paid fines for lesser violations.

“Organizations are human endeavours and are subject to human failings.”

We also see real estate organizations claiming to be authorities on ethics. This is a powerful claim—to be the authority on ethics for an industry. These organizations must also answer the question: says who? 

Organizations are human endeavours and are subject to human failings. If it hires unethical management, its whole claim to ethical authority is undermined. I’ve seen it happen, we all have. Authority is not something we claim, it is something we earn, and still, the question must be answered, says who?

That said, we do have real estate organizations with legitimate claims to being the authority on ethics—namely, our regulatory bodies, but they gain their authority by legislation, not by any proof of ethical superiority and so, their rules must also be subjected to the question, says who? We must legally obey their ethical proclamations but it is also our ethical (and legal) duty to respectfully question their ethical proclamations; they are proven wrong from time to time.

All theories on ethics must pass the test of reason and reality

So, if all of these are not the final authority on ethics, who is? According to Ayn Rand, nobody. Nobody is the final authority. Reason is the final authority and we must subject ourselves to reason. Objective reason is the only way we will ever find common ground; feelings and subjective urges will never provide us with that common ground. All theories on ethics must pass the test of reason and reality—whoever can prove their theories in the real world is correct.

This will be argued forever but I believe she was on to something. So, is Alberta’s rule surrounding personal real estate trades ethical? Do you have any other personal examples? Have you reasoned them through? Again, I ask, what process do you follow in your ethical decision-making?

No surprise to most of us, the Competition Bureau (CB) is investigating the Canadian Real Estate Association (CREA)’s MLS commission policy requiring a commission be paid to buyers’ agents, and the Cooperation Policy requiring all listings to be on the MLS within three days.

I expected both, and I’ll be surprised if the Cooperation Policy comes out unscathed as I find it unethical no matter how many times I re-evaluate it, but I take real issue with the investigation into the mandatory buyers’ agent commission policy.

Now, this is clearly a complex issue involving both law and ethics and, as we realtors get used to saying, I am not a lawyer, but I would like to comment on both the legality and the ethics of the situation.

Our MLS at a high level

Before I comment, I need to back up a few steps and discuss our MLS from a high-level standpoint. MLS in North America is, to use the parlance of our times (Big Lebowski fans will recognize that line), a unicorn. In many, if not most, countries, listing agents do not cooperate with buyers’ agents, and even in North America we see that commonly with commercial transactions.

In other countries, buyers are forced to peruse multiple websites, drive around, talk to multiple agents — none of whom work in their best interests — and then ultimately work with one of these agents whose primary job is to get the most money from them as possible. Whether or not it’s the best home for them is secondary. These agents are’t bad people; this is just their duty, same as listing agents here. 

Of benefit to buyers, sellers and both agents

Our MLS strikes me as one of the best creations the world has ever seen, and I’m not exaggerating. For most of us, our home is an extension of who we are and one of the most important purchases of our lives. American psychologist Abraham Maslow recognized this almost 100 years ago when he placed shelter at the very base of his hierarchy of human needs. A comfortable, happy home is probably one of the most important factors of a fulfilling life.

The MLS gives homebuyers easy access to the widest selection of potential homes while simultaneously allowing them to have a trusted representative on their side in what may very well be the most expensive purchase of their lives. I dare say only a few things in this world are more important than that to the average person, though we rarely take the time to think that through.

At the centre of this transaction is the trusted representative, the buyers’ agent, the realtor. In my career, I’ve had the opportunity to work across the table from some very competent realtors. Watching these professionals at work has been a great pleasure and learning experience over the years. Many homebuyers have been able to purchase the best home available to them at the time with the least amount of effort and under the best terms and conditions available, thanks to the guidance of these professionals. MLS is truly a win-win-win-win — homebuyers, sellers and both agents benefit.

A conflict of legality and ethics, of cooperation and competition

Considering all these factors, the question arises: how should we reward these practitioners fairly and adequately? This is where the divergence between what is legal and what is ethical comes into conflict.

Is it ethical to have these people work for us with no guarantee of any pay, even up to the time of possession? No, but it is legal. Is it ethical to allow buyers to use this system without having to make any commitment to paying anyone anything at any time? No, but it is legal.

Before expanding on my answers, I need to cover a couple more things. As I mentioned, the MLS is a unicorn in that realtors cooperate and compete at the same time, and our legal system seems to have a difficult time wrapping its collective head around such a system, especially since the legal system is primarily an adversarial system and the notion of cooperation is foreign (I do find it particularly ironic and satisfying that both parties in a legal dispute start out adversarial but once nobody wins and they run out of money for legal fees, they quickly become cooperative.)

The real question: Is it unreasonable to ask that consumers using the system must pay for it?

The critical distinction is that whether we’re cooperating or competing, it is always in the client’s best interest. We cooperate to get the seller’s home sold and to get the buyer a home purchased; we compete to attract and keep business, and that means competing on fees. I can’t recall ever, not once, in 30-plus years having another realtor try to conspire with me for a mutually higher fee, but I sure have lost a lot of business to lower fees or better service.

Now, given the benefits I’ve just listed, here’s the real question, in my opinion: is it unreasonable to ask that consumers using this system must pay something? That something could be a dollar but it must be something and both parties are free to negotiate that fee. Is that unreasonable? Is that anti-competitive?

Negative price competition and steering: Not remotely possible

And this brings me to the current situation. The CB is investigating whether the commission policy negatively influences price competition and whether it enables steering. I cannot see how either of these is remotely possible given that the policy simply states that a fee must be offered — this could be any fee, even 10 cents.

Our Buyer Agency agreements in Alberta, and I suspect across the country, address specifically what happens when a listing offers more or less commission than we have agreed to with our buyer. If a buyer has chosen not to sign an agency agreement with us for their own interests, then we owe them the same commitment they owe us: little or none. This is both legal and ethical. We’ve offered them a mutually satisfactory arrangement and they refused. Additionally, it takes away a seller’s right to make their property more attractive to the marketplace, something I argue the CB and no human entity has the moral or legal authority to do.

A comical yet sobering proposition: Value of services rendered diminishes greatly once services are rendered

I remember being at a conference some years ago where an economist was speaking and he mentioned the system in which realtors only get paid after a transaction is completed. Economists had come up with a casual, humorous principle by which they described this system.

Decorum does not permit me to provide all the details, so let me just say that they compared our system of payment to the system of payment for one of the world’s oldest professions, as follows: the value of services rendered diminishes greatly after services have been rendered. It was comical for a moment but has been rather sobering since then, and it applies directly to today’s situation.

When we really need a service we will negotiate a higher fee; once we’ve received what we wanted, we want to renegotiate. That may be legal but it’s not ethical. If you use a product or service, you must expect to pay for it.

I don’t know the answer but I’m becoming more confident in my conviction that the CB needs to take a step back and re-evaluate the ethics of what they are doing. Competition is only one factor of many in the world of economics and business — nothing exists in a vacuum.