Dual Agency In Real Estate: Everything You Should Know

Dual agency in real estate is when the same real estate agent represents both the buyer and seller in a home purchase. It can also occur when different agents within the same real estate brokerage represent the buyer and seller in a purchase transaction. Although dual agency isn’t uncommon, it can sometimes create conflicts of interest and leave buyers and sellers feeling like their needs aren’t being fully represented.

More than half of homebuyers and sellers don’t realize that there are different types of agencies, according to a report from the Consumer Federation of America, a research, advocacy and educational organization based in Washington, D.C. What’s more, some consumers don’t know that a real estate agent is required to represent their best interests.

What Is Dual Agency In Real Estate?

Dual agency is when a single real estate agent represents both the buyer and the seller in a real estate transaction. It can also occur when an agent represents both the landlord and the tenant, or when the same real estate company represents both parties in a purchase and sale or rental transaction.

Single agency is when an agent represents only one party. A different agent who works for a different company represents the other party. Single agency allows an agent to act in their client’s best interest without conflict.

How Does Dual Agency Work?

Here’s how dual agency works in an ideal world. When someone hires a real estate agent, they have the opportunity to decide whether they want to work with a dual agent, and they fully understand the trade-offs of doing so. The agent asks any client who says they’re fine with dual agency to sign an official disclosure from the state department of real estate.

Unfortunately, not all states require such disclosures at the beginning of an agent-client relationship. Even when they do, these forms aren’t always written in plain language, or easily understandable or readable.

Dual Agencies Are Illegal In Some States

Clients don’t have to agree to dual agency. In fact, dual agency is illegal or heavily restricted in eight states:

• Alaska
• Colorado
• Florida
• Kansas
• Oklahoma
• Texas
• Vermont
• Wyoming

In some of these states, agents can’t allow dual agency to happen by accident. This can happen in a case where someone finds a home online that they want to purchase, but that home is listed for sale by the same agent they’ve hired to represent them as a buyer.

What Is a Dual Agency Agreement?

A dual agency agreement is entered into between the buyer, seller and the real estate agent stating that the agent will serve as both the seller’s agent and buyer’s agent in the sale of the property in accordance with state law.

It also lays out how the agent must conduct themselves in representing both parties, including the stipulation that the agent cannot, unless given permission, disclose confidential or sensitive information about one party to the other.

Who Pays Commission In Dual Agency?

If one real estate agent is representing both the buyer and the seller, the seller typically pays the full commission as they normally would. The commission is usually 5% to 6% of the purchase price. Typically, outside of dual agency, the selling agent would split the commission evenly with the buyer’s agent.

Dual Agency Pros and Cons

State laws about when agents have to disclose dual agency, and whether they have to disclose it orally or in writing can leave home buyers and sellers uninformed. Plus, some agents may not follow the rules.

To limit the possibility of undisclosed dual agency, ask your agent as soon as possible whether they will be working only for you as a single agent or whether they are working, or might work, as a dual agent who also represents the other party. Don’t wait until closing to find out.

As a consumer considering dual agency, these are the pros and cons you should be aware of before making a decision.

Pros

• Faster communication: When one agent represents both sides of a real estate transaction, there can be less of a delay in price negotiations or getting the answer to a question. The agent still may not get a timely response from their buyer or seller. However, because there aren’t two agents, there’s one fewer party that could hold things up.
• Possible savings: An agent who stands to earn a double commission might be willing to accept a lower commission. The seller typically pays both agents’ commissions, so the seller is the one who can directly save money in this situation. But when the seller’s costs are lower, they may be willing to accept a lower price from the buyer. The seller, buyer and agent could all benefit from the arrangement.
• More knowledge of the property: From a buyer’s or tenant’s perspective, using the seller’s or landlord’s agent could mean gaining access to more information about the home. The problem is that some of the details you want may be the same details the seller or landlord doesn’t want their agent to share. Indeed, an ethical agent in this situation will keep these details to themselves.

Cons

• Conflict of interest: This is the biggest drawback to dual agency and the reason why some states ban it. Human nature and financial incentives can make it hard for an agent to be neutral when representing both the buyer and seller, or both the landlord and tenant.
• Tricky negotiations: An agent who represents parties with opposite interests can’t advocate for either. If a dual agent suggests the buyer make a purchase offer below list price, the agent is going against the seller’s best interest. Similarly, if that dual agent tells the seller not to accept an offer below the list price, they go against the buyer’s best interest.
• Clients have to look out for their own best interests: A dual agent can’t possibly represent the best interests of two parties with different goals. That means a dual agent acting ethically can’t do more than facilitate the transaction. For example, the buyer will have to come up with the price they want to offer and decide whether to counteroffer without their agent’s input.

When To Consider Dual Agency

Some real estate professionals and consumer advocates say you should never consider dual agency. They question whether a dual agent can truly be neutral when facilitating a transaction where they represent both the buyer and the seller. That’s mainly because the seller will want to sell their home for the highest price possible while the buyer will want to pay the lowest price.

Other real estate agents say dual agency isn’t a problem and can even benefit both parties by speeding up communications and helping the transaction close faster. There are other points to note, however.

Dual agency can sometimes be hard to avoid when:

• A large real estate agency has hundreds of agents working in the same area.
• A small area has few agents.

Dual agency can also sometimes happen without the buyer realizing it like for:

• New construction. Visiting the sales office to buy a new construction home means talking to agents who represent the seller (the builder). This relationship might not be obvious to potential buyers. Savvy buyers will hire a single agent to represent them when buying new construction, but many buyers don’t know they even have this option.
• An open house. The agent hosting an open house will be representing the seller. They’ll also have a sign-in sheet to collect names and phone numbers of visitors interested in buying a home. If one visitor wants to buy the open house property and has a good rapport with the listing agent, they might want to hire them without realizing the potential disadvantages.
• Online listings. You’re shopping for homes online and you find a property you’re interested in. The listing provides contact information for an agent. If you call them yourself instead of having your own agent (one who works for a different company) reach out, you can find yourself in a dual agency situation.

Frequently Asked Questions (FAQs)