Houses for Sale

All About Dual Agency

If you’ve decided to sell your home, you may have heard about dual agency in real estate. In this article, we’ll address the following topics to bring you up to speed for this transaction type when selling your home:

  • What is Dual Agency?
  • The Pros and Cons of Dual Agency
  • Other Important Details of Dual Agency

What is Dual Agency?

In short, dual agency is when a real estate agent works with both the buyer and the seller on the same real estate transaction at the same time. Real estate agents that engage in this practice are also known as transaction brokers. While it is an uncommon arrangement, it does exist and may help sell your home quickly.

Common Scenarios of Dual Agency

  • A real estate agent is hired to sell the home of a client. That same agent has a second client who is in the market to purchase a home. The agent puts these two parties in contact with one another and helps finalize the sale.
  • Similarly, dual agency can occur when two different agents represent the buyer and seller, respectively, but belong to the same brokerage company.
  • Another scenario may occur during an open house. If a buyer meets the agent that shows interest in the property and doesn’t have an agent to represent them, the agent can represent both parties as a dual agent.

The Pros and Cons of Dual Agency

Pros of Dual Agency

  • Streamlines transactions: The process of selling a home can seem like a lot of back-and-forth between different agents. By having the same agent or brokerage company working on the transaction, the process can be streamlined for sale. This can be seen in open communication during the negotiation process as well as preparing both forms of sale simultaneously.
  • More transparency: Because a dual agent is faimilar with both sides of the transaction is held by fiduciary responsibility, both parties are able to have better access to information that would not ordinarily be disclosed between different brokerage firms.

Cons of Dual Agency

  • Conflict of interest: Perhaps the major red flag of dual agency is that a real estate agent may have a conflict of interest. Because they are in the market of obtaining the highest fair-market price for a seller and the lowest for the buyer, satisfying both requirements becomes extremely difficult.

Similarly, if the agent is selling an overpriced home, they may not disclose this to the buyer - violating the fiduciary responsibility of either party. This can take the form of problems found during the home inspection or the actual cost of estimated repairs. Or, the agent may act in bad faith to preserve their double commission. There is also the question of favoritism (intentional or not), where one party receives a better deal than another, especially if the agent and another party have a personal relationship beforehand.

  • Potential oversights and mistakes: Due to the precarious situation of dual agency, agents may be susceptible to not providing full disclosure of important details, mixing up documents, or other scenarios that may inadvertently occur.

Other Important Details about Dual Agency

Dual agency isn’t common for the aforementioned cons above. Even if the agent works in what they feel is the best interest for both clients, many buyers and sellers may feel cheated by the final closing price.

Real estate agents and brokerages typically act as dual agency due to the potential for earning double commissions. With the average commission at 3% for an agent, earning double that is enticing for many individuals - especially with the reduced workload.

It’s also important to note that dual agency is illegal or highly regulated in many states. For example, Texas, Colorado, Maryland, Oklahoma, Florida, Alaska, Vermont, and Kansas do not allow dual agency. Most other states that don’t prevent this arrangement do require that agents have to disclose that they are representing both sides of the transaction to their clients.

Last, there are some instances where an agent acting in dual agency may lower the commission if both parties agree to working with the same agent/brokerage. For this reason, it is important for sellers who wish to go through this agreement have this established before listing the property.